TMI Tax Updates - e-Newsletter
October 4, 2014

Case Laws in this Newsletter:

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

Articles

1. Rule 6 Credit Restriction- Analysed.

   By: Madhukar N Hiregange

2. CBDT circular – no extension for the purpose of interest under section 234A- seems ultravirse the Income-tax Act.

   By: DEVKUMAR KOTHARI

News

1. 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

2. Different Departments of Ministry of Finance to take Coordinated actions to make Swatchh Bharat Campaign a Great Success; Action Plan Drawn to keep the Office Premises Neat and Clean; Goal is to Provide an Aesthetic and Congenial Working Atmosphere for one and all

3. Due Date of Deposit of Tax Deducted at Source/Tax Collected at Source during the Month of September, 2014 extended from 7th October, 2014 to 10th October, 2014

4. Repayment of 7.56% Government Stock 2014 and 11.83% Government Stock 2014 on November 03, 2014 and November 12, 2014 Respectively

5. RBI Reference Rate for US $

Notifications

Customs

1. 96/2014 - dated 1-10-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 2nd October, 2014

2. F. No. 437/117/2014-Cus IV - dated 30-9-2014 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Aka Impex India Pvt. Ltd., Room No.21, 79, Shyamlal Road, Daryaganj, New Delhi

3. F. No. 437/115/2014-Cus IV - dated 30-9-2014 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Mining & Machinery Services, 216, C-Block, Karan Trade Centre, S.D.Road, Secunderabad.

4. 95/2014 - dated 30-9-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Income Tax

5. 45/2014 - dated 23-9-2014 - IT

Section 92C of the Income-tax Act, 1961 - Transfer Pricing - Computation of arm’s length price - Notified tolerable limit for determination of ALP

Circulars / Instructions / Orders

Income Tax

1. PRESS RELEASE - dated 1-10-2014

Extension of the due date of deposit of tax deducted at source/tax collected at source during the month of September, 2014.

2. 10/FT&TR/2014 - dated 29-9-2014

SECTION 144C OF THE INCOME-TAX ACT, 1961 -RENAMING OF DRP AT BENGALURU

DGFT

3. 71 (RE 2013)/2009-14 - dated 30-9-2014

Application Form for Served From India Scheme (SFIS) for Net Foreign Exchange earning in the year 2013 -14

Highlights / Catch Notes

Income Tax

• Taxpayer Penalized for Late TCS Return Filing; Court Rules Responsibility Cannot Be Shifted to Accountant or HQ.

  Case-Laws - HC : Imposition of penalty u/s 271A(2)(c) – delay in furnishing return for Tax Collection at Source (TCS) - The liability cannot be shifted on the Chartered Accountant or Headquarters - HC
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• Assessment Reopening u/s 148 on Title Improvement Fails to Affect Short-Term Capital Gains Taxability.

  Case-Laws - HC : Reopening of assessment u/s 148 – The conversion from lease hold to a free hold being an improvement of the title, does not have any effect on the taxibility of profits as short term capital gains - the notices issued u/s 148 of the Act does not comply with the proviso to Section 147 and 149 of the Act - HC
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• High Court Clarifies: Drilling Rig Operational Costs are Revenue Expenditure; Acquisition is Capital Expenditure.

  Case-Laws - HC : Drilling operations being the very business of the assessee, expenditure incurred to make the rig operational would be covered and should be treated as “revenue expenditure”, whereas the cost of the rig would fall and should be treated as a “capital expenditure” - HC
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• Assessee fails to prove recipient is taxable u/s 195(1), withholding tax obligation remains.

  Case-Laws - HC : If the amount paid is not taxable under the Act, the obligation ceases – assessee is not able to demonstrate that the person or agency whom it paid the amount is the one that is described in the first part of sub-section (1) of Section 195 of the Act - HC
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• Software Payment Enhances Efficiency, Not a Capital Asset; Classified as Revenue Expenditure.

  Case-Laws - HC : The payment for application software, though there is an enduring benefit, does not result in acquisition of any capital asset and it merely enhances the productivity or efficiency and has to be treated as revenue expenditure - HC
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Customs

• Strict Adherence to "In Writing" Requirement Crucial in Customs and Tax Law for Re-assessment Confirmation Compliance.

  Case-Laws - HC : Self assessment - It is to be reminded that the legislature never used any words unnecessarily and, therefore, if there was a conscious intentment to incorporate the words “in writing” for confirmation of the acceptance of the re-assessment, the same is to be followed in its true spirit. - HC
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• Partnership Liable for Sole Proprietor's Unpaid Excise Duty Despite Separate Registration, High Court Rules.

