TMI Tax Updates - e-Newsletter
November 11, 2013

Case Laws in this Newsletter:

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

Articles

1. Assessee entitled to interest if the Department unjustly holds rightfully earned Cenvat credit

   By: Bimal jain

2. E-Return of income and E-tax audit report (with original due date as 30.09.13 ) Could be filed electronically by 31.10.13 so as to be deemed as filed within due date u/s 139(1)- board will do well to clarify that the order amount to extension of due date for all purposes including S. 40 and 43B to avoid disputes.

   By: DEVKUMAR KOTHARI

News

1. Auction for Sale (Re-issue) of Government Stocks

2. Training for Commercial Bankers (Speech of Shri G Gopalakrishna, Executive Director, RBI at the Inauguration of Academic Block of NITTE Institute of Banking and Finance on November 9, 2013)

3. India’s Foreign Trade: October, 2013

4. RBI Reference Rate for US $ and Euro

5. Vice President’s inaugural address at 11th Asem Foreign Ministers Meeting

6. Shri Anand Sharma, Union Minister for Commerce & Industry, will meet Mr. Borge Brende, Minister of Foreign Affairs, Norway, today as per the following details

Notifications

Customs

1. 27/2013 - dated 8-11-2013 - ADD

Seeks to extend the validity of notification No 123/2008 dated 20th November, 2008 for a period of one year i.e. upto and inclusive of 19th October, 2014.

Highlights / Catch Notes

Income Tax

• Supreme Court Upholds Constitutional Validity of Section 80HHC(3) Amendments on Exporter Tax Deductions Retroactive to 1998.

  Case-Laws - HC : Constitutional validity of amendments in Section 80HHC(3) brought by the Taxation Laws (Amendment) Act, 2005 - Deduction in respect of DEPB and DFRC benefits - classification between exporters with less than Rs.10 crore and more than Rs. 10 crore export turnover - Amendment is wholly valid with retrospective effect from 1.4.1998 - HC
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• Assessing Officer Disallows 25% of Bogus Purchases Instead of Total Amount.

  Case-Laws - AT : Disallowance made on account of bogus purchases - AO directed the disallowance to 25% of purchases instead of the total purchases made by the AO. - AT
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• Sole Proprietorship to Company Conversion: Section 47(xiv) Ensures No Extra Tax from Asset Revaluation in Succession.

  Case-Laws - AT : Conversion of sole proprietorship firm into company - succession - Applicability of section 47(xiv) - Receipt of higher value of shares because of re-valuation of the assets at the time of succession cannot be treated as consideration or benefit received other than by way of allotment of shares - AT
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• Income tax retraction requires proof of initial error; a new voluntary statement isn't enough. Assessee holds burden of proof.

  Case-Laws - AT : Retraction made of statement - Exhibition of the mistake or error or incorrect statement, with which the earlier statement is ostensibly imbued with, a matter of fact, is a burden cast by the law on the assessee, and cannot be discharged merely by another ‘voluntary’ statement. - AT
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• Income Tax Penalty Removed: Full Disclosure Made in Response to Section 153A Notice, No Concealment Found.

  Case-Laws - AT : Penalty levied u/s 271(1)(c) of the Income Tax Act is deleted as the entire income has been properly disclosed in the return filed by the assesse in response to notice u/s 153A - AT
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• Ocean Freight Expenses Paid to Non-Resident Shipping Company Governed by Section 172, Overriding Sections 194C and 195.

  Case-Laws - AT : Disallowance of Ocean Freight Expenses paid by the assessee company to a non resident shipping company - provisions of section 172 shall apply and those of Sections 194 C and 195 will not apply - AT
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• Taxpayer's Share Transactions Deemed Investment, Resulting in Capital Gain, Not Business Income, Upholding Consistency Principles.

  Case-Laws - AT : In view of principles of consistency, accepted the claim of the assessee as the transaction of purchase and sale of shares and securities in question as investment and arising out of the transaction is capital gain and not business income - AT
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• Books Rejection Justified u/s 145: Diaries Show Unaccounted Payments to Partner and Expenses.

  Case-Laws - AT : Rejection of books of account u/s.145 is justifiable as two diaries in which unaccounted payments to the partner and unaccounted expenses recorded, were found - AT
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• Books Rejected Under Sec 145(3) for Unverifiable Expenses; ITO Can't Challenge Accounting Without Identifying Defects.

  Case-Laws - AT : Rejection of books of accounts u/s 145(3) - Various expenditure are not verifiable as expenses towards loading and unloading, labour charges & transportation are not found properly vouched and supported by proper bills & vouchers - ITO is not entitled to interfere with the system of accounting, unless it is possible for him to point out inherent defects in books of account - AT
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• Charitable Purpose Defined: Financial Stability Doesn't Disqualify Registration u/s 12AA for Promoting Games.

  Case-Laws - AT : Charitable purpose u/s 2(15) - Promotion and development of games - it is nowhere mentioned that a charitable society has to be poor, illmanaged, financially drenched and always anchoring for financial help - Even in case the society earns from investment, then there is no reason to refuse registration u/s 12AA - AT
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• R&D Expenditure on G.E. and Eaton Projects Deemed Revenue, Not Capital Asset; Classified as Revenue Expenditure &D.

  Case-Laws - AT : Research and Development expenditure i.e. G.E.Linear Development Expenditure, Eaton Project Development - the expenditure did not reflect that any new capital asset had came into existence - allowed as revenue expenditure - AT
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• Commission Expense to Employee Directors Disallowed Due to No Dividends; Penalty u/s 271(1)(c) Deleted.

  Case-Laws - AT : Disallowance of commission expense paid to its employee directors on the ground that company had not distributed dividend in spite of there being handsome profits - Penalty u/s 271(1)(c) deleted - AT
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• CIT Petition u/s 264 Deemed Infructuous, Appeal to be Considered by CIT (Appeals) as Assessee Retains Rights.

  Case-Laws - AT : Petition u/s.264 is infructuous exercise which has admitted by the CIT u/s. 264 of the IT Act. The assessee had also not waived the right of appeal - CIT(A) directed to consider the appeal - AT
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Customs

• Drawback Claim Denied: Goods Re-exported After 18 Months, Customs Act Provisions Override Foreign Trade Policy.

  Case-Laws - CGOVT : Rejection of drawback claim - re-exported the imported goods after a period of 18 months - As such, legal framework of FTP cannot be automatically made applicable to provisions of the Customs Act, 1962 - CGOVT
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• Circular 41/2005-Cus. Sets Rules for Brand Rate of Drawback, Includes Only Customs Duty Paid via DEPB.

  Case-Laws - CGOVT : Fixation of brand rate of drawback - Circular No. 41/2005-Cus., dated 28-1-2005 allow only additional customs duty paid through DEPB to be considered for fixation of brand rate - CGOVT
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• Sale Proceeds of Confiscated Foreign Gold Biscuits Exempt from Duty Payment; Total Weight 582.8 Grams.

  Case-Laws - HC : Confiscation of 5 gold biscuits with foreign markings totally weighing 582.8 grams - what is being given is the sale proceeds and not the gold as such. - the question of paying duty in respect of the sale proceeds would not arise - HC
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• Imported Gold and Silver Medals Classified Under Chapter 71; Specific Duty Rates Applied per Notifications No.80/97-Cus. & No.62/04-Cus.

  Case-Laws - AT : Classification of the gold and silver medals imported - Once classification under Chapter 71 is upheld the appellants were eligible to pay duty at specific rates under notifications Notification No.80/97-Cus. and Notification No.62/04-Cus. and valuation was of no consequence for payment of duty - AT
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Indian Laws

• CBI's actions deemed unconstitutional for violating Article 21 of the Indian Constitution; case registration and prosecution invalidated.

  Case-Laws - HC : Actions of the CBI, in registering a case, arresting a person as an offender, conducting search and seizure, prosecuting an accused, etc., offend Article 21 of the Constitution and are, therefore, liable to be struck down as unconstitutional. - HC
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Service Tax

• Show Cause Notice Invalid for Indian Railways: Divisional Railway Manager Not a Competent Party for Service Tax Liability.

  Case-Laws - AT : Service tax liability on Indian Railways – Whether issuance of SCN in the name of Divisional Railway Manager is valid as competent party - Held no - AT
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• Court Grants Stay on Cenvat Credit Distribution by Input Service Distributor; No Violation Allegations Found.

  Case-Laws - AT : Stay application - Distribution of cenvat credit of service tax - input service distributor (ISD) - it is seen that there is no allegation against the appellant that they have violated any of these two conditions as observed by the HC - Stay granted. - AT
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• Simultaneous Penalties Allowed Under Service Tax Sections 76 & 78; Amendments Not Retroactive Without Explicit Mention.

  Case-Laws - AT : Penalty u/s 76 or 78 - since this amendment has come into force w.e.f. 10th May, 2008, it cannot have retrospective operation in the absence of any specific stipulation to this effect - simultaneous levy of penalty confirmed - AT
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• Legal Challenge: Reimbursement Charges in Real Estate Valuation u/r 5(1) Temporarily Halted for Review.

  Case-Laws - AT : Valuation - Validity of Rule 5(1) of Service Tax Rules - Real Estate Agent’s Service – inclusion of reimbursement charges - Stay granted. - AT
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• Partial Waiver of Pre-Deposit Granted for Service Tax on Vocational Training and Personality Development Courses.

  Case-Laws - AT : Waiver of pre deposit - commercial coaching and training service - vocational training - personality development courses - stay granted partly - AT
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Central Excise

• Excise Exemption for Waste By-products: Gum, Wax, and Oils from Manufacturing Process Under Notification No. 89/95-CE.

  Case-Laws - AT : Exemption under Notification No.89/95 – emergence of waste Product During Manufacture – Notification No.89/95-CE is available to the residues emerged in the form of gum/wax and recovered oil/fatty acids - AT
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• Refund Orders Finalized as Revenue Didn't Contest; Long Limitation Period Show Cause Notices Unlawful.

  Case-Laws - AT : Refund Order - Excess duty paid on final product - The refund orders have not been challenged by the Revenue and have attained finality – thus issuance of show cause notice by invoking longer period of limitation is not in accordance with law - AT
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• Court Examines Valuation of Retail Chemical Packages: MRP vs. Transaction Value Under Central Excise Act Section 4A/4.

  Case-Laws - AT : Valuation - MRP Based duty u/s 4A or transaction value u/s 4– Goods sold as retail packages – solvents, industrial adhesives, sealants and other chemicals - there was a clear mis-declaration on the part of the appellant - AT
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• Tax Exemption Valid for Projects with Sub-Contractors under Notification No.108/95, Including World Bank-Funded Initiatives.

