Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 12, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Having completed assessment it was not open for the AO, in the absence of any material, which includes information, to doubt on the completed assessment and to reassess the assessee on the basis of the report of DVO. - HC
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Penalty imposed u/s 271(1) - Power of reduce or waive penalty u/s 273A - concealment of income - Tribunal was wrong in cancelling the penalty imposed on the assessee under Section 271(1)(c) - HC
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Addition u/s. 41(1) read with section 28(iv) of the Act - the liability has been acknowledged by the assessee. Since amount has not been written off by the assessee in its books of account, it cannot be said that the liability has ceased to exists - AT
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Claim of exemption / deduction during assessment proceedings - Denial of additional claims on the ground that claims were not made by way of filing the revised return under Section 139(5) - claimed allowed - AT
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Valuation u/s 50C - Reference to DVO - objection of the Revenue that CIT direction in referring the valuation to DVO is not correct cannot be accepted. - AT
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Deduction u/s 54EC - Investment in two years - it is apparent that the Government only intended to restrict the investment in a particular financial year and accordingly has fixed the limit of Rs. 50,00,000/- as permissible limit in a particular financial year. The Government did not intend to restrict the maximum amount of exemption permissible under Section 54EC - AT
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Additions cannot be made on account of difference arising in the quantity and value of stock shown in the books of accounts and the statement furnished to the banking authorities, admittedly to avail higher credit facilities - AT
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Cancellation of registration u/s 12A/12AA - Exemption u/s. 11(1) is only upon the application of income for charitable purpose/s, so that it is only where so applied, reading the term 'charitable purpose' as per the extant law, that it could be allowed. - AT
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Deduction u/s. 54F - The investment in new property is not entitled to the extent made before the sale of property - investment made after sale of property as per section 54F is entitled for exemption - AT
Customs
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Cancellation of Import Export Code Number (IEC Number) - no opportunity was given to the petitioner and also copy of the order was not sent to them, which amounts to violation of the principles of natural justice. - matter remanded back - HC
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Exemption from levy of CVD on MRP basis - import of lipsticks - although the goods are sold in numbers, they are not required to pay duty on MRP as having the weight less than 10 gms per pc. - AT
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Confiscation of goods - photocopiers imported by the appellant have to be held as freely importable at the relevant time of import and the decision of the lower authorities in this regard cannot be sustained - AT
Service Tax
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Condonation of delay - Appeal not filed on time by the lawyers appointed - As fundamental issue challenged by the other CHAs is at large before the Tribunal, his case on substantive ground should be permitted to be proceeded with rather than defeating him on technical ground - HC
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Exemption under Notification 4/2004 - Rule 6(3)(C) of the CENVAT Credit Rules – Supply of services to SEZ - in view of retrospective amendment stay granted - AT
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Cenvat Credit – outsourcing of services to sister concern - cenvat credit of service tax paid by the sub-contractor - prima facie credit is allowable - stay granted - AT
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Classification - Annual technical support fee - Consulting Engineers' Service or Intellectual property services (IPR) - not taxable as consulting engineer's service - AT
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Cargo Handling Services - if an activity of packing, loading and unloading is done within the factory premises, the said service would be out of the purview of Cargo Handling Service. - AT
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Services of a Valuer - Ambit and scope of Consulting engineer services under service tax - the services of valuers is not liable to service tax as Consulting Engineer - AT
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Classification - Management Consultancy Service or Business Auxiliary Services - While manager actually manages the things, a consultant provides consultancy/advice as to how to manage - the activity in question is not management consultancy service - AT
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Classification - Manufacturing activity or Business auxilliary service - processes on rough castings - machining, drilling, tapping and milling etc. - stay granted - AT
Central Excise
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100% EOU - Clearance of goods from Domestic Tariff Area – Authorization not taken or even applied – The petitioner was entitled to clear goods for sale to the DTA, though prospectively - Thus relief granted to the extent of penalty of an equivalent amount as the duty component, imposed u/s 11AC - AT
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Valuation - Eligibility for Deduction from assessable value – Deferment Scheme under sales tax - prima facie case is in favor of assessee - AT
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Payment of Interest till Refund – Earlier Interest not provided in any statutory provisions – it cannot be said that the respondents had no legal right to raise the demand at the time when the position of law was not very clear - HC
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Claim of Interest for delay in allowing the transfer of respective MODVAT/CENVAT credit - Contention to the effect that no interest is payable because there is no provision of interest under the scheme of the Act is also thoroughly misconceived and misplaced - claim of interest allowed @9% - HC
VAT
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Refund of tax - Exemption - A person who has deposited tax out of his own pocket cannot be permitted to be placed in a disadvantageous position than those who have not deposited tax at all. - HC
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Discrepancy in books of accounts - The view of the Sales Tax Appellate Tribunal was that it was a subsequent document from the Nationalised Bank and hence, it could not be given credence to the stock position. Such view cannot be accepted - HC
Case Laws:
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Income Tax
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2013 (11) TMI 562
Deductibility u/s 37 of the Income Tax Act of privilege fee paid by the assessee to the State Government who was holding 100% share in the assessee – company – Deduction in the light of amendment to the provisions of section 24 of the Karnataka Excise Act, 1965 - Appellate Tribunal noticed that there was an amendment to provisions of section 24 of the Karnataka Excise Act, 1965 and subsequent to the Commissioner passing revisional order under section 263 of the Act and the effect of amendment was required to be examined as the section had been amended with retrospective effect and therefore the privilege fee paid by the assessee to the State Government who was holding 100% share in the assessee – company was again to be allowed as a deductible expenditure etc – Held that:- All aspects of the matter being left open by the Tribunal and the matter having gone back to the Commissioner who has to re-examine the whole thing and pass orders afresh, there is no need for interference at this stage to examine the questions of law.
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2013 (11) TMI 531
Inadequate reasons for re-opening of assessment u/s 147 of the Income Tax Act – Held that:- Reliance has been placed on the Apex court judgment in the case of ACIT v. Dhariya Construction Co. [2010 (2) TMI 612 - Supreme Court of India], in which the Supreme Court held that the opinion of the DVO per se is not an information for the purpose of reopening of assessment u/s 147 of the Act. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the present case, there is nothing to show that there was any material other than DVO's report, which is only an estimation to issue notice under Section 148 of the Act. The A.O. may be justified in assessment proceedings to obtain report of DVO to meet the estimation of the cost of construction made by the assessee. Having completed assessment it was not open for the AO, in the absence of any material, which includes information, to doubt on the completed assessment and to reassess the assessee on the basis of the report of DVO.
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2013 (11) TMI 530
Whether revenue should be restrained from taking coercive measures for recovering any amount from the petitioner - Refund due to the present petitioner has been adjusted towards penalty– Held that:- Entire penalty has been recovered by adjusting refund due to the petitioner and admittedly appeals filed by the assessee and the revenue are pending adjudication, no reason, to grant any relief to the petitioner, except to the extent of directing the Income Tax Appellate Tribunal, Amritsar to decide the appeals filed by the assessee and the revenue within one month of receipt of a certified copy of this order.
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2013 (11) TMI 529
Appellant accepted the facts, then why the appeal - Disallowance u/s 14A of the Income tax act – Held that:- Factual inaccuracies in computing the disallowance under Rule 8D by AO, pointed out by the Commissioner (Appeals) are not wrong or incorrect - Commissioner (Appeals) has relied and referred to Rule 8D and has recomputed the disallowance on the basis of applicable and correct figures. These figures are not disputed by the Revenue in the present appeal in the grounds – Therefore, appeal do not sustain – Decided against the Revenue.
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2013 (11) TMI 528
Penalty imposed u/s 271(1) - Power of reduce or waive penalty u/s 273A - concealment of income - disclosure voluntary or not – Held that:- On the facts and circumstances projected by Commissioner of Income Tax (Appeals), it was not only a case of furnishing of inaccurate particulars in earlier assessments but is also a case of concealment of income which thus had escaped assessment. Sequelly, even when strict compliance in terms of Commissioner of Income Tax, Ahmedabad v. Reliance Petroproducts Private Limited, [2010 (3) TMI 80 - SUPREME COURT] sought by the assessee is made of the provisions of Section 271(1)(c) of the Act, it is clearly a case of concealment of income and by no means can be said to be a disclosure made voluntarily or bona fide. Regarding waiver of penalty u/s 273A - Held that:- Entire exercise by the assessee was preceded by search and seizure operations resulting in seizure of books of account of the assessee which had positively suggested concealment of income which had earlier escaped assessment. It has already been noticed in this context that proceedings for escapement, viz, under Section 148 of the Act had been initiated against the assessee. Chain of events and concomitant conduct of the assessee is a clear indicator that there was complete absence of good faith and when the the assessee was placed in a very tight and rather vulnerable position, only then additional income had been disclosed. - Tribunal was wrong in cancelling the penalty imposed on the assessee under Section 271(1)(c) of the Income Tax Act, 1961. – Decided in favor of Revenue.
