TMI Tax Updates - e-Newsletter
October 8, 2014

Case Laws in this Newsletter:

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

Articles

1. VAT Problems In E-Commerce Transactions – Amazon’s Karnataka Case Study (A Potential Noscitur Principle Issue)

   By: CA.Ankit Gulgulia

2. Paper Board notified for the purpose of E-ICC and E-Trip-some interesting analysis

   By: AMIT BAJAJ ADVOCATE

News

1. DIPP on a Overdrive to Boost Manufacturing

2. Commerce Secretary Inaugurates India Pavilion at CPHI Worldwide 2014

3. Gross Direct Taxes Collections during April-September of the Current Financial Year 2014-15 is up by 15.00 percent and stood at ₹ 3,46,144 crore as against ₹ 3,01,063 crore Collected during the same Period Last Year

4. RBI Reference Rate for US $

Notifications

Income Tax

1. 48/2014 - dated 30-9-2014 - IT

Income-tax (10th Amendment) Rules, 2014 - Prescribed authority under section 133C

2. G.S.R. 624(E) - dated 28-8-2014 - IT

U/s 120 of the Income Tax Act 1961 - Jurisdiction of Direct Taxes Regional Training Institutes (DTRTIs)

3. G.S.R 625(E) - dated 28-8-2014 - IT

U/s 120 of the Income Tax Act 1961 - Jurisdiction of Ministerial Staff Training Units (MSTUs)

4. 1/2014 - dated 21-7-2014 - IT

Notification u/s 35AC - Notifies the various institutions Approved by the National Committee.

Highlights / Catch Notes

Income Tax

• Improper Service of Notice Invalidates Assessment Reopening u/s 148, Lacking Jurisdiction, Says High Court.

  Case-Laws - HC : Reopening of assessment u/s 148 – when notice u/s 148 of the Act is not duly served on the assessee, the proceedings u/s 147 of the Act is one without jurisdiction and the Tribunal has rightly set aside the order - HC
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• Interest-Free Loans to Sister Concerns: Interest Deduction Disallowed During Litigation or Arbitration Proceedings Involving Sister Entity.

  Case-Laws - HC : Interest on borrowed funds disallowance - interest free loan given to sister concerns - The sister concern getting into litigation or involving itself in a arbitration proceedings to which the holding company is nowhere responsible, cannot be made a ground for allowing deduction - HC
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• High Court Allows Expense Claim for Abandoned Project u/s 37(1) After Initial Disallowance and "Work-in-Progress" Status.

  Case-Laws - HC : Claim of expenses disallowed u/s 37(1) - expenditure/loss incurred on abandoned project – for the first two years the expenditure is shown as “work-in-progress” - claim of expenses allowed - HC
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• High Court Remands Tribunal's Decision on 5% ALP Reduction for Reassessment u/s 92C(2) Proviso.

  Case-Laws - HC : Reduction of 5% of ALP u/s 92CA(2) – the order of the Tribunal in relation to the claim of reduction of 5% of arm's length price of international transaction in view of proviso to section 92C(2) is set aside and the matter is remitted back to the Tribunal for fresh consideration - HC
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• High Court Rules Expenses on Interior Modifications as Revenue in Nature, Resulting in Long-term Rent Savings for Taxpayer.

  Case-Laws - HC : Classification of expenses - Expenses on wooden partitions, electric wiring, power connections, interior layout and carpeting - the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts - held as revenue in nature - HC
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• Capital Gains Tax: Use Original Owner's Holding Period for Indexed Cost on Inherited Assets.

  Case-Laws - HC : Computation of indexed cost of acquisition – capital gain on transfer of capital asset acquired through succession - for the purpose of 'Indexed Cost of Acquisition', it has to be understood as the first year in which the previous owner held the said property - HC
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• Technical service fees are non-taxable in India without a Permanent Establishment; no tax deduction if services not made available.

  Case-Laws - HC : Fees for technical services paid, taxable or not – No Permanent Establishment in India - when once factually it is held the technical services has not been made available, then, there is no liability to deduct tax at source - HC
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Customs

• 4% Special Additional Duty Refunds via Re-Credit Post-June 2013 Deemed Improper.

  Case-Laws - AT : Whether sanctioning of 4% of SAD refunds by way of re-credit in the respective licenses after 30.06.2013 was proper or not - held as not proper - AT
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• High Protein Poultry Mash rightly classified under CETA chapter 2302 and CTA chapter 2309, not CETA chapter 2301.

  Case-Laws - AT : Classification of High Protein Poultry Mash (HPPM) - HPPM is rightly classifiable under chapter 2302 of CETA and 2309 of CTA and not under chapter 2301 of CETA - AT
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Service Tax

• Refund Claim Rejected: Attempted Adjustment Against Unconfirmed Demand Lacks Legal Authority.

  Case-Laws - AT : Rejection of refund claim - adjustment of unconfirmed demand with refund - there was no legal authority to adjust the amount as the same cannot be held to be a confirmed demand for the reasons recorded - AT
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• Appellants can offset excess service tax paid this month against next month's liabilities.

  Case-Laws - AT : Adjustment of excess service tax - Whether the excess service tax paid in same months can be adjusted by the appellants in the following months - held yes - AT
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• Appellant's Creative Activities Not Classified as "Sound Recording" for Service Tax Purposes, Court Concludes.

  Case-Laws - AT : Activities undertaken by the appellant involves writing of scripts, recording voices of artists, producing the program, providing musical background and recording of sound - prima facie appellant's activity does not fall within the statutory definition of “sound recording“- AT
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• Clearing Agent Allowed to Sell Goods in Small Lots, Not Just Acting for Principal.

  Case-Laws - AT : Nature of activity - Clearing and forwarding agents - appellant is free to sell the goods to his customers in small lots. Such permission given to the assessee in the present case is indicative of the fact that he is not working as clearing and forwarding agent of the principal. - AT
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• Small Scale Industry Exemption Under Notification No. 6/2005-S.T. Allowed Despite Non-Opt-In by Assessee.

  Case-Laws - AT : Benefit of Notification No. 6/2005-S.T. - SSI exemption - revenue argue that SSI benefit cannot be extended when the assessee has not opted for the same - benefit of small scale exemption allowed - AT
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Central Excise

• Appellant Settles Interest on 100% CENVAT Credit in First Year; No Recovery Needed for 50% Credit.