  Case-Laws - AT : Benefit of Notification No.108/95 - Project funded by the World Bank and Asian Development Bank – As the machineries had been put in use by the sub-contractors, who were given the job of execution the claim for exemption cannot be denied - AT
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• CENVAT Credit for NCCD: Use Exclusively for NCCD Payment; Other Credits Allowed for Final Product NCCD.

  Case-Laws - HC : While CENVAT credit of National Calamity Contingency duty (NCCD)can be utilized under the CENVAT Credit Rules only towards payment of such National Calamity Contingency duty, CENVAT credit obtained from other sources can be utilized for payment of National Calamity Contingency duty on the final product. - HC
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• Rebate Claim Denied: Fraudulent Cenvat Credit from Non-Existent Parties Violates Compliance Rules on Reasonable Steps by Manufacturers.

  Case-Laws - HC : Rebate claim – Claim rejected as being Fraudulent – the statutory provisions pertaining to reasonable steps to be taken by the manufacturer are mandatorily in nature - The goods were purchased from non-existent and fictitious parties and Cenvat credit was wrongly availed - HC
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• Refund Claim Entitlement u/s 11-B: Credit Notes Ensure No Excise Duty Burden Transfer, Allowing Assessee Refund.

  Case-Laws - HC : Refund claim u/s 11-B of Central Excise Act,1944 – Duty paid by mistake – If credit notes are raised and benefit is passed on to the customer, thus, not passing on the burden of excise duty, the assessee is entitled to refund of the same - HC
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• Court Rules Name Change Not Grounds for Revoking Central Excise Registration; No Justification Found for Action.

  Case-Laws - HC : Revocation of the certificate of registration – there is no basis or justification to revoke the Central Excise Registration merely because the name of the company has been changed - HC
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VAT

• Sales Tax Dues Take Priority Over Mortgages, Ensuring Tax Obligations Are Settled Before Bank Debts.

  Case-Laws - HC : Sales Tax - Recovery of tax - Priority as between sales tax dues and dues owed to banks and financial institutions - when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage - HC
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Case Laws:

• Income Tax

• 2013 (11) TMI 482
  Constitutional validity of amendments in Section 80 HHC(3) of the Income Tax Act, 1961 brought by the Taxation Laws (Amendment) Act, 2005 - Deduction in respect of DEPB and DFRC benefits - classification between exporters with less than Rs.10 crore and more than Rs. 10 crore export turnover - Held that:- as per plain reading of the unamended provisions of Section 80HHC, deduction was not available in respect of profit on the transfer of DEPB. It became available to exporters in respect of DEPB credit sale and DFRC referable to Section 28(iiid)/(iiie), when 2nd, 3rd and 4th Proviso in Section 80 HHC(3) were inserted. Simultaneously clauses (iiid)(iiie) were also inserted in Section 28 of the Act by the Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1.4.1998. Thus, no one can have grievance falling under the scope of Section 80HHC against the amended provisions inasmuch as such eligible person would be getting benefit of deduction under section 80HHC with retrospective effect. - The petitioners do not have any right to be aggrieved for the reason that deduction or exemption is available strictly in accordance with the statutory provisions. No one has any fundamental right for deduction or to ask for deletion or modification of the conditions so as to qualify for exemption or deduction. - Decided against the assessee. Retrospectivity - Held that:- the amendment in Section 80HHC made by the Taxation Laws ( Amendment) Act, 2005 with retrospective effect from 1.4.1998, does not suffer from the vice of unconstitutionality. The amendment so made with retrospective effect is accordingly held to be valid. - Decided against the assessee. Classification & Article 14 - issue of discrimination - Held that:- classification of exporters on the basis of turn over of less than Rs. 10 crores and more than Rs. 10 crores is a valid classification based on intelligible differentia. The exporters having export turn-over not exceeding Rs. 10 crores referable to the 2nd Proviso of Section 80HHC(3) fall under one group while the exporter having export turn-over exceeding Rs. 10 crores referable to 3rd and 4th proviso of Section 80HHC(3) fall under another group. Thus, the classification so made is founded on an intelligible differentia which distinguishes the exporters falling under one group (having export turn-over not exceeding Rs. 10 crores) from those who fall under another group (exporters having export turned over exceeding Rs. 10 crores). - provisions are not violative of Article 14 of the Constitution of India. The classification as provided in the 2nd, 3rd and 4th proviso are wholly valid and based on intelligible differentia. - Decided against the assessee. Principles of estoppel - promissory estoppel - Held that:- there is no estoppel against the legislature and the vires of the Act cannot be tested by invoking the said plea but so far as the government was concerned the rule of estoppel did apply. Thus, it is clear that there cannot be any promissory estoppel against the legislature even if on the basis of the representation or promise made certain concessions have been allowed. The legislature is not bound by the principles of promissory estoppel. In view of this settled position of law, we reject the contention of the petitioners that the impugned provision is violative of the principles of promissory estoppel. - Decided against the assessee. Presumption of Validity - Held that:- A provision conferring very wide and expansive powers on authority can be construed in conformity with legislative intent of exercise of power within constitutional limitations. Where a Statute is silent or is inarticulate, the Court would attempt to transmutate the inarticulate and adopt a construction which would lean towards constitutionality albeit without departing from the material of which the law is woven. These principles have given rise to rule of "reading down" the provisions if it becomes necessary to uphold the validity of the law. - the petitioners have completely failed to rebut the presumption of constitutional validity of the impugned provision. The provisions of Section 80 HHC(3) of the Act as amended by the Taxation Laws (Amendment Act) 2005 to be wholly valid with retrospective effect from 1.4.1998. - Decided against the assessee.

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• 2013 (11) TMI 481
  Limitation - Jurisdiction of ITAT to dismiss the appeal of the department on the ground that the learned Single Judge had already held that block assessment was barred by limitation against which Writ Appeal was already filed and was pending – Held that:- In respect of the very same assessee by order dated 24.09.2013 in W.A.No.874 of 2011, this Court had already considered the Revenue's appeal, as against the order passed by the learned Single Judge in allowing the writ petition by observing that the block assessment was not barred by limitation and hence within jurisdiction - Matter is restored back to the file of the Tribunal for the purpose of considering the case of the assessee on merits other than the question of limitation

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• 2013 (11) TMI 480
  Disallowance made on account of bogus purchases - Disallowance to the tune of Rs. 13,19,645/- - Held that:- Reliance has been placed on the judgment in the case of Vijay Proteins Ltd Vs ACIT [1996 (1) TMI 144 - ITAT AHMEDABAD-C] where the assessee had failed to produce the alleged suppliers, brokers and transporters or any other evidence to prove the genuineness of transactions purchases, co-ordinate bench of Hon’ble Tribunal had held the purchases to be bogus and 25% of the purchase amount was disallowed. In the present case, facts are identical to that of Vijay Proteins [1996 (1) TMI 144 - ITAT AHMEDABAD-C] - Assessee has not furnished the names, addresses of suppliers or brokers nor has it furnished the relevant evidences called for by the Assessing Officer and thus could not discharge of the onus of proving the genuineness of purchases - Directed the disallowance to 25% of purchases instead of the total purchases made by the AO.

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• 2013 (11) TMI 479
  Ad-hoc disallowance of traveling, conveyance, telephone expenses, staff welfare and sales promotion expenses – Held that:- Traveling and conveyance as well as telephone expenses may include some expenses of personal nature by the partners - No justification for 10% disallowance out of staff welfare and sales promotion expenses on the ground of personal expenses - Therefore, 10% disallowance out of traveling and conveyance expenses and telephone expenses is sustained. Ad-hoc disallowance u/s 37 as expenses or personal nature out of total expense of generator – Held that:- Assessee has given the complete details of generator expenses - The Assessing Officer has made the disallowance of Rs.1 lakh out of the total expenditure of Rs.37,26,302/- simply on adhoc basis. The assessee has filed a comparative chart in which it was pointed out that in the immediately preceding as well immediately succeeding year, there was no disallowance out of generator running expenses. Considering the totality of the above facts, no any justification for adhoc disallowance of Rs.1 lakh out of generator running expenses – Decided in favor of Assessee.

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• 2013 (11) TMI 478
  Conversion of sole proprietorship firm into company - succession - Applicability of section 47(xiv) of the Income Tax Act - certain transactions not to be regarded as transfer – Receipt of higher value of shares because of re-valuation of the assets - Held that:- all the assets and liabilities of the same proprietorship concern relating to business immediately before the succession has become the assets and liabilities of the company - Shareholding of the same proprietor was not less than 50% of the total voting power in the company - The Assessee has duly complied with the condition as stipulated under clause (c) to Section 47(xiv). This proviso only requires that same proprietor does not receive any consideration or benefit directly or indirectly in any form or manner other than by way of allotment of shares in the company. The words 'other than by way of allotment of shares in the company' qualifies the words 'does not receive any consideration or benefit' as well as 'directly or indirectly'. This clearly denotes that proviso (c) permits receiving of consideration or benefit directly or indirectly by way of allotment of shares in the company. It is not a case where the Assessee has received any other consideration or benefit other than the allotment of shares in the company - Clause (c) of Section 47(xiv) does not prohibit receipt of higher number of shares because the re-valuation. Receipt of higher value of shares because of re-valuation of the assets at the time of succession cannot be treated as consideration or benefit received other than by way of allotment of shares – Reliance has been placed upon the decision in the case of Asstt. CIT v. Nayan L. Mepani [2011 (12) TMI 347 - ITAT, Mumbai] – Decided against the Revenue. Applicability of section 14A read with Rule 8D - Assessing Officer disallowed a sum of Rs. 3,05,423/- applying the provisions of Sec. 14A r/w Rule 8D - There is no precise finding given by the Assessing Officer relating to the expense incurred by the assessee in respect of the income not forming part of the total income. The CIT(A) reduced the disallowance to Rs. 1 lac but also noted that the assessee did not file the full details of the expenditure - Held that:- Not filed any details of expenditure incurred by the assessee not relating to the dividend income - The onus lies on the assessee to prove that the assessee has not incurred any expenses relating to the income not forming part of the total income - Applicability of Sec. 14A has not been denied by the Learned AR – The order of the Assessing officer is restored vide applying Rule 8D read with section 14A – Decided in favor of assessee.

