TMI Tax Updates - e-Newsletter
October 7, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. Taxation of Works Contracts under TN VAT Vs Profit maximization in project execution (3rd Revision)

   By: Jagadeeswaran P

2. SERVICE TAX REIMBURSEMENT – WHAT COURTS SAY

   By: Dr. Sanjiv Agarwal

News

1. Government of India announce the sale of four dated securities for Rs. 15,000 crore on October 11, 2013

2. RBI Announces Measures to Improve Liquidity Conditions

3. What, Why and How of Retail (Mass) Banking: Issues and Challenges (Inaugural address by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at the Bank CEOs Roundtable organised by CAFRAL in Udaipur on October 2, 2013)

4. Meeting of Anand Sharma with DG, WTO : Key Highlights

5. RBI Reference Rate for US $ and Euro

Notifications

FEMA

1. 288/2013-RB - dated 26-9-2013 - FEMA

Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Fifth Amendment) Regulations, 2013

Circulars / Instructions / Orders

VAT - Delhi

1. 20/2013-14 - dated 4-10-2013

Regarding filing of Stock Statement

Service Tax

2. 173/8/2013-ST - dated 7-10-2013

Restaurant Service- clarification -regarding

Central Excise

3. F. No. 267/39/13-CX.8 - dated 1-10-2013

Request of Federation of Indian Chambers of Commerce and Industry (FICCI) for reduction of time period from 90 days to 30 days for settlement of rebate claims on exports – reg.

Highlights / Catch Notes

Income Tax

• High Court rules Commissioner should waive delay for belated revised tax return u/s 119 to claim deductions.

  Case-Laws - HC : Waiver of delay in filing belated revised return u/s 119 - Belated Revised return filed to claim deduction of freight expenses after depositing TDS u/s 40(a)(ia) - Commissioner ought to have exercised such powers u/s 119 - HC
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• Court Reviews Foreign Donation's Legitimacy u/s 68; Donor's Tax Returns Scrutinized by U.S. Authorities.

  Case-Laws - HC : Unexplained income u/s 68 - foreign donation - The donor, in fact, contended that not only his income tax return, but, all such returns are regularly scrutinized by the authority in USA. The gift was received through bank transaction genuineness thereof was thus suitably established - HC
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Customs

• Section 1112(a) Customs Act Penalty Nullified; Adjudication Order Overturned Due to Missing Documents; Stay Granted on Penalty.

  Case-Laws - AT : Imposition of Penalty u/s 1112(a) of Customs Act - n the absence of the documents which have been relied upon for issuance of show cause notice, the adjudication order does not survive - stay granted - AT
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Service Tax

• Five-Member Bench to Review Service Tax Applicability on Works Contract Services u/s 65(105)(zzzza) Pre-June 2007.

  Case-Laws - AT : Service tax on Works Contract - Section 65(105)(zzzza) - Whether works contract service is chargeable to service tax, prior to 1.6.2007 - matter referred to 5 member bench - AT
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• Penalty for Service Tax on GTA Imposed and Adjusted with CENVAT Credit, Later Waived u/s 80.

  Case-Laws - AT : Penalty u/s 76 and 78 - Waiver of penalty u/s 80 - service tax on GTA under reverse charge method was adjusted with cenvat credit - later paid in case at the instance of revenue - penalty waived - AT
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• Tax Liability on Bank Transactions: Only When Specific Entity and Service Align.

  Case-Laws - AT : Hire/purchase and lease transactions - banking and financial services - For tax liability to enure there should thus be a confluence between the specified entity and the specified service. - AT
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Central Excise

• Cement in Mines Not Eligible for CENVAT Credit, Rules Court on Construction Material Use.

  Case-Laws - HC : CENVAT Credit - Whether Cement, used as construction/building material in the mines is eligible as input for the purpose of availment of Cenvat Credit - held no - HC
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• Court Questions If Packing and Relabeling Bikes Count as Manufacturing Under Excise Laws; Partial Stay Granted.

  Case-Laws - AT : Activity Manufacture OR Not - packing, repacking, relabeling etc. of the battery operated bikes - prima facie falling under the category of automobiles - stay granted partly - AT
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• Court Grants Stay on Duty Payments; Provisional Assessment Finalized with Concessional Rate Benefit for Company.