  Case-Laws - HC : Successor's liability - Demand notice sent - Death of sole proprietor - even if, a separate Excise registration number is provided to a partnership concern it cannot escape from its liability towards the excise duty imposed on the said proprietorship firm - HC
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Service Tax

• Zonal Audit Office of National Bank Can Distribute CENVAT Credit to Branches, Affirms Right as Input Service Distributor.

  Case-Laws - AT : CENVAT Credit - Whether appellant as Zonal Audit Office of PNB could take Cenvat credit on the basis of invoices issued in their name and distribute the same to the branches as input service distributor - Held Yes - AT
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Central Excise

• Appellant Liable for 13% Interest on Delayed Duty Payment per Rule 8(3), Central Excise Rules, 2002.

  Case-Laws - AT : Delayed payment of duty - Rule 8(3) of central excise rules, 2002 - Appellant is liable for payment of interest on the delayed payment for the disputed period as provided under Section 11AB of Central Excise Act i.e. 13 % per annum - AT
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• Appellant's Claim for CENVAT Credit Refund Denied; Excess Payment Credit in October 2001 Not Justified.

  Case-Laws - AT : CENVAT Credit - Denial of refund claim - Whether the appellant was correct in taking credit on his own in respect of amount paid by him in excess in October 2001 - Held No - AT
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• Party Admits to Secret Removal and Manufacture of Goods, Violating Central Excise Regulations.

  Case-Laws - AT : Clandestine removal of goods - The actual allegations have been admitted and confessed. The activity of clandestine manufacture and clearances is clearly manifested. - AT
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Case Laws:

• Income Tax

• 2014 (10) TMI 10
  Imposition of penalty u/s 271A(2)(c) – delay in furnishing return for Tax Collection at Source (TCS) - whether penalty can be imposed for technical breach, delay in filing of statement in form 27EC – Held that:- It is the mandatory provision to furnish half yearly return - The returns were furnished on 12.06.1996 - It is not a procedural or technical mistake - The D.D.O. is responsible for furnishing the return, so the contention of the assessee cannot be accepted that it was supposed to be furnished by the Headquarter - It is the pios duty of the D.D.O. to furnish the return - It shows gross negligence on the part of the D.D.O, who has not furnished the return in Form No. 27EC well in time - It is not a technical mistake - The liability cannot be shifted on the Chartered Accountant or Headquarters - Such plea is not sufficient to make out the reasonable cause – thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (10) TMI 9
  Validity of notice for reopening of assessment u/s 148 – Held that:- A specific declaration in the notice that it was being issued after obtaining the necessary satisfaction of the Commissioner and Chief Commissioner of Income Tax was scored out - there was every reason to believe that no permission of the CIT or the Chief Commissioner was obtained before issuing the notice - in the absence of reasons on 30th January, 2013, the Commissioner could not have recorded satisfaction u/s 151 of the said Act. Revenue cannot act beyond the reasons furnished - The only basis for reopening the assessment was error in computation of the “indexed cost of acquisition on 1st April, 1981” - they are based on the opinion of an officer posted in Chennai - It is stated in the body of the reasons that it is based on such opinion - Therefore the assessment of the case of the assessee was sought to be reopened not on the basis of non-disclosure of income or concealment of income or under assessment of income but on a change of opinion. Relying upon Hindustan Lever Ltd. Vs. R.B. Wadkar, Assistant Commissioner of Income-Tax And Others (No.1) [2004 (2) TMI 41 - BOMBAY High Court] - the formal reasons given in support of reopening the case cannot be added to or subtracted from or improved in the affidavit-in-opposition - the assessment was sought to be reopened on a mere change of opinion, the change of opinion being with regard to estimation of the indexed cost of acquisition on 1st April, 1981 - an assessment cannot be reopened on a change of opinion – Decided in favour of assessee.

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• 2014 (10) TMI 8
  Reopening of assessment u/s 148 – Held that:- Two distinct conditions must be satisfied before the AO can assume jurisdiction to issue a notice u/s 148 of the Act, that he must have reasons to believe that the income of the assessee had escaped assessment and, that he must have reasons to believe that such escapement was by reasons of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment - If either of these conditions are not fulfilled, the notice issued by the Assessing Officer would be without jurisdiction - the AO in his reasons should also state that the escaped income is likely to be Rs. 1 lac or more, which is an essential ingredient for seeking the approval and satisfaction that is to be recorded by the Competent Authority u/s 151 of the Act. The difference between "short term capital asset" and "long term capital asset" is the period over which the property has been held by the assessee - It has nothing to do with the nature of the title over the property – assessee already had rights as owner of the property subject to the covenant of the lease for all purposes such as transfer of the lease hold rights of the property with the previous consent of the lessor - The conversion of the rights of the lessee in the property from lease hold to free hold was only an improvement of the rights over the property, which the petitioner enjoyed and this would not have any effect on the taxibility of capital gains from such property - the property was held for more than three years, short term capital gains would not be applicable - The conversion from lease hold to a free hold being an improvement of the title, does not have any effect on the taxibility of profits as short term capital gains - the notices issued u/s 148 of the Act does not comply with the proviso to Section 147 and 149 of the Act - The reasons recorded does not indicate that the assessee has failed to disclose fully and truly all material facts necessary for his assessment and that the escaped income was likely to be Rs. 1 lac or more – the notice issued u/s 148 cannot be sustained and is to be set aside – Decided in favour of assessee.

