TMI Tax Updates - e-Newsletter
October 7, 2014

Case Laws in this Newsletter:

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

Articles

1. Representation prepared on behalf of Jalandhar Sales Tax Bar on the issue of retention of ITC on closing stock

   By: AMIT BAJAJ ADVOCATE

2. No penalty can be levied merely on the basis of provisional assessment

   By: AMIT BAJAJ ADVOCATE

Notifications

Income Tax

1. 47/2014 - dated 24-9-2014 - IT

Agreement for Avoidance of double taxation and prevention of fiscal evasion with foreign countries - Poland

2. 44/2014 - dated 23-9-2014 - IT

Agreement for Avoidance of double taxation and prevention of fiscal evasion with foreign countries - Republic of Colombia

3. 41/2014 - dated 29-8-2014 - IT

EXPENDITURE ON AGRICULTURAL EXTENSION PROJECT ON NOTIFIED ELIGIBLE AGRICULTURAL EXTENSION PROJECT U/S 35CCC OF THE INCOME-TAX ACT, 1961 - RALLIS KISAN KUTUMBA - MORE PULSES PROJECT

4. 40/2014 - dated 29-8-2014 - IT

EXPENDITURE ON AGRICULTURAL EXTENSION PROJECT ON NOTIFIED ELIGIBLE AGRICULTURAL EXTENSION PROJECT U/S 35CCC OF THE INCOME-TAX ACT, 1961 - RALLIS KISAN KUTUMBA - HELPLINE

5. 39/2014 - dated 29-8-2014 - IT

EXPENDITURE ON AGRICULTURAL EXTENSION PROJECT ON NOTIFIED ELIGIBLE AGRICULTURAL EXTENSION PROJECT U/S 35CCC OF THE INCOME-TAX ACT, 1961 - RALLIS KISAN KUTUMBA - 4S CAMPAIGN

6. 38/2014 - dated 27-8-2014 - IT

EXPENDITURE ON AGRICULTURAL EXTENSION PROJECT ON NOTIFIED ELIGIBLE AGRICULTURAL EXTENSION PROJECT U/S 35CCC OF THE INCOME-TAX ACT, 1961 - RALLIS KISAN KUTUMBA - RALLIS CROP ADVISORY CENTRES

7. 37/2014 - dated 27-8-2014 - IT

EXPENDITURE ON AGRICULTURAL EXTENSION PROJECT ON NOTIFIED ELIGIBLE AGRICULTURAL EXTENSION PROJECT U/S 35CCC OF THE INCOME-TAX ACT, 1961 - RALLIS KISAN KUTUMBA - TATA RALLIS AGRI INPUT TRAINING SCHEME

Highlights / Catch Notes

Income Tax

• Technical Service Fees Taxable under DTAA Article VII for Activities in India per Section 9(1)(vi) on Royalty.

  Case-Laws - HC : Royalty u/s 9(1)(vi)– Consideration paid for technical services would be taxable under Article VII of the DTAA, to the extent the amounts were attributable to the activities performed by the respondent-assessee in India. - HC
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• Court Disallows Assessee's Commission Expenses, Questions Necessity and Genuineness of Payments in Bullion Procurement Case.

  Case-Laws - HC : Genuineness of Expenses – Commission paid or not - Assessee could have procured the bullion without assistance of any agent - additions confirmed - HC
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• Hindu Undivided Family (HUF) must stay joint; individual members can't claim or transfer specific shares.

  Case-Laws - HC : As long as the Hindu Family remains joint, which in fact is a sine qua non for it to be recognised as HUF, the question of one member of the HUF claiming any particular share in it, in contradistinction to undivided share much less transferring it in favour of another does not arise - HC
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Customs

• Court Rules on Timely Refund Processing for SEZ Export Duties; No Unreasonable Delays Allowed in Adjudication Process.

  Case-Laws - HC : Refund of export duty with interest - jurisdiction and/or authority to adjudicate the refund application with respect to units situated in SEZ - there cannot be vacuum and the applications for refund cannot be kept pending for unreasonable period - HC
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Service Tax

• Service tax held in escrow for apartment projects doesn't fall u/s 73A of the Finance Act, 1994.

  Case-Laws - AT : Activity of development and construction of apartments - Whether service tax collected from the customers and kept in the escrow account and not paid to the Government would attract provisions of Section 73A of the Finance Act, 1994 or not - held NO - AT
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• Appellant Must Deposit Interest for Delayed Service Tax Payment on Intellectual Property Rights, Relating to R&D Cess.

  Case-Laws - AT : Intellectual Property Right service - the appellant should deposit the interest because of the delayed payment of service tax to the extent of R&D cess - AT
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• Offshore services to India taxable from April 18, 2006; matter settled despite Revenue's unclear stance.

  Case-Laws - AT : Even if Revenue's stand (although Revenue's stand is not very clear) is that service has been provided from offshore territory to India, we find it is a settled matter that Service Tax on services provided by a service provider located outside India to a recipient in India is leviable only from 18.4.2006 - AT
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• Service Tax Implications Limited for Off-Shore Drilling Rig Services Due to Distance Discrepancies in Operations.