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2013 (11) TMI 527
Addition in respect of bogus purchase of JCB – Held that:- Assessee in his return submission dated 6.11.2009 had explained that the purchase of 2 JCB machines were made from Yantraman Automac Pvt.Ltd., Baroda and both these purchases were on hypothecation with Centurion Bank of Punjab. The purchase bills also reflected hypothecation with the Bank - Books of accounts were audited under section 44AB and the Tax Audit Report under the said provision had been duly furnished before the Assessing Officer, which was also evident from the assessment order - Tax Auditor did not point out any discrepancy in the entire report. Not only the purchase bills filed by the assessee reflected such hypothecation with the Bank but the repayment schedule also was furnished before the Assessing Officer – Decided against the Revenue. Addition on account of capital introduced by the partners – Addition on account of credited in the bank account – Both these additions in view of the no books of account produced before the Assessing Officer – Held that:- In respect of capital introduced by the partners amounting to Rs.7,60,000/-, the assessee has furnished the necessary evidence which is evident from the written submissions dated 6.11.2009 which is reproduced by the AO in the assessment order – Relying upon the judgment of the Hon’ble Gujarat High Court in the case of Pankaj Dyestuff Industries [2005 (7) TMI 601 - GUJARAT HIGH COURT], deleted the addition – Decided against the Revenue. Deposit in bank account of Rs.8,90,000/- stood explained as capital introduced by the partners. The receipt of contract work amounting to Rs.13,73,671/- is also stood explained as AO himself estimated profit at the rate of 8% on this civil contract receipt of Rs.13,73,671/-- Ld. Counsel of the assessee explained that Rs.2,34,329/- is out of opening balance of Rs.10,64,074/- - Books of accounts are audited - Deposit of Rs.24,98,000/- is stood fully explained – Decided against the Revenue.
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2013 (11) TMI 526
Addition u/s 69A of the Income Tax Act for unexplained money - Amount of Rs.22,51,000/- was seen as deposit in the Savings Bank Account of the appellant – Held that:- In a letter dated 14.12.2007, as reply to the request of the department, the assesseee had only reiterated the earlier deposit stating that the funds were withdrawn from the Savings Bank Account to advance to his brother and when such amounts were returned by his brother, the same were deposited in the account - It is also contended that the funds have also been received from the sister when she was in station. He also sought for time to obtain details of the remittance from Italy. He was granted time upto 27/12/2007, on which date he had given a letter dated 26.12.2007 making a declaration stating that his brother Mr.Thomas K.George had received amounts from his sister in Italy through Western Union Money Transfer which was credited to the Post Office Savings Bank Account of Sri Thomas Geroge and Raji Thomas. The amounts that were received by them from his sister in 2003-04 were used as temporary fund adjustments which got routed in his Savings Bank Account. Assessee did not furnish any proof regarding his claim other than producing a copy of the Post Office Savings Bank Accounts pass book - The assessing Officer found that there was no proof to substantiate such contention. When the amounts in the Savings Bank account of the appellant remained unexplained, the assessing officer was justified in passing the impugned order - This is purely a question of fact which has been found against the petitioner – Decided against the Assessee.
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2013 (11) TMI 525
Addition u/s. 41(1) read with section 28(iv) of the Act - cessation of liability - Treated advance against export received from Amas Mauritius Ltd. by the assessee on 24.1.1997 as its income by treating the said transaction as sham transaction in the assessment year under consideration – Held that:- Assessee received a sum of Rs. 3,04,38,400/- from M/s. Amas Mauritius Ltd. on 24.1.1997 as an advance for the purpose of export of goods and the same has been appearing in the books of account of the assessee till date. It is also fact that the assessee neither has made export against the said advance nor the amount has been returned till date. Moreover, the assessee has admittedly stopped export business and is in the business of advisory as well as in share dealing. It is not in dispute that the said amount is shown as advance in the balance sheet of the assessee. The said liability is also shown as on 31.3.2007. Therefore the liability has been acknowledged by the assessee. Since amount has not been written off by the assessee in its books of account, it cannot be said that the liability has ceased to exists - Hon'ble Madras High Court has held in the case of CIT Vs. Tamilnadu Warehousing Corporation [2006 (10) TMI 118 - MADRAS High Court] that the amount representing liabilities which were shown year after year could not be added back u/s. 41(1) of the Act, 1961 – Decided in favor of Assessee.
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2013 (11) TMI 524
Disallowance due to shortage of material – Held that:- Shortage is inherent in the chemical business due to evaporation loss of highly inflammable materials, weigh bridge differences etc - Disallowance made by the Assessing Officer is on the basis of surmises and conjectures - CIT(A) has noted that the disallowances was restricted by predecessor at lump sum amounts for various assessment years - Noted that the orders of predecessors for A.Ys. 1998-99 1999-2000 have been confirmed by Hon. Tribunal - Thus following the order of predecessors, restricted the disallowance to Rs. 50,000/- - In the present case, out of the claim of Rs. around 31 lakhs. CIT(A) has restricted the disallowance to Rs. 50,000/- which appears to be reasonable considering the disallowances made in the past. Accrual of income - interest on sundry debtors – Held that:- Amount has been classified as “other debtors” the same are not in the nature of debtors. The transactions with the aforesaid parties are not with respect to the sales but are with respect to financial transactions - Assessing Officer has worked out the interest at 12% on the total outstanding of Rs. 1,65,65,363/-. Since the Assessee has already charged interest from Sarojben Shah and Shah Investments as evident from the copy of ledger placed on record, the charging of interest from those parties again would amount to duplication - With respect to advance from H.M. Shah, it is submitted that he is an employee of Assessee and the advance was given to him for carrying due business dealing at Bharuch. This submission of the Assessee could not controverted by Revenue - Interest could have been charged by the Assessing Officer on the so called debtors after excluding balance of the aforesaid three parties namely Sarojbeh Shah, Shah Finance and Investments and H.M. Shah, Bharuch - Assessing Officer is therefore directed to re-work the interest in view of the aforesaid facts.
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2013 (11) TMI 523
Claim of exemption / deduction during assessment proceedings - Denial of additional claims on the ground that claims were not made by way of filing the revised return under Section 139(5) of the Income-tax Act, 1961 – Held that:- Reliance has been placed on the Hon’ble Delhi High Court judgment in the case of CIT Vs. Sam Global Securities Ltd [2013 (9) TMI 876 - DELHI HIGH COURT] - Issue is now squarely covered in favour of the assessee by the decisions of Hon'ble Jurisdictional High Court - That in the case of Sam Global Securities Ltd. (supra), the facts were that in the return of income, the assessee had not claimed exemption under Section 10(35) on the dividend income from the mutual funds and the loss on sale of units as business loss. During assessment proceedings, the assessee filed the revised computation of income claiming exemption as well as business loss. However, the Assessing Officer as well as CIT(A) rejected the assessee's claim on the ground that the assessee had not claimed it by filing of revised return under Section 139(5) within the time limit. In the instant case, ratio of the above decision of Hon'ble Jurisdictional High Court would be squarely applicable - Set aside the orders of authorities below on this point and restored the matter to the file of the Assessing Officer – Decided in favor of Assessee.
