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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter November 16, 2013 Case Laws in this Newsletter: Income Tax Customs Corporate Laws FEMA Service Tax Central Excise CST, VAT & Sales Tax Articles 1. PARTNER'S REMUNERATION WHETHER TAXABLE UNDER SERVICE TAX By: Dr. Sanjiv Agarwal Summary: In the context of service tax, remuneration paid to partners in a partnership firm is not considered taxable under service tax provisions. This is because a partnership firm is not a separate legal entity from its partners, and the remuneration is essentially a share of the firm's profits distributed to partners for their contributions. According to the Indian Partnership Act and relevant tax laws, such remuneration is not classified as a salary but rather as a profit distribution. Consequently, it is considered a transaction in money, which is excluded from the definition of taxable services under section 65B(44) of the Service Tax Act. Highlights / Catch Notes Income Tax Interest on Delayed Payments Qualifies for Deductions u/s 80HH and 80I, High Court Confirms. Case-Laws - HC : Whether interest received from the debtors or customers on delayed payment was income derived from the Industrial Undertaking and Deduction under Section 80HH and 80I - Held yes - HC Visit to Get Source Tax Department Must Follow Circular 7 of 2009; Assessing Officer Can't Disallow Non-Deduction u/ss 195 & 40(a)(i. Case-Laws - HC : Circulars 7 of 2009 in the relevant year was binding upon the department and assessee can challenge the affect of the Circular but that the A.O. did not have any right to ignore the circulars and to disallow non-deduction of tax at source under Section 195 and under Section 40 (a) (i) of the Act - HC Visit to Get Source Income Tax Department Cannot Retain Cash and Jewellery if No Tax Liability Exists for Relevant Assessment Years. Case-Laws - HC : If there is no tax liability, pending against the petitioner in respect of relevant assessment years, corresponding to the search and seizure operations, there is no justification in law to continue to keep the cash and jewellery in the possession of the income tax department - HC Visit to Get Source Taxpayers must submit a signed audit report with their return to claim Section 80J deductions. Case-Laws - HC : Allowance of claim u/s 80J - Deduction claimed shall not be admissible unless the assessee also furnishes along with the return, the audit report in the prescribed form duly signed and verified by the accountant - HC Visit to Get Source High Court Confirms Interest u/s 234B for Non-Deduction of TDS on Payments to Non-Residents by Indian Payers. Case-Laws - HC : Interest u/s 234B - Payer did not deduct TDS on payment to made to non-resident - Having denied its tax liability, it seems unfair on the part of the assessee to expect the Indian payers to deduct tax from the remittances. - levy of interest confirmed - HC Visit to Get Source High Court rules rubber crumb production from old tyres is "manufacture" u/s 80IB, qualifying for tax deductions. Case-Laws - HC : Deduction u/s 80IB - Whether cutting, grinding and sieving of old rubber tyres and rubber scrap and converting the same into rubber crumbs is “manufacture” - Held yes - HC Visit to Get Source Monetary Compensation to Retiring Partner Not a Capital Asset Transfer, No Tax u/s 45(4) of Income Tax Act. Case-Laws - HC : When a retiring partner takes only money towards the value of his share and when there is no distribution of capital asset/assets among the partners there is no transfer of a capital asset and consequently no profits or gains is payable u/s 45(4) - HC Visit to Get Source DDB incentive receipt must be excluded from deductions u/s 80-IB without expense deductions. Case-Laws - HC : Deduction u/s 80IB - Gross receipt of DDB incentive, without reduction of expenditure spent for its recovery, is to be excluded from allowable deductions under Section 80-IB of the Act - HC Visit to Get Source AO Rightly Demands Financial Institutions Report Account Holders with Transactions Over Rs. 1,00,000 u/s 133(6) IT Act. Case-Laws - SC : AO has not erred in issuing the notice to the assessee- financial institution requiring it to furnish information regarding the account holder with cash transactions or deposits of more than Rs. 1,00,000/- u/s 133(6) - SC Visit to Get Source Section 41(1): Time Alone Doesn't Prove Liability Cessation; Requires Concrete Evidence or Circumstances Beyond Three Years. Case-Laws - AT : Addition u/s 41(1) on account of cessation of liability – there could be no cessation of liability solely on the ground that it is over three years old - AT Visit to Get Source Liabilities Written Back Qualify for Deduction u/s 80IB; Receipt Character Remains Profit for Eligible Undertaking. Case-Laws - AT : Deduction u/s 80IB r.w.s 41(1) - in the year of writing back