  Case-Laws - AT : CENVAT Credit - Capital goods - 100% credit availed in the first year - Since the appellant has already compensated the Central Government by paying the interest, the question of recovery of the Cenvat Credit of the 50% availed by them in the same financial year does not arise. - AT
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• Suppliers can claim CENVAT Credit if job workers pay duty on manufactured goods, creating a revenue-neutral situation.

  Case-Laws - AT : CENVAT Credit - Job work - Even if a job worker pays duty on the goods manufactured by him the same will be eligible as CENVAT Credit to the supplier of the raw material making it a totally revenue neutral situation - AT
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• Input Credit Allowed as Bills of Entry Endorsed in Appellant's Name Despite Head Office Issue.

  Case-Laws - AT : Denial of input credit - Bills of Entry were in the name of their Head Office - it is not in dispute that lorry receipts and the Bills of Entry are having endorsements in the name of the appellant - credit allowed - AT
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• Extended Limitation Period Not Applicable for Captive Consumption u/r 6(b) Valuation Rules in Central Excise Law.

  Case-Laws - AT : Extended period of limitation - captive consumption - As the issue is that whether Rule 6 (b)(i) is applicable to the facts of this case or Rule 6(b) (ii) of the Valuation Rules is applicable to this case, therefore we hold that the extended period of limitation is not invokable - AT
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Case Laws:

• Income Tax

• 2014 (10) TMI 114
  Stay application – Imposition of condition – Held that:- Once it is admitted that at least 25% of the demand now made by the revenue is already with them in the form of an amount due by way of refund, the imposition of the condition does not appear to be proper - The fact that a refund of at least 25% of the total amount now demanded is due to the assessee has not been taken note of by the respondents - the writ petition is allowed and the condition imposed in the order for payment of 50% of the demand is set aside – Stay granted.

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• 2014 (10) TMI 113
  Reopening of assessment u/s 147 – Reason to believe - claim of deduction u/s 80HHC – Held that:- The Tribunal had rightly held that the assessee had disclosed all material facts - Had they not been disclosed, then, it was not possible for the revenue to bifurcate the income from the export and income from salary - If the deduction which was disclosed as income from export included the salary, then, that was also disclosed and material facts in relation thereof were on record - though the Tribunal could not have upheld the exercise of powers by the AO, the case clearly fell within the proviso to section 147 – the facts was not falling within the later part of the distinction made by the Tribunal but the earlier one – the AO could not have proceeded u/s 147 – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (10) TMI 112
  Reopening of assessment u/s 148 – Proof for having dispatched notice - Held that:- Before making the assessment or reassessment or re-computation u/s 147 of the Act, the AO shall serve notice on the assessee - service of notice u/s 148 (1) of the Act is a condition precedent before initiating proceedings u/s 147 of the Act – relying upon S.Narayanappa Vs. Commissioner of Income Tax [1966 (9) TMI 36 - SUPREME Court] - the proceedings for assessment or reassessment u/s 34(1)(a) of the Act which is in pari materia with Section 147 of the Act, which start with the issue of a notice and it is only after the service of notice, that the assessee whose income is sought to be assessed or reassessed becomes a party to the proceedings - if such a service of notice is not affected, there cannot be any assessment or reassessment proceedings – also in Commissioner of Income Tax Vs. Mani Kakar [2008 (10) TMI 565 - HIGH COURT OF DELHI] proceedings u/s 147 of the Act cannot be initiated without the service of notice as mandated in Section 148 of the Act - Service of notice is a precondition for permitting asessement under Section 147 of the Act - when notice u/s 148 of the Act is not duly served on the assessee, the proceedings u/s 147 of the Act is one without jurisdiction and the Tribunal has rightly set aside the order – the order of the Tribunal is upheld – decided against the revenue.

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• 2014 (10) TMI 111
  Allowability of expenses – Payment made to M/s. Akerrald Investments Ltd. – nexus between the payment made for the services rendered by them and the consultancy services for which they received the payment - Held that:- In order to render consultancy services and achieve performance parameters, all of them entered into an agreement with M/s. Akerrald Investments Ltd. who in turn submitted a report giving analyses about the biscuit market in Pakistan, Nepal, Srilanka, Bangladesh and Maldives - The sizes of the various markets have been estimated broadly on the available data on population and consumption and GDP per capita figures - All of them have paid a sum as the fee for the services rendered by M/s. Akerrald Investments Ltd. - all the three authorities have concurrently held in the first place, there was no obligation on the part of the assessees to have such a report from M/s. Akerrald Investments Ltd. - even if they have obtained report, there is no nexus between the said report and a consultancy service they were expected to render under the agreement between them and BIL - the consultancy service was only for the period from 1.10.2000 to 30.9.2001 - The report of M/s. Akerrald Investments Ltd. is dated 28.9.2001, two days prior to the expiry of the period of consultancy service – the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (10) TMI 110
  Interest on borrowed funds disallowance - interest free loan given to sister concerns - Whether the Tribunal was correct in holding that due to an award passed in Arbitration Proceedings between M/s.K. Raheja Development Corporation and M/s.Unique Estates Development Corporation and M/s.Sea-Crust Properties Pvt. Ltd. where the Assessee was not a party, interest was paid due to compelling reasons and therefore allowable deduction – Held that:- The explanation offered by the assessee is that the interest could not be charged due to certain disputes among certain members of Raheja Group Concern - The explanation was not accepted by the assessing authority as well as the Appellate Commissioner - it is not their opinion that in every case interest on borrowed loan has to be allowed if a assessee advances it to a sister concern - the assessee received payment from its clients and it deposited the same in the account and subsequently, the said amount were paid to the sister concern - No interest was charged for the amounts so advanced to the sister concern - the assessee borrowed the fund from the bank and lent it to the sister concern as interest free loan. The test in such a case is really whether this was done as a measure of commercial expediency - If the interest free loan was given to the sister company as a commercial expediency, then such interest paid on such capital could have to be allowed - interest on borrowed loan advanced to its sister concern cannot be claimed as deduction automatically - the sister concern has returned a substantial portion of the amount borrowed - Merely because they got into litigation and suffered arbitration award is not a justification for not paying the interest for the amount borrowed - The sister concern getting into litigation or involving itself in a arbitration proceedings to which the holding company is nowhere responsible, cannot be made a ground for allowing deduction – Decided in favour of revenue.