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2013 (11) TMI 522
Disallowance u/s 40(a)(i) - Deduction for fees paid to Master Card - Held that:- The assessee in this case has made certain payments to US company for allowing use of certain services, etc. in India - US companies; as per the own admission of the learned counsel for the assessee, have chosen to agree with the contention of the Income-tax department that they are liable to pay tax under the Indian Income-tax Act. These US companies have also remitted the amount of income-tax - Deduction, if any, can be allowed, only in the year in which the tax has been paid or deducted under Chapter XVII-B. As in the impugned assessment year no tax has been deducted while remitting these amounts to companies situated outside India, we hold that the first appellate authority was right in upholding the disallowance made by the Assessing Officer - Similar view has also been adopted by the Tribunal in assessee's previous case alo - Therefore, matter decided in favour of Revenue. Disallowance of deduction in respect of New York Branch State Franchise, Tokyo Branch business tax and pre factural municipal tax - Documentry evidence not produced to prove payments - Held that:- CIT(A) has given direction to the AO to verify the claim and allow the claim on the basis of actual payment in respect of taxes paid relating to assessee's New York and Tokyo Branch and hence, there is no grievance of the assessee - Therefore, decided in favour of Revenue. Disallowance u/s 14A - Expenses incurred in relation to exempt income - Disallowance of expenditure of 0.5% of average investments - Held that:- disallowance made by the AO by following 12% of the income as expenses is not justified and is not based on any rational basis. There is no dispute to the fact that for making the disallowance u/s.14A of the Act, the expenditure which is related to the income which does not form part of total income under the Act has to be identified. AO has to identify the expenditure which can reasonably said to have been incurred on tax exempt income before making any disallowance u/s.14A of the Act - Assessee in the assessment for the year 2003-04 has stated that the disallowance of 0.5% of tax free income would be reasonable - It is prudent to restore this issue to the file of AO with a direction to make reasonable disallowance u/s.14A as per law and taking into consideration the details as may be filed by the assessee and the decisions of the coordinate benches that may be relied upon before him - Decided against Revenue for statistical purposes. Disallowance of fees paid to Master Card International - Whether CIT (A) erred in setting aside this issue to the AO with a direction to allow as per law after verification of taxes paid - Held that:- Assessee bank has paid to Master Card International without deducting tax. Hence, AO is justified in disallowing the payments. However, CIT(A) has directed the AO to verify the claim of the assessee regarding taxes paid in this year under consideration in respect of earlier years and allow them as per law - there is no discussion on this issue in the assessment order but CIT(A) has given the direction to the AO to allow the claim as per law on verification and there should be no grievance to the assessee on it - Decided in favour of Revenue.
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2013 (11) TMI 521
Adjustment of arm's length price - Uncontrolled transaction - Held that:- when the Associate Enterprise had sold the items to the assessee at the same price at which it had purchased it, there cannot be any arm's length price adjustment done, unless and until the original vendor was also an Associate Enterprise. Here, admittedly, M/s Intel Semiconductor Limited was not an Associate Enterprise of assessee or its Associate Enterprise in Singapore. Therefore, we cannot say that the price at which M/s Intel Semiconductor Limited sold to Redington Distribution Pvt. Ltd., Singapore, was not at arm's length price - when Redington Distribution Pvt. Ltd. sold the items to assessee at very same price at which it had purchased from M/s Intel Semiconductor Limited, there cannot be any question of under pricing or over pricing - adjustment carried out by the lower authorities, based on list price, on the purchase of 1250 Pentium IV processors from Associate Enterprise was not called for. Such adjustment, therefore, stands deleted - Decided in favour of assessee. Disallowance of depreciation - claim of 100% depreciation - Held that:- Nothing has been brought on record by the assessee to show that erection of office cabins, partitions, installation charges, flooring charges, waterproofing treatment, etc. were in the nature of pure temporary erections which alone qualified for 100% depreciation. In such circumstances, we are of the opinion that Assessing Officer was justified in making a disallowance to the extent of Rs. 1,06,25,793/-. No interference is required - Decided against assessee. Disallowance of royalty - Non-deduction of tax - Held that:- assessee was obliged to deduct tax at source at the time when credit was given to M/s Microsoft Corporation Inc. No doubt, Hon'ble Apex Court in the case of GE India Technology Centre (P.) Ltd. (2010 (9) TMI 7 - SUPREME COURT OF INDIA) has clearly held that a person is bound to deduct tax at source only when the sum paid is assessable to tax in India. Here, there is no dispute that the sum paid to M/s Microsoft Corporation Inc. was taxable in India. In such a situation, in our opinion, contention of the assessee that only the net amount actually paid could be considered for effecting deduction of tax at source, cannot be accepted. Assessee was obliged to deduct tax at source when credit entries were passed in its books based on invoices or demands raised by M/s Microsoft Corporation Inc. In our opinion, lower authorities were justified in applying Section 40(a)(i) of the Act, to the extent assessee failed to make such deduction. No interference is required - Decided against assessee.
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2013 (11) TMI 520
Transfer pricing adjustments - Rejection of comparable - Segmental financial not reported - Whether, a company whose more than 80% of the revenue of the said company is from the trading activity can be compared with assessee - Held that:- Data available on record do not give segmental results of DGJL. The TPO has considered the segmental data and source of which is stated to be capitaline. Since the bifurcation of revenue and expenses are not based as per the accounts reported by the company; therefore, the authenticity of such bifurcated data is not free from doubt. Further, there is no dispute that the DGJL has a SEZ unit which is having benefit of concessional levy, duty taxes etc. Though, it is not clear from the records whether the diamond unit or Gold jewellery unit or both are SEZ unit; however, these are crucial and import aspect for considering the company as comparable. The TPO as well as DRP have not addressed this specific objection raised by the assessee. When substantial revenue of the said company is from trading activity and segmental results are not available on record and further the said company is having a SEZ unit; therefore, in the facts and circumstances, these aspects are required a proper verification and examination. As regards the exceptional result, this issue is now settled by various decisions of this Tribunal that the factors for determining inclusion or exclusion of any case in the list of comparables are specifically provided under Rule 10B(2). Therefore, unless and until there are specific reasons and factors as provide under the Rule 10B, an entity cannot be excluded or eliminated from the list of comparables solely on the basis of high profit making or loss making entity because no such factor finds place either in Rule 10B(2) or 10B (3) of IT Rules. Exclusion of foreign exchange gain - Foreign currency exposure - Export and import of diamonds with AEs - Forward contracts - Held that:- It is clear that in case of hedging of foreign currency exposure on the underlining trade receivable or payable the profit of loss will be treated in the same way in determining the net profit - In view of the facts that the assessee has entered into forward contracts for the purpose of hedging of foreign currency exposure on the export and import of diamond, the gain or loss arising of the said, will be treated as part and parcel of the operating profit. Working capital adjustment - Held that:- Initially the assessee works out the working capital adjustment in respect of the assessee's own results. Therefore, the TPO rejected the claim of the assessee on working capital adjustment. However, before the DRP, the assessee has revised the working capital adjustment in respect of the comparable margin. The DRP has rejected the claim of the assessee without even noticing the specific explanation and objections raised by the assessee that the assessee has revised its working capital adjustments with regard to the risk undertaken by the uncontrolled comparable companies - It is apparent from the record that the observations of the DRP while rejecting the claim of the assessee is contrary to the fact on record because vide letter dated 16.9.2011, the assessee recalculated the working capital adjustment with regard to the comparable companies. Therefore, after excluding the comparable company namely DGDJ, if any adjustment is made then the working capital adjustment has to be considered. Accordingly, this issue is set aside to the record of the TPO/Assessing Officer for considering the revised computation of working capital adjustment as produced by the assessee before the DRP - Decided in favour of assessee. There is no dispute on the point that the transfer pricing adjustment is required to be made only in respect of the transactions between the assessee and the AE and not in respect of the total transaction of the assessee including the transactions with non AEs - Assessing Officer is directed to make the TP adjustment, if any only in respect of the transactions between the assessee and the AEs and not on the total turnover of the assessee - Following decision of Petro Araldite (P.) Ltd v. DCIT [2013 (8) TMI 403 - ITAT MUMBAI] - Decided partly in favour of assessee.
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2013 (11) TMI 519
Valuation u/s 50C - Reference to DVO - Held that:- when the Assessee objects to the valuation of the Stamp Authorities before the A.O., the Assessing Officer has no option than to refer the valuation to the DVO. It has been held by various decisions of the coordinate bench of the Tribunal that the word “May” used in subsection 2 of section 50C has to be read as “Should” and the Assessing Officer has no discretion but to refer the matter to DVO for the valuation of the property when the Assessee raises an objection that the valuation adopted or assessed by the Stamp Valuation Authorities exceeds the Fair Market Valuation of the property - objection of the Revenue that CIT direction in referring the valuation to DVO is not correct cannot be accepted. More over, if any such direction is given and same was implemented by the Assessing Officer, having referred the matter to the DVO, it cannot be questioned in the present appellate proceedings when the CIT(A) directed the AO to adopt the valuation of DVO which is mandatory under the provisions - Decided against Revenue.