  Case-Laws - AT : Survey and exploration of mineral, oil and gases - Off-shore jack up drilling rig services - two opinions given by expert body like DGHC about the distance itself would show that demand cannot be extended beyond normal period. - AT
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Central Excise

• CENVAT Credit Covers Maintenance of First-Aid Facilities for Workers as Input Service for Manufacturing Final Products.

  Case-Laws - AT : CENVAT Credit - input services - the availment of service for maintenance of the first-aid facilities for the workers has to be treated as the service used in or in realtion to the manufacture of final products. - AT
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• Statements Alone Can't Prove Goods Removal in Central Excise Cases Without Corroborative Evidence or Retracted Testimonies.

  Case-Laws - AT : Clandestine removal of goods - few statements, which are not corroborated by other evidences and were subsequently retracted, cannot be the sole basis for quantification and confirmation of demand - AT
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• Applicant Failed to Waive Pre-Deposit Penalty for Alleged Double Availment of CENVAT Credit in Central Excise Case.

  Case-Laws - AT : Availment of CENVAT Credit twice - Applicant failed the make out a prima facie case for waiver of pre-deposit of the entire amount of penalty - AT
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Case Laws:

• Income Tax

• 2014 (10) TMI 78
  Royalty u/s 9(1)(vi)– DTAA between India and Austria - recurring payments - technical assistance agreement - lump-sum payment as attributable to ‘information and services, to be furnished’ – Held that:- The differentiation between ‘technical know-how’ and ‘technical services’ - In know-how or under a know-how contract, one party agrees to grant ‘right to use’ or simply provide to the other special knowledge and experience not revealed to the public - the granter may not guarantee the result of the formulae, information and for which licence for use is granted - This ‘service’ element goes beyond mere providing of technical know-how - the consideration paid for right to use technical know-how etc. under the Agreement would be taxable in India as ‘royalty’ under Article VI and consideration paid for technical services would be taxable in India to the extent of such amounts were attributable to the activities actually performed in the country of source, after allowing deduction of expenditure incurred in India - payments made for technical services furnished by the non-resident assessee outside India would not be taxable in India. The entire amount paid including the periodical payments were treated as royalty, ignoring Article VII of the DTAA and the relevant clauses of the Agreement - Ignorance and nescience was not due to lack of awareness, but attributable to failure to understand and deal with the issue inspite of the submission/contention - It was propelled with the desire to ensure 100% taxation of the entire consideration - No attempt was made to elucidate, and painstakingly answer the objections with facts and to bifurcate and divide the consideration in a reasonable manner between right to use technical information or know-how etc. and the consideration paid for services - in respect of services, differentiation regarding services rendered in the source state, i.e. India, the amount attributable to the activities actually performed in India and expenses incurred, was not undertaken - Consideration paid for technical services outside India had to be examined and excluded - the payments received were offered for taxation as ‘royalty’ under Article VI of the DTAA - the findings/division of the appellate authorities may not be in terms of the reasoning and finding recorded - Evidence and material, by passage of time would have disappeared and desiccated. Assessee offered and stands taxed on 5% commission – the matter cannot be remitted back on the ground that the bifurcation/division made should be ignored and on a reasonable basis after ascertaining full facts, the amounts should be bifurcated and amounts covered under Article VI should be taxed in India and the amounts covered under Article VII should be taxed in India only if they were attributable to activities actually performed in India, after deducting expenditure - It does appear that the assessee stands taxed on payments under clause 4.2 in India and therefore, has paid tax in India Consideration paid for technical services would be taxable under Article VII of the DTAA, to the extent the amounts were attributable to the activities performed by the respondent-assessee in India. Deduction of expenses would be made - consideration paid for right to use technical information and know-how would be taxable under Article VI of the DTAA - the consideration paid for furnishing technical services outside India, shall not be taxable in India - the expression ‘royalty’ and the other similar expressions used in other DTAAs or u/s 9(1)(vi) of the Act may not or may warrant same interpretation – Decided partly in favour of revenue.

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• 2014 (10) TMI 77
  Stay application – Imposition of condition – Held that:- The demand is high-pitched - But, what is reasonable and what is unreasonable, cannot really be determined, without reference to the facts of each case - The condition imposed by the respondents directing the petitioner to deposit the entire amount, in 15 instalments may be wrong - there are two options open to the Court - one is to set aside the order and to remand the matter back for a fresh consideration in accordance with law - The other is to impose a reasonable condition for the grant of stay and to direct the appeal itself to be disposed of - The second course of action appears to be a better course of action - an interim stay is granted the demand now made – Partial stay granted.

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• 2014 (10) TMI 76
  Nature of investment income – Trader of shares or not – Held that:- Assessee had declared long-term capital gains and the stand of the assessee is that he was an investor as well as trader in shares - the Tribunal has not dealt with the contentions raised after examining and ascertaining the facts in detail - Answer or conclusion has been recorded without reference to facts of the particular year - The factual position can vary and can be materially different – thus, the matter is to be remitted back to the Tribunal for adjudication – Decided in favour of assessee.

