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TMI Tax Updates - e-Newsletter
November 14, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Allowability of exemption u/s 11 Charitable purpose u/s 2(15) - Once the assessee is a charitable institution and duly recognised under section 12A, then income is to be computed in accordance with the provisions of section 11 only - AT
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Windows Server, 2003 and Abode Photoshop software - first one is an operating system and the second one is application software - Both the softwares are also having fairly long utility life - the expenses incurred in acquisition of the softwares is capital in nature - AT
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Such actions on the part of the income tax department not only bring disrepute to the department but also encourage the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonesty - AT
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Deduction u/s 80IB - Business of manufacturing of LED based products Major manufacturing activity is done by the Job Worker - Further processing done by the assessee - deduction allowed - AT
Case Laws:
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Income Tax
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2014 (11) TMI 380
Addition of unexplained cash credits u/s 68 Facts and evidences not properly appreciated by CIT(A) - Held that:- CIT(A) accepted assessees claim on mere face value without supporting evidence only on the reason that assessee has made payments through crossed-cheques to M/s Sainatheswara Traders, Hyderguda, which proves the fact of transaction being carried out by assessee with that party - While coming to such conclusion though the CIT(A) has observed that AO has verified all the cheques and found that except an amount of ₹ 3,78,467 rest of the amount is credited to the account of M/s Sainatheswar Traders - the conclusion drawn by CIT(A) is not correct - assessee apart from submitting that it has entered into purchase and sale transaction with M/s Sainatheswara Traders, Hyderguda has failed to produce any corroborative evidence to prove either the existence of M/s Sainatheswara Traders, Hyderguda or the fact that Mr. Manoj Kumar Jain is either proprietor or partner of the concern or in any way related to M/s Sainatheswara Traders, Hyderguda - There is also no documentary evidence to show that payments made to Mr. Manoj Kumar Jain is at the instruction of M/s Sainatheswar Traders - no bills and vouchers have been produced to prove either the purchase from M/s Sainatheswara Traders, Hyderguda or sale to them - even the assessee has not produced the quantitative details of purchase and sales effected by it during the year - the conclusion drawn by CIT(A) cannot be accepted as it is without proper appreciation of facts and evidences thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of revenue.
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2014 (11) TMI 379
Allowability of exemption u/s 11 Charitable purpose u/s 2(15) - Held that:- The assessee has been recognised as a charitable institution looking to its objects and certificate under section 12A has been granted by the competent authority, vide certificate dated 21st June 1980 - In DIT (Exemption) v. Chembur Gymkhana [2012 (8) TMI 611 - Bombay High Court] it has been held that the fact that the membership of the club is open to a section of the community would not detract from the fact that the club has been constituted for the advancement of any other object of general public utility - The Club is not formed for the benefit of an individual or a group of individuals as such - while affirming that the object of the Club falls within the purview of Section 2(15), the matter is remitted back to the AO for determination as to whether as regards the application of the funds, the requirements of Section 11 have been duly fulfilled as the AO did not have an occasion to consider the application of the funds with reference to provisions of Section 11, since he had come to the conclusion that the Assessee does not fulfill the charitable purpose as defined in Section 2(15) Thus, the AO is directed to compute the total income of the assessee in terms of sections 11 to 13 - Once the assessee is a charitable institution and duly recognised under section 12A, then income is to be computed in accordance with the provisions of section 11 only - Decided against revenue.