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2013 (11) TMI 518
Deduction u/s 54EC - Investment in two years - The Assessee claimed the exemption of the Capital Gains amounting to Rs. 1,00,00,000 by making investment - The Assessee claims that he has invested the funds within 6 months and therefore is entitled for exemption under Section 54EC - Interpretation of proviso of Section 54EC(1) - Held that:- The plain reading of the section as well as the proviso clearly suggests the same interpretation. There is no ambiguity in the interpretation. Had there been an intention of the legislature to restrict the exemption to Rs.50,00,000/-, the legislature would have provided the embargo in this regard. Restriction relates only to the investment made in any financial year by the assessee. Making of the investment is a condition for availing of the exemption. Condition for availing of the exemption requires that the investment can be made within a period of 6 months. If 6 months falls within a different financial year, as has happened in this case, in our opinion, this Tribunal cannot add the embargo that the assessee cannot make the investment to avail of the exemption under Section 54EC in the different financial year if he had already made the investment in the financial year in which the capital asset is transferred. In our opinion, the language of Section 54EC is clear and unambiguous and it leads to the interpretation that the assessee can make the investment in two different financial years provided in a financial year the investment made did not exceed Rs.50,00,000/-. We have also gone through the circular no. 3/2008 dtd. 12.3.2008 issued by the CBDT being an explanatory note on the provisions relating to direct taxes in Finance Act, 2007 - it is apparent that the Government only intended to restrict the investment in a particular financial year and accordingly has fixed the limit of Rs. 50,00,000/- as permissible limit in a particular financial year. The Government did not intend to restrict the maximum amount of exemption permissible under Section 54EC. Legislature in our opinion has consciously used the words "in a financial year" in the proviso to Sec. 54EC of the Act. If the legislature wanted to restrict the exemption itself to Rs. 50,00,000/-, it could have have simply dispensed with using the words 'in a financial year' - Following decision of Vikrant Tyres Ltd. v. First ITO [2001 (2) TMI 129 - SUPREME Court] and CIT v. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME Court] - Decided against Revenue.
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2013 (11) TMI 517
Disallowance u/s 40(a)(ia) - Deduction of tax at source - Violation of TDS provisions - Reversal of entries made regarding provision for TDS payable on contractors payment - Held that:- It is seen that the assessing officer has made disallowance of expenditure u/s40(a)(ia) of the Act only on the basis of reversal of entries made regarding provision for TDS payable on contractors payment. The assessing officer has not brought on record any such instance of expenditure, on which tax is not deducted or deducted but not paid so, and in the absence of which disallowance cannot be made u/s 40(a)(ia) of the Act. Further Ld. Counsel has drawn our attention to pg. nos.140-147 of P/B and submitted that on each and every expenditure for contractor’s payment, tax has been deducted at source and paid wherever it is applicable. We are of the firm view that if the expenditure has been subject matter of tax deduction at source and if the compliance to the Chapter XVII-B has been made then no disallowance can be made u/s 40(a)(ia) of the Act on presumption basis. Therefore, in the interest of justice, we set aside this issue to the file of Assessing Officer and direct him to verify the details as furnished by the Assessee and find out as to whether tax has been deducted at source on the expenditure - Decided in favour of assessee. Addition u/s 69B - Difference between stock declared to the Canara Bank and stock reflected as closing stock - Held that:- additions cannot be made on account of difference arising in the quantity and value of stock shown in the books of accounts and the statement furnished to the banking authorities, admittedly to avail higher credit facilities. Courts have laid down the following guidelines while dealing with the issue: - (a) The stock in quantity and value is inflated on estimate basis in the statement furnished to the banking authorities to avail higher financial credits; - (b) The inflated and estimated stock is hypothecated and not pledged; - (c) No actual physical verification of stock is carried out by the officer of banking authorities during the year or as on date of valuation of stock; - (d) The assessee has maintained stock register; - (e) The assessee’s books of accounts are not found to be defective or nongenuine by AO; - (f) The books of accounts maintained by the assessee are accepted by the Central Excise and / or Sales Tax Department. After including the addition made by the AO, the financial statement would completely be distorted and will not show the correct, true and fair view, which is on more factor which substantiates our finding that the figure of stock was inflated, adhoc and estimated purely for showing to the bank without there being any actual stock acquired by the assessee. Therefore in any which way, the addition made by the assessing officer is not justified and the same is hereby directed to be deleted - Decided in favour of assessee.
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2013 (11) TMI 516
Cancellation of registration u/s 12A/12AA - In view of the learned DIT(E), the assessee's activities, which fell in the last category of the specified activities, i.e., 'advancement of any other object of general public utility' were hit by first proviso to section 2(15) of the Act, so that they could no longer be regarded as charitable or as constituting a 'charitable purpose/s' - Held that:- The first proviso to the provision (s.2(15)), it would be noted, does not impinge directly on the objects per se, but the manner in which those are to be attained or achieved, and herein lies the controversy or the dichotomy attending the respective view points of the assessee and the Revenue. The review of registration subsequent thereto, as spoken of by the tribunal in Mumbai Cricket Association (2012 (8) TMI 369 - ITAT MUMBAI), is only in terms of and subject to the mandate of section 12AA(3), and which thus would be of no assistance to the Revenue - Assessing Officer is, while framing an assessment, empowered to examine the allowability of exemption u/s.11 where the proviso to section 2(15) is attracted. This follows trite law that exemption u/s. 11 r/w s. 12 is to be, notwithstanding grant of registration, only by the Assessing Officer, whose powers in the matter of assessment are plenary, on the satisfaction of the condition/s of those sections. Exemption u/s. 11(1) is only upon the application of income for charitable purpose/s, so that it is only where so applied, reading the term 'charitable purpose' as per the extant law, that it could be allowed. The insertion of section 13(8) by the Finance Act, 2012 (w.e.f. 1.4.2009, i.e., A.Y. 2009-10 onwards), from which period the changed section 2(15) becomes operative, removes the matter beyond the pale of any doubt. The matter/issue of exemption u/s. 11 would thus have to be reviewed by the Assessing Officer in assessment on a year to year basis. The primary onus to return its income each year in accordance with the law, it may be appreciated, is on the assessee. The argument advanced as to the inapplicability of even the substituted s. 2(15) in view of 'low' profitability, even as we find no reference to any criteria qua the same therein, is rendered out of place or superfluous in view of our aforesaid findings, and is accordingly not dealt with - Following decision of Rajasthan Housing Board v. CIT (2012 (5) TMI 100 - ITAT JAIPUR) - Decided in favour of assessee.
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2013 (11) TMI 515
Exemption under Article 12 of Indo-U.S. DTAA - Receipts for services provided to various Companies - Assessee claims that receipts in question were neither in the nature of "Fees for Included Service" (FIS) under Article 12(4)(b) nor as "Royalty" - Whether provisions of Article-12(3) and (4) will be applicable to assessee’s receipts - Held that:- Since, the assessee does not have any permanent establishment in India, the incomes so arising to them in India cannot be taxed under Article 7 as 'business profits' either. Therefore, we direct the Assessing Officer to delete the impugned additions. - Decided in favor of assessee. Use of names / logo - Held that:- payment made to SRMCRI is not taxable in India either as "Royalty" or as "FIS" - Decided in favor of assessee. Decision in Joint Director of Income-tax-OSD(IT)3(1) Versus Harvard Medical International, USA [2011 (11) TMI 484 - ITAT MUMBAI] followed - Decided in favour of assessee.