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• 2014 (10) TMI 109
  Claim of expenses disallowed u/s 37(1) - expenditure/loss incurred on abandoned project – Held that:- The FAA has looked into the profit and loss account and was convinced that for the first two years the expenditure is shown as “work-in-progress” but as the expenditure was not shown as work-in-progress and the entire expenditure was shown as expenditure the assessee is not entitled to the benefit - the assessee in that previous year has shown the entire amount incurred as expenditure and sought for writing off as business expenditure - This aspect has been missed by the FAA - It is only in the relevant year the assessee has not shown the amount spent towards expenditure as work-in-progress - It is during that year the contract was terminated and he put forth the present claim - He could not have shown it as work-in-progress - the finding that he is not entitled to the benefit is ex-facie illegal and cannot be sustained. Relying upon Laxmi Ginning And Oil Mills Versus Commissioner of Income-Tax, Patiala [1970 (12) TMI 17 - PUNJAB AND HARYANA High Court] - if the assessee incurs a liability and when the contract under which that liability was incurred was terminated and when no amounts under the contract or in pursuance of a claim is receivable, he is entitled to claim the said amount incurred as expenditure in implementing the contract as a set off u/s 37(1) r/w 28 of the Act - though the assessee has incurred expenditure during the AYs 2000-2001, 2001-02 and 2002-2003 during which period he has not received any amount as against the expenditure, if and when he receives the money in pursuance of the award which is already passed, if it is upheld by the High Court, the amount is chargeable to income tax as the income of that previous year in which he receives the said amount whether the business in respect of which the deduction has been made is in existence in that year or not - the interest of the revenue is fully protected - All the three authorities have not applied their mind to the factual aspects of the case and have not kept in mind the statutory provisions and thus committed a serious illegality in passing the orders – thus, the order of the Tribunal is set aside – Decided in favour of assessee.

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• 2014 (10) TMI 108
  Set off of STCG on transaction of shares against LTCG on sale of immovable property – Held that:- Sub-section (2) and (3) of section 70 clearly states that where the result of the computation made for any AY in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset -the assessee shall be entitled to have the amount of loss set off against the income, if any, as arrived at under a similar computation made for the AY in respect of any other capital asset not being a short-term capital asset – the Tribunal also held the same – Decided against revenue.

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• 2014 (10) TMI 107
  Assessee in default u/s 201(1) - Treatment of payment made to hire of JCB Machine, Roller & Tractors – Section 194C or 194I – Effect of amendment w.e.f. 13-7-2006 – Held that:- CIT(A) as well as Tribunal have rightly relied upon M/s. Hindustan Coca Cola Beverage Pvt. Ltd Versus Commissioner of Income Tax [2007 (8) TMI 12 - SUPREME COURT OF INDIA] – the deductees had already paid the tax on the same, have set aside the demand raised by the revenue and has quashed and set aside the order passed u/s 201(1) of the Act - once tax due has been paid by the deductee, thereafter tax cannot be recovered once again from the assessee - as such no error has been committed by the tribunal in confirming the order passed by the CIT(A) in quashing and setting aside the demand of tax raised against the assessee and quashing and setting aside the order passed under section 201(1) of the Act with respect to payment made to hire of JCB Machine, Roller & Tractors – thus, as the matter is already remitted back to the AO for verification of the claim and computation of the liability of the assessee to the extent of interest paid by the assessee, there is no reason to interfere with the order – Decided against revenue.

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• 2014 (10) TMI 106
  Admission of review petition – head office expenses u/s 37(1) or u/s 44C – Held that:- As decided in Commissioner of Income-Tax Versus Deutsche Bank AG [2003 (7) TMI 6 - BOMBAY High Court], the Court has refused to entertain the issue and the review petition by the revenue cannot be admitted as it has already been decided that assessee was governed by the DTAA entered into between Germany and India - the deduction in respect of head office expenses allowable would not be less than what is allowable under the Indian Income Tax Act - the head 'office expenses' was deductable u/s 37 of the Act – the DTAA continues to be in force for the AY 1994-95 also – decided against revenue. Bad debts written off u/s 36(1)(vii) and 36(2) – Held that:- CIT(A) and Tribunal was rightly of the view that the advance was given by the assessee to its associate company was in the course of its banking business - the advance made to the associate company was lost only on account of security scam in AY 1993-94 which resulted in the market crashing and consequent losses of the associate company - when the assessee advanced money to its associate company, it could not have foreseen that it would not be recoverable - in any banking business, there are a lot of considerations involved in making advances and merely expressing doubt about the genuineness of the advance is not sufficient to take away discretion of the bankers to make advance – Decided against revenue. Buy back transactions in UTI units – Held that:- The appeal was admitted to the court for adjudication.

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• 2014 (10) TMI 105
  Reduction of 5% of ALP u/s 92CA(2) – Tribunal did not considered the earlier order of the assessee – Held that:- The Tribunal's order has resulted in unnecessary confusion and chaos - The Tribunal ought to be aware and realise if any order passed by it in the prior AYs is followed for the successive years in relation to the same Assessee, then, it must indicate with sufficient clarity, the issue dealt with, the number of the appeal and the date of its order - The reference to the order must be correctly denoted - If it refers to some orders of the prior AYs, then it must also indicate in clear terms as to whether such an order has been delivered in consolidated Appeals of the Assessee and Revenue or whether in isolated appeal or successive appeals of either of them - It is only thereafter the higher Court will be in a position to appreciate the point involved in the matter – thus, the order of the Tribunal in relation to the claim of reduction of 5% of arm's length price of international transaction in view of proviso to section 92C(2) is set aside and the matter is remitted back to the Tribunal for fresh consideration – Decided in favour of revenue.