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2014 (11) TMI 378
Software expenses disallowed Revenue expenses or not Held that:- Assessee rightly contended that the softwares purchased by the assessee were used to carry on the business more efficiently and they do not fall in the category of profit making apparatus of the assessees business - they fall in the category of Revenue expenditure relying upon the tests laid down in Amway India Enterprises. Versus Deputy Commissioner Of Income-tax, Circle - 1(1), New Delhi [2008 (2) TMI 454 - ITAT DELHI-C] - the software named Wealth spectrum is supportive software for PMS application - Similarly the software named i-deal is also supportive software for i-deal application - The nature of software named Chart FX is not stated - The description given for the software supports the submission of the assessee that they are not the primary software, on which the business of the assessee is run, but they perform supporting role and they are having short life due to continuous upgrading - All the submissions have not been controverted by the revenue thus, the order of the CIT(A) is set aside and the AO is directed to allow the claim Decided in favour of assessee. For the remaining two softwares that are Windows Server, 2003 and Abode Photoshop etc., the first one is an operating system and the second one is application software - Both the softwares are also having fairly long utility life - CIT(A) was justified in holding that the expenses incurred in acquisition of the softwares is capital in nature. Disallowance u/s 14A Application of formula provided under Rule 8D - Held that:- The assessee had held investment of ₹ 70.62 crores as on 1.4.2007 and it has come down to ₹ 68.26 crores as on 31.3.2008 - the assessee has invested mainly in various schemes of Reliance mutual fund and its subsidiaries - out of aggregate investments of ₹ 68.25 crores, the investment made in other companies was only ₹ 8.00 crores - The remaining investments are mainly in various schemes of Reliance mutual fund only and also in other group concerns - the investments made in the various schemes of Reliance mutual fund and also in other group concerns are usually made out of business policy and the same does not require complex analysis by technical experts - there is no necessity to apply the formula prescribed in Rule 8D(2)(iii) of the Income tax Rules - the disallowance worked out by the assessee also appears to be on a lower side - the assessee has allocated salary of a junior executive in the workings - Though the investments made in the schemes of Reliance mutual fund and group concerns do not require technical analysis, yet the decision to make investment is normally taken at a higher level - thus, the disallowance under Rule 8D(2)(iii) is determined at ₹ 3,50,000 thus, the order of the CIT(A) is modified Decided partly in favour of assessee.
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2014 (11) TMI 377
Payments for job works, salaries and wages disallowed Held that:- The assessee has maintained books of account and the audited statements/Form 3CD which were furnished before the AO - In the absence of any evidence or finding to this effect being rendered, a summary, ad hoc disallowance of the kind made by the AO is not tenable the AO has not assigned any reason for pegging the disallowance at 20% of the total expenses claimed - CIT(A) rightly pointed out that only the amount claimed as an expense in the profit and loss account can be considered for disallowance and not the amount shown as outstanding in the balance sheet thus, the matter is required to be remitted back to the AO for fresh examination of the issue Decided in favour of revenue. Interest on advances receivable Held that:- The advances have been given to related parties and that no interest has been charged on the advances - the assessee is paying interest @ of 9% to HDFC Bank for overdraft facility the AO has not examined whether there was any nexus between the Bank funds and the amount advanced to related parties the facts of the issue are not clear thus, the matter is remitted back to the AO for proper examination and verification Decided in favour of Revenue. Commission payable Genuineness of creditors Held that:- Commission payable was the opening balance as on 1-4-2005 in the assessee's balance-sheet under the head 'sundry creditors' CIT(A) was rightly of the view that the assessee actually claimed an amount of ₹ 80,000/- as the brokerage the AO was not correct in disallowing the amount as appearing in the balance sheet against the claim made in the Profit and Loss account the order of the CIT(A) is upheld Decided against revenue.
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2014 (11) TMI 376
Unexplained investment in purchases of silver, job charges and undisclosed profit earned deleted Held that:- All the papers were considered in the case of M/s.Mahashakti Jewellers and addition was made - The papers are not pertaining to the assessee - the papers relate to the business of M/s. Mahashakti Jewellers assesse is an employee of M/s.Mahashakti Jewellers and the finding of certain papers relating to M/s. Mahshakti Jewellers cannot be said unusual - Moreover absolute inference cannot be drawn u/s.132(4A) particularly when appellant had admitted in clear terms that certain papers in Annexure A-1 relate to the business of M/s.Maheshakti Jewellers - the AO was unjustified in making addition on account of investment in purchase of silver, payment of job charges for making silver ornaments and on profit earned the order of the CIT(A) is upheld Decided against revenue. Unexplained deposit in bank account Held that:- CIT(A) was of the view that the deposit made by the assessee on 04/10/1994 in SB A/c. was duly disclosed while furnishing return in the AY 1995-96 much prior to the date of search Decided against revenue. Undisclosed income from job work Held that:- CIT(A) was of the view that the assessee was a partner in firm known as M/s. Mahashakti Jewellers upto AY 1993-94, therefore he thought it appropriate to restrict the addition to the extent of ₹ 1,28,392/- out of addition of ₹ 3,46,392 the order of the CIT(A) is upheld Decided against revenue. Determination of undisclosed income on account of household expenses Held that:- The estimation in block assessment is to be made on the basis of the material found during the course of search and any estimation is beyond the purview of the block assessment the order of the CIT(A) is upheld Decided against revenue. Unexplained cash found at the time of search Held that:- CIT(A) has given a finding on fact that Smt. Savitridevi, w/o assessee admitted in her primary statement i.e. in the statement before the start of the search that there may be about ₹ 2000 to ₹ 3000 of cash at her residence and there was also cash belonging to her father which was kept at her residence for the treatment who was hospitalized at Ahmedabad after he met with an accident Decided against revenue. Unexplained investment in gold ornaments Held that:- The gold ornaments were found during the course of search weighing 263gms. from a locker in the joint names of the assessee and his wife the gold ornaments belonged to him and his wife - The CIT(A) has rightly accepted the explanation given by the assessee since this kind of practice is prevalent in the society that the bride and bridegroom at the time of marriage are given certain gifts in the form of gold ornaments the order of the CIT(A) is upheld Decided against revenue. Low withdrawals for household expenses Held that:- CIT(A) was rightly of the view that the AO was not justified in making this addition because no evidence whatsoever was found during the course of search on the basis of which it could be said that appellant had spent more on house hold expenses than disclosed by him while filing returns for the block period prior to the date of search - No information was also brought on record by the AO on the basis of which it could be said appellant's withdrawals for house hold expenses made by the assessee and his wife were insufficient for meeting the family expenses of the assessee which comprised of two adult members and one small child thus, the order of the CIT(A) is upheld Decided against revenue.