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2013 (11) TMI 514
Deduction u/s. 54F - Sale of property - Construction of house was substantially completed before the sale of capital asset which led to capital gain - Violation of conditions u/s 54F - Whether the cost of construction incurred by the assessee after the sale of capital asset, though the construction commenced before the sale and the construction completed within two years from the sale of capital asset is entitled for deduction u/s. 54F - Held that:- investment in residential house which would have taken place after the sale of existing capital asset is to be considered for deduction u/s. 54F of the Act as the investment in residential house would not only include the cost of purchase of the house but also the cost incurred in making the house habitable and an inhabitable premises, in our opinion, cannot be equated with a residential house. If a person cannot live in the premises, then such premises cannot be considered as a residential house. In case of semi-finished house, the assessee will have to invest huge money on finishing the house to make it habitable. The investment in new property made by the assessee is not entitled for deduction u/s. 54F of the Act to the extent made before the sale of property. Only that portion of investment made in the new property in accordance with section 54F of the Act is entitled for deduction u/s. 54F of the Act. Accordingly, we direct the assessee to furnish the details of investment made by the assessee in the construction of new residential building after the sale of existing property before the due date of filing of return of income u/s. 139(1) of the Act. The Assessing Officer shall consider that investment made by the assessee in the construction of new property after the sale of existing property in terms of section 54F of the Act. Accordingly, the issue is remitted back to the file of the Assessing Officer for the purpose of quantification of deduction u/s. 54F of the Act - Decided in partly favour of assessee for statistical purposes.
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2013 (11) TMI 513
Undisclosed income - Whether the primary ingredients of the sections 69 or 69A are met for their invocation by the Revenue - Held that:- AO on basis of seized document made additions u/s 69 as un-identified investment – there was sufficient material before the A.O. to have made additions – I.T.A.T. by elaborate reasoning has also held that the presumption created by the document had not been rebutted nor had the assessee denied the loan amount - no infirmity in AO's order – contention raised at the appellate stage was merely an attempt to create doubts in the mind of court – no violation of principle of natural justice - vacating the impugned order, restore the matter back to the file of the A.O. for allowing an opportunity to the assessee to prove his case before him, and who shall frame the assessment afresh per a speaking order, considering all the objections, if any, raised by the assessee to the impugned addition - Decided in favour of assessee.
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Customs
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2013 (11) TMI 549
Cancellation of Import Export Code Number - Export of 100KVA transformers M/s. Uttar Haryana Bijli Vitaran Nigam Limited, Haryana - Availment of duty exemption for the inputs sourced for the manufacture of the said transformers - Show cause notice issued for non fulfillment of export obligation - JT. DGFT cancelled the petitioner’s Import Export Code No. 0488011868 but the same was not served on the petitioner and no opportunity was given to the petitioner before passing the impugned order - Held that:- Before passing the impugned order dated 4-4-2012, no opportunity was given to the petitioner and also copy of the order was not sent to them, which amounts to violation of the principles of natural justice. Before cancelling the petitioner’s Import Export Code No. 0488011868, the first respondent ought to have given an opportunity of hearing to enable them to substantiate their case. Considering the facts and circumstances of the case and in the interest of justice, the impugned order dated 4-4-2012 passed by the first respondent is quashed with a direction to the first respondent to consider the matter afresh and pass order in accordance with law as expeditiously as possible, preferably, within a period of two weeks from the date of receipt of a copy of this order, after giving opportunity to the petitioner to substantiate their claim - Decided in favour of Petitioner.
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2013 (11) TMI 548
Waiver of pre deposit - Tribunal ordered waiver and release of confiscated goods - Held that:- Tribunal prima facie found that “there was no material to implicate or impute the appellant to the case, and in the absence of any culpatory statement recorded from him, we do not think that we would come to any other findings.” - We are of the considered view that the power of this Court while admitting the appeal is not to make endeavour to record different fact findings even on prima facie - Decided against Revenue.
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2013 (11) TMI 547
Exemption from levy of CVD on MRP basis - MRP on the lipsticks imported not affixed - Revenue denied exemption the basis that products imported by the appellant namely, 27648 pcs blue aviance slimline lipstics SPF 5 with weight of 2.2.gm/pc are sold not on weight basis but on number basis - Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules 1977 - Held that:- although the goods are sold in numbers, they are not required to pay duty on MRP as having the weight less than 10 gms per pc. - Following decision of M/s PIDLITE INDUSTRIES LTD VERSUS COMMISSIONER OF CUSTOMS (IMPORT), NHAVA SHEVA [2013 (11) TMI 91 - CESTAT MUMBAI] - Decided in favour of assessee.
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2013 (11) TMI 546
Waiver of Pre-deposit – import of surgical tapes - Benefit of Notification No.21/2002 – Mis-declaration of Goods - Revenue was of the view that the assessee had mis-declared the end use of the tapes imported - Held that:- All the points have to be gone into at the stage of final hearing since the same involved interpretation of medical terms, surgical terms and statutory provisions etc. - Relying upon BSN Medical Pvt. Ltd. Vs. CC(Import)[2013 (10) TMI 998 - CESTAT MUMBAI] and Sutures India Pvt. Ltd. Vs. CC, Chennai [2013 (10) TMI 999 - CESTAT CHENNAI] Since in the case of very same item, there were already two decisions, we do not consider it necessary at this stage that we should discuss all these submissions and come to a conclusion - the appellant had made out a prima facie case in their favour for waiver - Under these circumstances, there shall be waiver of predeposit and stay against recovery during the pendency of appeals.
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2013 (11) TMI 545
Waiver of penalty - Repeated Mis declaration of goods - Commissioner confirmed classification of goods under 38089910 and allowed re-exportation of the goods upon payment of redemption fine - Demand of differential duty - Held that:- live consignments valued at ₹ 67 lakhs, which is lying with the department is not sufficient for waiver of pre-deposit of duty and penalty. It is noticed, prima facie , that there is a communication between the applicant and the supplier regarding the change of classification. It appears that these communications were intended to change the classification for the purpose of evasion of duty. Prima face, there is material available that they have changed the classification for evasion of duty. Hence, the applicant failed to make out a strong prima facie case for waiver of pre-deposit of entire amount of dues - stay granted partly.
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2013 (11) TMI 544
Duty demand - Fraudulent claim of draw back by different exporters - Held that:- Demand was made jointly or severally but an amount of Rs.16,46,842 was quantified against the applicant which included drawback on goods which were awaiting export. He fairly submits that an amount of Rs.8,72,265 was paid to the applicant as drawback. He also submits that demand for drawback was confirmed against Shri Kalandar Seeni Ahmed and vide Stay Order No.832-833/12 dt. 11.12.12, the Tribunal directed him to deposit Rs.50 lakhs along with penalty partly. We find that Commissioner has prima facie quantified an amount of Rs.16,46,842 against the applicant and the learned counsel admitted that Rs.8,72,265 towards drawback was received by the applicant in his bank account. - stay granted partly.
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2013 (11) TMI 543
Confiscation of goods - Penalty u/s 112 - Import of 21 used photocopiers of various models - Restricted items for import under para 2.17 of the FTP 2004-09 - Whether Photocopiers were freely importable or required a licence – SCN issued alleging that Used Photocopying Machines were restricted items for import under para 2.17 of the FTP 2004-09 r.w. circular No. 20/05 – Held that:- DGFT has no authority to issue clarification that the import of photocopiers is restricted and such action could be taken only by the Central Government by issuing a Notification and this was done on 19-10-2005. Therefore in 2004, when the photocopiers were imported by the appellant, the same cannot be considered as restricted being capital goods. Therefore, photocopiers imported by the appellant have to be held as freely importable at the relevant time of import and the decision of the lower authorities in this regard cannot be sustained - Following decision of Atul Commodities Pvt. Ltd. v. Commissioner of Customs, Cochin [2009 (2) TMI 18 - SUPREME COURT] - Decided in favour of assessee.