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• 2014 (10) TMI 104
  Liability to tax u/s 26 (1) of the Gift Tax Act, 1958 - Whether the applicant can be said to have gifted his one- third share in the building to his mother and as a consequence, liable to pay the gift tax and whether any act of transfer in one of the five known methods – Held that:- Two items of property were held by the members of the same family - while the building was held by the mother and the sons in equal shares, the open space was in the name of the two sons - Both the items became the assets of the partnership firm, which was brought into existence through a deed of partnership, dated 07.04.1986 - The assessment of the gift tax is only with reference to the house property – following the decision in CIT vs. Keshavlal lallubhai patel [1964 (11) TMI 9 - SUPREME Court] - it is difficult to infer that any transaction, similar to the one of gift, has taken place when the mother of the applicant became the absolute owner as a process of adjustment of shares between herself and her sons - what becomes clear is that a gift, as defined under Section 2 (xii) of the Act, which is fairly wider than the description of gift under Section 122 of the Transfer of Property Act, can be said to have taken place if only there is a valid and legal disposition. A firm is not a recognised legal personality and no partner can hold any item of the assets, exclusively for himself - the actual entitlement of the partner comes to be translated if only the dissolution takes place and the item of property is allotted to his share - The occasion for the member of a joint family or a co-owner or a partner to make a gift would arise only after his share is determined in the process of partition or dissolution, as the case may be - What has accrued as a result of partition or dissolution does not amount to any transfer at all - The assessing authority proposed to treat the accrual of the property to the mother of the applicant, as a result of partition or dissolution of firm; as a gift – This is contrary to the unequivocal law, laid down by the Honble Supreme Court. - Decided in favour of assessee.

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• 2014 (10) TMI 103
  Claim of depreciation on intangible assets u/s 32(1)(ii) – Pre-operative expenses and SEBI registration fees – Held that:- The claim of depreciation was raised in the AY 2003-2004 - The Assessee claimed that it is allowable as per the provisions of Income Tax Act on block of assets under the head "intangible assets" – Tribunal held that when the AO had to allow depreciation on the written down value of the block of assets, then, it cannot in the present AY dispute the opening written down value of the block of assets nor can he examine the correctness or otherwise of the opening written down value brought forward from the earlier year - The order u/s 143(3) for the AY 2003-2004 continues to operate and no proceedings under the Act were initiated to disturb the same - what comes within the purview of Section 32 (1) (ii) and whether the department was right when it allowed the depreciation on the basis or foundation for the earlier assessment years need not be gone into – the department has allowed the depreciation as claimed with regard to these fees - Decided against revenue.

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• 2014 (10) TMI 102
  Classification of expenses - Expenses on wooden partitions, electric wiring, power connections, interior layout and carpeting - Revenue expenditure or capital expenditure – Held that:- The expression is so typical and complicated that it is difficult to define it with an amount of certainty - Much would depend upon the facts and circumstances of the case in which the question arises – assessee is a lessee of a building - The business premises naturally needed certain alterations and works of arranging partitions extending electricity supplies carpeting, wherever needed was arranged - even while claiming that the expenditure is revenue, in nature, the revenue claimed depreciation on it – Following CIT vs. Madras Auto Service Private Limited [1998 (8) TMI 1 - SUPREME Court] In order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view - the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts - the assessee did not get any capital asset by spending the amounts - The assessee could not have claimed any depreciation - Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure – Decided against revenue. Perquisites to employees – Held that:- The Tribunal rightly held that the amount allowed towards perquisites can be Rs. 500/- per employee and not more than that - there was no binding precedent handed out by the constitutional Courts – Decided against revenue.

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• 2014 (10) TMI 101
  Computation of indexed cost of acquisition – capital gain on transfer of capital asset acquired through succession - Whether the tribunal is right in concluding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee through succession, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee actually became the owner of the asset through succession – Held that:- Though in the definition of indexed cost of acquisition , the word used are, "in which the asset was held by the assessee", a harmonious reading of Sections 48 and 49 makes it clear for the purpose of Indexed Cost of Acquisition , it has to be understood as the first year in which the previous owner held the said property - Otherwise, if the date of inheritance is taken into consideration, then the cost of acquisition of the asset on that date corresponding to the market value is to be taken into consideration - Otherwise, take the cost of acquisition on the day the previous owner acquired it and apply the "Indexed Cost of Acquisition" and then calculate the capital gains and the tax payable – the Tribunal rightly followed Commissioner of Income-tax Versus Manjula J. Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] and the order is upheld – Decided against revenue.

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• 2014 (10) TMI 100
  Fees for technical services paid, taxable or not – No Permanent Establishment in India - Whether the Tribunal was correct in holding that as technology, experience or skill has not been made available to the assessee as per Article 12(4) of DTAA between India and Singapore, the payments made by the assessee were not liable to be taxed under the head "fees for technical services – Held that:- Assessee is engaged in marketing and support system of hardware and software products - The material on record do not disclose that Sun Singapore has made available to the assessee its technical knowledge, experience or skill - the Tribunal rightly held that, as Sun Singapore is not having any permanent establishment and that Sun Singapore has not made available the technical knowledge, experience or skill, the payments made by assessee to Sun Singapore were not required to be taxed under the head "business" and is not taxable in view of Article 7 of DTAA between India and Singapore – relying upon Commissioner of Income Tax and others Vs. De Beers India Minerals (P) Ltd. [2012 (5) TMI 191 - KARNATAKA HIGH COURT] when once factually it is held the technical services has not been made available, then, there is no liability to deduct tax at source – the order of the Tribunal is upheld – Decided against revenue.

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• Customs

• 2014 (10) TMI 123
  SAD Refunds - Notification No. 102/2007-Cus dated 14.09.2007 - Whether sanctioning of 4% of SAD refunds by way of re-credit in the respective licenses after 30.06.2013 was proper or not - Held that:- utilisation of re-credited amounts was permitted / revalidated by CBEC Circulars till 30.06.2013 which was further extended up to 30.09.2013. In Para 7.6 of the orders dated 20.01.2014 passed by the first appellate authority it is factually stated that the re-credits were given well before 30.09.2013. It has not been brought on record by the Revenue that re-credit was allowed by the adjudicating authorities after 30.09.2013. It is also seen that there is no condition under Notification No. 102/2007-Cus that SAD duty should be initially paid through cash. It has been correctly agitated by the respondents in the cross objections that a right given under an exemption notification cannot be taken away by the issue of Departmental Circulars. In view of the above observations orders passed by the first appellate authority are legally correct and are not required to be interfered with - Decided in favour of assessee.