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• 2014 (10) TMI 7
  Accrual of income - Services charges deemed to be income or not – part of trading receipts – Held that:- The amount received by the assessee in the name of the service charges were meant for the service to be rendered in the second year from the date of sale of television sets - It was an advance money for which separate account was maintained - the amount cannot be treated as the income of the assessee during the assessment year - It was meant for the future service – the amount was treated, during the assessement as an income, but the appellate authorities have deleted the said amount by observing that it was service charges - relying upon M. Janardhana Rao Vs. JCIT [2005 (1) TMI 14 - SUPREME Court] – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (10) TMI 6
  Reopening of assessment u/s 147 – Full and true disclosure – bar of limitation - Held that:- The return of income was furnished by the assessee on 31.10.2001 and the assessment was framed by the AO u/s 143(3) - The notice u/s 148 was issued by the AO on 31.03.2007 after a period of four years from the end of the relevant assessment year – relying upon Ganga Saran & Sons P. Ltd. Vs. Income-Tax Officer and others [1981 (4) TMI 5 - SUPREME Court] - It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid - the Tribunal was justified in holding that the initiation of proceedings u/s 148 was barred by limitation – Decided against revenue.

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• 2014 (10) TMI 5
  Revised Return u/s 139(5) - period of limitation - Intimation u/s 143(1) - belated and invalid or not – Whether the Tribunal was justified in law in holding that issue of the intimation u/s 143(1) for the AY 1999-2000 on August 08, 2000 amounted to completion of assessment within the meaning of section 139(5) disabling the appellant from filing a revised return and that the revised return filed on March 31, 2001 was belated and invalid – Held that:- The provision contemplates an assessment without prejudice to the provisions of sub-section (2) of the section where under the AO shall, if he considers it necessary, serve on the assessee a notice requiring him, on a date to be specified therein, to attend his office or to produce or cause to be produced there, any evidence on which the assessee may rely in support of the return and after taking into account all relevant materials the Assessing Officer shall by an order in writing make an assessment - Thus the provision for assessment to be made for the purpose of issuance of an intimation u/s 143(1) of the Act reserving the authority of the AO to resort to the provisions under sub-section (2) thereof, cannot be said to be completion of assessment and, therefore, limit the time otherwise available to file revised return – relying upon Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] – Decided in favour of assessee.

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• 2014 (10) TMI 4
  Classification of expenses – Revenue expenses or not - Expenses on payment of salaries – Held that:- Assessee was engaged in the business of oil drilling operations and drilling oil wells - making the oil rigs operational was the very business of the assessee - It was this business activity, which yielded income in the form of earning or even hire charges – the Tribunal was of the view that the new rigs purchased by the assessee were financed - The financing cost was allowed as revenue expenditure - The new oil rigs were a new capital asset - the rigs had to be installed for the purpose of making them operational - The assessee had deployed their workers and technicians to whom salaries were paid to make the rigs operational - The business of the respondent assessee was continuous and ongoing - The business required constant deployment, installation and re-installation of the rigs, which upon purchase or on shifting from an location to the other had to be made functional - The rigs, no doubt, constitute capital asset, but, the expenditure incurred on the salary paid to the employees can be treated as capital expenditure. The expenditure was incurred on labour, i.e., wages - it would be a “revenue expenditure” unless there are special or specific reasons why it should be treated as capital in nature, the expenditure being akin to raw material - after the oil rigs were acquired by the assessee as a capital asset, they had to be made operational and functional - This was the very business or the activity, which was undertaken by the assessee - The activity required expenditure in the form of salary to workers - It was in the nature of running expenses - Drilling operations being the very business of the assessee, expenditure incurred to make the rig operational would be covered and should be treated as “revenue expenditure”, whereas the cost of the rig would fall and should be treated as a “capital expenditure” – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (10) TMI 3
  Assessee in default u/s 201 – TDS deduction – Held that:- The deduction of tax at source is one of the important features of the Act - In a way, it obviates the necessity for the department to track the amount paid by an assessee to another, and then to levy tax on the recipient - The failure to deduct tax at source which was otherwise to be done, invites several consequences, including levy of interest u/s 201 of the Act. Such assessee is liable to be treated as the one, in default, u/s 221 of the Act - the verification can be person specific and/or the amount specific - If the person who receives the amount happens to be non-resident, subject to certain qualifications, the individual who pays the amount stands relieved from the obligation to effect deduction of the tax on the amount so paid - if the amount paid is not taxable under the Act, the obligation ceases – assessee is not able to demonstrate that the person or agency whom it paid the amount is the one that is described in the first part of sub-section (1) of Section 195 of the Act and thereby it is not under obligation to pay tax at all - assessee was not able to establish that the amount paid by it is not taxable – Decided against assessee.