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Corporate Laws
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2013 (11) TMI 542
Injunction for Restraining Arbitration Proceedings - Plea of Limitation - Whether the learned Single Judge was justified in passing an order of injunction restraining an arbitration proceeding pending before ICC between the parties - Held that:- The learned Single Judge was justified in rejecting the plea of limitation as a valid ground for injunction, as prayed for, so far as it relates to the transfer of 155 million shares to CPIL - Both on the factual and legal matrix the letter of termination had been disputed as the starting point of limitation - it cannot be said that the claim of the appellant was patently barred by limitation in the facts of this case so as to justify an order of injunction on such premise - The power of the judicial authority to decide the issue as to existence/ validity of the arbitration agreement was provided under the statute itself and was not whittled down by operation of section 5 of the Act - A bare reading of Section 45 of the Act would show that in the event a judicial authority was in seisin of an action relating to a matter covered by an arbitration agreement referred to in Section 44 of the Act the judicial authority shall refer the dispute in question to arbitration provided – (a) a party or anyone claiming through or under him makes such request and (b) a judicial authority was satisfied that the agreement is not null and void or inoperative or incapable of being performed. Section 45 therefore empowers the judicial authority when seized of to a matter relating to an arbitration agreement to decide as to whether such agreement is null and void or inoperative or incapable of being performed prior to referring the parties to arbitration. Such power prevails over the provisions contained in Part I of the Act (which includes Section 5 of the Act) or the Civil Procedure Code due to the operation of the non-obstante clause contained in such provision. Whether an action as can be said to be covered u/s 45 of the Act Power to entertain an action or cause by a Civil Court was inherent in itself - the nature of action which may be entertained by the Court was not regulated by Section 45 of the Act - The provision merely lays down the procedure to be followed if the action so entertained by a Court related to a matter covered by an arbitration agreement providing for foreign seated arbitration - Similar was the scope of section 8 of the Act in respect of domestic arbitration - neither Section 8 nor section 45 of the Act restricted the inherent power of a Court to entertain any action in a mater relating to arbitration agreements including an action challenging the validity, existence or scope. In SBP & Co. vs. Patel Engineering Ltd. & Anr. [2005 (10) TMI 495 - SUPREME COURT ] - It was evident from the decision of the Constitution Bench that the power of the Court to decide as to the validity or existence of the arbitration agreement (when called upon to do so by one of the parties) was not eclipsed by the existence of such power in the arbitral tribunal. Whether the respondent had made out a case to restrain the foreign seated arbitration - None of the ancillary agreements were running counter to the terms or modified or altered the principal shareholder agreement - The Court held that in exceptional cases where it can be inferred that the real intention of the parties was to subject non signatory affiliates to arbitration, such non signatory affiliates could be referred to arbitration - It further held that real intention of the parties was to be decided in the facts of the case - The subsequent agreement was therefore not in terms of the earlier agreement but in abrogation of the liabilities arising therein and created new rights and liabilities by and between the parties - The subsequent arrangement arrived at by and between the parties on substituted the terms of the earlier agreement with regard to the reliefs pertaining to the transfer of 155 million shares to CPIL - The subsequent arrangement also provided for a different forum for adjudication and rendered the arbitration clause null and void, inoperative and incapable of being performed in relation to such dispute in the aforesaid case - no reason to differ from the finding of the learned Single Judge in this regard. The claim of transfer of shares beyond 155 million shares to CPIL stood extinguished by clause 1 and 2 of the supplementary agreement dated 30th July, 2004. Such claim, therefore, is not a live claim and referring to the parties to arbitration would be wholly vexatious and unwarranted - When a party to an arbitration agreement pursues the self-same relief before a court and invites the Court to adjudicate the same on merits and such court adjudicates the same on merits and arrives at a decision, the said party shall be deemed to have abandoned his right to seek arbitration in respect of such claim. In the instant case, the right of the Chatterjee Group to seek managerial control and majority status under the aforesaid agreement or otherwise had been finally decided by the Apex Court. It would be patently vexatious and the abuse of process of law to permit the appellant to reagitate the self-same issue before the arbitral tribunal. Remedy of arbitration and that before the CLB cannot be said to be complementary remedies constituting one remedy as a whole and one invoking arbitration on the issue of majority status and managerial control in HPL, after the Apex Court had returned a verdict on merits against the appellant on the self-same issue in the Company proceeding at the latter’s behest undoubtedly amounts to abandonment of its right to arbitration by choosing to agitate such issue before the other tribunal.
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Service Tax
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2013 (11) TMI 559
Condonation of delay - Appeal not filed on time by the lawyers appointed - CESTAT denied condonation of delay for no bonafide reason - Held that:- it was noted by the Tribunal that the appellant being a CHA firm, it received order-in-appeal on 17th January, 2012, but, did not prefer appeal within the time prescribed. The Tribunal did not believe the reasons put forth by the appellant-petitioner of his having a bona fide belief that the receipt of the order of the Commissioner (Appeals) had not arrived for a long time on the ground that in the application for condonation of delay itself, it was specified that such an order was received on 17th January, 2012 - Tribunal nowhere has questioned its power to condone the delay of about three months period. It was only on account of its doubting the credentials of the petitioner that it chose to reject its request for condonation of delay. Petitioner is not to gain anything by preferring such an appeal belatedly, when it has already deposited substantial amount from the entire demand of Service Tax and is also ready to abide by any other condition, there is also no justification in denying to condone the delay in the application moved by him. Assuming that the petitioner had received copy of order of the appellate forum on 17th January, 2012, as mentioned by the Tribunal, then also, he has sufficiently explained the reasons for such delay in preferring the appeal. He has shown a bona fide belief that the Association was pursuing the cause of all CHAs jointly, if such ground of genuine belief led the petitioner not to pursue his individual cause; particularly in wake of the certificate of Customs House Agents Association, we have no hesitation in holding that the delay was well explained. Substantive cause of the litigant is far more vital to be considered; when pitted against technicality and the procedural delays. As fundamental issue challenged by the other CHAs is at large before the Tribunal, his case on substantive ground should be permitted to be proceeded with rather than defeating him on technical ground - Delay condoned.
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2013 (11) TMI 558
Exemption under Notification 4/2004 - Rule 6(3)(C) of the CENVAT Credit Rules – Waiver of Pre-deposit - the taxable services provided to a unit located in Special Economic Zone (SEZ) including under construction of the SEZ by any service provider are exempted from service tax subject to specified conditions – Held that:- Their case is covered by the retrospective amendment by way of insertion of clause 6(6)(A) of the CENVAT Credit Rules and the retrospective amendment is made applicable in the clause 144 of the Finance Bill, 2012 - the period after 09-02-2006 is squarely covered in the retrospective amendment - the notification No.04/2004 is a conditional exemption and therefore, the restrictions under Rule 6 of the CENVAT Credit Rules are not applicable - Period involved is clearly covered by the retrospective amendment as per clause 144 of the Finance Bill, 2012 and in respect of the other two appeals, the period involved is prior 10-02-2006 - the notification No.4/2004 r.w. Rule 25 of the SEZ is a conditional exemption and demand restrictions under Rule 6 of the CENVAT Credit Rules would not apply - Prima facie the appellants have a strong case in their favour - the pre deposit waived till the disposal – stay granted.
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2013 (11) TMI 557
Cenvat Credit – outsourcing of services to sister concern - cenvat credit of service tax paid by the sub-contractor - input services mainly on telephone, rent a cab and chartered accountant services - Held that:- The Service tax amount paid by the sister entity was being disallowed by the Department in the present appeal - the invoices issued by the sister entity, in which the amount has been charged in respect of service charges rendered on Audits, Limited Reviews, FDRs and Certification works during the period - The service tax paid by the sister entity on this account has been claimed by the appellants as CENVAT credit - the Board circular No.96/7/2007, dated 23 August 2007, in which it was clarified by the Board that when the services provided by a sub-contractor are used by the main service provider for completion of its work, the service tax paid by the sub-contractor can be taken as credit by the main service provider - Prima facie, the appellants have a strong case for waiver of the deposit - the deposit waived and stay granted against the recovery till the disposal – Stay granted.
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2013 (11) TMI 556
Demand of service tax - Business Auxilliary Service - Availment of CENVAT Credit - Assessee not a registered company - Services of technical inspection and certification - Held that:- revenue contended that appellants had paid the tax by utilizing CENVAT credit for payment of taxes on ‘Business Auxiliary Services’ and since at that time they were not registered, CENVAT credit available in their books could not have been utilized. - there is no provision restricting the credit to the person who is registered only. - benefit of credit allowed. Technical inspection and certification services - Held that:- Commissioner has relied upon clause 8.1 of the agreement which provides for inspection of the fields by the officers of the company and puts a condition on the farmers to allow the officials of the company to visit their farm and give advice. We find that there is no mention of any remuneration or fee for this service rendered by the appellant. On the other hand, we find that in para 3.1, there is a specific provision for charging fee and recovering same for giving technical advice. In fact, the learned advocate submitted that this amount demanded has been worked out on the basis of fee received by the appellant as per the clause 3.1 of the agreement. Therefore, we find that in the impugned order, demand has been confirmed on an activity for which no fee has been charged - appellant has made out a prima facie case in their favour. - stay granted.