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• 2014 (10) TMI 75
  Genuineness of Expenses – Commission paid or not - Held that:- This is nothing but an attempt of seeking re-appreciation and reappraisal of the factual findings - The Tribunal has rightly found that the total commission of Rs. 85.32 lacs was paid - That is by the Assessee who is in the business of import and export of bullion - The amount included quantum paid to M/s Himneel Breweries Limited. The argument was that the services of Director of this Company, namely, Mr. Laxman Khemka were utilized for purchasing the bullion - if the services of a third person are genuinely utilized, then, the commission has to be allowed - the Assessee stated that no such commission was paid in earlier or later year - the Assessee could have procured the bullion without assistance of any agent - the Tribunal in order to satisfy itself whether any services are rendered by this Company, which is in a distinct business, that the presence of it's Director, namely, Mr. Laxman Khemka was found necessary and it was stated that he was not cooperating. There is no supporting evidence to hold that Silver was imported by the Assessee at a lesser price from M/s Jerad Metal and that was possible only because of the contacts of Mr. Laxman Khemka with that entity and because of intervention of one Mr. Amar Singh, Manager of ICICI Bank - If the services were rendered by Mr. Laxman Khemka the commission ought to be paid to him, but that is not to be found to be the factual position – the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (10) TMI 74
  Claim of unabsorbed depreciation under Capital gains – Restriction u/s 34A – Held that:- The carry forward and set off of unabsorbed depreciation allowance was considered in Commissioner of Income Tax vs Jaipuria China Clay Mines (P) Ltd [1965 (11) TMI 32 - SUPREME Court] - the unabsorbed depreciation of the past years should be added to the depreciation of the current year and the aggregate of the unabsorbed depreciation and the current year s depreciation to be deducted from the total income of the previous year relevant for the assessment year 1952-53, and answered in favour of the assessee - the unabsorbed depreciation can be allowed under the head capital gains , however, it shall be restricted to 2/3rd of such allowance – thus, the matter is remitted back to the AO for re-computation of the unabsorbed depreciation and since the Company is in liquidation, the AO shall issue notice to the Official Liquidator – Decided in favour of Revenue.

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• 2014 (10) TMI 73
  Reopening of assessment u/s 147 - Amount spent on construction of godown - unexplained investment u/s 69B or not - The orders of assessment, insofar as they relate to the cost of construction of a godown have been reopened in exercise of power u/s 148 of the Act - The appellants suffered orders of re- assessment in the hands of the assessing authority and accordingly carried the matter to the appellate Commissioner - It is no doubt true that the ground of the absence of factual basis for reopening the assessment was urged - The reason appears to be that the reopening was on the basis of the valuation of the godown by the Superintending Engineer. Miscellaneous application - The assessee are not able to point out as to what exactly the error in the orders passed by the Tribunal in the appeals, which is apparent from the record - the Tribunal did not address the question pertaining to the very basis for reopening the assessment - the Court or a Tribunal is deemed to have taken every aspect that is placed before it, into account and granted the relief which it felt appropriate and gave a disposal to the matter before it, in a manner which it felt appropriate the order of the Tribunal is upheld Decided against assessee.

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• 2014 (10) TMI 72
  Reopening of assessment of HUF u/s 148 – basis for reopening – Held that:- Apart from being an individual assessee, the respondent is the Kartha of the HUF, which is also assessed to tax - Though in the ordinary context, much difference cannot be discerned, the distinction assumes significance from the point of view of assessment and levy of income tax - The notice was issued in his individual capacity - Even when the discrepancy was pointed out, the appellant proceeded on the assumption that once the respondent is before him, it does not matter whether the notice was issued to the HUF or the individual - The Tribunal had rightly observed that there was hardly any explanation or justification for reopening the assessment of the HUF by issuing a notice to the individual - where law requires a thing to be done in a particular manner, it shall be done in that manner, or not at all - The requirement in this behalf is more rigorous in relation to the steps taken by the State and its authorities which have the effect of imposing additional financial liability on the citizens or exposing them to penal consequences - reopening of the assessment was only on the basis of change of opinion and it does not accord with the powers conferred u/s 147 of the Act – Decided against revenue.

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• 2014 (10) TMI 71
  Block assessment order u/s 158BB - Facts and figures of the year of search - Held that:- A perusal of the block assessment discloses that there was no discrepancy or disparity of facts and figures in relation to all the AYs within the block, except the last year - Chapter XIVB is virtually as a self-contained code - It prescribes the procedure to be followed whenever searches are conducted and the undisclosed income is discovered or found - To be fair to the assessee, the chapter provides for allowing all the deductions etc., as is done in the ordinary assessments - since the assessee did not file any returns for the AYs 1996-97, it is difficult to straightaway conclude as to whether they had any unabsorbed loss to their credit - the verification of their books of accounts is necessary. It is only when the AO is satisfied on verification of the books, that the assessee incurred loss during the period preceding search, that an occasion may arise to adjust the same - If in the course of verification it emerges that the assessee have incurred any losses during that period, losses do not answer the description of unabsorbed loss - even while upholding the view taken by the AO as well as the Tribunal, the verification of the books of accounts for the AY 1996-97 preceding the date of search needs to be undertaken – thus, the revenue is directed to undertake verification of the books of accounts for AY 1996-97referable to the period, preceding the date of search and if the respondent is satisfied that the appellants have incurred loss during that period, he shall take the same into account for determining the undisclosed income, as well as for passing the block assessment order – Decided partly in favour of assessee.