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• 2013 (11) TMI 477
  Retraction made of the statement through filing affidavit – Statement was made u/s 132(4) of the Income Tax Act - accommodation bills – Held that:- It is for the assessee to tell as to how it has been able to identify some of the bills earlier considered as bogus, as being actually not so - Initial disclosure was voluntary - Assessee does not contend of it being not so, or of having been made under pressure or under physical or mental stress - In the absence of any charge of coercion, mis-representation or fraud, the onus on the assessee to show as to what mistaken belief or incorrect fact/s attends the earlier disclosure, and which it has completely failed to discharge. Exhibition of the mistake or error or incorrect statement, with which the earlier statement is ostensibly imbued with, a matter of fact, is a burden cast by the law on the assessee, and cannot be discharged merely by another ‘voluntary’ statement. On the contrary, there is nothing sacrosanct about the affidavit, so that it is liable to be necessarily controverted in order to be considered unacceptable. Facts are to be proved on the basis of material and evidences, and not on the basis of affidavits and counter affidavits – Decided against the Assessee. Deduction u/s 37 of the Income Tax Act - Rs.8 lakhs, being compensation paid to the local fishermen in connection with the construction of a temporary Jetty at Cuddalore - The assessee claimed to have met the said expenditure out of the cash generated from the accommodation bills procured from M/s. Sachin Crane Service; M/s. Rajesh Hiring; and M/s. Jayesh Crane & Transport Co., for an aggregate of Rs.8.22 lakhs – Held that:- There is no question of any double deduction in respect of Rs.8 lakhs. The same is being claimed and would stand to be allowed in terms of our foregoing order, u/s.37(1), separate and distinct from the addition qua the accommodation bills for Rs.8.22 lakhs, which have under the facts and circumstances of the case been considered as the source of funding of the said expenditure. Disallowance for the sum being stated to be paid on account of commission for obtaining bogus accommodation bills – Held that:- The said expenditure is not for generating any income per se, but rather depressing artificially the income already reflected per the assessee’s regular books of account - The stated purpose of booking the expenditure in the accounts is an illegal activity. The same is definitely an offence under, and in any case prohibited by, the law, including the Act, so as to be hit by Explanation to section 37(1) - The same does not represent any economic activity, and is deemed to be an income under the Act for the simple reason that it leads to artificially depressing the actual profit/income as reflected by the assessee’s books of account. No business purpose as such is served – Decided against the Assessee. Levy interest u/s.158BFA(1) of the Act, if the work of the photocopying was incomplete - The assessee was required to file its return u/s.158BC on or before 01.05.2000 - The copies of the assessee’s record were made available to it only subsequently, so that it could not have possibly filed the return by 01.05.2000 – Held that:- Interest being compensatory in nature, any delay which is not attributable to the assessee could not be a subject matter of levy of interest - Interest could be charged to the assessee only for the period after allowing 15 days clear time from the date on which the copy of the relevant records was made available to the assessee – Decided in favor of Assessee.

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• 2013 (11) TMI 476
  Addition of amount by A.O. on account of deficit in stock – Survey under section 133A is conducted - Deficit stock i.e., physical balance ascertained being lower than book balance as per computer records - retraction of statemetn – Held that:- When the reconciliation statement was prepared and furnished by the assessee after the survey to explain the deficit in stock found during the course of survey and the same was supported by third party evidence, the same should be considered on merit after necessary verification. Deletion of the addition of Rs. 24,45,670/- made by the A.O. on account of excess stock found during the course of survey – Held that:- The basis given by the ld. CIT(A) for deleting the addition made by the A.O. on account of excess stock found during the course of survey is not sustainable - When certain items of stock were found to be in excess at the time of survey, the onus in this regard was on the assessee to explain the said difference and if he has failed to discharge this onus successfully and satisfactorily, the addition can be made on account of excess stock u/s 69-B of the Act – It is fair and proper to set aside the impugned order of the ld. CIT(A) on this issue and restore the matter to the file of the A.O. for deciding the same afresh after taking into consideration the explanation offered by the assessee in respect of excess stock found during the course of survey – Decided in favor of Revenue. Delayed payment of employees contribution to provident fund – Held that:- Reliance is placed upon the judgment in the case of Allied Motors (P.) Ltd. v. Commissioner of Income-tax [1997 (3) TMI 9 - SUPREME Court], wherein it was held that the amendment made in the proviso to section 43-B being clarificatory in nature is applicable with retrospective effect – The decision in the above case was followed and held that it is hereby deleted the disallowance made by the A.O. and sustained by the ld. CIT(A) on account of payment of employees contribution towards provident fund made before the due date of filing the return of income for the year under consideration – Decided against the Revenue.

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• 2013 (11) TMI 475
  Penalty u/s 271(1)(c) of the Income Tax Act – Concealment penalty levied though the assessee had disclosed the income in the return filed in response to notice under section 153A – Applicability of Explanation-5 of section 271(1)(c) of Income Tax Act – Held that:- penalty has been levied by the revenue on the ground that assessee having not disclosed the impugned income in return of income filed under section 139(1) of the Act is guilty of concealing income as such action of the assessee declaring the impugned income in the return filed in response to notice under section 153A is but for the detection of such income during the course of search. Therefore, the assessee has concealed the particulars of his income or he has furnished inaccurate particulars of his income. In other words, the default of concealment of income by the assessee is viz-a-viz returned originally filed by him under section 139 of the Act and declaration of the income in return filed under section 153A is irrelevant for the purpose of levy of concealment of penalty. The provisions of Explanation-5 to section 271(1)(c) contemplates a situation where in the cases of search concealment penalty can be levied with reference to a return furnished before the date of search. In the present case, relying upon the discussion made in the case of Prem Arora Vs. DCIT [2012 (6) TMI 480 - ITAT DELHI], penalty levied u/s 271(1)(c) of the Income Tax Act is deleted as the entire income has been properly disclosed in the return filed by the assesse in response to notice u/s 153A - Decided in favor of Assessee.

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• 2013 (11) TMI 474
  Rectification of mistake u/s 154 - Disallowance of expenditure u/s 40(a)(ia) of the Income Tax Act - Commission was paid to non-residents agents for rendering services in respect of procuring export orders from various countries - Assessee paid commission at 5% on FOB value of the shipment of the product to the foreign agents and is also not in dispute that the agent is not authorized to market the products to any third party and it does not have any business connection in India - Their services are also not utilized in India – Held that:- Following the decision in the case of CIT v. EON Technology[2011 (11) TMI 20 - DELHI HIGH COURT], and also the Coordinate bench decision in the case of Armayesh Global v. ACIT [2012 (5) TMI 124 - ITAT Mumbai], it has been held that the income of the non resident cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of the said agents were rendered/utilized outside India and the commission was also payable/paid outside India - In the absence of permanent establishment in India, the income of the said agents cannot be subjected to tax in India and hence assessee was not liable to deduct tax on payments made to the said agents. Therefore, provisions of section 40(a)(ia) have no application on the given facts. - Decided in favor of assessee. The ITAT, Mumbai in the case of DCIT vs. Ardeshi B. Cursetjee & Sons Ltd [2008 (3) TMI 500 - ITAT MUMBAI] has held that commission paid to nonresident agents outside India for services rendered outside India were not chargeable to tax in India. In the facts and circumstances, commission paid by appellant to the non resident commission agent was not chargeable under the provisions of I.T. Act. Disallowance of Ocean Freight Expenses paid by the assessee company to a non resident shipping company M/s Transmode Overseas Partners, Germany by invoking section 40(a)(ia) of the Act – Held that:- Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies to payments made by a person referred to in clauses (a) to (u) of sub-section (1) to any "resident". (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any "resident". On the other hand, section 172 operates in the area of computation of profits from shipping business of non-resident ship-owner or characterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of Sections 194 C and 195 will not apply - Assessee company is not required to deduct tax at source from the ocean freight paid by it of Rs.58,82,475/- to M/s. Transmode Overseas Partners, Germany – Decided in favor of Assessee. Disallowance of an amount of Rs.6.00 lakhs claimed as legal expenses – Held that:- Reliance has been placed upon the judgment in the case of DCIT vs. Mahindra Realty & Inf. Developers Ltd [2013 (9) TMI 113 - ITAT MUMBAI], wherein it was held that even though the expenditure may be of enduring nature, the same cannot be considered as capital in nature always unless an asset was created. Expenditure incurred on website development is although enduring in nature, the intent and purposes behind the development is not to create an asset but only to provide a means for disseminating the information about the assessee among its clients – Similar views are expressed in the case of CIT vs. Indian Visit.com P. Ltd.[2008 (9) TMI 8 - DELHI HIGH COURT], wherein it has been held that Just because a particular expenditure may result in an enduring benefit would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee - In the case of expenditure on a website, there is no change in the fixed capital of the assessee. Although the website may provide an enduring benefit to an assessee, the intent and purpose behind development of a website is not to create an asset but only to provide a means for disseminating the information about the assessee – In the instant case, it has been held the ratio of the above decisions that expenditure is correctly allowed as revenue expenditure – Decided in favor of Assessee. Disallowance of interest expenses of.3,18,600 - Assessee has paid interest and financial charges of Rs. 10,104,198/. It is also noticed that assessee has made investment amounting to Rs. 20,05,600/ and gave loan of Rs. 6,50,000/ to M/s Alpanso Netsecure Pvt. Ltd being associate company – Held that:- No part of the interest could be disallowed on the reason that assessee had advanced interest free advances to its sister concern. It is also a fact that assessee has invested money in a sister concern and if any disallowance is required the same has to be considered under section 14A which is the case not here as assessee has not earned any exempt income. Since assessee’s available capital is more than the borrowed funds, presumption as decided by the Hon'ble jurisdictional High Court in the case of Reliance Utilities and Power Ltd [2009 (1) TMI 4 - HIGH COURT BOMBAY] equally apply - Amount of Rs.3,18,600 cannot be disallowed as it has no nexus to the other finance charges claimed by assessee as business expenditure – Decided in favor of Assessee.

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• 2013 (11) TMI 473
  Classification of head of income to be ‘Income under head Business these are delivery based transactions; therefore, having accepted similar transaction in the earlier years as well as in the subsequent year the Assessing Officer cannot take a different view in the absence of distinguishing material factors - In view of principles of consistency, accepted the claim of the assessee as the transaction of purchase and sale of shares and securities in question as investment and arising out of the transaction is capital gain and not business income – Decided in favor of Assessee.