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• 2014 (10) TMI 119
  Classification of High Protein Poultry Mash (HPPM) - Classification under Heading No. 2301 or under Heading No. 2302 and 2309 - Held that:- Sub Heading 2301.00 of CETA covers all residues and waste from food industries which includes bagasse and other waste of sugar manufacture and oil cakes. From the very nature of the description provided under sub-heading 2301.00 of CETA, it is abundantly clear that the goods classifiable under this heading are only residues and wastes arising from food industries. Whereas heading 2302.00 of CETA covers preparations of a kind used in animal feeding including Dog & Cat food - it is evident that the product cleared by the appellant is neither a Residue nor a waste from food industry. As seen from the series of process as explained above, the resultant product emerged is distinct from the mere poultry waste. The very fact that the appellants themselves described in their own invoices as ‘High Protein Poultry Mash’ confirms the view. Added to that the appellants described the HPPM in the invoice documents as ‘Poultry feed supplement and cleared to DTA. The appellants who are fully aware of the new product and its usage and on their own given a specific name and description as HPPM as ‘poultry feed supplement’. Product HPPM is fully satisfies the description given under chapter note of heading 23 of CTA and chapter note of chapter 23 of CETA. Therefore, the product cannot be classifiable under Ch. 2301 of CETA, as a waste as claimed by the appellants. The product of a kind used in animal feeding cannot be covered under Ch. 2301 of CETA. By virtue of chapter note of chapter 23 of CETA read with Explanatory Note to sub-heading 2309 of HSN, we are of the considered view that the product HPPM is rightly classifiable under Ch. 2302 of CETA and Ch. 2309 of CTA. chapter heading 2301 includes the animal wastes such as meat and meat offals only other than bones and other materials. Whereas, as seen from the process, as explained by the appellants themselves before the lower authorities, it is very clear that the poultry wastes used by the appellants for preparation and manufacture of HPPM are intestines, feathers, heads, legs, blood and other offals. Poultry waste of heads, legs contains bones and other materials. It cannot be called as only meat and meat offals, as claimed by the appellants. Therefore, the product HPPM cannot be classifiable under chapter 2301 of CETA. Impugned product HPPM is rightly classifiable under chapter 2302 of CETA and 2309 of CTA and not under chapter 2301 of CETA. - Decided against assessee.

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• 2014 (10) TMI 118
  Violation of EXIM policy - Import of BMW 5 series luxury cars in contravention of Transfer of Residence facility of baggage rules - misdeclaration of the year of manufacture and model number and tampered with the chassis number - imposition of fine and penalty - Held that:- there cannot be two orders by the Tribunal, with two different results. In any event, before passing the impugned order, there is no mention that the earlier order recorded on 3.6.2009 allowing the appeal in part has been withdrawn. The error apparently has not been noticed by the Tribunal while deciding the appeal for the second time. The error as above requires to be corrected. - matter remanded back to verify and record as to whether the earlier order is supported by reasons and if so, has it been withdrawn for any reason - Decided in favour of assessee.

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• 2014 (10) TMI 117
  Misdeclaration of goods - Held that:- The petitioner filed a statutory appeal before the 2nd respondent. The 2nd respondent was expected to consider the appeal memorandum in the light of the order passed by the original authority. However, very strangely, the 2nd respondent recorded that the adjudicating Commissioner has taken an appropriate view in determining levy of redemption fine and penalty which calls for no interference. The order does not contain any indication that the merits of the matter was considered by the 2nd respondent. - The authorities while exercising quasi-judicial functions must record reasons in support of their conclusion. It is not necessary to pass a lengthy order. In case, reasons are supplemented it would enable the appellate and revisional authorities to ascertain the materials considered by the authority in arriving at a decision in a particular manner. In case reasons are not furnished in the order, it would result in failure of justice - Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 116
  Custom House Agent - Oral examination - Held that:- It would be best for the respondents, if they are aggrieved with the judgment delivered by a Court, to carry the matter to the next appellate forum in order to set the controversy at rest. In any event, having examined the judgments of the Kerala High Court [2008 (12) TMI 146 - KERALA HIGH COURT], it cannot but be said that it is a plausible view - writ petition is disposed of with a direction to the respondent to accord an opportunity to similarly circumstanced persons to take the oral examination if, his/her case falls within the time frame fixed by the aforementioned judgments of the High Court of Kerala - There is no dispute insofar as this petitioner is concerned, that the time frame of two years if, calculated from the date of the publication of the result of the written examination, would expire on 28-4-2013 - Decided in favour of assessee.

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• 2014 (10) TMI 115
  Condonation of delay - revision application - Held that:- order-in-appeal was received by the petitioner on 10-10-2001, the period of limitation of three months, as provided under sub-section (2) of Section 129DD of the Customs Act, 1962, would expire on 9-1-2002, and the revision has been dispatched on 8-1-2002, for which, proof has been filed in the form of postal receipt - at the time of raising a query on 25-1-2002, the administrative office would have verified whether the revision has been filed in time and whether it had been communicated to the petitioner/applicant. In that event the petitioner would have had the opportunity of filing the application for condonation of delay, as provided under the proviso to sub-section (2) of Section 129DD of the Customs Act - revision has been dispatched on 8-1-2002, which is well within the period of limitation, and therefore, the revision filed by the petitioner should be treated as filed in time and the order of the first respondent deserves to be set aside and accordingly, it is set aside. The matter is remitted to the first respondent for passing orders on merits. - Delay condoned.

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• Service Tax

• 2014 (10) TMI 139
  Rejection of refund claim - adjustment of unconfirmed demand with refund - Held that:- while confirmed demand can be adjusted from the amount of refund, there is no provision to adjust unconfirmed demand from the amount of refund. It is seen that there has been no show cause notice given to the appellants for showing cause as to why the cenvat credit amount of Rs. 11,18,182 (adjusted from the amount of refund sanctioned) was inadmissible to them and how the same was recoverable under what provision of law and how it was not hit by time bar inspite of having been taken in the year 2005-06. Even if the corrigendum issued on 17.07.2007 is attempted to be treated as a show cause notice, the said corrigendum falls fatally short of the requirement of a notice under Section 73 of the Finance Act, 1994 inasmuch as the said corrigendum does not even mention Section 73 ibid anywhere at all and it also does not contain any grounds to allege as to how the recovery, even if the said credit was held to be inadmissible, was not hit by time bar. Indeed the said corrigendum nowhere requires the appellants to show cause as to why the said amount should not be held inadmissible and why / how the same is recoverable without being hit by time bar. It merely stated that the said amount appeared to be not admissible to them and then straightaway called upon the appellants to show cause as to why the refund claim should not be rejected to the extent of Rs. 11,18,182 As a matter of fact, it has been sanctioned 100% inasmuch as the refund sanctioned is Rs. 11,79,720/-. Having sanctioned the full amount, there was no legal authority to adjust the amount of Rs. 11,18,182/- as the same cannot be held to be a confirmed demand for the reasons recorded earlier. - Decided in favour of assessee.