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• 2014 (10) TMI 2
  Classification of expenses – capital or revenue - Expenses on software – Held that:- Following the decision in Commissioner of Income Tax V. Southern Roadways Ltd. [2007 (6) TMI 193 - MADRAS HIGH COURT] – The concept of enduring benefit must respond to the changing economic realities of the business - The expenses incurred by installation of software packages in the present computer world, which revolves on the modern communication technology, enables the assessee to carry on its business operations effectively, efficiently, smoothly and profitably - such software itself does not work on a standalone basis - It has to be fitted to a computer system to work - Such software enhances the efficiency of the operation - It is an aid in the manufacturing process rather than the tool itself - the payment for application software, though there is an enduring benefit, does not result in acquisition of any capital asset and it merely enhances the productivity or efficiency and has to be treated as revenue expenditure - the Tribunal had rightly held that the expenditure incurred on software packages as a revenue expenditure – Decided against revenue.

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• 2014 (10) TMI 1
  Benefit under Voluntary Disclosure of Income Scheme – Sale transaction of diamonds - Genuine transaction or not - Held that:- All the three assesses made separate voluntary disclosures of their income, in response to a scheme and they were also issued the certificates - For one reason or the other, the family thought of selling away the jewellery - the diamonds were separated from gold and while the gold was sold at Hyderabad, diamonds were sold at Surat - The resultant sale proceeds were shown as capital gains in the respective returns for the AY 1998-99 - there is ample evidence to show that all the three assesses have sold the diamonds, that are separated from the jewellery, at Surat. It is a place known for voluminous business in diamonds - Not only the particulars of the persons, who purchased the diamonds was furnished, but also the manner of payment was disclosed - The entire payments were through demand drafts - The purchaser was undoubtedly a dealer in diamond - Even assuming that on certain occasions, the corresponding assessee did not proceed to Surat, it cannot be a factor to disbelieve the transaction - When not only the respondents have disclosed the wealth in VDIS, but also have shown sale proceeds as capital gains, it was farfetched, if not unreasonable, on the part of the AO, to doubt their honesty in this behalf - Though it is prerogative of the State to levy tax, referable to its sovereign power, it cannot be extended to the level of regulating the conduct of a citizen to such minute extents - Except that the AO intended to treat the sale proceeds of jewellery u/s 68 of the Act, no other provision of law is invoked, nor any principle is projected – Decided against revenue.

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• Customs

• 2014 (10) TMI 13
  Condonation of delay - Held that:- in the peculiar facts and circumstances of this case, so as to ensure that the Union of India does not habitually file belated petitions, we consider it just and appropriate, while condoning the delay, to impose cost - Quantified cost is also imposed on Petitioner - delay condoned.

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• 2014 (10) TMI 12
  Self assessment - Discharge of statutory liability - Held that:- If the reassessed duty has been deposited by the importer or the exporter that implies the acceptance of the said order and therefore, the Assessing Officer is not under any obligation to pass speaking order. Such submission cannot be accepted for a simple reason that the legislature was conscious of such situation and incorporated the word “in writing”. Such confirmation relating to an acceptance must be “in writing” and cannot be obliterated because of the conduct of the exporter or the importer having chosen to deposit the reassessed duty. Any other interpretation in my considered view, would frustrate the intent and/or the object of the legislature incorporating the words within the statutes. It is to be reminded that the legislature never used any words unnecessarily and, therefore, if there was a conscious intentment to incorporate the words “in writing” for confirmation of the acceptance of the re-assessment, the same is to be followed in its true spirit. If the thing is required to be followed in a particular manner, it is to be done in such a manner and not otherwise. Court finds that the Assessing Officer cannot sit idle and decline to discharge the statutory duty as provided in sub-section (5) of Section 17 of the Customs Act, 1962 - Decided in favour of assessee.