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2014 (11) TMI 375
Issues not properly adjudicated by the CIT(A) - Levy of penalty u/s 271A - Admission of additional evidence Unexplained investment in respect of improvement of these two properties u/s 69B Income to be assessed as profit and gains of business or capital gains Held that:- The entire matter needs re-examination at the end of the AO - So far as addition under Section 69B made by the CIT(A) and his observation with regard to the head of income and levy of penalty u/s 271A is concerned, all these aspects were not considered by the AO - The CIT(A) made these additions and observations without allowing any specific opportunity to the assessee which cannot be said to be justified - the issue with regard to the source of cost of improvement also needs examination - The issue whether the income from sale of property is to be assessed under the head capital gains or business income also needs examination because from the details submitted by the assessee - one property at GK-1 was purchased by the assessee on 2.4.2006 for ₹ 43,00,386/- and assessee claimed to have incurred the expenditure for improvement amounting to ₹ 1,22,98,550/-. The property is sold on 31.3.2008 - Another property was purchased on 10.1.2007 for ₹ 18,69,638/-, cost of improvement is claimed at ₹ 61,48,700/- and the property is sold on 30.1.2008 - it certainly requires examination whether the profit/loss from the sale of those two properties is assessable under the head capital gains or business income- the matter is to be remitted back to the AO for re-examination of whole issue and pass a speaking order Decided in favour of revenue.
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2014 (11) TMI 374
Deletion of penalty u/s 271(1)(c) Retrospective amendment in clause (1) of Explanation 1 to section 115JB - Held that:- As decided in assessees own case for the earlier assessment year, it has been held that it cannot be held that the appellant had furnished any inaccurate particulars or concealed any material fact - there is no valid reason to interfere with the observations and findings of the CIT(A) as the legal position is well settled that the assessee cannot anticipate on the date of fling of return which was admittedly filed on 29.11.2006, that a retrospective amendment in law would be introduced by Finance Act 2009 w.e.f. 1.4.2001 i.e. subsequent to the date of filing return - Even otherwise neither it can be said that the assesees claim was not bonafide nor the material facts were not properly disclosed by the assesee at the time of filing of return - the return was filed on 29.11.2006 based on the past position on the very same facts and prior to the amendment to the provision of the Act was introduced which subsequently inserted with retrospective effect by Finance Act 2009 - the CIT(A) was right in cancelling and deleting the penalty as the provisions retrospective inserted by Finance Act 2009 was not before the assessee at the time of filing of return on 29.11.2006 - the CIT(A) was right in cancelling the penalty Decided against revenue.
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2014 (11) TMI 373
Denial of claim of exemption u/s 80P(2)(a)(i) Co-operative society as per Kerala Co-operative Societies Act Nature of assessee Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- The Assessee is a co-operative bank, the Assessee will not be entitled for deduction as stipulated u/s 80P(2)(a)(i) but in case the Assessee is not a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, the provisions of Sec. 80P(2)(a)(i) will be applicable to the Assessee provided the Assessee is engaged in carrying on business of banking or providing credit facilities to its members - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal - the types of the deposits which the assessee has accepted as per bye-laws are the same as are being accepted during the course of the carrying out the banking activities - the paid up share capital and reserves in the case of the Assessee is more than ₹ 1 lac - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) thus, the order of the CIT(A) is set aside and the AO is directed to allow the deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members Decided in favour of assessee.