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• 2014 (10) TMI 70
  Application of section 60 and 64(4)(iv) – The petitioner is the Kartha of HUF and the HUF is a partner, in a firm - petitioner gifted half of the holding in the firm to his wife - profit derived by Smt. Subbaratnamma – Held that:- The HUF held a share in the firm and it was receiving its share of profits from the firm - That in turn was being treated as the income of the HUF - Had it been a case where the HUF transferred part of its share in the firm in favour of an outsider, its income, to that extent could have certainly been treated as reduced - The transfer is said to have been made by the petitioner in the form of a gift to none other than his wife - the donee is very much part of the HUF, along with the children - Even if the disposition through the declaration is treated as valid, it did not have the effect of taking any fraction of the share of the HUF in the firm, outside the purview of the HUF. When the entire shareholding in the firm is by the HUF, there was no occasion or basis for further changing the extents among the persons constituting HUF - in a HUF, no member can claim any definite share in the assets, till the partition takes place - as long as the Hindu Family remains joint, which in fact is a sine qua non for it to be recognised as HUF, the question of one member of the HUF claiming any particular share in it, in contradistinction to undivided share much less transferring it in favour of another does not arise - once the assessee is a HUF and its income from the partnership firm remained unaffected, no legal consequences referable to the Act can be said to have flown from the declaration dated 15-04-1981 said to have been made by the petitioner – Decided against assessee.

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• 2014 (10) TMI 69
  Unexplained investment – Held that:- There was not even an indication as to the suppression of income, she voluntarily filed revised returns for as many as 7 assessment years - She reflected two sources of income - The first is through money lending business and the second is in the form of gifts received by her - the Tribunal has undertaken extensive discussion with reference to each and every ground - it is not a case where the appellant came forward with the revised returns, on being issued notice by an authority under the Act - As regards the source to commence the money lending business, the plea of the appellant was that she has savings through agricultural income - There cannot be a better instance of stretching a totally unrelated fact to the extent of straining it – assessee has shown the income through agriculture - it had accrued to her free from any obligation and she has every right to put the amount to the use of her choice - It was nobodys case that the income earned by the appellant through agriculture was spent for social obligations - the Tribunal has permitted its imagination to cross all barriers of propriety and reasonableness. The law does not indicate that a gift must emanate only from a known person - it is difficult to describe let alone define, as to when a person can be said to be related to another, in the context of making gifts - A small gesture of affection may result in presentation of quite a fabulous gift and, even where stupendous service is rendered, it may not fetch even an act of gratitude - Much would depend upon the thinking of the concerned persons as well as their financial conditions – the order of the Tribunal is set aside – Decided in favour of assessee.

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• 2014 (10) TMI 68
  Business of growing manufacturing and sale of tea - Rule 8 of the Income-tax Rules 1962 – Computation of value of fringe benefit – Inclusion of expenses in the taxable value of fringe benefit - Held that:- The applicability of Rule 8 in the matter of arriving at the value of fringe benefit for the purpose of tax – following the decision in CIT vs. Doom Dooma India Ltd. [2009 (2) TMI 9 - SUPREME COURT] - the amount of expenditure incurred by the assessee in extending fringe benefits to its employees was not solely for the purpose of business - The expenditure incurred is both for the purpose of business and for the purpose of agriculture - The submission made by Mrs. Gutgutia that the expenditure on account of fringe benefits has already been taken into account is not correct - once that is done 40% of the net profit and loss has to be worked out which shall be chargeable to tax - If that is done, the result would be that the agricultural income itself would become liable to tax, which is not permissible under sub-Section 1 of Section 10 of the Income Tax Act – Decided in favour of assessee.

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• Customs

• 2014 (10) TMI 81
  Misdeclaration of goods - Undervaluation of goods - Import in the name of partner - Held that:- It comes out that natural legal heirs of the ex-partner of the firm namely, Smt. Prabha Sharma, wife of late Shri Sushil Kumar Sharma and Smt. Neelam Sharma, wife of late Shri Surinder Mohan Sharma by way of sworn in affidavit dated 01.12.2011 deposed that they are the legal heirs wives of the partners of the importing firm. Commissioner (Appeals) accepting the affidavit directed they should file bill of entry. there is no force in the findings of the Commissioner (Appeals) to allow the so called legal heir to file B/E and claim for imported goods which have been smuggled and later absolutely confiscated. Absolute confiscation is fully justified as goods were prohibited and could not be released provisionally under section 125 of the Customs Act, 1962. Goods are rightly confiscated absolutely. - Decided in favour of Revenue.