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• 2013 (11) TMI 472
  Unexplained expenditure u/s 69C of the Income Tax Act – detection of income and unexplained expenditure during survey - Held that:- The appellant had made disclosure of income of Rs.42,00,000/- during the course of survey, it means additional income after all deductions - The total disclosure made by the appellant is unaccounted income which has been detected by the department and admitted by the assessee. Therefore, it is a deeming income to the extent of Rs.22,35,685/- u/s.69C of the IT Act, as the assessee has not explained the source of these expenses – Decided in favor of Revnue. Rejection of books of accounts u/s 145(3) – Held that:- Rejection of books of account u/s.145 is justifiable as two diaries in which unaccounted payments to the partner and unaccounted expenses recorded, were found – Decided in favor of Revenue. Allowance of remuneration and interest to the working partners u/s.40(b) of the I T Act – Held that:- Section 40A is not applicable to payments covered by Section 40(b) of the Income Tax Act. - Following the judgments in the case of CIT vs. Yoganand Textiles [1991 (9) TMI 14 - GUJARAT High Court] and DCIT Circle-6, Surat vs. Om Terrace [2013 (9) TMI 118 - ITAT AHMEDABAD], claim of deduction in regard to interest and remuneration is allowed – Decided against the Revenue.

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• 2013 (11) TMI 471
  Rejection of books of accounts u/s 145(3) of the Income Tax Act - Various expenditure claimed in trading account are not verifiable as expenses towards loading and unloading, labour charges & transportation are not found properly vouched and supported by proper bills & vouchers. The payments were made through self-made vouchers – Held that:- Department is bound by the assessee's choice of accounting regularly employed unless it can be said that the method of accounting followed by the assessee does riot reflect the true income. The AO after a careful scrutiny, came to the conclusion that the system of accounting employed by the assessee is consistent and regular and the ITO, therefore, is not entitled to interfere with the system of accounting followed by the assessee, unless it is possible for him to point out inherent defects in books of account and bring the case within the terms of s. 145 of the I. T. Act.– Decided against the Revenue. In the case of Sunil Siddharthbhai v. CIT [1985 (9) TMI 7 - SUPREME Court], it has been held that books of accounts for a businessman remains in the "Womb of future" – In the instant case, action of the Assessing Officer in invoking section 145(3) was not in accordance with law. The CIT(A) also examined enhancement made in turnover by the Assessing Officer and found that there was no justification in enhancing the turnover and applying arbitrary G.P. of 4% - Therefore, deleted the addition of Rs.23,63,115/- made by the Assessing Officer. Increase in G.P. rate by A.O.- G.P. rate increased from 3.30% to 4 % - Held that:- Enhanced the sale at Rs.22,02,584/- by applying G.P. rate of 4% - Assessing Officer before enhancement of sales has not given any queries and reason to the assessee. Though the assessee has submitted quantities and qualitative details, produced stock register, purchase and sale register and other related record. The enhancement of the sales is an arbitrary and not legal and regular. The Assessing Officer has not given any opportunity to the assessee to rebut the same and addition made by the Assessing Officer can not be sustained - The mere fact that there was a less rate of gross profit declared by an assessee as compared to the previous year would not by itself be sufficient to justify the addition – Decided against the Revenue. Disallowance of depreciation and vehicle expenses to 20% on the ground of personal use – Held that:- 5% disallowance on account of personal use will be reasonable - Therefore, restrict the disallowance to 5% instead of 20% made by the Assessing Officer.

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• 2013 (11) TMI 470
  Charitable purpose u/s 2(15) - Rejection of registration of society u/s 12AA - Promotion and development of games - Assessee is a society with the name ‘Professional Golf Tour of India’ (in short PGTI), which is registered under the Society Registration Act, 1860. The founder-members of this society are professional golfers – Held that:- It is clear from the aims and objects of the society that any person who is in any way attached to or interested in the game of golf can join as its member and can contribute towards the promotion of game – There is nothing on record which suggest that the society is being run on commercial lines. It is not taking any financial aid or grant from any government agency. Therefore, it becomes imperative for it to follow certain rules or commercial expediency in order to keep-going. It is nowhere mentioned that a charitable society has to be poor, illmanaged, financially drenched and always anchoring for financial help. Even in case the society earns from investment, then there is no reason to refuse registration u/s 12AA of the Act – Reliance is placed upon the Hon'ble Madras High Court case of New Life in Christ Evangelistic Association V CIT reported in [1998 (8) TMI 8 - MADRAS High Court], wherein it has been held that at the stage of considering application for registration u/s 12AA, it is not necessary to consider how the applicant would be able to claim exemption u/s 11 or section 12 of the Act. - Decided in favor of Assessee.

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• 2013 (11) TMI 469
  Unexplained cash deposit in Bank account – Invocation of section 68(or section 69) of the Income Tax Act - The assessee, Shri Sushil M. Raney, who is assessed in the capacity of the legal representative of his late father, explains the impugned cash deposits to be cash donations/contributions collected from various donors outside Mumbai in small amounts with the help of the others, to be used for charitable purposes, in which his father was engaged, viz., helping poor people for marriage purposes, ill health, etc., being also associated with Vivekanand College, Chembur, Mumbai for over 40 years, being one of its founder trustees – Held that:- There is nothing on record to substantiate the claim of assessee-son. In fact, even so, inasmuch as the explanation furnished ascribes the source of the entire funds to donations, it would only mean that his father was engaged in charitable works by way of financial assistance to the poor and needy, without contributing anything of his own. Rather, if and to the extent the contributions are from the account-holder himself, there is an implicit admission of the source of funds being unaccounted or unexplained. In the present case, the assessee's explanation is vague and unsubstantiated - The peak credit theory is based on recycling of funds, implying systematic activity, while neither the nature of the deposits nor their utilization, stands explained, so that the plea is not maintainable at the threshold. Scrutiny (of the bank account statement) reveals it to be inconsistent with not only the explanation of the amounts being possibly used for charitable purposes, but also with the fact of the same being, apart from withdrawn in cash, also by cheques for ostensibly personal purposes, on a regular basis and in no insignificant sums - Further, the pattern of withdrawal reveals the account to be employed for transfer of funds in the main, i.e., deposit of cash at one place and its withdrawal at other; the funds being withdrawal almost in toto, and soon after their deposit. The assessee has been wholly unable to discharge the onus of a satisfactory explanation qua cash deposits, including the quantum of funds involved – Appeal disallowed – Decided against the Assessee.

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• 2013 (11) TMI 468
  Addition on account of adjustment in Transfer Pricing sale Transaction – Held that:- As per the CA's certificate provided by the assessee, being certificate dated 3.4.2013, when we consider all 15 sale transactions of the assessee with its "AE", the average profit margin of total sales of the "AE" works out to 11.68%. This is admitted position of the fact that the profit margin of the comparable adopted by the TPO and the assessee i.e. IDA was 11.94%, and hence, the aggregate profit margin of the "AE" is within the limit of ± 5% of the profit margin of the comparable i.e. IDA, and therefore no addition is called for in this year, even as per the basis adopted by the AO/TPO, i.e. "AE" as a tested party, and IDA as comparable - When no addition is justified, even as per the basis adopted by the AO and the TPO, therefore, the entire addition made by the AO in respect of sales effected by the assessee to the "AE" of Rs.2,65,37,704/- is deleted – Decided in favor of Assessee. Addition on account of adjustment in Transfer Pricing purchase transaction - Addition of Rs.3,68,986/- made by the AO and the TPO out of which Rs.1 lakh addition was confirmed by the learned CIT(A) – Held that:- when the same material, which is purchased by the assessee from the "AE" is sold to the same "AE", and profit margin on such purchase and sale to the "AE" is considered for working out the addition in the profit of the assessee, no separate addition in respect of purchases can be made, because, once the value of purchase is reduced for making the adjustment as per the TP rules, the margin on its sale to the "AE" will further go up, and therefore, this addition is not sustainable in the facts of the present case – Decided in favor of Assessee. Selection of a company as a comparable – Domestic segment as comparable for a company of export segment – Held that:- The companies chosen for comparision do not have any export business for the year under consideration whereas the assessee company has full-fledged export business. The functions, risks and assets are entirely different – Hence, the chosen company cannot be considered as a comparable company for determining the ALP - Moreover, the Delhi Bench of the Tribunal in the case of Mentor graphics [2013 (5) TMI 49 - DELHI HIGH COURT] held that the ALP should be determined by taking results of a comparable transaction in comparable circumstances – Therefore, from the reasoning above, the chosen companies will not be in the final list of comparables. Reliance have been placed upon the judgment in the case of ITO v. CRM Services India (P.) Ltd [2011 (6) TMI 398 - ITAT DELHI ], wherein it was held that territory of the business is a material factor in deciding comparability of the cases. The assessee renders services in USA while Shreejal Info Hubs Ltd. renders services in India. This fact alone is sufficient to exclude this comparable. Selection of a company as a comparable – Turnover criteria – Held that:- Relying upon the judgment in the case of DCIT v. Indo American Jewellery Ltd. [2010 (5) TMI 530 - ITAT, MUMBAI], it is held in the instant case that use of turnover criteria is an important comparability factor, even if the search process carried out by the assessee is considered. Selection of tested party – Held that:- "AE" is having the intangible in the form of supplier list, and the "AE" is developing the market by participation in tenders and bears all types of risks. The data of the assessee-company is easily available, and the same are reliable data whereas the data of the "AE" is complex data and it cannot be more reliable, as compared to the assessee, and considering all these facts, as compared to its "AE", the assessee should be treated as tested party in the present year as the least complex party is the assessee-company in comparison to its "AE" – Decided in favor of Assessee. Applicability of precedent decisions in Transfer Pricing issues - Applicability of the Tribunal decision cited by the learned DR of the Revenue – Reliance have been placed upon the case of Interra Information Technologies (India) (P.) Ltd. [2013 (9) TMI 120 - ITAT DELHI], wherein it has been held that while adjudicating the TP issues that there is no legal binding precedence on the issue of selection of most appropriate method, selection of comparable companies, selection of comparables transactions for benchmarking etc, as these are facts based and vary from company to company. Hence this Tribunal decision cited by the learned DR of the Revenue in fact does not help the Revenue – Decided in favor of Assessee. Selection of comparables – Four comparables selected - The arithmetic mean margin of these four comparables comes to 4.27% - Held that:- Assessee-company has to be considered as tested party - Working of the profit margin of the assessee-company, which is 5.29% being gross profit margin on COGS and 1.15% is the operating profit margin on operating revenue and 1.16% is operating profit margin on operating cost – Comparison of these margins of the assessee-company with arithmetic mean - Average of these four companies worked out at 4.27% - Arithmetic mean is within the range of (+/-)5%, and hence, no Transfer Pricing adjustment is called for – Decided in favor of Assessee.