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• 2014 (10) TMI 11
  Successor's liability - Demand notice sent - Death of sole proprietor - Held that:- Statutory, liability which accrued to a proprietorship concern cannot be said to have evaporated because of the action of the erring parties. There is more strong reasons in support of the above that the entire assets belonging to the proprietorship concern came to be vested in the partnership firm and, therefore, even if, a separate Excise registration number is provided to a partnership concern it cannot escape from its liability towards the excise duty imposed on the said proprietorship firm. Admittedly, the proceeding was initiated after the introduction of the proviso in the year 2007 though for a earlier period. The proprietor who was alive at that point of time did not take any such plea. Nor this Court, has been apprised of such fact when an appeal by one of the sons who is also the partner of the partnership firm to be aforesaid plea in an appeal filed before the Tribunal. Since the appeal abates it necessarily implies that the original order stood affirmed. Court, therefore, does not find any ambiguity in an action of the respondent authorities and, therefore the writ petition is devoid of merit. The same is hereby dismissed. There shall be no order as to costs. - Decided against the appellant.

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• Service Tax

• 2014 (10) TMI 31
  Cenvat credit - Goods Transport Agency Services - Reverse Charge mechanism - Held that:- even though the person is not providing service but is paying service tax as per law on reverse charge basis, by the fiction of law the service on which he is discharging service tax shall be deemed to be 'output service'. In the present case also the respondent, since they discharged the service tax on GTA service, the said GTA service became an 'output service'. - Rule 3(4) of the Cenvat Credit Rules, 2004 provides the manner of utilisation of the cenvat credit availed by an assessee - From the above provision for utilisation of Cenvat credit, it provides, amongst others, the Cenvat credit can be utilised for payment of service tax on output service. As discussed in above para the GTA service though received by the respondent but paid service tax thereoupon, the said GTA service is an 'output service'. Therefore the utilisation of Cenvat credit for payment of service tax on GTA made by the respondent is legal and correct - following the Hon'ble Punjab & Haryana High Court judgment in Nahar Industrial case [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] held that prior to 01.03.2008 the payment of service tax on GTA by utilising Cenvat credit is legal - Decided against Revenue.

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• 2014 (10) TMI 30
  Works contract service - Construction of complex - Held that:- Sufficient material is on record to show that the appellant had paid the service tax out of its own pocket in respect of exempted service and the appellant has not passed on the burden of tax so deposited with the Revenue, on the service receiver. Thus, the appellant is entitled to refund of the excess tax paid of Rs. 11,21,974/- along with interest as per rules - Decided in favour of assessee.

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• 2014 (10) TMI 29
  CENVAT Credit - Whether appellant as Zonal Audit Office of PNB could take Cenvat credit on the basis of invoices issued in their name and distribute the same to the branches as input service distributor - Held that:- there is no dispute that the services in question had been received and are covered by the definition of ‘Input service’ and if the appellant had obtained separate registration as ‘input service distributor’, there would have been no objection to availing Cenvat credit on the basis of invoices in the name of Zonal Audit Office and distributing the same to the branches of PNB. In the peculiar facts and circumstances of the case, when the Appellant, though not providing the banking/financial services, were registered as provider of banking service since 2004, they should be treated as registered as ISD also, as they were for all practical purposes, functioning as input service distributor and the availment of service tax credit and its distribution to various branches by issue of invoices were being reflected in the ST-3 returns being filed by them, which is what a registered Input Service Distributor would have done. Appellant could take the Cenvat credit and distribute the same by issuing invoices to their branches. The impugned order is, therefore, not sustainable - Decided in favour of assessee.

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• 2014 (10) TMI 28
  Imposition of penalty - Whether the penalty of Rs. 6,67,226/- imposed on the appellant under Section 76 for failure to pay the Service Tax by the due date can be waived under Section 80 of the Finance Act, 1994 - Held that:- Section 80 provides that notwithstanding anything contained in the provisions of Section 76, Section 77 or Section 78, no penalty shall be imposable on an assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure. The point of dispute is as to whether the failure to discharge the Service Tax liability by the duty date on account of financial crisis can be treated as reasonable cause for the purpose of this Section. This point has been considered by the Tribunal in the case of Ramanasekar Steels Ltd. (2007 (10) TMI 28 - CESTAT, CHENNAI) wherein the Tribunal has held that when the assessee has been declared as sick by BIFR it is a reasonable cause for delay in payment of tax warranting waiver of any penalty under Section 76. Things would have been different had non-payment of tax was due to fraud or with intention to evade the tax, which is not the allegation here. I am, therefore, of the view that ratio of this judgment of the Tribunal is squarely applicable to the facts of the present case. No contrary decision has been pointed out by the respondent. In view of this, the impugned order upholding the penalty imposed under Section 76 is not sustainable - Service Tax demand along with interest and penalty imposed under Sections 70 and 77 are upheld, the penalty imposed under Section 76 is set aside - Decided partly in favour of assessee.