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• 2014 (10) TMI 80
  Imposition of penalty - Whether the CESTAT was right and justified in imposing penalty of Rs. 3 lacs on assessee, though it has recorded that Mr. Neeraj Jain was the main culprit - Held that:- total fine imposed on Neeraj Jain is Rs. 7 lacs. Penalty of Rs. 1 lac each has also been imposed on Shailender Singh and Santosh Kumar Jain, but they were not appellants before the Tribunal in the batch of appeals decided by the impugned order. It is submitted that when penalty of Rs. 7 lacs has been imposed on Neeraj Jain, then the penalty of Rs. 3 lacs on appellant M.L. Chandra is not justified even if we accept that M.L. Chandra was to share profit with Neeraj Jain in the ratio of 80%:20%. Penalty should be proportionate. It is also submitted that penalty of Rs. 1 lac has been imposed on Santosh Kumar Jain, but penalty of Rs. 3 lacs has been imposed on the appellant. Santosh Kumar Jain, it is claimed and submitted is the recorded proprietor. It is brought to our notice that M.L. Chandra was hospitalized immediately after recording of his statement dated 31st January, 2004 and the retraction dated 5th February, 2004 was made while the said appellant was still in hospital - Penalty redeuced - Decided partly in favour of assessee.

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• 2014 (10) TMI 79
  Refund of export duty with interest - jurisdiction and/or authority to adjudicate the refund application with respect to units situated in SEZ - Held that:- we granted sufficient time to the Union of India to clarify the position and inform the Court who will be the appropriate authority to decide the refund application, as there cannot be vacuum and the applications for refund cannot be kept pending for unreasonable period. Under the circumstances and so long as the order passed by this Court in [2014 (9) TMI 615 - GUJARAT HIGH COURT] stands, we dispose of the present Special Civil Application by directing the authority mentioned in the communication dated 1-11-2012 to adjudicate, decide and dispose of the refund application of the petitioner in accordance with law and on merits at the earliest However, it is clarified that in case order passed by this Court in [2014 (9) TMI 615 - GUJARAT HIGH COURT] is reviewed and/or modified and/or the Union of India comes with a case that any appropriate authority other than the authority mentioned in the communication dated 1-11-2012 is the authority and/or empowered to decide the refund application, an appropriate review application may be submitted - Decided in favour of assessee.

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• Service Tax

• 2014 (10) TMI 99
  Waiver of pre deposit - procurement of goods and services to the member companies - management consultancy, sponsorship service - Held that:- appellant had taken legal opinion and the nature of service provided which is basically assisting in procurement of inputs and taking into account the fact that for demanding service tax, cost of inputs has also been taken into account, we consider that extended period in this case could not have been invoked because all along the appellants were seeking clarification from the department and had made it clear that they had no intention to evade payment of service tax but were interested in fulfilling their statutory obligations. Since appellants have made out a strong prima facie case on limitation itself, we are not going into other issues at this stage. We also take note of the fact that appellants have deposited an amount of Rs. 4,45,82,010/- and Rs. 6,92,291/- also. In view of the above, the requirement of balance dues is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

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• 2014 (10) TMI 98
  Activity of development and construction of apartments - Whether service tax collected from the customers and kept in the escrow account and not paid to the Government would attract provisions of Section 73A of the Finance Act, 1994 or not - Held that:- if a person has collected any amount as service tax, that amount has to be paid to the Government. In this case, question is whether that amount can be said to have been collected. Admittedly, the meaning of ‘escrow account’ is that amount is kept with a third party and has to be disbursed to a person who is eligible to get the same as and when the issue attains finality. It is stated that the amount collected by the appellant was kept in escrow account and he has given an assurance to the buyer that if the amount is not liable to be paid, the same shall be paid with interest. It is only a deposit which is not taken into account of the appellant and kept in a separate account to ensure safety of money and to ensure disbursement to the ultimate customer. Needless to say that if the liability exists and if it is held that the appellant is liable to pay, the amount will have to be paid to the Government since it is in escrow account. Therefore Commissioner should have determined the liability and if there was liability, the amount in escrow account would have been paid to the Government. Therefore, at this stage, we cannot say that the amount has been collected as service tax and therefore, the clause (2) of Section 73A is attracted and the amount should have been paid to the Government by the appellant. It is not the case of the department that the appellant is liable to pay service tax on the service rendered - Decided in favour of assessee.

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• 2014 (10) TMI 97
  Works contracts - turnkey projects - change in classification - service provider paid service tax prior to 01.06.2007 for the taxable service, namely, erection, commissioning or installation service - Held that:- Where projects were started after 01.06.2007, in respect of these projects at least, in our opinion, prima facie the decision of the Tribunal in the case of Ramky Infrastructure (2012 (6) TMI 165 - CESTAT, Bangalore) may be applicable. Even though we are required to go into much more detailed submissions, records and statutory provisions etc., we consider that the learned counsel was fair in submitting that the amount of more than Rs. 3.22 crores deposited by them would be sufficient to discharge the entire service tax liability arising for the period up to September 2009 in respect of all these projects. However he was not able to produce a worksheet to support this claim. Since considerable time was spent in hearing the matter, it was felt that it may not be worthwhile adjourning the matter only for this purpose and therefore if the appellants are required to deposit some additional amount, that can be considered as sufficient for pre-deposit to hear the matter. - Conditional stay granted.