  Case-Laws - AT : Finalization of provisional assessment - extended benefit of Concessional Rate of Duty – prima facie, we do not see any reason to exclude the amount refunded to Grasim Industries from duty payments made by BHEL - stay granted - AT
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Case Laws:

• Income Tax

• 2013 (10) TMI 201
  Waiver of delay in filing belated revised return u/s 119 - Belated Revised return filed to claim deduction of freight expenses after depositing TDS u/s 40(a)(ia) - Held that:- there would be genuine hardship, if the time limit is not extended as otherwise, the entire claim of Rs. 17,84,323/- would be destroyed. The petitioner would neither get deduction in the assessment year 2005-06 nor in the year 2008-09 as per then prevailing Section 40(a)(ia) of the Act. In our opinion, the petitioner was neither lethargic nor lacking in bona fides in making the claim beyond the period of limitation, which should have a relevance to the desirability and expedience for exercising such power. Before proceeding further we may caution that undoubtedly such powers are not to be exercised in a routine manner to extend limitation provided by the Act for various stages. Commissioner ought to have exercised such powers u/s 119. It is true that the Appellate Commissioner recorded that the petitioner did not remain present in the appellate proceedings. However that by itself would not take away the petitioner's case for genuine hardship nor contrary to what is vehemently contended before us by the counsel for the Revenue, convince us to hold that filing of revised return beyond limitation lacked bona fides - Decided in favour of assessee.

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• 2013 (10) TMI 200
  Bad debts – Section 36(1)(vii) - Held that:- Tribunal as in case of TRF(T.R.F.) Ltd (2010 (2) TMI 211 - SUPREME COURT) the Apex Court has made it clear inter alia that it is not necessary for the assessee to establish any more that the debt has become irrevocable after 01.04.1989. It would be sufficient for him to write off the debt as irrevocable in his account. Such being a ratio of the Apex Court when it was not noticed by the Tribunal it chose to recall its earlier order. In the instant case, Tribunal is yet to decide the entire aspect on merits. It has merely directed the office to to refix the hearing on the question whether the ratio would be applicable to the case of assessee. As applicability of ratio to the facts is yet to be decided by the Tribunal and when it was perfectly justified in recalling the order for not having considered such ratio! at the time of deciding the entire case on merits, we see no reason to entertain this appeal as it does not give rise to any substantial question of law - Decided against Revenue.

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• 2013 (10) TMI 199
  Income from sale of land - income under the head long term capital gains or business income – Held that:- Similar issue for earlier assessment year 2003-04 the income earned from the sale of land has been assessed to capital gain. The revenue has accepted the order of the Assessing Officer for assessment year 2003-04. The Tribunal by impugned order while applying rule of consistency held that it is not permissible for the revenue to agitate the same issue when in the earlier assessment year 2003-04 the same being taxable as capital gains has been accepted by the revenue – Decided against the Revenue.

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• 2013 (10) TMI 198
  Retention of seized amount by Revenue authorities - Petitioner, who is in the business of commission agent, at Kalanwali, District Sirsa had purchased 380 bags of wheat on account of M/s Jyoti Parshad Sham Lal, Delhi between 15.8.1988 and 19.8.1988. The petitioner had sent its partner Shri Bhushan Kumar to Delhi to collect the payment of Rs.80,000/- from M/s Jyoti Parshad Sham Lal against the aforesaid purchase - Amounts were seized by S.H.O., Railway Police Station, Delhi in the night of 22.8.1988. Thereafter, the Income Tax authorities took the amounts in their possession – Held that:- Before passing the impugned orders, opportunity of hearing was not given even when that is mandatorily required under Rule 112A of the Income Tax Rules. To the same effect are the provisions of Section 132(5) of the Income Tax Act as well - On this ground alone, the writ petitions are allowed – Decided in favor of Assessee.