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• 2014 (10) TMI 27
  Waiver of pre deposit - appellant has rendered Business Auxiliary Services by agreeing to play for Kings XI Punjab, under a contract with Indian Premier League (IPL) - Appellant did not play any single match - Classification of service - Brand promotion service or Business Auxiliary service - Held that:- Appellant herein was contracted by Kings XI Punjab for playing IPL matches. It is also undisputed that though the appellant was selected for playing, did not play a single match for Kings XI Punjab. We find that while introducing the Service Tax liability under the category of Brand Promotion Service, C.B.E. & C. has given certain clarifications - activity of Brand Promotion being a new activity, was liable to be taxed from 2010 and has specifically stated that the Business Auxiliary Service is a wider category and this kind of promotion of name and house mark will fall under the category of Brand Promotion Service and not under the category of Business Auxiliary Service. show cause notice which has been issued for the period 1-4-2010 to 31-3-2011, there is no payment received by the appellant from Kings XI Punjab. If that be so, the appellant has made out a prima facie for waiver of pre-deposit of the amounts involved. - Stay granted.

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• 2014 (10) TMI 26
  Consulting engineering service - Penalty u/s 78 - Held that:- As per the Section 65(31) of the Finance Act, 1994 “Consulting Engineer” means “any professionally qualified engineer or an engineering firm who either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering”. In the present case, it is seen that the appellant had undertaken the inspection of the equipment and given suggestions to their client for improving the efficiency. Inspection of equipment does not come under the category of “Consulting Engineers Service” and this Tribunal in the case of MRF Ltd. case (2004 (10) TMI 10 - CESTAT (CHENNAI)) has held that such activity would come under “scientific and technical consultancy service”. Further it is seen that the “Consulting Engineers Service” rendered by “body corporate and other firms” came under the taxable net only with effect from 18-5-2006. Prior to that date the service tax levy applied only to services rendered by a professionally qualified engineer or engineering firm. The appellant is a manufacturer of excisable goods and therefore, it cannot be said that the appellant is an engineering firm rendering engineering consultancy - Decided in favour of assessee.

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• 2014 (10) TMI 25
  Condonation of delay - Inordinate delay of 290 days - Held that:- appellants have expressed all the misfortunes met by them during the intervening period of receipt of impugned order and filing of appeal thereagainst. As regards, the first reason that their legal counsel Shri K.C. Jain, suffered from heart attack. It is seen that no details of heart attack treatment of the same and subsequent difficulties faced by him stands placed on record. Even if, we accept the appellants stand that Shri Jain suffered heart attack, as per the appellants themselves, he was attending office though not regularly. Nothing stand shown by the appellant as to what efforts they made to contact Shri Jain, for the purpose of preparing the appeal & signing the same. It also does not stand disclosed as to when appeal papers were handed over to Shri Jain. While examining the reasons advanced by the appellant for condoning such a huge delay of 290 days, we find that reasons for such delay have occurred after the expiry of limitation period and as such cannot be considered to be a sufficient cause for the delay. In these circumstances, it has to be held that delay has occurred on account of appellants being negligent and not on account of any compelling reasons - Condonation denied.

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• Central Excise

• 2014 (10) TMI 22
  Delayed payment of duty - Rule 8(3) of central excise rules, 2002 - department has calculated interest as per Rule 8 (3) at the rate of Rs. 1000/- per day which is equivalent to the duty determined under Rule 8(3) - Held that:- Division Bench of this Tribunal in the case of Elastolan Engineers Pvt. Ltd. (2007 (5) TMI 431 - CESTAT, KOLKATA) has dealt with the similar issue and held that assessees are not liable to pay interest in excess of the amount notified under Section 11AB for the delayed period of payment of duty. This Bench of the Tribunal in the case of Kanagadurga Clothers Pvt. Ltd. (2010 (1) TMI 352 - CESTAT, CHENNAI), taking into consideration the ratio laid down in the cases of Elastolan Engineers Pvt. Ltd. (supra) and Lucid Colloids Ltd. (2005 (8) TMI 134 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR) has held that interest on delayed payment would be payable as per Section 11AB. - Appellant is liable for payment of interest on the delayed payment for the disputed period as provided under Section 11AB of Central Excise Act i.e. 13 % per annum. Accordingly, the impugned order is modified to the extent of charging interest @ 13% per annum as provided under Section 11AB and I uphold the penalty. - Decided partly in favor of assessee.