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• 2014 (10) TMI 138
  Adjustment of excess service tax - Whether the excess service tax paid in same months can be adjusted by the appellants in the following months - Held that:- adjustment of service tax paid in excess in certain months towards the service tax liability of the subsequent months cannot be denied on such technical grounds. Indeed, in a very recent CESTAT judgment order No. 52863/2014 dated 10.07.2014 in the case of Bharat Sanchar Nigam Limited [2011 (7) TMI 946 - CESTAT, NEW DELHI] the issue has been considered and decided in favour of the assessee. Thus, the issue stands settled in favour of the appellants and is no longer res-integra - Decided in favour of assessee.

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• 2014 (10) TMI 137
  Waiver of pre deposit - Sound recording service or advertising agency service - Held that:- Activities undertaken by the appellant involves writing of scripts, recording voices of artists, producing the program, providing musical background and recording of sound. Thus, it is a combination of activities and not merely recording of sound. Therefore, we are of the prima facie view that the appellant's activity does not fall within the statutory definition of "sound recording". The appellant has a bona fide case for grant of stay. - Stay granted.

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• 2014 (10) TMI 136
  Benefit of Notification No.45/2010-ST dt. 20.7.2010 - service in relation to civil structure to facilitate erection of electricity transmission tower - Revenue submits that they have already paid a portion of the demand which cannot be released - Held that:- claim could have been made while replying to the show cause notice so that the lower authorities could have investigated this issue with TNEB. We find from the SCN, it is an admitted fact that appellant rendered services to facilitate erection of electricity transmission tower for TNEB. Hence the applicant is eligible to Exemption Notification No.45/2010. In our view, the exemption notification is applicable in respect of the amount which was not paid relating to electricity transmission tower provided by the service provider. Hence the appellant is not eligible to get refund of tax whatever they have paid. Appellant is eligible to benefit of Exemption Notification No.45/2010-ST dt. 20.7.2010 and the demand of balance amount of tax along with interest and penalty is set aside - Decided in favour of assessee.

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• 2014 (10) TMI 135
  Nature of activity - Clearing and forwarding agents - Held that:- use of expression and in between two expressions clearing and forwarding is reflective of the legislative intention to cover the person rendering clearing and forwarding services both. We also note that in a recent decision, Tribunal in the case of Videocon TV Manufacturer (P) Ltd. vs. CCE NOIDA, vide [2013 (7) TMI 349 - CESTAT NEW DELHI], by referring to Tribunals Larger Bench decision in the case of Larsen & Toubro Ltd. vs. CCE, Chennai reported in [2006 (6) TMI 3 - CESTAT CHENNAI] has held that inasmuch as the assessee is working on commission basis and is not engaged in the activity of receiving goods from the factory or premises of principal, warehousing these goods, receiving despatch orders, arranging despatch of goods as per the direction of the principal, maintaining records of the receipt and despatch of goods and preparing invoices on behalf of the principal cannot be held to be clearing and forwarding agent. The main activity of clearing and forwarding agent is that he receives the despatch orders from the principal and arranges clearance of the goods in terms of the directions of the principal. He is not free to sell or purchase the goods by his own choice - appellant is free to sell the goods to his customers in small lots. Such permission given to the assessee in the present case is indicative of the fact that he is not working as clearing and forwarding agent of the principal. As such, we are of the view that no service tax liability would arise against him - Decided in favour of assessee.

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• 2014 (10) TMI 134
  Insurance service - Employees' State Insurance - Held that:- The Finance Act, 2014 (No.25 of 2014), received the assent of the President on 6.8.2014. This Act introduced Section 100 into the Finance Act 1994. This provision enjoins fortified by a non obstante provision qua provisions of Section 66 of the Act, as it stood prior to 1.7.2012, that no service tax shall be collected in respect of taxable services provided by the Employees’ State Insurance Corporation set up under the Employees' State Insurance Act, 1948, during the period prior to 1.7.2012 It is asserted on behalf of the appellant and conceded on behalf of Revenue that appellant falls within the ambit of the immunities enacted in Section 100 of the Act. As a consequence of this legislative intervention, the service tax liability of the appellant stands effaced. As a result, the impugned order has become inoperative and the appeal therefore is infructuous.

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• 2014 (10) TMI 133
  Levy of penalty u/s 78 - Business Auxiliary service - distributor / commission agent of M/s. Vodafone Essar Gujarat Ltd - service tax with interest paid before issuance of show cause notice - Held that:- appellant started providing services in April 2007 and full payment was made in February 2008. Under these circumstances, the circular issued by the Board in 2007, wherein it was clarified that the conclusion of proceedings envisaged under sub-section (3) of Section 73 would be applicable where the Service Tax and interest are paid on ascertainment by Central Excise officers or otherwise with interest. This case is squarely covered under Section 73(3) of Finance Act, 1994 and therefore penal provision under Section 78 need not be initiated. Therefore, penalty under Section 78 is not sustainable and accordingly the same is set aside. Benefit of Notification No. 6/2005-S.T. - SSI exemption - revenue argue that SSI benefit cannot be extended when the assessee has not opted for the same - Held that:- the appellant took registration for the first time in April 2007 and did not pay any tax and only in February 2008, after coming to note that the appellant was liable to pay tax, they paid the tax. They did not file return also - appellants have to be given the benefit of SSI exemption. - Decided in favour of assessee.