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• 2013 (11) TMI 467
  Operating lease or finance lease – Whether the assessee company is a financial company under the Interest Tax Act, 1974? – Held that:- sufficient material is not available on record to give the finding as to whether the assessee is engaged in granting operating lease or finance lease - The assessee has taken contradictory stands in interest tax proceedings and income tax proceedings. In the interest tax proceedings, the assessee is claiming that it is engaged in operating lease but in income tax proceedings, the stand of the assessee is this that the assessee is engaged in granting financial lease - There is no clear cut finding of the lower authorities also in this regard – Matter to go back to the file of A.O. for a clear cut decision on this aspect of matter as to whether the assessee is engaged in granting operating lease or finance lease.

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• 2013 (11) TMI 466
  Expenditure to be revenue or capital in nature - Research and Development expenditure i.e. G.E.Linear Development Expenditure, Eaton Project Development - In the books of accounts the assessee has treated them as research and development expenditure. In the computation depreciation @100% has been claimed thereon. Initially, it was the claim of the assessee that these expenditure having been incurred are allowable under section 35(1)(i) and 35(1)(iv) of the Act and alternatively it was claimed that the same is allowable as revenue expenditure under section 37 of the Act – Held that:- Expenditure are incurred on raw material, Sub-contracting charges, power and fuel, salary and wages, bonus, P.F, ESI, LWF, leave encashment, canteen, telephone expenses, printing and stationary, foreign travel expenses and interest. None of these expenditure can be said to have formed a new asset and A.O has admitted that these expenditure are relatable to the business of the assessee then simply for the reasons that these have given some enduring benefit to the assessee cannot be regarded as capital expenditure – In the computation these expenditure were claimed under section 37/ 35(1)(iv) of the Act and going into the nature of expenditure it was held that the expenditure did not reflect that any new capital asset had came into existence. The expenditure were held to be allowable under section 37(1) of the Act – In the present case, expenditure claimed by the assessee are revenue expenditure and are allowable in the year under consideration under section 37(1) of the Act – Decided in favor of Assessee.

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• 2013 (11) TMI 465
  Disallowance of deduction u/s 80IB of the Income Tax Act - Built up area of few residential units exceeded 1500 sq.ft. - According to A.O., the area of the garden should be included in total built up area and if same is included, the built up area of two flats exceed 1500 sq.ft. – Condition laid down in section 80IB(10) has not been complied – Held that:- Assessee has violated the size limit of two flats because garden area was attached to the flats and was not located on the ground floor, but on the podium level and podium was constructed like any other part of the building using cement, concrete, steel, etc., and was very much built up. Garden area was well demarcated and had clear boundaries. Garden was attached to the flats and was not open for others to use. Furthermore, the garden area has been sold the buyers at price just like terrace – Decided against the Assessee. Deduction u/s 80IB(10) to be allowed on proportionate basis in respect of units whose built up area is less within prescribed limit – Assessee contended that as per section 80IB(10), there is no condition that all units in the housing project should have the built up area of less than 1500 sq.ft. Even if built up area of some of the units exceed 1500 sq.ft., deduction is to be allowed in respect of those units whose built up area is less than 1500 sq.ft. - - Held that:- Held that:- Reliance has been placed upon the decision in various cases s.a. Rohan Homes [2013 (10) TMI 758 - ITAT PUNE], wherein it has been held that prorata deduction is to be allowed – Also, as per ITAT Kolkata Bench in its decision in the case of Brigade Enterprises [2008 (8) TMI 453 - ITAT BANGALORE-A], it has been held that deduction u/s.80IB(10) was to be allowed on prorata basis with reference to qualifying residential units and assessee would not be denied claim for deduction u/s.80IB(10) if some of its residential units are of built up area exceeding prescribed limit in clause (c) of section 80IB(10) of the Act – In view of the above decisions, in the present case it is held that whatever portion completed by the assessee which satisfies the conditions prescribed u/s.80IB(10) is eligible for deduction - Accordingly held that the assessee is eligible for deduction u/s.80IB(10) in respect of building No. A,C,D, E and the 17 row houses – Decided in favor of Assessee. Date of sanction of a project is distinguishable factor for different project - Deduction in respect of project Kumar Kruti – Deduction u/s 80IB is disallowed by observing that project Kumar Kruti is a part of large project named Kumar City and as the said project was sanctioned prior to 01.04.2004, assessee should have completed the project on or prior to 31.03.2008. Secondly, commercial area in Kumar City project is more than limit prescribed and since project Kumar Kruti is a part of Kumar City project, the said condition has also been violated – Held that:- Common lay-out of the project Kumar Kruti and Kumar City project has been done on date 08.08.2003 - Project Kumar Kruti was independent project since building plan of the said project was sanctioned independently on 26.07.2006 – Reliance has been placed upon the judgment in the case of Aditya Developers [2013 (3) TMI 512 - ITAT Pune]- Revenue authorities were not justified in holding that project Kumar Kruti is a part of Kumar City project. Further, regarding commercial area exceeded the limits prescribed u/s.80IB(10) exceeded the limits prescribed u/s.80IB(10) – Held that:- Project Kumar Kruti is independent of Kumar City project, and there is no commercial area in project Kumar Kruti, then there is no question of violating the limits of commercial area as prescribed u/s.80IB(10) with regard to deduction of claim u/s.80IB(10) in respect of project Kumar Kruti in question – Dedution under the said section is allowed – Decided in favor of assessee.

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• 2013 (11) TMI 464
  Penalty u/s 271(1)(c) - Disallowance of commission expense u/s 36(1)(ii) of the Income Tax Act - commission paid to its employee directors – The said claim of the assessee was disallowed on the ground that since such commission was not paid to the directors in the earlier years and the assessee company had not distributed dividend during the relevant year in spite of there being handsome profits; the payment of commission to directors during the relevant previous year was in order to reduce the taxable profit so as to minimize the tax liability - Held that:- Assessee has made true and full disclosure and hence, there is no concealment of income or furnishing of inaccurate particulars - The factum of payment of commission was categorically disclosed in the Audited Financial Accounts as well as in the Tax Audit Report filed alongwith return of income - Issue of allowability of the payment of commission to assessee company to its directors was a debatable matter - The Special Bench was constituted to interpret the provisions of section 36(1)(ii) of the Act. This goes to prove that the issue involved was debatable – Further, in the immediately following year, similar payment of commission was allowed. Reliance is placed upon the Apex Court decision rendered by a larger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in [1969 (8) TMI 31 - SUPREME Court], wherein it was held that “An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute” – Decided against the Revenue.

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• 2013 (11) TMI 463
  Penalty u/s.271(1)(c) – The assessee had undertaken the construction of building commonly known as 'Haridas Park', with Wings 'A' to 'G' - The construction of the Wings C & D, part of which was sold during the year, the construction of which commenced only after 01.10.1998 - Held that:- The construction of the Wings A to D started much subsequent to the other part of the project, so that it was considered as Phase 2 of the project - The long time lag (of over a decade) between the construction of the two phases of the project, the second phase required extensive modification of the plans - The assessee have a reasonable ground for believing that the construction of Wings A to D formed a separate project by itself and eligibility of the project for deduction u/s 80-IB (10) – Decided in favour of assessee.

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• 2013 (11) TMI 462
  Maintainability of Revision application u/s 264 of the Income Tax Act - Petition filed by the assessee under section 264 on 2-8-2000 - Bar imposed by section 264(4), as an appeal filed by the assessee before Commissioner (Appeals) on 31-7-2000 was pending - The appeal pending before the Commissioner (Appeals) was dismissed because of non-compliance with section 249(4)(a). The assessee filed before the Commissioner another petition under section 264 on 28/2/2002 - The assessee, later, complied with section 249(4)(a) and filed a fresh appeal before the Commissioner (Appeals) on 9-2-2004 with a request for condonation of delay, but the Commissioner (Appeals) refused to condone the delay and dismissed the appeal on 31-9-2004 – Held that:- Petition u/s.264 is infructuous exercise which has admitted by the CIT u/s. 264 of the IT Act. The assessee had also not waived the right of appeal – Reliance is place upon the judgment in the case of ITO vs. Ankush Finstock Ltd [2012 (5) TMI 164 - ITAT AHMEDABAD]- In view of the above facts, legal position as well as sequence of events and having paid the entire taxes as per return of income, the application dated 31/5/2011 filed before CIT(A) requesting for the condonation of delay or the revival of the appeal in view of the judgment of the ITAT, Mumbai in case of Bhumiraj Construction [2010 (4) TMI 754 - ITAT MUMBAI], is required to be considered and accordingly, the CIT(A) is directed to verify whether the entire admitted tax has been paid or not and if so, he shall consider the case on merit in accordance with law, on the various grounds raised by the appellant Company – Appeal of assessee allowed for statistical purpose.

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• Customs

• 2013 (11) TMI 498
  Rejection of drawback claim - Import of old and used machinery and equipments/accessories spare parts on re-export basis - Contravention of provisions of Notification No. 23/2008-Cus., dated 1-3-2008 - Time frame of re export of goods - re-exported the imported goods after a period of 18 months - Held that:- applicant re-exported the goods after 19 to 23 months and filed claim of drawback under Section 74 - At the time of export only one notification was in existence i.e. 23/2008-Cus, dated 1-3-2008 which in force. The drawback of duty on said re-exported goods can be sanctioned in accordance with the Notification No. 23/2008-Cus. which was applicable on the date of re-export - As per Notification 23/2008-Cus. goods cleared for re-export after 18 months of their import into India attract nil rate of drawback and as such no drawback can be allowed. Applicability of Chapter 1A of Foreign Trade Policy (F.T.P.) 2004-2009 - Held that:- drawback is a export promotion scheme, which specifically governed under Sections 74 and 75 of the Customs Act, 1962 and rules/notifications issued thereunder. As such, legal framework of FTP cannot be automatically made applicable to provisions of the Customs Act, 1962. Moreover the said legal framework of FTP Policy para 1.4 Chapter 1A, refers to notifications or public notices issued by DGFT - Therefore, there is no infirmity in order in appeal - Decided against assessee.

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• 2013 (11) TMI 497
  Fixation of brand rate of drawback - Contravention of the proviso (ii) of Rule 3 of the Customs & Central Excise Duties Drawback Rules, 1995 read with Circular No. 3/99, dated 3-2-1999 and Circular No. 41/2005-Cus., dated 8-10-2005 - Held that:- Applicant has admitted that proviso (ii) of Rule 3 of Drawback Rules, 1995, and C.B.E. & C. Circular 3/99-Cus., dated 3-2-1999 do not allow the duty drawback when customs duty is paid through debit of DEPB scrip. However, he claimed that Circular No. 3/99-Cus. amended vide Circular No. 41/2005-Cus., dated 28-10-2005 to the extent that additional customs duty paid through debit of DEPB scrip shall also be allowed to be considered for fixation of drawback brand rate, and therefore on same analogy the debit of customs duty from DEPB should also be allowed to be considered for fixation of Brand rate. In this regard, Government notes that Circular No. 41/2005-Cus., dated 28-1-2005 allow only additional customs duty paid through DEPB to be considered for fixation of brand rate. So, the contention of applicant to also allow payment of customs duty through DEPB for allowing duty drawback is not legally tenable - Revision denied.