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2014 (11) TMI 372
Revision u/s 263 - Proceeding before the Administrative Commissioner is a judicial proceedings u/s 136 - Held that:- The proceeding before the Administrative Commissioner is a judicial proceedings u/s 136 of the Act - The judicial / administrative order shall contain the reasons for the conclusion in the order itself - the AO has not discussed anything in the assessment order - It is not known why the claim of the assessee for higher depreciation was allowed on the windmill - In the absence of discussion in the assessment order, the revisional/appellate authority cannot appreciate the reason for the decision taken by the lower authority - Since the AO has not discussed anything in the assessment order regarding the depreciation on the windmill which shows the non-application of mind to the material available on record as decided in Commissioner of Income-Tax Versus Sunil Kumar Goel [2005 (1) TMI 34 - PUNJAB AND HARYANA High Court] - an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of the court under article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under article 227 of the Constitution and that the reasons, if recorded, would enable this court or the High Courts to effectively exercise the appellate or supervisory power - a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the stand point of policy and expediency. The then AO (Shri Bhopal Singh), the Additional Commissioner of Income Tax, Range-II, Muzaffarnagar and Shri Kundan Misra, the then Commissioner of Income Tax, Muzaffarnagar who passed the order dated 25.1.2008 have abdicated their duties - The Court in the exercise of supervisory jurisdiction under Articles 226 and 227 of the Constitution of India cannot be a mute spectator - Such actions on the part of the department not only bring disrepute to the department but also encourage the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonesty the AO has not applied his mind to the material available on record the Tribunal is of the opinion that the Commissioner has rightly exercised his jurisdiction u/s 263 of the Act Decided against assessee.
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2014 (11) TMI 371
Deduction u/s 80IB - Business of manufacturing of LED based products Major manufacturing activity is done by the Job Worker - Further processing done by the assessee - Held that:- The Assessee is a small-scale industrial undertaking having Permanent Registration No.30325068/Sl dated 18.08.1997 and obtained Excise Licence having R. C. No.20/M/8/C/9 Cal- E/97 dated 06.06.1997 which has presently been changed to AABCB2719DXM001 following the decision in Ujagar Prints Vs. Union of India [1989 (1) TMI 122 - SUPREME Court] - monitoring and soldering of raw materials/components on Circuit Board as performed by Job Worker is only one part of the manufacturing activities has not resulted towards emergence of any product which has commercial identity and is excisable - It was not considered by the AO that had such work performed by Job Worker resulted into emergence of a product having commercial identity, then such work would have attracted the Excise Act - assessee is a small-scale industrial undertaking and is engaged in the business of manufacturing of any article or thing - All conditions laid down in Section 80-IB of the Act stands satisfied - Central Excise authorities recognizes the assessee as manufacturer and is collecting Excise Duty from the Assessee for manufacture of excisable goods. The Central Excise Authorities recognizes assessee as manufacturer and is collecting Excise Duty for manufacture of excisable goods for carrying out the operation of fitting, mounting and soldering of raw materials/components at the factory of the Job Worker under close supervision and monitoring by the employees of the assessee, further processing, burning and testing shall be carried out at the factory of the assessee, whereby and whereto a product will emerge which is having distinct Identity in the commercial world assessee is eligible for deduction u/s 80-IB Decided in favour of assessee.
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Customs
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2014 (11) TMI 384
Denial of refund claim - Bar of limitation - Held that:- Condition No. 29 of the Notification No. 21/2002 provides that if the goods are imported by ONGC or by the subcontractor of the licencee, he must produce to the Dy. Commissioner of Customs or to the Asst. Commissioner of Customs, as the case may be, at the time of importation, a certificate from the authorized officer of DGH, Ministry of Petroleum, to the effect that the imported goods are required for petroleum operations and imported under the licence for mining, as the case may be. In the present case, there is no dispute that the appellant had not produced the ECs issued by the DGH at the time of importation. It is seen that the goods were cleared on payment of duty as per the direction of the Honble Delhi High Court. - Following decision of assessee's own previous in [2011 (2) TMI 1 - SUPREME COURT OF INDIA] - Matter remanded back - Decided in favour of assessee.