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• 2014 (10) TMI 132
  Waiver of pre deposit - Valuation - Works contract service for several government departments - Held that:- Execution of the works contract had commenced prior to 7-7-2009 and receipt of the consideration for providing such works contract service to NTPC was also prior to 7-7-2009. The inclusion of the value of the transaction covered by the supply contract for assessing the Service Tax liability though after granting the benefit of the composition scheme is therefore, prima facie, unsustainable. The Service Tax liability on the value of the transaction covered by the supply & service works contract is Rs. 36,65,120/-. During personal hearing on 29-1-2013 before the adjudicating authority, the petitioner asserted to have remitted Rs. 6,01,093/- and interest of Rs. 2,07,570/- on an assumption that it had provided Business Auxiliary Service (BAS) to NTPC, on the component of the 5% commission received from NTPC. Prima facie, the classification of the service as works contract service and as concluded by the adjudicating authority and not BAS as the petitioner assumed, appears to be unassailable. The petitioner is however entitled to take credit of the amount of Rs. 6,01,093/- already remitted, but for BAS. On this analysis, the balance Service Tax liability of the petitioner in respect of the transaction value of works contract provided to NTPC is Rs. 30.65 lakhs (approximately) - Conditional stay granted.

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• Central Excise

• 2014 (10) TMI 129
  Denial of CENVAT Credit - Capital goods - 100% credit availed in the first year - Held that:- There being no dispute as to eligibility to avail Cenvat Credit on capital goods, the contravention that has arose is only in respect of the availment of 50% in the credit in the same year instead of next year needs to be condoned. At the same time, the appellant is required to pay appropriate interest on the amount of such credit availed by him in the same financial year. On a specific query from the bench, it was pointed that the appellant has already paid the appropriate interest on the excess availed Cenvat Credit. Ld. Departmental Representative does not dispute the payment of interest. Since the appellant has already compensated the Central Government by paying the interest on the amount of excess Cenvat Credit availed by him; which was eligible to be availed by him in subsequent year, the question of recovery of the Cenvat Credit of the 50% availed by them in the same financial year does not arise. As regards the penalties imposed by the lower authorities, justification given by the appellant that the availment of total Cenvat Credit of the duty paid on the capital goods was inadvertent as the capital goods in question was parts of oxygen plant and different valves seems to be correct as there could be a confusion as to these capital goods may be consumables. Since there is no malafide that could be attributed to such availment of credit nor does the records reveal anything to hold a view against appellant, I am of the view that the penalty imposed on the appellant is unwarranted and needs to be set aside. interest liability which is paid by the appellant is correct, while the Cenvat Credit availed by the appellant is also held to be correct and the penalties imposed are set aside. - decided in favour of assessee.

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• 2014 (10) TMI 128
  CENVAT Credit - Whether the appellants were eligible for CENVAT Credit of Service Tax paid on "onward transportation" for delivery of final products upto the customer's premise or port of export - Held that:- From the copies of invoices and the respective purchase orders it is seen that the terms of delivery of goods have been specified in the purchase orders. In some purchase order the terms is specified as "free delivery to our factory" or "FOB destination" or "delivery charges inclusive" or "delivery at Goa Plant" etc. This clearly indicates that the price of the goods was inclusive of delivery charges and the ownership of the goods remained with the appellants during the transit and the same passed on to the buyer only on delivery at the delivery point. Similarly, the insurance policy drawn in favour of the appellants also indicates that the ownership of the goods in question remained with the appellants till the delivery point - Following decision of ABB Ltd. [2011 (3) TMI 248 - KARNATAKA HIGH COURT] and Parth Poly Pvt. Ltd. [2011 (4) TMI 975 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2014 (10) TMI 127
  Waiver of the pre-deposit - Denial of rebate claim - Held that:- adjudicating authority has recorded that the processors of grey fabrics from whom the appellant had purportedly got the goods processed had clearly indicated that they have not supplied any goods to the appellant and some of the firms were not at all to be found and were either fake / bogus or non-existing firms. appellant had approached one of the broker of textile and sought for only central excise invoices and that also of high value fabrics and in turn agreed to give premium / commission to the tune of 5% to 7% of the value shown in the invoices. - adjudicating authority has recorded detailed findings of the ineligibility of the appellant to claim rebate of duty paid by them on export of goods. As against such a detailed findings, we are of the view that the grounds taken in appeal by the appellant herein needs to be appreciated in depth which can be done only at the time of the final disposal of appeal. - appellant has not made any case for the waiver of the pre-deposit of the amounts involved. At the same time, as the appellant is pleading severe financial hardship, keeping in mind that identically placed appellant Amar Fashions application for waiver of amounts was considered sympathetically and waiver of balance amounts was granted on the ground that said Amar Fashions has deposited an amount of Rs. 50.00 lakhs; we direct the appellant herein to deposit an amount of Rs. 45.00 lakhs for hearing and disposing the appeal on merits - Partial stay granted.

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• 2014 (10) TMI 126
  CENVAT Credit - Notification 35/2003-CE dated 10.04.2003 - Relevant documents not produced - Held that:- Duty on the fabrics was introduced with effect from 01.04.2003 and Rule 9A of the CENVAT Credit Rules, 2002, was introduced for availment of CENVAT Credit on the fabrics lying in the factory of the assessee as on 31.03.2003, Notification No. 35/2003 provides that if any assessee is not able to produce the documents of paying duty for availment of credit, then they can avail the credit on the formula prescribed as per the said Notification. It is not disputed that the appellant has taken the CENVAT credit without producing the duty paying documents as per the formula prescribed as per Notification 35/2003 dated 10.04.2003. A buyer of fabrics, who is unable to produce the document evidencing actual payment of duty are entitled to avail credit as per Rule 9A(2) of the CENVAT Credit Rules, 2002 - to avail Cenvat Credit on the fabrics lying in stock on 31.03.2003, the appellants were not required to produce any documentary evidence of duty paid on the fabrics as per Rule 9A(2) of the CENVAT Credit Rules, 2002. - Decided in favour of assessee.