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• 2014 (10) TMI 96
  Intellectual Property Right service - exemption notification No. 17/2004-S.T. dated 10.9.2004 - Held that:- Procedure followed by the appellant has resulted in short payment of service tax to the extent of R&D cess deducted till cess was paid. Therefore, a view can be taken that there was a delayed payment of service tax to the extent of R&D cess and the appellants are liable to pay interest. Demanding entire amount of service tax equal to R&D cess is not correct. Since we have taken a view that the appellant does not have prim facie case in respect of deduction made by them and we have also taken note of the consequence of the procedure followed by the appellant, we consider that the appellant should deposit the interest because of the delayed payment of service tax to the extent of R&D cess within eight weeks and report compliance on 11/9/2014. Subject to compliance of above requirement, there shall be waiver of pre-deposit and stay against recovery of balance dues for 180 days from the date of this order - Partial stay granted.

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• 2014 (10) TMI 95
  Classification of service - Consulting Engineer Service or Real Estate Agent Service - Import of servcies - Commission (appeals) agreed with the classification under Real Estate Agent service but set aside the demand of tax holding that the services were mainly provided offshore and only some peripheral activities such as visit of personnel to the site were performed in India and other attendant expenses on communication and temporary structure facilities were incurred in India and therefore service tax is not leviable. - Held that:- there seems to over lapping between the description of the two services. Although, some components in the definition of Real Estate Consultant have been performed by Bechtel, the description of some components in the definition appear to be related to rendering service in relation to sale, purchase, leasing or renting of Real Estate. However, the activities of a Consulting Engineer are more comprehensive in scope as they cover all disciplines of consultancy and engineering be it feasibility study, detailed designing, construction, civil, mechanical, electrical engineering etc. The contention of the appellant that the Consulting Engineer Service more specifically describes the service provided by them and is the correct classification in terms of Section 65A (2) (a) for determination of classification is accepted. - the service provided by M/s. Bechtel comes under the category of Consulting Engineer Service. Offshore Services and levy of tax - Held that:- Keeping aside the peripheral activities of deputing personnel to India, the demand of service tax from a foreign entity is not valid especially when Revenue has not put forth any evidence that the services provided under the Agreement were not provided offshore. - Even if Revenue's stand (although Revenue's stand is not very clear) is that service has been provided from offshore territory to India, we find it is a settled matter that Service Tax on services provided by a service provider located outside India to a recipient in India is leviable only from 18.4.2006 with the introduction of Section 66A. - Decided against Revenue.

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• 2014 (10) TMI 94
  Survey and exploration of mineral, oil and gases - Off-shore jack up drilling rig services - Held that:- it would appear that the activity is not limited to exploration alone but if the well is successful it will be used for mining the oil also. - appellants relied upon the decision in the case of M/s. Atwood Oceanics Pacific Ltd. reported in 2012 (12) TMI 425 (CESTAT) - it may not be correct to take a view that drilling a well in this case is basically a part of pre-mining activity. Therefore from the definition itself, it is possible to take a view that appellant may not be liable to pay tax. In addition to that as submitted by the appellants, they had brought it to the notice of GSPC on 5.10.2004 and had sought GSPC confirmation and further GSPC had issued a letter to them that no service tax would be liable in view of the fact that its distance in terms of nautical miles from Kakinada shore base is more than 12 nautical miles and therefore the activity is not liable to service tax. However, the Commissioner in this case has relied on a subsequent letter issued by Directorate General of Hydrocarbons (DGHC) that wells are within 12 nautical miles of Indian landmass Hope Island, which is part of India is less than 12 nautical miles from all the wells. In our opinion, two opinions given by expert body like DGHC about the distance itself would show that demand cannot be extended beyond normal period. Moreover, it was also submitted that the appellant has explicitly communicated to GSPC that in the event any service tax is demanded, the burden would be on GSPC. In the absence of evidence to show that GSPC has not rejected this contention and in the absence of any such finding by the Commissioner, which compels us to accept this submission, what emerges is the fact that appellant had no reason not to pay service tax since in any case GSPC was liable to pay. - demand and penalty set aside - Decided in favor of assessee.

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• Central Excise

• 2014 (10) TMI 91
  Transfer of unutilized CENVAT credit - transfer of capital goods - Held that:- when the matter was called, the learned counsel submitted three delivery challans covering the movement of capital goods from the units to the new units. Further, he also submitted that there was no credit relating to capital goods in the books of accounts and therefore there was no transfer of credit. Ongoing through the jurisdictional Range Officer s reports available in both the orders of the lower authorities, we find that Commissioner (A) while coming to the conclusion that capital goods had been transferred and there is no credit to be transferred, has seen the delivery challans. Delivery challans numbers and the dates are available in paragraph 11 of the impugned order. In view of the fact that there is evidence of movement of capital goods and both the Range Officers have not mentioned anything specifically regarding credit relatable to capital goods and naturally, logical conclusion would be that there is no CENVAT credit attributable to the capital goods to be transferred to units. - Decided against Revenue.