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2013 (11) TMI 555
Demand of service tax - Classification of service - Annual technical support fee - Consulting Engineers' Service or Intellectual property services (IPR) - Held that:- agreement provides for supply of technical know-how and assistance for manufacture of diesel engines and components thereof. The technical knowhow includes information regarding design data, manufacturing and quality control impressing processing, design and construction of plant facility, quality related problems of the licenced product and training to the personnel of the Indian entity. The agreement also envisages supply of updated data based on the current research and development and engineering done by the foreign service provider. It is seen that the activity undertaken would more appropriately fall under ‘Intellectual Property Rights Service' and not under ‘Consulting Engineers' Service' and, therefore, the demand of Service Tax under the category of Consulting Engineers' Service is not sustainable in law. The ratio of the decisions relied upon by the lower appellate authority would also apply - agreement provides that there are no separate charges for on site assistance and only travelling and living expenses shall be reimbursed by the service recipient to the service provider - Decided against Revenue.
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2013 (11) TMI 554
Demand of service tax - Cargo Handling Services - Held that:- There are no findings of the lower authorities as to whether loading of the bags of soda ash was done out-side the factory premises or otherwise. The definition of Cargo Handling Service was being interpreted by their Lordships in the case of Modi Construction Company (2011 (4) TMI 598 - JHARKHAND HIGH COURT) wherein the Hon'ble High Court has held that if an activity of packing, loading and unloading is done within the factory premises, the said service would be out of the purview of Cargo Handling Service. Appellant has made out a prima-facie case for the waiver of the confirmed demands - Decided in favour of assessee.
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2013 (11) TMI 553
Service tax liability - Courier Agency Services, Renting of Immovable Property, Rent-a-Cab and Tour Operator services - Held that:- to be covered under the definition of Courier Agency Service, there has to be door to door transportation of time sensitive goods or articles. In the case in hand, the issue is arguable one to the extent that the person at Junagarh city hands over documents or envelops to the appellant and the said envelop or document is transported by the appellant from Junagarh to Ahmedabad - Prima facie case not in favour of assessee - Stay granted partially.
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2013 (11) TMI 552
Services of a Valuer - Ambit and scope of Consulting engineer services under service tax - Service provided to a client - Held that:- The service provided by any qualified engineer in the area of insurance survey or loss assessment are not in the nature of services in an engineering discipline. Even as per the WTO classification of services, insurance survey and loss assessment is categorized as insurance auxiliary services and not as "Consulting Engineer Services". It was accordingly clarified that the term "Consulting Engineer" as defined in the Service Tax Act, will not include those qualified engineers who act as ‘insurance surveyor and loss assessor' within its scope and therefore, service tax levy on the Consulting Engineer in any discipline of engineering will not cover the insurance survey and loss assessment services rendered by a qualified engineer. In the Institution of Valuers case (2013 (1) TMI 348 - GUJARAT HIGH COURT), the Hon'ble High Court held that services rendered by a valuer whether it be by engineer or any other person, is not in relation to advice, consultancy or technical assistance in any one or disciplines of engineering and therefore, the services of valuers is not liable to service tax as "Consulting Engineer" - Decided in favour of assessee.
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2013 (11) TMI 551
Demand of service tax - Classification of service - Management Consultancy Service or Business Auxiliary Services - Held that:- From the agreement available on record it is seen that SKL is actually undertaking the manufacturing operations and have provided space to SCPL for installation of machinery, etc. In other words, M/s. SKL is actually managing the operations of the SCPL by employing their own staff. There is a difference between "manager" and "managing consultant". While manager actually manages the things, a consultant provides consultancy/advice as to how to manage. Both are not the same. Therefore, we find that the reasoning adopted by the lower appellate authority in the impugned order for coming to the conclusion that recipient did not render any management consultancy services cannot be faulted - Management consultancy and such management services which are executor in nature would merit classification under "Business Auxiliary Services" - Following decision of BASTI SUGAR MILLS CO. LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD [2007 (4) TMI 25 - CESTAT,NEW DELHI] - Decided against Revenue.
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2013 (11) TMI 550
Stay application - Classification of activity - Manufacturing activity or Business auxilliary service - processes on rough castings - machining, drilling, tapping and milling etc. - Exemption under Notification No. 8/2005-ST - Held that:- impugned processes amounted to manufacture and consequently it cannot be classified under business auxiliary 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 - Prima facie case in favour of assessee - Following decision of Paramount Centrispun Castings Ltd. Vs. Collector of C.Ex. Nagpur [1995 (3) TMI 205 - CEGAT, NEW DELHI], Vishal Malleable Ltd. Vs. Collector of C.Ex. Baroda [1994 (1) TMI 176 - CEGAT, NEW DELHI] and Brakes India Ltd. Vs. Superintendent of C.Ex. [1997 (3) TMI 120 - SUPREME COURT OF INDIA] - Stay granted.
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Central Excise
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2013 (11) TMI 541
Denial of Cenvat credit – Waiver of Pre-deposit - Revenue was of the view that the oxygen generating plant would be an immovable property and also on the ground that the plant is not owned by the appellant but has been leased out – Held that:- If good is a capital good, Rule 57Q is applicable enabling party to claim credit of duty paid on capital goods by the manufacturer of specified goods - A manufacture is entitled to claim Credit on account of the excise paid on the components, spares and accessories of the goods exempt. – Following COMMISSIONER OF CENTRAL EXCISE Versus GUJRAT AMBUJA CEMENT LTD. [2008 (10) TMI 363 - HIMACHAL PRADESH HIGH COURT] – the appellant have made out a prima facie case - there being no dispute to the receipt and utilisation of the capital goods in the factory premises of the appellant, who is a manufacturer - the appellant has made out a case for the waiver of the pre-deposit of the amounts involved - applications for the waiver of pre-deposit of the amounts allowed and recovery stayed till the disposal – stay granted.
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2013 (11) TMI 540
100% EOU - Clearance of goods from Domestic Tariff Area – Authorization not taken or even applied – differential duty of SAD demanded with Penalty u/s 11AB of the Central excise Act 1944 - Held that:- Prima facie, the clearances in April 2009, while applied for authorization (for clearance of goods in the DTA) on 29.04.2009 and authorization was granted on 1.5.2009 is clearly irregular - The petitioner was entitled to clear goods for sale to the DTA, though prospectively - Thus relief granted to the extent of penalty of an equivalent amount as the duty component, imposed u/s 11AC of the Central Excise Act, 1944, on condition that the petitioner remits to the credit of Revenue the amount of differential SAD of Customs assessed by the adjudicating authority plus interest – Decided partly in favour of assessee.
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2013 (11) TMI 539
Valuation - determination of assessable value of body built vehicles by the applicant on the chassis supplied by Tata Motors Ltd. - Waiver of Pre-deposit of Penalty under Rule 26 of CE Rules – Held that:- Following M/s. Hyva (I) Pvt. Ltd. and others Versus Commissioner of Central Excise, Jamshedpur [2013 (9) TMI 136 - CESTAT KOLKATA] wherein the Tribunal had directed M/s Tata Motors to deposit an amount of Rs.2.00 Crores and waived the balance dues against M/s Tata Motors and all other applicants - The issue involved is the same - the present stay application could not be heard on that date thus it is appropriate to waive the requirement of pre-deposit of penalty imposed on the applicant – Pre-deposits waived till the disposal – Stay granted.
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2013 (11) TMI 538
Benefit of Cenvat credit – H.R. Coil, C.R. Coils, Bars, Wires etc - Waiver of Pre-deposit – Revenue was of the view that the items cannot be used as input in the manufacture of ingot - Held that:- lot of evidence is required to be gone through, and a final view can only be arrived at the time of disposal of the appeal - at this point appellant has not been able to make out the case in its favour so as to dispense with the condition of pre-deposit of the entire duty amount - Appellant directed to deposit Rs. 20 lakh as pre-deposit of Penalty and Interest – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2013 (11) TMI 537
Eligibility for Deduction from assessable value – Deferment Scheme under sales tax - Waiver of Pre-deposit - Revenue was of the view that the appellant are not eligible for deduction of the tax which was not actually paid by them – Held that:- Following Maruti Udyog Limited vs. CCE, Delhi-III [2004 (1) TMI 158 - CESTAT, NEW DELHI ] - Prima-facie the deferment scheme dealt with in the Tribunal’s judgement in the case of Maruti Udyog Limited and the scheme in this case is different only in respect of the point that while in the scheme dealt with in case of Maruti Udyog Limited the deferred amount of tax was to be paid within fourteen years, in the present scheme there is no time limit - However, in both the schemes there was an option available to the assessee to have the deferred amount adjusted against the capital subsidy to be received from the Government and in case of Maruti Udyog Limited it is a second option which had been opted by the assessee to this case - The requirement of pre-deposit of duty demand, interest thereon and penalty waived for hearing of the appeal and recovery stayed till the disposal of the appeal - Stay granted.