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2014 (11) TMI 383
Waiver of pre deposit - Benefit of interim stay - Whether any 'substantial question of law' is involved in the present case so as to relegate the petitioner to avail the statutory remedy by way of appeal - Held that:- In the appellate order it is stated that the petitioner had to produce a certificate with reference to the notifications, but the same was not produced at the time of clearance of the goods before the Customs authorities, which was a mandatory requirement so as to avail the benefit of exemption, if at all any exemption was to be provided. These aspects are largely with regard to the factual position and as such, it prima facie cannot involve any substantial question of law, so as to enable the petitioner to avail and maintain the remedy by way of appeal. That apart, the relief sought for by the petitioner vide relief No.(ii) to direct the appellate authority to consider and finalise the appeal on time, cannot be the subject matter of any appeal, as it can be dealt with only by issuance of a writ of mandamus. petitioner is entitled to claim set off, in respect of the payment already effected, pursuant to judgment to an extent of 25%. It is made clear that the petitioner is required to satisfy only the balance 25%, as ordered by the Tribunal - Decided partly in favour of assessee.
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2014 (11) TMI 382
100% EOU - TED refund - challenge to the policy circular - Supply of goods by DTA unit of the petitioner to EOU unit of the petitioner - benefit of Deemed Export - refund of terminal excise duty (TED) - petitioner clarified that they did not claim or avail Cenvat credit in respect of the duty paid by the DTA unit. Meaning thereby, they did not invoke the provisions of Cenvat Credit Rules, 2004. The petitioner's DTA unit did not claim the TED refund and a certificate of disclaimer was relied upon. - Held that:- Once the petitioner is given an opportunity of personal hearing and raising all contentions, then, a speaking order assigning reasons can be passed by the respondents dealing with them. It could not be that a cryptic communication satisfies the requirement of a proper and speaking order being passed. Therefore, it would be open for the petitioner to raise all contentions, including that the policy circular, a copy of which is annexed to the writ petition as annexure-B, should not be relied upon to deny the refund. - respondents shall deal with the same while passing a speaking order on the Refund Application. - Petition disposed of.
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2014 (11) TMI 381
Revocation of license - contravention of Regulation 13(a), 13(g) & 13(j) of the Courier Imports and Exports (Clearances) Regulations, 1998 - Non submission of authorisations for delivery of the consignments to the consignees and further, the signatures appearing on several authorisations appeared to be similar, which indicated that the signatures on the authorisations were forged/fabricated. In addition, it was alleged that petitioner had availed of the services of another courier without any prior permission of the Commissioner of Customs as required by virtue of Regulation 13(j) of the 1998 Regulations - Forfeiture of security amount - Held that:- It is apparent that the petitioner has failed to approach this Court with clean hands. The details of the proceedings initiated against the petitioner in respect of clearing goods under fictitious names has not been disclosed. Although, the impugned order dated 17.06.2014 refers to show cause notice issued by the Additional Commissioner (Exports) for denial of benefit of notification no.154/94-CUS dated 13.07.1994. Apparently, the allegations against the petitioner are not merely procedural but serious as the genuineness of the consignees is in doubt. The least that was required of the petitioner was to, candidly, disclose the nature of all allegations made against the petitioner. However, even though the impugned order dated 17.06.2014 refers to other proceedings, the petitioner has carefully ensured that the writ petition is bereft of any details as to the other proceedings that were initiated against the petitioner in respect of the consignments purportedly delivered by the petitioner. The show cause notice dated 04.07.2013 contained an allegation that the petitioner had not been submitting authorisations which were statutorily required. It was further alleged that the signatures on delivery proofs of consignments imported were forged/fabricated and the petitioner had sublet delivery of goods to another courier without prior permission as required. The impugned order dated 17.06.2014 had further specifically noted that the petitioner had not submitted authorisation certificates in respect of 40 bills of entries during the period 16.10.2012 to 31.10.2012. The allegation with respect to non-submission of authorisation certificates had been indicated in the show cause notice. In addition, the imports made by the petitioner were, apparently, subject matter of another show cause notice referred to by the Chief Commissioner of Customs in the impugned order dated 17.06.2014. The petitioner, thus, had full knowledge of the allegations and also had the opportunity for meeting the same. - No reason to interfere with impugned order - Decided against the petitioner.