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• 2014 (10) TMI 90
  CENVAT Credit - input services - manpower supply agent service - Service of first-aid facilities to the workers - Nexus with manufacturing activity - Held that:- Providing of first-aid facilities to the workers, whether in the factory or in mines is the requirement of the Factories Act, 1948 and also the Mines Act, 1952 and if a manufacturer wants to carry on manufacturing activities, he has to comply with the provisions of the Factories Act and the Mines Act. In view of this, the availment of service for maintenance of the first-aid facilities for the workers has to be treated as the service used in or in realtion to the manufacture of final products. I find that the same view has been taken by the Hon’ble Gujarat High Court in the case of Ferromatik Milacron India Ltd. (2010 (4) TMI 649 - GUJARAT HIGH COURT). Under the provisions of Section 46 of the Factories Act, it is mandatory for the employer to provide canteen services to the staff. Thus, provision of canteen services is a statutory requirement. Provision of canteen services being indispensable, it is incumbent on a manufacturer of goods, to provide the same if he desires to run his factory. In view of the definition of ‘input service’ which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products. In the circumstances, canteen services which are indispensable in relation to manufacture of the final products would certainly fall within the ambit of ‘input service’ as defined under the Rules. impugned order denying the cenvat credit is not sustainable - Decided in favour of assessee.

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• 2014 (10) TMI 89
  Denial of CENVAT Credit - capital goods installed in appellant's premises belonged to the job worker - Held that:- Reason mentioned for non-appearance before Tribunal is reasonable. Accordingly, the appellant's prayer for recall of stay order ordering predeposit of entire duty amount and the MISC application for recalling the stay order is allowed and the stay order No.40645/2014 dt 2.5.2014 is recalled and restored to its original number - There is no dispute on the fact that the appellants availed capital goods credit on the machinery purchased by their job worker and installed in appellant's premises for carrying out the job work inside their factory - prima facie, the applicants have made out a case for waiver of entire amount of demand along with interest and penalty. Accordingly, predeposit of entire dues arising out of impugned order is waived and its recovery thereof stayed till pendency of the appeal - Stay granted.

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• 2014 (10) TMI 88
  Clandestine removal of goods - Lack of evidence - Whether appellants have diverted the imported tubes as clandestinely or used the same for remelting and making of copper tubes of higher dimensions - Held that:- during stock taking of the factory premises of the main appellant, no grave discrepancies were found and Commissioner has not disputed that imported copper tubes can be remelted to make out higher diameter tubes - even if there is no evidence of clandestine removal of pipes still he is holding that appellant is not able to justify their claim of remelting of imported copper pipes conclusively. It is also observed that adjudicating authority has found such practice of issuing copper pipes for remelting was in vogue during the period April 2007 to September 2007. There is no evidence like seizure of clandestinely removed imported copper pipes or extra raw material acquired by the main appellant for manufacturing higher diameter copper pipes/tubes. The statements of the Chairman and Authorised signatory of the main appellant also do not say anywhere that the imported copper tubes have been diverted clandestinely. Though the initial statement of Shri Sanjay Mardia recorded by the investigation team convey that he was not able to properly convey as to how imported copper tubes were dealt, but it is well settled law now that few statements, which are not corroborated by other evidences and were subsequently retracted, cannot be the sole basis for quantification and confirmation of demand on clandestine manufacture and clearance of the final excisable goods. Appellants have, therefore, made out a prima facie case for full waiver of the confirmed dues and penalties. - Stay granted.

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• 2014 (10) TMI 87
  Maintainability of appeal - Validity of authorization - Committee of Commissioners Constituted of Commissioner of Central Excise - Held that:- authorization obtain to file the appeal is undated, therefore, the authorization is not proper. Hence, the appeal is required to be dismissed in toto - Decided against Revenue.

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• 2014 (10) TMI 86
  CENVAT Credit - Notification No.18/2012-CE (NT) dt. 17.3.2012 - transfer of unutilised cenvat credit of SAD lying in balance - Held that:- there is no dispute on eligibility of transfer of credit under Rule 10A of the said Rules. The adjudicating authority, already observed that there is non-compliance of the procedural requirement. In any event, we find that, according to the Revenue, the appellant would be eligible to transfer such credit on or after 1.7.2012 which they had transferred in 31.5.2012. In this context, the learned advocate submits that they have not utilized the entire credit. On a query from Bench, Ld. Advocate submits that they have utilized the credit during the relevant period about Rs. 25 lakhs. We find that the applicant transferred the credit but utilized about 4% of the credit during the material period - the words "at the end of a quarter" in the said Rules would apply from March 2012 quarter and there is no specific mention in the Rules that it would apply from June 2012. Applicant has made out a strong prima facie case for waiver of predeposit of entire amount of duty along with interest and penalty. Accordingly, the predeposit of entire amount of duty along with interest and penalty would be waived and its recovery be stayed till disposal of appeal. - stay granted.