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• 2013 (10) TMI 197
  Unexplained income u/s 68 - onus of proving transaction - Held that:- Commissioner (Appeals) as well as the Tribunal concurrently found that the factum of gift was established. The genuineness of transaction was also proved on record; even creditworthiness of the donor was not possible to doubt. In fact, the gift was received by the assessee from his own son, who was residing in USA. Assessing Officer's stand, that the donor had earned income of only Rs. 40,690/- during the assessment year 1998-99, was rebutted by pointing out that such return was filed for interest income earned in India whereas the assessee is based in USA and is subjected to tax there. The donor, in fact, contended that not only his income tax return, but, all such returns are regularly scrutinized by the authority in USA. The gift was received through bank transaction genuineness thereof was thus suitably established - Decided against Revenue.

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• Customs

• 2013 (10) TMI 208
  Waiver of Pre-deposit - Manner of Calculating Cess - Whether clean energy cess payable on non-cooking coal should be first added to other customs duties and then the education cesses should be worked out – Held that:- Both sides submitted that the Division Bench had already heard the matter at stay stage and ordered predeposit - Both sides have no objection if this Bench passes the order following the order of the Division Bench considering that the amount involved was very small - The applicant is willing to deposit the same for the purpose of stay – Partial Stay Granted.

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• 2013 (10) TMI 207
  Imposition of Penalty u/s 1112(a) of Customs Act - Stay application - allegation of improper imports of the goods under invalid licenses – Held that:- Following M/s. Pravin Bhatt & Sons and M/s. Kandla Clearing Agency Pvt. Ltd. Versus CC Kandla [2013 (8) TMI 617 - CESTAT AHMEDABAD] - The case started on the basis of clearance of consignments based on forged/tampered licence - In the absence of the documents which have been relied upon for issuance of show cause notice, the adjudication order does not survive - applicants have made out a case for the waiver of pre-deposit of amounts involved - Applications for the waiver of pre-deposit of amounts involved were allowed – Stay Granted.

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• 2013 (10) TMI 206
  Waiver of Pre-deposit - Held that:- If the amount which had been confirmed by the first appellate authority was debited by the appellant in SFIS and nothing remains to be further deposited - We direct the Ld. Departmental Representative to send a copy of the written submissions filed by the assessee to the concerned Commissionerate and get the confirmation of amount debited in the SFIS. Ld. Departmental Representative to report such verification - Subject to such confirmation being made, applications for waiver of pre-deposit of the balance amounts involved were allowed and recovery thereof stayed till the disposal of appeals - the cross-appeal filed by the Department needed to be heard together.

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• Corporate Laws

• 2013 (10) TMI 196
  Scheme of Amalgamation - Merger of shareholders - Held that:- In view of the approval accorded by the shareholders and creditors of the Petitioner, representations / reports filed by the RD and the OL to the proposed Scheme, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under Sections 391 to 394 of the Act. Since, the registered office of the Transferor company 1 and the Transferee company is situated in the State of Karnataka, the second motion petition is pending adjudication before the Bangalore Bench of Karnataka High Court. The Scheme shall come into operation only after the same is also sanctioned by the Bangalore Bench of Karnataka High Court. The Petitioner company will comply with the statutory requirements in accordance with law - Upon sanctioning of the Scheme by Bangalore Bench of Karnataka High Court, the certified copy of this order shall be filed with the Registrar of Companies within 30 days. In terms of Sections 391 and 394 of Act and in terms of the Scheme, the whole of the undertaking, the property, rights and powers of the Petitioner Transferor company 2 shall be transferred to and vest in the Transferee company without any further act or deed. Similarly, in terms of the Scheme, all the liabilities and duties of the Transferor company shall be transferred to the Transferee company without any further act or deed. Upon the Scheme coming into effect the Transferor company shall stand dissolved without winding up - Petition allowed.

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• Service Tax

• 2013 (10) TMI 205
  Service tax on Works Contract - Section 65(105)(zzzza) - Whether works contract service is chargeable to service tax, prior to 1.6.2007 - Held that:- since there is a conflict of opinion between Larger Bench decisions of this Tribunal in Jyoti Ltd. Vs. CCE [2007 (12) TMI 20 - CESTAT, AHMEDABAD]; CCE Vs. Indian Oil Tanking Ltd. [2007 (8) TMI 180 - CESTAT, MUMBAI] and CCE Vs. BSBK Ltd. [2008 (10) TMI 33 - CESTAT NEW DELHI], it is appropriate that in the interests precedential coherence, the issue whether a composite contract, involving transfer of property in goods and services which is taxable only from 1.6.2007, onwards and not earlier thereto, in view of the provisions of Section 65(105)(zzzza), could be vivisected and service components of such composite contract could subjected to tax by classification of such service components under other pre-existing taxable services such as commercial or industrial construction service or erection, installation and commissioning service, construction of residential complex service etc. for the period prior to 1.6.2007, must be referred to a larger bench of five members. Accordingly, we direct the Registry to place the papers before the Hon’ble President, for an appropriate decision.