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2013 (11) TMI 536
Stay Application – Appeal and stay application pending – Recovery notice of outstanding dues issued to petitioner based on CBEC circular dated 1-1-2013 - Held that:- Relying upon LARSEN & TOUBRO LTD & OTHERS Versus UNION OF INDIA AND OTHERS [2013 (2) TMI 188 - BOMBAY HIGH COURT] – there has been no delay or inaction on the part of the Petitioner and the application for stay is still pending - the Commissioner (Appeals) directed to dispose of the appeal – Recovery stayed – Decided in favour of Petitioner.
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2013 (11) TMI 535
Right to cross examine - Whether the petitioners are entitled to cross-examine of the witnesses or not – Held that:- Even if the petitioners had never submitted any explanation to the show cause notices, the conduct of an enquiry becomes necessary and the cross-examination of the officers, who are authors of the statements, crystalizes into a right for the petitioners - cross examination allowed. Retraction from an early statement would normally occur only during the course of the enquiry - In the course of the enquiry, witnesses have not been examined so far - The purpose of cross-examination is only to disprove the statements given by the witnesses - If the witnesses had already retracted from their original statements, the petitioners would have been well advised not to ask for cross-examination at all - only those persons whose statements or whose documents or whose reports are relied upon will be made available for cross-examination – Decided in favour of Petitioner.
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2013 (11) TMI 534
Payment of Interest till Refund – Earlier Interest not provided in any statutory provisions – on 26-5-1995 Section 11BB of the central excise act was enacted – Held that:- Interest can be awarded on the money withheld by a party on the basis of either statutory provision of law or by virtue of contractual liability of payment of interest - In other case, the Court may award interest as damages to the aggrieved party on account of illegal retention of money by the party withholding the money - So far as rate of interest is concerned, it is governed by the statutory provision in civil suits when interest claimed is neither as per statutory provision for interest, nor is a contractual interest. The petitioner deposited the amount in compliance of the order of this Court and to take benefit of the interim order, it cannot be said that the respondents recovered the amount illegally - This situation is peculiar in the facts of the case and may not be applied in all cases, where there may be absolutely illegal demand raised by the Department without any authority of law, which is found to be absolutely illegal by the court of law when challenged in the court of law - the petitioner succeeded in the first round of litigation before the learned Single Judge, but lost the battle in the second round before the Division Bench and ultimately succeeded in third round before the Supreme Court – thus, it cannot be said that the respondents had no legal right to raise the demand at the time when the position of law was not very clear because of the reason that ultimately the view taken by the respondent-Department was found to be erroneous - Petitioner is entitled to interest from the date of the judgment of Hon’ble Supreme Court dated 22-1-1997 till the refund of the amount of Rs. 50 lacs on 12-1-1999 - for quantification the petitioner is entitled to interest @ 15% over Rs. 50 lacs from 22-1-1997 to 12-1-1999 – Decided in favour of Petitioner.
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2013 (11) TMI 533
Stay - Full duty amount ordered to be deposited by the tribunal - Held that:- The appeal was taken up for hearing on several days and the appellant did not bother to appear to press the appeal - The Tribunal suo motu passed an order asking the appellant to deposit the entire amount - the deposit of the entire amount would be too harsh – Thus the appellant directed to deposit 50% of the basic amount of tax to be submitted to Tribunal – Balance 50% to be secured by furnishing a bank guarantee – Decided partly in favour of Petitioner.
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2013 (11) TMI 532
Refund of amount deposited during investigation - Principles of unjust enrichment – Substantial question of law - Held that:- The Commissioner (Appeals) allowed the refund claim after examining the unjust enrichment - The appellant could not refer to any material or any relevant fact to enable him to assail the finding recorded by the Commissioner (Appeals) rejecting the arguments on the basis of unjust enrichment – There was no substantial questions of law for consideration in the appeal – Decided against Appellant.
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2013 (11) TMI 512
Claim of Interest for delay in allowing the transfer of respective MODVAT/CENVAT credit - On merger, the unutilized credit lying with the amalgamating company gets transferred to the amalgamated company automatically by virtue of Rule 57F(20) and 57S(5) of the Central Excise Rules, 1994 – Held that:- The department initially, even refused to grant the transfer of credit raising some technical objections. It was only at the intervention of this Court that the department, ultimately thought it appropriate to grant the transfer of the amount of unutilized MODVAT/CENVAT credit to the petitioner which the Respondent had unlawfully withheld. While doing so, however, no order was made as to interest. A further application made for grant of interest for delayed payment of MODVAT/CENVAT credit was rejected by the respondents. It is really surprisingly that the logic was that there was no statutory provision enabling the department to pay such interest to the petitioner. The contention to the effect that no interest is payable because there is no provision of interest under the scheme of the Act is also thoroughly misconceived and misplaced. When the Department acts illegally and not as per the scheme of the Act, the interest on such refund can never be provided for under the Scheme of the Act. If the authorities act as per the law, the question of granting interest on refund can be appreciated and considered as per the scheme of the Act. Contention to the effect that no interest is payable because there is no provision of interest under the scheme of the Act is also thoroughly misconceived and misplaced - Interest on refund is automatic and has to be granted on commercial principles – Reliance has been placed on the judgment of Apex court in the case of Sandvik Asia Ltd. v. Commissioner of Income-tax [2006 (1) TMI 55 - SUPREME Court], wherein the Hon’ble Apex Court even while finding that there was no statutory provision to pay interest on delayed payment of interest, held the assessee entitled to the same on general principles and found that the assessee would be entitled to be compensated by way of interest on interest – Decided in favor of Assessee.
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CST, VAT & Sales Tax
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2013 (11) TMI 561
Refund of tax - Notification 7038 dated 31.1.1985 - Exemption under Section 8 (2-A) of the Central Sales Tax Act - Held that:- A person who has deposited tax out of his own pocket cannot be permitted to be placed in a disadvantageous position than those who have not deposited tax at all. It has further been held that keeping in mind the object of the circular and the factual background for which it was issued, it is implied that the persons who have not paid tax etc. if already paid by a person without passing on the burden to the customer, the same shall be refunded to the dealer - Once the remission of tax is granted on the turnover of seeds prior to 1.7.1998 it ceases to be tax due and any amount deposited in excess is liable to be refunded under Section 29 (1) of the Act in the absence of anything to the contrary. There is nothing in the circular which prohibits or restricts refund of the excess amount. Therefore, in my view, the amount deposited in pursuance of the assessment order against the disputed amount of tax, in the absence of any prohibition, is liable to be refunded. It is not the case of the assessing authority that such tax has been admitted by the revisionist at any stage either in return or subsequently. There is nothing on record to show that the tax has been realized from the customer - Following decision of Anand Gramodyog Samiti Vs. Commissioner of Trade Tax, reported in [2005 (5) TMI 613 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.
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2013 (11) TMI 560
Discrepancy in books of accounts - Whether the Appellate Tribunal was correct in overlooking the law that when the entire alleged stock difference is less than 2% the G.O.Ms.No.200 dated 26.01.1988 contemplates that such stock difference can be ignored for purpose of making assessment under the Act - Held that:- As per the letter of the Indian Overseas Bank, Kodambakkam Branch, which is a Nationalised Bank, the total stock of polythene granules stored in Key cash Godown as accepted by the Bank was 8750 kgs. When that being the case, the apparent error in the statement made by the assessee cannot be taken as advantage of by the Revenue to make the assessment on the stock position. The view of the Sales Tax Appellate Tribunal was that it was a subsequent document from the Nationalised Bank and hence, it could not be given credence to the stock position. Such view of the Sales Tax Appellate Tribunal cannot be accepted since the stock was under the Bank's custody and the assessee had no control over it at any point of time - Decided in favour of assessee.
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