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• 2014 (10) TMI 85
  Waiver of pre deposit - Classification of goods - Classification under CETH 84.21 or under CETH 84.24 - Held that:- From the product-literature produced, it is clear that the filters manufactured by the appellant are mainly used in agricultural/horticultural systems and have no application elsewhere. From the purchase orders available on record, it is seen that the buyers of the goods are manufacturers of irrigation systems, which also indicates that they are used in irrigation systems. These evidences on record confirm the fact that the products would merit classification under CETH 8424 and not under the CETH 8421. The various decisions relied upon by the appellant also support the appellant's case for classification as agricultural/horticultural equipment. In view of the above, we find that the appellant has made out a case to grant of stay. Accordingly, we grant waiver from pre-deposit of the dues adjudged against the appellant and stay recovery during the pendency of the appeal - Stay granted.

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• 2014 (10) TMI 84
  Availment of CENVAT Credit twice - Imposition of penalty - Held that:- During the period Oct.’07 to Mar.’10, the applicant had availed Cenvat credit twice to the tune of Rs. 66,26,625/- on the basis of 113 nos. of input invoices. There is no dispute that the initial credit was taken on the basis of invoices marked with ‘MRN’. For the second time, they have taken credit on the basis of same invoices without any marking of ‘Material Receipt No.’ Thus, it is apparent that the applicant had taken credit twice on the same invoices with or without MRN No. It is also noticed that the preventive officers during the verification of the records had detected continuous availment of Cenvat credit twice in some invoices such and, therefore, prima facie the contention of the learned Counsel that they have voluntarily deposited the tax cannot be accepted - Assessee has taken the credit twice on the basis of documents continuously for more than two years. Therefore, the facts of the said case would not be applicable herein. Applicant failed the make out a prima facie case for waiver of pre-deposit of the entire amount of penalty - stay denied.

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• 2014 (10) TMI 83
  Cenvat credit - M.S.Angles, Channels, Beams, Plates, flats, G.C./G.P. Sheets etc., claimed to have been used in the fabrication of capital goods - Held that:- The ld.Adjudicating Authority has directed the field formation for a factual verification of the claim of the Appellant. Consequently, the Range Superintendent after due verification submitted to the adjudicating authority in explaining the use of disputed items at various locations/machineries in the factory. A copy of the said verification report ought to have been handed over to them, before deciding the issue and non-supply of the same, resulted in violation of principle of natural justice - Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 82
  Waiver of predeposit of tax - Cenvat Credit - input services - Management, Maintenance & Repair Service of helicopter and Management Consultancy Service - Held that:- Applicant availed credit on Management Consultancy Services based on the fact that Shri Sankar, Group Chairman of the Company was providing Management Consultancy Services to the applicant and raised invoices for the services rendered and service tax was paid on those services by the applicant unit and service was rendered to other units also. Hence on this issue, the applicant is failed to make prima facie case for waiver of entire amount of tax. - stay granted partly.

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• CST, VAT & Sales Tax

• 2014 (10) TMI 93
  Benefit of Input Tax Credit - penalty at 150% under Section 27(3) (c) of the Tamil Nadu Value Added Tax Act, 2006 - Held that:- A perusal of the records would show that the authority had issued the show cause notices on 06.05.2014 granting fifteen days time to file its objection and the petitioner has received the same only on 22.05.2014. However, the authority without even waiting for the time granted for filing the objections by the petitioner had passed the impugned order on 06.06.2014. Hence, the same is liable to be set aside and accordingly, it is set aside. However, the petitioner is directed to approach the respondent and file its objections within one week from today [without waiting for this order copy]. On such objections being filed, the respondent is directed to consider the same afresh and pass orders on merits and in accordance with law - Decided in favour of assessee.

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• 2014 (10) TMI 92
  Liability to tax - Payment already made not credited to account - Held that:- It is trite that under Section 55C of the KGST Act, appropriation has to be made first towards interest and the balance available towards principal outstanding. Hence, satisfaction of interest first and the balance against the demand of Rs. 7,46,427/- towards TOT is justified. But, the Assessing Officer shall not calculate any interest prior to 14.03.2013. The amount payable as on 14.03.2013 is crystallized in the order Exhibit P4 and definitely future interest could be computed as per the appropriation made under Section 55C and a statement issued to that extent of the payments made in instalments. Hence, subsequent to Exhibit P4, when instalments are made, as directed in Exhibit P3; first the interest due should be satisfied. While any portion of the interest remains due, the tax demand would carry interest. On the interest being satisfied, payments should be credited to the tax demand. There shall be a direction to the 1st respondent to compute such amounts and give a statement to the petitioner within three weeks from today and if the petitioner remits the said amounts within three weeks therefrom, there shall be no further demand made. Decided in favour of assessee.

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