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Service Tax
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2014 (11) TMI 394
Business Auxiliary service - availment of services of procuring orders and promotion of their business from foreign company - Bar of limitation - Held that:- Prima facie, the services being received by the appellant are covered by Clause (ii) of the definition of Business Auxiliary Service as given in Section 65 (19). It is seen that the show cause notice exactly mentioned the nature of the service received by the appellant from M/s Software Service, LC, USA. Therefore, in our prima facie view, just because the show cause notice did not mention the exact clause of Section 65 (19) under which the services being received by the appellant are covered, this would not vitiate the show cause notice and, in our prima facie view, the judgment of the Tribunal in the case of ITC Ltd. vs. CST, Delhi (2013 (8) TMI 148 - CESTAT NEW DELHI) cited by the learned Counsel of the appellant is not applicable to the facts of this case. Therefore, at least for the period prior to October 2009, it cannot be said that the Department was aware of the receipt of taxable services by the appellant from M/s Software Services, LC, USA. Only in respect of receipt of service during the period w.e.f. October 2009 it can be said that the Department was aware of the transactions. Therefore, we are of prima facie view that the appellants plea that the bulk of the service tax demand is hit by limitation and the longer limitation period under proviso to Section 173 (1) would not be applicable, is not entirely acceptable. Therefore, this does not appear to be a case for total waiver. - Partial stay granted.
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2014 (11) TMI 393
Levy of service tax on Supply of food and beverages in a restaurant - Constitutional validity of sub clauses (zzzzv) and (zzzzw) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011 - single Judge found that the matters covered by sub clauses (zzzzv) and (zzzzw) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011, are matters enumerated in Entries 54 and 62 respectively, of List II of the Seventh Schedule to the Constitution and hence, beyond the legislative competence of the Union to impose tax on such matters, invoking Entry 97 of List I of the Seventh Schedule of the Constitution - Held that:- Supply of food and beverages in a restaurant, as indicated above, prior to the Constitution (Forty Sixth Amendment) Act, the same was considered to be wholly a service. When the whole transaction was held to be a service, the States could not have imposed tax in respect of that transaction. However, by virtue of the Constitution (Forty Sixth Amendment) Act, this transaction was also deemed to be a sale, conferring authority on the States to tax on the whole consideration received by the person making the supply of food and beverages. Thus, after the Constitution (Forty Sixth Amendment) Act, tax could be imposed and levied by the States on the value of the goods involved in the works contract and tax could be imposed and levied by the Union for the value of the services involved in the works contract. As far as the supply of food and beverages in a restaurant is concerned, after the Constitution (Forty Sixth Amendment) Act, tax could be imposed and levied for the whole amount of the consideration received by the person making the supply of the food and beverages. Sub clause (zzzzv) of Clause 105 of Section 65 of the Finance Act, 1994, relates to the supply of food and other consumables in restaurants. After the Constitution (Forty Sixth Amendment) Act, the said activity is deemed as a sale of goods. After the Constitution (Forty Sixth Amendment) Act, it cannot be said that it is an activity of service. When the said activity is deemed to be a sale of the food and other articles of human consumption, by a constitutional definition, tax on the said activity can be imposed only by the States in view of Entry 54 in List II of the Seventh Schedule. In view of the words used in article 366(29A) (f), the bill raised on the customer cannot be split as charged for the service part and as charged for the food part and that the supply of food by the restaurant owner to the customer, though it may be a part of the service that he renders by providing good furniture, furnishings and fixtures, linen, crockery and cutlery, music etc., tax is leviable for the whole amount of the consideration received by the restaurant owner. In other words, in view of the aforesaid constitutional amendment, it cannot be said that there is any service involved in the supply of food and other articles of human consumption in a restaurant. It is thus evident that the matter covered by sub-clause (zzzzv) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011 is a matter enumerated in Entry 54 of List II of Seventh Schedule and the States alone have the legislative competence to enact any law imposing tax on the said matter. Matter covered by sub-clause (zzzzw) of Clause 105 of Section 65 of the Finance Act, 1994, as amended by Finance Act, 2011, is a matter enumerated in Entry 62 of List II of Seventh Schedule and the States alone have the legislative competence to enact any law imposing tax on the said matter. since the whole of the consideration received by a restaurant owner for supply of food and other articles of the human consumption, including the service part of the transaction, is exigible to tax by the State by virtue of the constitutional definition, it is not open to the Union to characterise the same transaction as a service for imposition and levy of service tax. No reason to interfere with the decision of the learned single Judge - Decided against Revenue.
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2014 (11) TMI 392
Waiver of pre deposit - transportation of Air Cargo service - Financial hardship - Held that:- There is force in the plea of the appellant regarding undue hardship and financial difficulty in pursuing the appeal on payment of the pre-deposit as ordered by the Tribunal. The same, therefore, requires to be modified considering the prima facie case of the appellant - order of the Tribunal is modified to the effect that the appellant shall make a pre-deposit of ₹ 50,00,000 less the amount already deposited, if any, towards pre-deposit - Partial stay granted.