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• 2014 (10) TMI 125
  CENVAT Credit - Job work - Whether CENVAT Credit is required to be denied, in view of the provisions of Rule 6(2) of CENVAT Credit Rules to the Respondent with respect to credit taken on common inputs/raw material used in the manufacturing of final product on job work basis under Notification No.214/86-CE dt.25.03.1986 read with Rule 4(5)(a) of the CENVAT Credit Rules - Held that:- both the lower authorities have given a categorical finding that Notification No.214/86-CE is, though an exemption notification, but the same is prescribing a procedure to delay the payment of duty and is subject to payment of duty on the finished goods by the supplier of the raw material. Notification No.214/86-CE is only a device to postpone duty payment when read with the provisions of Rule 4(5)(a) of the CENVAT Credit Rules. Even if a job worker pays duty on the goods manufactured by him the same will be eligible as CENVAT Credit to the supplier of the raw material making it a totally revenue neutral situation. Following decision of Sterlite Industries (I) Ltd Vs CCE Pune [2004 (12) TMI 108 - CESTAT, MUMBAI] and Kinetic Engn. Ltd Vs CCE Pune-II [2006 (5) TMI 410 - CESTAT, MUMBAI] - Decided against Revenue.

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• 2014 (10) TMI 124
  Interest on differntial duty - whether the appellant would be liable to pay interest or not - Held that:- It is well settled law that the provisions of law, which were in force, during the relevant period, have to be adopted for deciding any disputed issue. Reference in this regard can be made to decision of the Tribunal in the case of CCE, Daman vs. Nirmala Dyechem reported in [2011 (3) TMI 771 - CESTAT, AHMEDABAD]. The provision of Section 11AB during the relevant period i.e. prior to 11.05.2001 were providing for interest payment only in those cases where duty of excise have not been levied or paid with intention to evade payment of duty on account of reason of fraud, collusion or any wilful mis-statement or suppression of facts. The Tribunal, while remanding the matter has already held that there is no suppression or any malafide on the part of the assessee and has extended the benefit of limitation as also penalty to the assessee. In such a scenario the provision of Section 11AB, as were in existence during the relevant period, would not get attracted inasmuch as the same related to payment of interest only in case of non payment of duty by reason of fraud, collusion or wilful mis-statement etc. Accordingly, while upholding the confirmation of duty, as not being contested by the appellant, in the present case, we set aside the confirmation of demand of interest - Decided in favour of assessee.

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• 2014 (10) TMI 122
  Denial of input credit - whether the appellant imported certain inputs/capital goods and Bills of Entry were in the name of their Head Office in all the six cases but in one case the address of the appellant itself was mentioned in the Bill of Entry - Held that:- it is not in dispute that lorry receipts and the Bills of Entry are having endorsements in the name of the appellant. Therefore, as per Rule 9 of the Cenvat Credit Rules, 2004 the appellant is entitled to take CENVAT Credit on inputs/capital goods. The lower authorities have not understood the said provisions in true spirit therefore, they passed the impugned order. As the order is totally wrong and contrary to the provisions of law therefore, the same is set aside by holding that the appellant is entitled to take CENVAT Credit on the inputs/capital goods in question. - Decided in favour of assessee.

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• 2014 (10) TMI 121
  Extended period of limitation - Valuation - what should be the value of polyamide chips manufactured by them which have been used captively in the manufacture of final product i.e. polyester filament yarn when they have also purchased polyamide chips from the open market - Held that:- Valuation Rules clearly state that if the comparable price is available, in that situation the valuation is to be opted by invoking Rule 6(b)(i) of the Valuation Rules, not as per Rule 6 (b)(ii). As the issue is that whether Rule 6 (b)(i) is applicable to the facts of this case or Rule 6(b) (ii) of the Valuation Rules is applicable to this case, therefore we hold that the extended period of limitation is not invokable - whole of the demand has been confirmed against the appellant by invoking the extended period of limitation. In these circumstances, we hold that the issue or interpreting particular provisions of the Rules. Therefore, the extended period of limitation is not invokable. As extended period is not invokable, therefore the impugned demands are not sustainable. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief if any - Decided in favour of assessee.

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• 2014 (10) TMI 120
  Waiver of pre-deposit of duty, interest and penalty - applicants was clearing their finished products through Pir-Pau and BPT pipelines to their warehouses - Held that:- Prima facie the Pir-Pau pipeline belongs to the applicant as contended by them and they are paying duty on the clearance of the goods. With regard to BPT pipeline, the demand has been confirmed on the basis of presumption and assumption. As in the earlier round of litigation, unconditional waiver has been granted by this Tribunal [2012 (3) TMI 364 - CESTAT MUMBAI], thus, we grant waiver of pre-deposit of the entire amount of duty, interest and penalty and stay recovery thereof during the pendency of the appeal - Stay granted.

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• CST, VAT & Sales Tax

• 2014 (10) TMI 131
  Penalty - Exemption from tax - request to grant 30 days time as against the show cause notice - Violation of principle of natural justice - Held that:- Admittedly, as against the show cause notice dated 10.1.2014, the petitioner sent a reply dated 16.1.2014 and 15.2.2014 seeking extension of time. But the respondent, without considering the same, has straightaway passed the impugned order. Further, though the petitioner claims exemption, the same has also not been considered by the respondent - Admittedly, the claim of exemption has to be considered only by the authority. In that context, I am inclined to set aside the impugned order. Accordingly, the writ petition is allowed and the impugned order is set aside. This matter is remitted back to the respondent for fresh consideration on condition that the petitioner, in order to show his bonafide, has offered to deposit 50% of the tax amount on or before 15.7.2014 - Decided in favour of assessee.

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• 2014 (10) TMI 130
  Non-inclusion of "used-excavator" in the Registration Certificate - Held that:- When the petitioner sought to sell the used excavator, he sought for inclusion of the same in the Registration Certificate. In fact, a mere perusal of Ext.P1 would indicate that "excavator and its accessories" has been included as item No.7 in the Registration Certificate of the petitioner. It is to be noticed that, whether, it be used or new, an excavator is exigible to tax @ 12.5%, as indicated in sub-item No.10 of Entry 15 of S.R.O 82 of 2006. This is especially so, since the petitioner's purchase was in pursuance of an import and that, did not suffer a tax within the State. Hence, any sale made, whether it be inter-State or intra-State, would be exigible to tax @ 12.5% with only the rider that on an inter-State transaction, if the same is supported by Form-C, necessarily the petitioner would be entitled to a concessional rate as provided under Section 8 of the CST Act. Needless to say that any export made of the goods, would also be entitled to the incidence of tax exemption as applicable under the CST Act. Decided in favour of assessee.

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