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• 2013 (10) TMI 204
  Penalty u/s 76 and 78 - Waiver of penalty u/s 80 - service tax on GTA under reverse charge method was adjusted with cenvat credit - later paid in case at the instance of revenue - Held that:- There cannot be any intention on the part of the appellant to evade service tax payment once the amount has been debited from the RG-23 account maintained by the appellant. On being pointed out appellant paid the entire disputed amount through TR-6 challan appellant has, therefore, had a reasonable cause for not making payment in cash when they were discharging the service tax liability on GTA services by debiting the service tax amount from their RG-23 account. It is therefore a fit case were penalties u/s. 76 and 78 are not imposable by virtue of section 80 of the Finance Act, 1994. Accordingly penalties imposed u/s. 76 and 78 of the Finance Act by the lower authorities are set aside under in section 80 of the Finance Act, and appeals filed by the appellant are allowed - Decided in favour of assessee.

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• 2013 (10) TMI 203
  Hire/purchase and lease transactions - banking and financial services - service tax on interest income disclosed under the head ‘Leasing Equipment Finance Income’ - Held that:- Prima facie, the adjudicating authority appears to have clearly erred in failing to comprehend that the taxable service during the relevant period (prior to 16.8.02) under Section 65(105)(zm) is specified to being a service provided or to be provided to a customer by a banking company or a financial company including a non-banking financial company in relation to banking and other financial services. The entity liable to service tax levy under Section 65 (105) (zm) is therefore a banking company or financial company including a non-banking financial company. Where however banking and other financial services as defined in Section 65(10) of the Act are provided by an entity which does not answer the description of the enumerated entities which alone are liable to tax for having provided the taxable service, there would be no liability. For tax liability to enure there should thus be a confluence between the specified entity and the specified service. This connect which is integral to the liability to tax is prima facie absent in the present case as the petitioners claim to not being either a banking company, a financial company or even a non-banking financial company during the relevant period i.e. prior to 16.8.02 , is not disputed - stay granted.

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• 2013 (10) TMI 202
  Admissibility of CENVAT Credit - Service Tax on Input Services – Waiver of Pre-deposit - Held that:- Assessee contented that the input service credit taken was in respect of the services which were used both for dutiable and exempted services provided by the appellant - Therefore, the credit was rightly taken - So far as the retrospective amendment of Rule 6(3)(b) of the CENVAT Credit Rules, 2004 is concerned reliance was placed upon Dabur Pharma Ltd Vs CCE Kolkata-I [2010 (5) TMI 734 - CESTAT KOLKATA] - It was the case of the appellant that the input service credit had been taken for the services utilized for providing both dutiable and exempted services - The issue involved was regarding interpretation of the definition of input service, given in Rule 2(l) of the CENVAT Credit Rules and needs deeper consideration, which can be done at the time of final hearing only - Since the appellant had reversed the CENVAT Credit the same was considered as sufficient deposit in this case to grant stay for the remaining amount – Stay granted.