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Central Excise
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2014 (11) TMI 391
Valuation of goods - Inclusion of installation, erection and commissioning charges - erection, commissioning and installation activity undertaken and amount charged separately, cannot form part of the assessable value of the goods supplied - impugned orders are not sustainable in law and the demands of duty made by including the erection, commissioning and installation charges in the assessable value of the Cranes & Hoists cannot be sustained in law as manufacture and rendering of services are distinct and different activities and have been taken under separate contracts - Following decision of De Nora India Ltd. - [2010 (5) TMI 749 - CESTAT MUMBAI] and Nichrome Metals Works Pvt. Ltd. - [2000 (4) TMI 813 - Supreme Court of India] - Decided in favour of assessee.
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2014 (11) TMI 390
CENVAT Credit - whether appellant can take suo moto credit of the Cenvat Credit once reversed and also whether Cenvat Credit with respect to services of Initial Public Offer (IPO) is admissible to the appellant - Held that:- order passed by the Honble High Court of Madras in the case of M/s. ICMC Corporation Ltd., Chennai Vs. CCE, Chennai [2014 (1) TMI 1473 - MADRAS HIGH COURT] that in the case of wrongly debited Cenvat Credit suo moto credit can be taken and there is no need to file the refund claim under Section 11B of the Central Excise Act, 1944. A similar view was earlier taken by the Jurisdictional High Court of Gujarat in the case of M/s. Shyam Textile Mills & Anr. Vs. UOI [2004 (6) TMI 590 - GUJARAT HIGH COURT]. On merits also a stay on the same issue was given by the Bangalore Cestat in the case of M/s. Kernex Micro Systems (I) Ltd. Vs. CCE, Hyderabad (2012 (9) TMI 376 - CESTAT, BANGALORE). Prima facie, appellant has made out a good case for waiver of the confirmed demand and penalties - Stay granted.
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2014 (11) TMI 389
Valuation of goods - Valuation under Section 4A or Section 4 - clearance of physician samples to brand owners - Held that:- samples are not distributed by the appellants free but cleared on receipt of consideration. Hence the excise duty is payable on transaction value - appellants have correctly valued the physician samples cleared by them on transaction value to the brand owner. Therefore, we hold that the appellants are not required to pay duty as per Section 4A of the Central Excise Act, 1944, but they are required to pay duty on transaction value. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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2014 (11) TMI 388
Condonation of delay - whether the Tribunal has exercised its discretion to condone the delay in accordance with law - Held that:- Tribunal has condoned the delay subject to an order of costs. The Tribunal, in fairness, did observe that though the assessee had not given a detailed elaboration of the reasons for his absence from Mumbai which led to the delay, an order of costs would serve the ends of justice. The Tribunal has taken an overall view in the interest of justice. The issue is as to whether the High Court in the exercise of its appellate jurisdiction can interfere in the exercise of its discretion. Once it is held that the Tribunal did, indeed, have a discretionary jurisdiction, as a first appellate body against the order of the Commissioner (Appeals), this Court would be slow to interfere, particularly having regard to the ambit of the jurisdiction of the Tribunal under Section 86(1) of the Act of 1994. The High Court, in this view of the matter, ought not to substitute its own view in the exercise of discretion where the discretion which has been exercised by the Tribunal is within the parameters of law and the Tribunal is not found to have acted outside its jurisdiction. Consequently and for these reasons, we find that no substantial question of law would arise. - Decided against Revenue.
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2014 (11) TMI 387
MODVAT Credit - suppression of information about the clearance of goods - Held that:- order of the Tribunal suffers from an error apparent on the face of the record, as the statement of the said Mr.Muralidharan, on which reliance was placed by the first appellate authority, is one factor which could have been considered for the purpose of deciding the appeal. If the Tribunal was of the view that such statement should be eschewed as inadmissible, it ought to have gone into the merits of the case, on the basis of the adjudication order which was the subject matter of challenge. It is another matter if the Tribunal had set aside the order of the first appellate authority finding error in relying upon the statement which did not form part of the show cause notice and remanded the matter to the said authority. We express no opinion on that for the present. But the Tribunal, if not inclined to accept such a statement, should have decided the issue on merits, as it had all the powers to appreciate the entire gamut of the case of the assessee as well as the department. As the Tribunal has failed to do so, we find the said order in error - Matter remanded back.