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• 2013 (11) TMI 496
  Bail Application - 975 grams of white Coloured Granules seized - Classification of drug - Revenue suspected it to be MATHAQUALONE but later it was found to be KETAMINE HYDRO CHLORIDE - Held that:- The contraband seized is of 975 grams valued at Rs. 9,75,000/-. Earlier, KETAMINE HYDRO CHLORIDE was not a scheduled drug. However, as per G.S.R.311(E) dated 10th February, 2011 KETAMINE is a scheduled Psychotropic substance and 500 gm and above are commercial quantity. Only on that reason, the earlier bail applications were dismissed and there is no change of circumstances warranting to take a different view - Decided against Appellant.

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• 2013 (11) TMI 495
  Confiscation of 5 gold biscuits with foreign markings totally weighing 582.8 grams - Refund claim on sale of gold - Tribunal allowed the refund claim - Whether the petitioner is entitled to the sale proceeds after deducting duty, fine and penalty imposed upon the petitioner - Held that:- Since, the Assistant Commissioner of Customs, sold out the 5 gold biscuits overlooking the order passed by the Commissioner of Appeal, dated 28-8-1997, allowing the petitioner to redeem the gold on payment of fine and penalty the action of the Assistant Commissioner in selling the gold biscuits is contrary to the earlier order passed by the Commissioner of Appeal dated 28-8-1997. Since the petitioner is seeking redemption of the confiscated gold, he cannot escape payment of fine and penalty. In fact, counsel for the petitioner offered to pay fine and penalty. As regards payment of duty is concerned, in our opinion, duty would be payable only if the gold was acually allowed to be redeemed. In the present case, what is being given is the sale proceeds and not the gold as such. In such a case, the question of paying duty in respect of the sale proceeds would not arise - No reason to interfere with the order of the Tribunal - Following decision of Shabir Ahmed Abdul Rehman v. The Union of India and Others [2008 (12) TMI 101 - BOMBAY HIGH COURT] - Decided against Revenue.

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• 2013 (11) TMI 494
  Classification of the gold and silver medals imported - classifiable under Chapter 71 or under Heading 9705 00 90 - Benefit of Notification No.80/97-Cus. and Notification No.62/04-Cus. - Confiscation under section 111(d), 111(m) and 111(o) - Violation of RBI guidelines - Held that:- goods were marketed to the public as coins/medals of numismatic interest and higher prices per gram of gold/silver were charged from the buyers as compared to such prices for coins of same purity - goods were not collections at the end of the supplier but were marketed as collectors pieces - If the Explanatory Notes in HSN given in Heading 9705 is considered, the impugned goods cannot be considered as items of numismatic interest because these goods were freshly minted against orders and 100s of such pieces are minted and if there was demand from more gullible people flush with money to buy such items, many more could be minted and sold at such high prices. Since the HSN notes 9705 are very explicit in the matter, it is not proper to adopt a different classification for the reason that the exporting company was established in the year 1871 or because the marketing agency adopted a gimmick of presenting the goods as items of numismatic interest to sell the goods to retail investors at high prices. Once the classification under Heading 9705 is overruled classification under Chapter 71 follows as a corollary of the HSN notes under heading 97.05 which itself suggests classification under Chapter 71 without specifying the heading. There is no reason for altering such classification though the exact classification under Chapter 71 needs further examination - exemption under the relevant notifications Notification No.80/97-Cus. and Notification No.62/04-Cus. were available so long as the goods were classifiable under Chapter 71 irrespective of the heading under which it was getting classified under Chapter 71. The consequence of violation of RBI guidelines is the confiscation under 111(d) and 111(o) of Customs Act. It is seen that the defense arguments submitted by the ICICIBL is not examined with reference to the factual position that goods were sold by ICICIBL to on payment of RST 1% and no is finding given with reference the argument that ICICIBL was not acting as agent for GQIPL but selling the goods to GQIPL. Further, we note that the goods were not available for confiscation. So, confiscation is not maintainable and consequently, penalties under section 112 (a) also are not maintainable. Once classification under Chapter 71 is upheld the appellants were eligible to pay duty at specific rates under notifications Notification No.80/97-Cus. and Notification No.62/04-Cus. and valuation was of no consequence for payment of duty - Decided in favour of assessee.

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• Corporate Laws

• 2013 (11) TMI 493
  Hypothecation of assets - Whether on account of the hypothecation of the goods of EHPL in its favour PICUP can be said to be a secured creditor - Held that:- Although the hypothecation as a legal concept is not explicitly recognized under the ICA, the said legislation is not exhaustive of all possible arrangements that the financial institutions may have in securing the moneys advanced by them. Section 29 of the SFC Act recognizes the hypothecation as a possible means of enforcing liability - Consequently, it is futile for ETC to contend that only because hypothecation does not form part of a species of pledge under Sections 172 to 179 of the ICA, it cannot be legally enforced by PICUP. It is apparent on the facts of the present case that the DOH referred to above, makes it explicit that the constructive possession of the goods remained throughout with the PICUP; that EHPL was holding the goods only as an agent of PICUP; the effective control of the goods always remained with PICUP and the constructive possession could be converted into the actual possession by PICUP. More importantly, it is made explicit both in the CLA as well as DOH that prior permission of PICUP had to be taken if any attempt was made to sell any part of the goods at any time. That there was a charge created in favour of PICUP in respect of the goods is evident from the fact that EHPL itself registered the charge with ROC under Forms 8 and 13. Both the Agreement and the DOH made it clear that PICUP was a secured creditor and could enforce the hypothecation in its favour by bringing the said goods to sale - Decided in favour of petitioner. Effect of the proceedings under the SFC Act - Held that:- ETC was aware of the charge on the goods in favour of PICUP even on the date of Agreement - Agreement between ETC and EHPL having been entered without prior clearance of PICUP is not binding on PICUP - plant and machinery of EHPL were sold by it without the permission of PICUP. Therefore the sale, which was in violation of the CLA, the DOH and Clause 3 of the Agreement, was not valid - Decided against petitioner. Even if ETC paid Rs. 29.15 lacs to EHPL for purchasing its plant and machinery it cannot seek to recover the said sum from PICUP. ETC is at best in the position of an unsecured creditor of EHPL in the winding up proceedings - ETC by appointing its watch and ward security did not actually take physical possession of the goods. Constructive possession thereof was already with PICUP. EHPL never parted with physical possession of the goods. EHPL was holding the goods as an agent of PICUP. Therefore, the question of ETC being forcibly deprived of possession of the goods by PICUP by misusing its position did not arise - given the clear wording of the clauses of the CLA and DOH, there was no need for PICUP to approach a Court designated under the SFC Act for enforcement of the hypothecation in its favour - property in the goods did not pass to ETC and it did not become the owner thereof prior to PICUP enforcing the hypothecation - sum paid by ETC to EHPL or to PICUP on behalf of EHPL should be treated as sums advanced to EHPL by ETC as an unsecured creditor. Issue No.14 is answered by holding that the payment of Rs. 3.30 lacs by ETC to PICUP was on behalf of EHPL consistent with ETC being an unsecured creditor of EHPL. Given the negative fund position of EHPL, and there being no assets of EHPL available for recovery, the question of ETC being entitled to recover the sum of Rs. 29.15 lacs much less any loss of profit does not arise.

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• Service Tax

• 2013 (11) TMI 510
  Service tax liability on Indian Railways – Whether issuance of SCN in the name of Divisional Railway Manager is valid as competent party - Renting of immovable property service - Held that:- In Chief Conservator of Forests, Govt. of A.P. vs. Collector and others - AIR 2003 Supreme Court 1805, [2003 (2) TMI 436 - SUPREME COURT] it was observed that, even post in the hierarchy of the posts in the Government set-up from the lowest to the highest, is not recognized as a juristic person nor can the State be treated as represented when a suit/proceeding is in the name of such offices/posts or the officers holding such posts, therefore, in the absence of the State in the array of parties, the cause will be defeated for non-joinder of a necessary party to the lis, in any court or Tribunal. The adjudication order as confirmed by the order of the Commissioner (Appeals) in the case are incompetent and consequently the adjudicated liability cannot be recovered by lawful process of law, from the Indian Railways, a department of the Union of India or from any division - The adjudicated liability, in the circumstances cannot be charged on the Indian Railways - Since the very initiation of assessment proceedings, in respect of the alleged liability to service tax of the India Railways is patently misconceived, the entire proceedings are a nullity - The appeal before us preferred by the Divisional Railway Manager is also mis-conceived – Decided against Assessee.

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• 2013 (11) TMI 509
  Stay application - Distribution of cenvat credit of service tax - input service distributor (ISD) - Held that:- Even if a service has been procured in connection with the manufacture of the goods to be produced by the appellant in future and even if it so happens that ultimately the goods are not manufactured, yet the service would be an input service used in or in relation to the manufacturing activity of the appellant and therefore, credit cannot be denied on the ground that the ultimate product in respect of which the service was availed did not get manufactured. Similarly, the Hon'ble High Court of Karnataka in the ECOF Industries Pvt. Ltd. case (2011 (4) TMI 560 - KARNATAKA HIGH COURT) held that distribution of credit can be done subject to satisfaction of two conditions, namely, (i) Credit distributed does not exceed the amount of service tax paid and (ii) the credit of service exclusively used for exempted goods or exempt service is not distributed. From the records of the case, it is seen that there is no allegation against the appellant that they have violated any of these two conditions - Stay granted.

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• 2013 (11) TMI 508
  Penalty u/s 76 or 78 - Whether penalty u/s. 76 of the Finance Act 1994 can be imposed when penalty u/s. 78 of the Finance Act has already been imposed - Amendment to section 78 - Held that:- With this amendment the legal position now is that simultaneous penalties under both Section 76 and 78 of the Act would not be levied. However, since this amendment has come into force w.e.f. 10th May, 2008, it cannot have retrospective operation in the absence of any specific stipulation to this effect. Going by the nature of the amendment, it also cannot be said that this amendment is only clarificatory in nature - Following decision of Anand Decoreters & Hirers Vs. Commissioner ST, Ahmedaba [2013 (8) TMI 374 - CESTAT AHMEDABAD] - Decided against assessee.