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• 2014 (10) TMI 21
  Cenvat credit - Bogus invoices - Equivalent penalty - Non supply of documents - Held that:- Except for statement of Shri Surinder Mahenderu, proprietor of M/s. Nicks India, no other documents have been supplied and in the first round of appeal before the Tribunal, relied upon documents had not been supplied. . The fact of non supply of relied upon documents is clear from the observations of the Commissioner (Appeals) in para 11 of his order wherein, after mentioning the appellants plea that certain relied upon documents such as verification report of stocks, job work challans and copy of statement of Aklesh Sharma have not been supplied and that the departments officer representing the department informed that these copies can be made available to the assessee. DR has no objection if the matter is remanded to the original adjudicating authority and he undertakes that this time, all the relied upon documents would be supplied - Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 20
  Restriction on utilization of CENVAT Credit - Default in payment of duty - Rule 8(3A) of CER, 2002 - Held that:- The provisions of sub-rule 8 (3A) was introduced to curb the tendency on the part of assessees in defaulting in payment of duty and the language used in the said Rule, especially the use of non-obstante clause makes it absolutely clear that during the period of default, the assessee cannot utilize the credit lying in the Cenvat Credit account for the purpose of payment of excise duty. The decision of the Hon'ble Bombay High Court in the case of Lloyds Steel Industries Ltd had dealt with a different situation prevailing under Rule 49 of the Central Excise Rules, and the language used therein was also different. Therefore, the ratio of the said decision cannot apply in the present case. On the other hand the decision of the Hon'ble High Court of Karnataka in the case of Manjunatha Industries case and the Hon'ble High Court of Madras in Unirols Airtex case are directly on the issue and interprets Rule 8 (3A) by stating that "utilization of Cenvat Credit during default period is an exercise in nullity." Therefore, the claim of the appellant that the reversal of Cenvat Credit of Rs. 74,45,393/- confirmed by the adjudicating authority is not correct in law, prima facie is not sustainable. - stay granted partly.

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• 2014 (10) TMI 19
  Valuation - Clearance of semi finished goods to other unit - Demand of differential duty - Difference in declared price - The price declared for clearance to the Daman unit is less by Rs. 3/- per unit sold. At the Daman unit after undertaking the process of printing, embossing, etc., the finished products are cleared by including the cost of printing, embossing, etc. and at the price which is equal to such goods cleared from the unit at Thane. The department's contention is that there is no evidence that the goods cleared to the Daman unit are semi-finished or partially processed - Held that:- in view of the categorical finding by the adjudicating authority that the unit at Daman had discharged excise duty liability after undertaking the processing on an additional value of Rs. 3/- per unit, we uphold the appellant's claim that what they had cleared to Daman unit was semi-finished PVC filament/sheets without printing or embossing - Decided in favour of assessee.

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• 2014 (10) TMI 18
  Waiver of pre deposit - Determination of assessable value - Interest u/s 11AA - Penalty u/s 11AC - Held that:- In the appellant's own case, the co-ordinate Bench at Ahmedabad Bench has taken a view that the transaction would not come under the provisions of Rule 10A of the Central Excise Valuation Rules, 2000. Therefore, the appellants have made out a prima facie case for grant of unconditional stay. Accordingly, we grant waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeals. Since the duty demand confirmed against the main appellant is stayed, the co-appellants would also get the same relief. - Decided in favour of assessee.

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• 2014 (10) TMI 17
  CENVAT Credit - Denial of refund claim - Whether the appellant was correct in taking credit on his own in respect of amount paid by him in excess in October 2001 and whether on denial of such credit, whether he can file refund claim - Held that:- appellant did pay an excess amount of duty in October 2001 debiting the same in modvet account. This error was noticed by them in October 2004 and by a letter informing the Range Superintendent and Jurisdictional Assistant Commissioner and after a lapse of one month, they took credit in the modvat account in October 1994. In our view, availing credit of the excess duty paid through modvat account after a lapse of three years, that too suo moto, seems to be incorrect as there is nothing indicated in the records that the duty was recovered by them or otherwise. It is also noticed that the appellant had on their own paid up the said amount as directed by the lower authorities alongwith interest on 24.08.2005 hence the said credit and subsequent reversal has squared up the demands which has been raised on the appellant - Refund is correctly rejected by the lower authorities as the provisions of Section 11B of Central Excise Act, 1944, mandates an assessee to claim the refund of any excess duty paid within a period of one year from the date of payment of such duty. - Decided against assessee.

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• 2014 (10) TMI 16
  Clandestine removal of goods - Misdeclaration of goods - Held that:- Shri Laxmi Kant Pandey, brother of Shri K.K. Pandey, proprietor of the said firm confessed that he was the actual person looking after the day to day affairs of the company. It was also confirmed that the production and clearance recorded in their residential premises was correct and he also testified the details of the production and clearances. It was confirmed that the production was cleared clandestinely without payment of duty. It is also evident from the statements of Shri Mahesh Kumar and Shri Shobh Nath that they had supplied the tobacco and supari which were recovered from the residential premises of the appellants. This is a case where there was no contest of the allegations. The actual allegations have been admitted and confessed. The activity of clandestine manufacture and clearances is clearly manifested. It is clear case of misdeclaration and suppression of production with intent to evade central excise duty to cause subterfuge to the revenue and it leaves no scope for interference in the order-in-original passed by the adjudicating authority which is also confirmed by Commissioner (Appeals) - Decided against Assessee.