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• Central Excise

• 2013 (10) TMI 195
  CENVAT Credit - Whether Cement, used as construction/building material in the mines is eligible as input for the purpose of availment of Cenvat Credit under the provisions of the Cenvat Credit Rules 2002/2004 – Held that:- The foundation made of cement in our view does not fall under the category of capital goods as defined under Rule 2(b) of the Cenvat Credit Rules, 2002 - The item in question i.e. cement also cannot be considered as inputs as per the definition of Explanation II of Rule 2(g) of the Rules, 2002 - no Cenvat Credit is available so far as the cement is concerned – the foundation made of cement does not fall under the category of capital goods as per the definition clause and since the cement was used in the construction of foundation, it cannot be said to be eligible capital goods in terms of Rule 2(b) of the Cenvat Credit Rules, 2002 and the cement cannot be said to be inputs in terms of Explanation II of Rule 2(g) of the Rules, 2002. The Tribunal has erred in allowing the appeal filed by the respondent-assessee. In our view, the Tribunal has committed substantial error of law in allowing the appeal of the respondent-assessee by holding that the assessee is entitled for getting benefit of Cenvat Credit on cement - the foundation cannot be described as capital goods as per Rule 2(b) of the Cenvat Credit Rules, 2002, and it cannot be said that the same is used in connection with manufacturing of goods, which are further used for the manufacture of the ultimate product - appeal allowed - The order of the Tribunal is set aside and the order of the Commissioner (Appeals), Customs and Central Excise is restored with no order as to costs.

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• 2013 (10) TMI 194
  Input Services - Welding Electrodes, Plastic Crates in other words, to ensure that the bottle remains bottle until such time it is cleared from the factory or the manufacturing premises. As would be evident from the show-cause notice, since the Plastic Crates were taken out from the factory premises in order to enable printing on the bottles those were manufactured, it was thought that the user of Plastic Crates was not in relation to manufacture of final products - It has not been doubted that the manufacture of the final product comes to an end only after the printing is done - While formulating the show-cause notice, reference was made to Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Rule 8 makes it abundantly clear that, at the stage of complying with the provisions of Rule 8, excisable goods may be taken for in the production or manufacture of the other articles - The fact remains that the bottle, as was manufactured on being printed, becomes a printed bottle - The setup of the respondent is to manufacture printed bottle for the purpose of sale - there cannot be any dispute that the Plastic Crates are used in or in relation to manufacture of final product, i.e. the printed bottle. Insofar as the input services are concerned, as has been noted by the Tribunal, it was never contended that such services were not used by the respondent in relation to the manufacture of final products - In other words, while issuing the show-cause notice, the claim of the respondent that the subject input services are being used by the respondent in relation to manufacture of final products was not disputed and, accordingly, there is no scope of interference with the finding recorded by the Tribunal in relation to input services – Decided against Revenue.

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• 2013 (10) TMI 193
  Activity Manufacture OR Not - Waiver of Pre-deposit – The main appellant is carrying out the processes of packing, repacking, relabeling etc. of the battery operated bikes at their premises which according to Revenue amounts to manufacture as per the amended definition of manufacturer given in Section 2 (f) (iii) of the Central Excise Act, 1944 - Held that:- From the classification of vehicles made in the IDRA, 1951, it is clear that all the vehicles used for transportation like Motor Cycle, Scooters and Bikes are considered as Automobiles - A Bicycle, Fork lift truck, Tractors etc. will not be automobile - A battery operated bike will be a self-performed vehicle like a scooter or a Motorcycle meant for transportation of goods/ humans will, prima facie, be a category of automobiles - Appellants have, therefore, not made out a prima facie case for full waiver of pre-deposit of confirmed dues and penalties and are required to be put to certain conditions - Partial stay granted.

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• 2013 (10) TMI 192
  Finalization of provisional assessment - extended benefit of Concessional Rate of Duty – Waiver of Pre-deposit - Held that:- Assessee had paid the duty amount for which Grasim Industries has claimed refund - M/s Grasim Industries did not pay the disputed duty amount to the appellant and the amount was figuring as a receivable in the books of accounts of BHEL for a few years but the appellant has finally written it off - They have not got the amount from Grasim Industries because Grasim Industries were contesting that they were eligible for concessional rate of duty on ESP - there is no ground for demanding that amount again from the applicant by excluding the amount from the duty paid by the applicant. If there is any refund granted or to be granted to Grasim Industries, prima facie, it can be only on account of the fact that there is a concessional rate of duty prescribed for ESP and that BHEL has paid duty in excess of such concessional rate of duty - The merit of that refund claim is not before the Tribunal in this proceeding - However, prima facie, we do not see any reason to exclude the amount refunded to Grasim Industries from duty payments made by BHEL - waiver of predeposit of dues granted arising from the order for admission of the appeal and stay its collection during the pendency of the appeal - Stay granted.

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