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• 2013 (11) TMI 507
  Demand of service tax on GTA services - reverse charge - Whether the applicant's Shyamnagar Unit has discharged Service Tax during the period 2005-06 to 2009-10 - Held that:- appellant had submitted various documents including a chart reflecting the payment shown at annexure 9 of the appeal memorandum wherein they have categorically stated amount of service tax paid by their head office on account of GTA services relating to Shyamnagar Unit and other units. The Ld. Commissioner could not analyse the same and also the affidavit in support of their claim. In these circumstances, for appreciation of the evidences submitted by the appellant including the chartered accountant's certificate now placed before us, the case needs to be remanded to the Ld. Commissioner to decide the issue afresh - Decided in favour of assessee.

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• 2013 (11) TMI 506
  Denial of input service credit - Activity of job work undertaken by assessee under Notification No.214/1986-CE - Held that:- when the final product has suffered duty, there is no bar on availment of CENVAT credit on inputs/input services by job workers - Following decision of Sterlite Industries (I) Ltd Vs Commissioner of Central Excise Pune [2004 (12) TMI 108 - CESTAT, MUMBAI] and Polycab Industries Vs Commissioner of Central Excise, Daman [2010 (6) TMI 156 - CESTAT, AHMEDABAD], applicant has made out a case for waiver of predeposit. - Stay granted.

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• 2013 (11) TMI 505
  Valuation - Validity of Rule 5(1) of Service Tax Rules - Real Estate Agent’s Service – Waiver of Pre-deposit – Held that:- The expenditures were not considered by the Adjudicating Authority on the ground that they were not considered as ‘Pure Agent’ on behalf of their Principal and sought to include such expenditures in the Gross Taxable Value of the services received by them under Rule 5(1) of the Service Tax Valuation Rules, 2006 - The Hon’ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT] had struck down Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 holding the same as ultra vires to the provisions of Section 67 of the Finance Act, 1994 - the Applicant could able to make out a prima facie case for total waiver of predeposit of the dues adjudged - the pre-deposit of the dues waived and its recovery stayed during pendency of the Appeal – Stay granted.

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• 2013 (11) TMI 504
  Condonation of delay - Appeal itself is within time - Held that:- Applicant is a public sector undertaking and in support of the fact of communication of the Order, an affidavit dated 19.06.2013 has been filed by the Applicant. In absence of any contrary evidence produced by the Department, we do not find any reason in accepting the claim of the Applicant. In these circumstances, the Application seeking condonation of purported delay has become infructuous and accordingly, the Application is allowed to be withdrawn by the Applicant - Decided against assessee.

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• 2013 (11) TMI 503
  Waiver of pre deposit - commercial coaching and training service - vocational training - personality development courses to the students under the brand names of the Licensor viz. ‘Zeal’ and ‘Speak Easy’ - Held that:- Exemption of vocational training institute would be extended only to those institutions that impart training to enable to the trainee to seek employment or self-employment. The contention of the applicant is that they are eligible to benefit of exemption would be decided upon examination of course detail at the time of appeal hearing. - stay granted partly.

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• 2013 (11) TMI 502
  Demand of service tax - Job work versus repair and maintenance service - Appellant contends exemption under notification 8/05-ST or 12/2003 for supply of goods - Held that:- The appellant has not given proper defence with supporting documents before lower authorities. So we consider it proper to direct the Applicant to make a pre-deposit of Rs.8,00,000 within a period of 8 weeks. If appellant is able to produce verification report from lower authorities that the payment by challan dated 02-09-2010 for Rs.3,39,306 is towards amount confirmed under this order the pre-deposit amount will get reduced to that extent - Decided against assessee.

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• 2013 (11) TMI 501
  Demand of service tax - Cargo Handling Service - Held that:- Prima facie we are of the view that the activity is done for appellant’s own benefit and it is done within the factory, is out of the purview of Cargo Handling Service. Therefore, this appeal is admitted without any pre-deposit. Further there shall be stay on collection of such dues during pendency of the appeal - stay granted.

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• Central Excise

• 2013 (11) TMI 492
  Waiver of Pre-deposit - Personal Penalty under Rule 26 of CE Rules 2002 r.w. Erstwhile Rule 209A of CE Rules 1944 – receipt of fabrics on which duty liability was not discharged by an EOU - Held that:- The issue needs to be gone into detail whether as to penalty is liable to be imposed on them - It can be done, only after going through the statements recorded by the authorities - the statements of these individuals are not annexed to the appeal memoranda - Since the issue requires more appreciation of facts – thus the applicant are directed to deposit an amount of Rupees Five Thousand as Pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2013 (11) TMI 491
  Exemption under Notification No.89/95 – emergence of waste Product During Manufacture – By Product OR Waste - Revenue was of the view that the products cannot be treated to be waste products are bi-products, in which case exemption would not be available – Held that:- Following CCE, Jalandhar vs. A.G. Flats Ltd. [2011 (7) TMI 968 - CESTAT, NEW DELHI] - The Notification No.89/95-CE is available to the residues emerged in the form of gum/wax and recovered oil/fatty acids - the appellant is entitled to get stay of the proceeding - the applicant has already deposited an amount of Rs.12.00 Lakhs - By treating the same as sufficient for the purpose of Section 35F, the balance amount of duty and entire amount of penalty dispensed – stay granted.

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• 2013 (11) TMI 490
  Bar of Limitation – Refund Order - Excess duty paid on final product - Waiver of Pre-deposit - The issue is that the appellant had paid excess duty on their final product by including the transportation charges in the assessable value of their goods - Held that:- The demand having been issued by invoking longer period of limitation is clearly barred - the appellant filed a refund claim along with the statement, which are verified and refund orders were issued - The refund orders have not been challenged by the Revenue and have attained finality – thus issuance of show cause notice by invoking longer period of limitation is not in accordance with law – unconditional stay granted.

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• 2013 (11) TMI 489
  Valuation - MRP Based duty u/s 4A or transaction value u/s 4– Goods sold as retail packages – solvents, industrial adhesives, sealants and other chemicals - Held that:- With effect from 13-1-2007, the Packaged Commodities Rules, 1977 was amended whereby only when the goods are sold directly by the manufacturer/packer to industrial or institutional consumers, there were excluded from the provisions of Packaged Commodities Rules - When the goods are sold through dealers/distributors in retail packages by affixing labels indicating MRP, the obvious conclusion is that the goods are meant for retail sale - Prima facie, the demand of differential central excise duty in respect of the goods manufactured by the appellant for the period from 13-1-2007 to 14-5-2008 is sustainable in law. Imported and traded goods – Activity of re-labeling amounts to manufacture as per section 2 (f) of Central excise act - Mis-declaration by the assessee – Goods were not captively used but traded - Held that:- The requirement of affixing MRP was statutorily provided for in Rule 2(p) of Packaged Commodities Rules as the same applied to imported packages also. Therefore, it was incumbent upon the importer to get the re-labeling done before they were cleared through the Customs - The appellant declared in the import documents that the goods are meant for captive use and not for trading - there was a clear mis-declaration on the part of the appellant. Extended period of limitation – Waiver of Pre-deposit – Held that:- The extended period of time has also been correctly invoked for demand of excise duty - the goods in respect of which the claim is made is not covered by the Third Schedule of the Act, this claim would need verification – also, the claim for Cenvat Credit of the duty paid on imported goods also would need verification which can be done at the time of final disposal - appellant has not made out any prima facie case for complete waiver of the pre-deposit of the dues – the appellant directed to make a pre-deposit of Rs. 2 crore - upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2013 (11) TMI 488
  Benefit of Notification No.108/95 - Project funded by the World Bank and Asian Development Bank – Steel bars Cleared were consumed in the Earthquake affected area of kuchh - Whether the appellant is eligible for the benefit of Notification No.108/95-CE on a certificate which has been issued in the name of the contractor who was executing the project – Held that:- There was no material placed by the Revenue on the allegations of the possible misuse of the goods for unintended purposes by the Sub-Contractors - being the beneficial Notification issued in public interest and the project itself being executed fully by the Contractors as per the directions of the Project Implementing Authority, the fact that the machineries were not given directly to the project implementing authority but given to the agency executing the work in fact cannot go against the assessee's claim. As the machineries had been put in use by the sub-contractors, who were given the job of execution the claim for exemption cannot be denied - The use of the phrase 'supplied to the projects financed by the said United Nations or an International Organisation and approved by the Government of India' clearly shows that the condition for grant of exemption is supply of the goods towards the project and nothing beyond – With all the conditions satisfied, the beneficial Notification applies – there is no justification to introduce any condition or read in a restrictive manner – Relying upon DEE DEVELOPMENT ENGINEERS LTD. Versus UNION OF INDIA [2010 (2) TMI 535 - PUNJAB & HARYANA HIGH COURT] and CCE, Pondichery Vs. Caterpillar India Pvt. Ltd. [2013 (7) TMI 244 - MADRAS HIGH COURT ]- the appellant is eligible for availing the benefit of Notification No.108/95-CE in respect of goods cleared by them for use in earthquake affected area – Decided in favour of assessee.

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• 2013 (11) TMI 487
  National Calamity Contingency Duty - Exemption under Notification No. 32/99 - Whether National Calamity Contingency duty is exempted under Notification No. 32/99 – Held that:- National Calamity Contingency duty is nothing but a duty of excise - Notification No. 32/99 relates to exemption to North East States from excise duty and additional excise duty on goods cleared from certain units - By virtue of this notification the Central Government has exempted goods specified in the First and Second Schedules to the Central Excise Tariff Act - The general exemption is only in respect of the duty of excise or additional duty of excise - The general exemption has absolutely no reference to NCC duty which is levied as a surcharge under the provisions of the Finance Act, 2001 - National Calamity Contingency duty, even though it is a duty of excise, is not exempted under Notification No. 32/99 - The operation of thie notification is limited. - Decided in favor of revenue. Utilization of cenvat credit - Duty not Exempted under the Notification - Whether CENVAT credit can be utilized towards payment of National Calamity Contingency duty under the CENVAT Credit Rules – Held that:- In terms of Rule 3(1) a manufacturer or producer of a final product is allowed to take CENVAT credit of National Calamity Contingency duty – National Calamity Contingency duty is a duty of excise, Rule 3(4) provides that CENVAT credit may be utilized for payment of any duty of excise on any final product - CENVAT credit of NCC duty may also be utilized for payment of any duty of excise on any final product in terms of Rule 3(4) subject to Rule 3(7) - while CENVAT credit of National Calamity Contingency duty can be utilized under the CENVAT Credit Rules only towards payment of such National Calamity Contingency duty, CENVAT credit obtained from other sources can be utilized for payment of National Calamity Contingency duty on the final product.