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• 2014 (10) TMI 15
  Clearance of goods without payment of duty - Imposition of redemption fine and penalty - levy of Central Excise duty on readymade garments - Held that:- The lower authorities have taken a view that because warehouse was a registered premises and the readymade garments were lying in the registered premises, the appellant could not have cleared them without payment of duty. In our opinion the fact that all the stock lying on 28-2-2011 had been received from their job workers under proper documents showing nil rate of duty, in terms of the clarification issued by the Board, the appellants may not be liable to pay tax again. Only if the goods had not been cleared under documents without payment of duty and was in the warehouse, then only said readymade garments would attract duty in terms of Board’s instruction. In view of the assertion by the learned counsel that the goods in the warehouses on 28-2-2011 had actually been received from job workers under documents showing nil rate of duty and appellant was covered by the Board’s instruction, we consider that appellant has a prima facie case in their favour - Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 14
  Rectification of mistake - Undervaluation - MRP based valuation u/s 4A - change in MRP subsequent to removal of goods - non declaration of the actual MRP on ceramic glazed tiles and vitrified tiles - two periods i.e. prior to 01.03.2008 and post 01.03.2008. - demand of differential duty and levy of penalty - Held that:- applications which are filed by the Revenue is on the observations/findings recorded by the Bench and the said findings and observations are not errors apparent on the face of the record and if the Revenue is aggrieved by such findings and observations, the legal remedies available to them should be explored, if advised to do so. We find that by these applications, Revenue is trying to reargue the entire cases which cannot be permitted as has been laid down by the Apex Court in the case of RDC Concrete (India) Pvt. Ltd. (2011 (8) TMI 25 - SUPREME COURT OF INDIA) wherein their Lordships have specifically settled the law which is rectification of mistake cannot be done by re-appreciation of evidence. Since the entire case in final order dated 12-12-2013 was decided on the basis of the legal provisions existing during the material period, and the judicial pronouncement of the Co-ordinate Bench on the same issue was followed and it was held that prior to 1-3-2008, RSP could not be re-determined - though the demand for the period post 1-3-2008 has been set aside, but the matter is remanded back to the lower authorities to appreciate the evidence on record and come to a conclusion, which itself would indicate that we had not recorded any findings on the factual matrix in the case in hand - Rectification denied.

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• CST, VAT & Sales Tax

• 2014 (10) TMI 24
  Input tax rebate - Rebate in respect of consumables and capital goods used in the manufacture of PCBs - Whether the assessee is entitled to the benefit of input tax deduction credit in respect of consumables as well as capital goods used in the business of manufacturing and job work of PCB - Held that:- Insofar as application of section 17(3) of the Karnataka Value Added Tax Act 2003 is concerned, partial rebate is applicable only if the assessee puts to use the inputs purchased for any other purpose other than sale, manufacturing, processing, packing or storing of goods, in addition to use in the course of his business. Therefore, section 17(3) is applicable. Insofar as input tax deduction credit in respect of capital goods is concerned, it was contended slotted angles falls in entry No.5 of 5th schedule in respect of which no rebate is permissible. The argument is, what is purchased by the assessee is slotted angle framework which includes slotted angle + gusset plates + bolt & nuts. Slotted angle is different from slotted angle framework. Slotted angle framework is used by the assessee to keep his manufactured goods. It is in the nature of capital investment and therefore, he is entitled for the benefit of input tax rebate. As such, it does not fall within entry 5 of 5th schedule. Decided against Revenue.

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• 2014 (10) TMI 23
  Imposition of condition pertaining to deposit - Bank guarantee - Held that:- Along with the appeals, the petitioner has paid 25% of the disputed tax. Pending appeals, the petitioner has sought for an order of interim stay. By separate orders passed in each of the appeals, the Appellate Deputy Commissioner directed the petitioner to pay another 25% of the disputed tax and to furnish bank guarantee for the remaining tax amount as well as for the entire penalty amount - petitioner therein to pay another 25% of the disputed tax and also directed to execute personal bond for 50% of the disputed tax and for the entire penalty amount within a time frame. However, For the balance 50% of the disputed tax and entire penalty amount, the petitioner shall execute a personal bond, on or before 31.07.2014 - Decided partly in favour of assessee.

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