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2014 (11) TMI 385
Whether Aluminium Dross and Skimmings or similar Non-ferrous Metal Dross and Skimmings, which arise in the process of manufacture of aluminium/Non (ferrous metal products can be considered as a manufactured goods' and hence excisable for the period post 10.5.2008 in view of the Explanation added to Section 2(d) of the Central Excise Act, 1944? - Held that:- , the legal position has undergone a change after the decisions were rendered by the High Court and the Supreme Court with regard to aluminium / zinc dross and skimmings. An explanation has been added to section 2(d) to provide for a deeming fiction in respect of goods. Secondly, a specific tariff entry has been created in Heading 262040 for aluminium dross, which was not the position when the issue was examined earlier by the hon'ble Apex Court. Therefore, the ratio of these decision cannot be applied to the facts of the case before us. Aluminium dross and skimmings and similar non-ferrous metal dross and skimmings which arise as a by-product in the process of manufacture of aluminium/non-ferrous metal products are manufactured goods and hence excisable w.e.f. 10/05/2008 in view of the explanation added to Section 2(d) of the Central Excise Act, 1944. - Decided against the assessee.
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Indian Laws
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2014 (11) TMI 386
Termination of employment - Non issuance of SCN, enquiry or without making the payment of retrenchment compensation - violation of the terms of Section 25-F of the Industrial Disputes Act, 1947 - Appellant was appointed on contractual basis - There was no break in his service and inspite of a policy of regularisation dated 23.01.2001, which provided that persons having 3 years of service were entitled to be regularised - whether the petitioners were only contractual employees in view of the agreement that they had entered into and the benefit of Section 25-F of the Act would not be applicable to them and whether the provisions of Section 2(oo)(bb) of the Act would be attracted in the facts and circumstances of the present case. Held that:- services of the workman were terminated inspite of the fact that the workman had completed 240 days in the preceding year. The provisions of Section 2(oo)(bb) provides an exception to the retrenchment of the workman on account of non-renewal of the contract between the employee and the employer or on the expiry of such contract being terminated under stipulation in that behalf, as contained in the said contract of employment, which has been examined time and again by this Court. It is not the case of the respondent-Council that there was any break in the service and it was only that the workmen were working on contract basis and even the request for regularisation had been made for all contractual employees by the Council which was rejected by the State Government on 24.08.2001. Thus, it would be clear that even proposal for regularising the services of the contractual employees was subject matter of consideration and the workman having completed 240 days were, thus, entitled for the benefit of the protective umbrella of Section 25-F and the mandatory provisions as laid down under it had to be followed before dispensing with the services of the workmen. Appointments were made in violation of the appointment letter and requirements had not been complied with and in such circumstances, reinstatement was not justified. In the present case, as noticed above, the job of the Keyman does not exist, as per the provisions of the Municipal Act but the respondent-Council had employed the petitionersworkmen for a period between 4 ½ years to 8 ½ years and a contract agreement was got executed by them. Practice of unfair labour has been alleged in the petition and in the evidence wherein it has been stated that the agreements were got signed at the time of giving the salaries and the respondents had acted as war slave lords who had treated the workmen like slaves. The Sectional Officer has admitted in evidence that the job of Keyman is to regulate the flow of water through valves installed in pipes in particular areas daily and the job is of perennial nature. The job of the Keyman existed even after 31.02.2002. It has also been admitted that the workman was employed as per rules and the proceedings of Section 25-F have not been followed. One dominant factor which weighs with this Court is that admittedly, there is no post under the rules and therefore, relief of reinstatement, in such circumstances, cannot be granted. The workman was appointed at that point of time to overcome the exigency of the situation and the Municipal Council made an effort to get their services regularised but the Government declined the said request in the absence of any post and in such circumstances, it has been held that reinstatement cannot be directed. Accordingly, following the principles laid down by the Division Bench, a sum of ₹ 20,000/- is granted as compensation for each completed year and the workmen will be entitled to the compensation as per the table attached as Schedule 'A'. Apart from the compensation, the workmen will also be entitled for cost of litigation to the tune of ₹ 20,000/- each, in view of the litigation which they have been fighting since their illegal termination on 31.03.2002 and since a period of more than one decade has passed by since then. The amount, as indicated, be paid to the workman within a period of 2 months from the date of receipt of a certified copy of this order, failing which, the same will carry interest @ 9% per annum, from the date of this order - Decided in favour of appellant.
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