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• 2013 (11) TMI 486
  Rebate claim – Claim rejected as being Fraudulent – Penalty imposed under Rule 15 (2) of Cenvat credit Rules - Bogus bills and documents submitted – Registration as Manufacturers obtained but no sale or movement of goods happened – Whether the petitioner had purchased the inputs which were duty paid – Held that:- The authorities found that inputs utilized by the petitioner for manufacturing export products were not duty paid - the entire basis for seeking rebate would fall - several suppliers who claimed to have supplied the goods to the petitioner were either fake, bogus or non-existent, the petitioner cannot be claimed rebate merely on the strength of exports made - The petitioner cannot take shelter that it had no knowledge or claim total innocence – Relying upon Sheela Dyeing & Printing Mills P. Ltd. v. C.C.E. & C, Surat [2008 (7) TMI 209 - HIGH COURT GUJARAT ] the statutory provisions pertaining to reasonable steps to be taken by the manufacturer are mandatorily in nature - The goods were purchased from non-existent and fictitious parties and Cenvat credit was wrongly availed – Decided against Petitioner.

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• 2013 (11) TMI 485
  Refund claim u/s 11-B of Central Excise Act,1944 – Duty paid by mistake – Burden to prove - Held that:- The material on record clearly show that CT-3 certificate had been obtained - thus there was no liability on the part of the assessee to pay excise duty - The burden of paying duty has to be borne by the assessee that there is no liability on him to pay the duty excise duty and the duty paid under mistake - Relying upon ADDISON & CO. Versus COMMISSIONER OF C. EX., MADRAS [2000 (11) TMI 146 - HIGH COURT OF JUDICATURE AT MADRAS] - If credit notes are raised and benefit is passed on to the customer, thus, not passing on the burden of excise duty, the assessee is entitled to refund of the same - Mafatlal Industries Ltd. v. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA ] - assessee is entitled to refund and conditions of Section 11B are satisfied – Decided against Revenue.

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• 2013 (11) TMI 484
  Adjournment by Tribunal - During the period Duty demanded – Application of Pre-deposit not taken up – Held that:- The Tribunal should give priority to hear applications for waiver of deposit instead of giving such long dates and putting the litigant to inconvenience and also burdening the Courts with petitions that can easily be avoided – Demand stayed till the Tribunal takes up the application for waiver of pre-deposit.

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• 2013 (11) TMI 483
  Revocation of the certificate of registration – Name of the Petitioner changed – Fresh certificate of incorporation issued – Application made for change in the name of the company - Fresh Central Excise Registration Certificate was received – Held that:- Mere change in the name of the company cannot possibly affect the position of the Central Excise dues or the liability of the company to pay those dues – there is no basis or justification to revoke the Central Excise Registration merely because the name of the company has been changed - the basis of the revocation is ex facie flawed – it does not require any detailed investigation - the Petitioner relegated to the remedy of an appeal before the Commissioner of Customs and Central Excise (Appeals) – Decided in favour of Petitoner.

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• CST, VAT & Sales Tax

• 2013 (11) TMI 511
  Sales Tax - Recovery of tax - Banks and financial institutions - Recovery of debts - Priority as between sales tax dues and dues owed to banks and financial institutions - KGST Act, 1963 - Section 26B - Whether Section 26B, creates the first charge, and gives an overriding effect over other laws - Held that:- the argument that involuntary transfers are not covered by Section 26A of the KGST Act, will not hold good. As far as the applicability of the principles governing precedence to the first charge for the tax dues are concerned, going by the decisions of the Apex Court a statutory first charge has been created by Section 26B of the KGST Act which will prevail over the mortgage created in favour of the Bank The creation of such a charge by operation of law amounts to statutory recognition of priority over private debts including mortgage, The non obstante clause in a statutory provision like the one in Section 26B will override all other laws in force which definitely will include Section 100 of the Transfer of Property Act. The absence of a provision for enforcing a charge in the KGST Act will not whittle down the effect of Section 26B of the Act. This is especially since by virtue of the operation of law the State will have prior charge over the properties in question which will prevail over all rights created by the Bank - Appellants are not entitled to succeed in the appeals. The argument whether there should be a separate provision for enforcement of the first charge raised by the learned Senior Counsel for the appellants, cannot hold good especially in the light of the non-obstante clause in Section 26B of the KGST Act and in the light of the view taken in State Bank of Bikaner & Jaipur's case {1994 (12) TMI 72 - SUPREME Court} that "when a first charge is created by operation of law over any property, that charge will have precedence over an existing mortgage", which is reiterated in Central Bank of India's case {2009 (2) TMI 451 - SUPREME COURT OF INDIA} has upheld the Division Bench decision in later cases regarding the effect of Section 26B of the KGST Act - Decided against assessee.

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• Indian Laws

• 2013 (11) TMI 500
  Is it permissible for the Executive to create a ‘police force’ with power to ‘investigate’ crimes in exercise of its executive powers, when exercise of such a power adversely affects or infringes fundamental rights embodied in Part III of the Constitution, particularly, Article 21 - Whether ‘Central Bureau of Investigation’, popularly called CBI, is a constitutionally valid police force empowered to ‘investigate’ crimes - Whether Delhi Special Police Establishment Act, 1946, empowers the Union Home Ministry to establish a ‘police force’ in the name of CBI – A criminal case was registered against the Petitioner under Sections 120B IPC/420 IPC and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988, in the office of the Superintendent of Police, Central Bureau of Investigation (hereinafter referred to as ‘CBI’), Silchar, Assam, against the petitioner, who is an employee of Mahanagar Telephone Nigam Limited, New Delhi. Having investigated the case, the CBI laid a charge sheet, dated 25-11-2004, in the Court of the learned Special Judge, CBI, Assam, Kamrup, Guwahati – Held that:- CBI has been constituted by way of an Executive Order/Resolution, dated 01.04.1963, issued by the Ministry of Home Affairs, Government of India, and not by making any legislation - Parliament is competent to make law on the Central Bureau of Intelligence and Investigation, the CBI, which is constituted under the Resolution No.4/31/61-T, dated 01.04.1963. No statute has been enacted by Parliament establishing a body called CBI. Since there is no legislation constituting the CBI, the CBI’s constitutional validity, according to the learned Amicus Curiae, has to be tested in the light of the provisions embodied in the Constitution of India - Whereas DSPE has been established under the DSPE Act, 1946, the CBI, has been constituted by a mere executive fiat - If the impugned Resolution had received the assent of the President of India, this Court, vide its order, dated 20.01.2013, directed the respondents to produce the records relating to the creation of the CBI. Though the relevant records have not been produced, in original, a copy thereof has been produced by the learned Additional Solicitor General and has been perused by the Court and the parties concerned inasmuch as the learned Additional Solicitor General had made it clear to this Court that the said records were no longer classified documents. Whether the impugned Resolution, dated 01.04.1963, is an executive action and, therefore ‘law’ within the meaning of Article 13 (3)(a) and/or Article 21 of the Constitution of India – Held that:- A bare reading of Article 73 makes it evident that the executive powers of the Union extends to all the matters with respect to which the Parliament has power to make laws; but, there are three fetters on exercise of the executive powers. First, this exercise is subject to provisions of the Constitution and, secondly, this exercise of executive power shall not, save as expressly provided in the Constitution or in any law made by Parliament, extend, in any State, to matters with respect to which the Legislature of the State also has power to make laws. Thirdly, the exercise of executive power cannot be stretched to the extent of infringing fundamental rights. Article 73 cannot be read in isolation and it becomes necessary to understand its co-relation with Article 245 and Article 246 of the Constitution, which embody the concept of federal structure of our Constitution - A combined reading of Article 245 and Article 246 shows that Parliament and State Legislatures have Constitutional competence to make laws - Subject matter of the laws to be made have been delineated in the form of three lists, namely, Union List, State list and the Concurrent list - ‘Police’ is a subject falling under Entry 2 of List II (State List). In view of Article 246 (3), therefore, only State has exclusive power to make laws on ‘police’ by taking recourse to Entry 2 of List II (State List). However, Union Territories are not States within the meaning of Article 246 and, hence, Parliament can make laws, on police, for the Union Territories - Once a legislation occupies a field, neither any of the States nor the Union can exercise its executive powers on the same field inasmuch as the legislation is the primary work of the Legislature and not of the Executive. CBI has been investigating offences and prosecuting alleged offenders in the garb of being an organization under the DSPE Act, 1946. In fact, impugned Resolution, dated 01.04.1963, is not, strictly speaking, an executive action of the Union within the meaning of Article 73 inasmuch as the executive instructions, embodied in the impugned Resolution, were not the decision of the Union Cabinet nor were these executive instructions assented to by the President. Therefore, the impugned Resolution, dated 01.04.1963, can, at best, be regarded as departmental instructions, which cannot be termed as ‘law’ within the meaning of Article 13(3) (a) nor can the executive instructions, embodied in the impugned Resolution, dated 01.04.1963, be regarded to fall within the expression, "procedure established by law", as envisaged by Article 21 of the Constitution - Actions of the CBI, in registering a case, arresting a person as an offender, conducting search and seizure, prosecuting an accused, etc., offend Article 21 of the Constitution and are, therefore, liable to be struck down as unconstitutional. Appellant has been able to make out a case calling for interference with the impugned Resolution, dated 01.04.1963, and also with the impugned prosecution of the appellant on the basis of the charge-sheet, which has been laid by the CBI, in the Court of the learned Special Judge, Assam, Kamrup, and, as a sequel to the conclusions - Impugned Resolution, dated 01.04.1963, whereby CBI has been constituted is quashed - Quashed the impugned charge-sheet, submitted by the CBI, against the appellant and, consequently, the trial, which rests on the impugned charge-sheet, shall stand set aside and quashed – Decided in favor of Petitioner.

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• 2013 (11) TMI 499
  Denial of Second ACP due to Respendent - ACR entry not communicated on date of denial - Whether the petitioners were justified in relying upon the non-communicated ACR of the first respondent to decide the issue relating to his eligibility to get Second ACP - Held that:- as ACR entries, namely "Just adequate" made in the Service Register insofar as the first respondent is concerned, were not communicated as on the crucial date, i.e., on 6.8.2007, the said ACR entries cannot be relied on by the petitioners to consider the claim of the respondent seeking Second ACP from 6.8.2007 - Second petitioner, namely, Additional Commissioner of Customs, ADC, Unit Mandapam Road, Ramanathapuram is directed to consider the said aspect and pass fresh orders - Following decision of Abhijit Ghose Dastidar v s. Union of India [2008 (10) TMI 599 - SUPREME COURT] - Decided in favour of Petitioner.

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