of liabilities, as not payable, and credited the same amount in the profit & loss account, the character of the receipt remains to be profit to the eligible undertaking, and hence, eligible for deduction under section 80IB - AT Visit to Get Source Section 40A(3) Addition: Cash Payments on Holidays Questioned Due to Banking Access in Hyderabad Property Transactions. Case-Laws - AT : Addition made u/s 40A(3) - Cash payment made on Holiday - Most of the parties mentioned hereinabove were in Hyderabad. The properties sold by them might be situated outside Hyderabad. Being so, it cannot be concluded that the recipients were having no bank accounts or access to the banking facilities - AT Visit to Get Source Debate Over Income Recognition: Percentage Completion vs. Project Completion Method Under Income Tax Act 1961. Case-Laws - AT : Rejection of Books of accounts - Method of accounting - Percentage completion method or project completion method - recognition/identification of income under the 1961 Act is attainable by several methods of accounting - AT Visit to Get Source Customs Appeal Dismissed Due to 10-Year Delay in Service; Appellant Denied Condonation for Avoiding the Law. Case-Laws - AT : Condonation of delay - Appeal time barred - Service of order delayed by 10 years - the appellant was eluding the law and therefore such a person cannot be given the benefit of condonation of any delay - AT Visit to Get Source Refund of Special Additional Duty Granted Despite Non-Declaration on Invoice; Assessee's Lack of Registration Not a Barrier. Case-Laws - AT : Refund of SAD - failure to make declaration on the Invoice for non availment of credit - all other conditions are met - assessee is not registered with central excise - refund allowed - AT Visit to Get Source Helicopter import case: Prima facie established for waiving pre-deposit amid dual interpretations and amended Condition No. 104. Case-Laws - AT : Import of helicopter - non-scheduled air transport services (passenger) - Misuse of helicopter - when two views are possible and the Condition No. 104 having been substituted, the appellant has made out a prima facie case for waiver of pre-deposit - AT Visit to Get Source Machinery for Hides and Skins Not Classifiable Under CTH 8453 Due to Inapplicability of Injection Moulding Process. Case-Laws - AT : Classification of goods - It is a known fact that hides, skins and other cannot be subjected to injection moulding and, therefore, the claim of the appellant that the machinery is classifiable under CTH 8453 is not sustainable - AT Visit to Get Source Burden of Proof Stays with Authorities in Smuggling Cases if Investigations Are Lax, Emphasizing Thorough Procedures. Case-Laws - AT : Smuggled goods - Burden of proof - Revenue cannot first show laxity in investigation and then seek to shift the burden to prove that the goods are not smuggled - AT Visit to Get Source Corporate Law Court Rules Disputed Amount Doesn't Prevent Winding-Up Proceedings for Non-Payment of Dues. Case-Laws - HC : Winding up of company - Non payment of dues - merely because the amount payable is disputed and is not acceptable to the respondent, it cannot be said that there is no case for winding-up the respondent - HC Visit to Get Source Court Grants Injunction Against Lifebuoy Soap Ad for Alleged Disparagement, Halting Further Broadcast. Case-Laws - HC : Interim Injunction - telecast of a television commercial of defendant’s Lifebuoy Soap, which as per the plaintiff is disparaging and denigrating the reputation and goodwill of the plaintiff in the commercial market - relief granted - HC Visit to Get Source Service Tax CENVAT Credit Restriction Applies to Excise Duty on Inputs and Services, Not Capital Goods for Reverse Charge Payments. Case-Laws - AT : Utilization of CENVAT Credit on capital goods for payment of service tax under reverse charge - Restriction applies for availing credit of duty only in respect of excise duty paid on input or service tax paid on any input services and not capital goods - AT Visit to Get Source CENVAT Credit Denial: Invoices Must Be in Service Recipient's Name, Not Customs House Agent's, for Eligibility. Case-Laws - AT : CENVAT Credit - invoice in the name of CHA - A cenvat credit case can be taken only with respect to the services availed by the service recipient and the document indicating duty payment is in appellant’s name. - AT Visit to Get Source Appellant in Mumbai Justified in Taking CENVAT Credit Despite Invoices Issued to Branch Offices. Case-Laws - AT : The appellant is paying service tax from Mumbai main office in respect of all the branch offices and, therefore, nothing wrong in taking cenvat credit just because the invoices are in the name of branch offices - AT Visit to Get Source Simultaneous Penalties Possible Under Finance Act Sections 76 and 78 for Pre-May 10, 2008 Periods. Case-Laws - AT : Penalty u/s 78 - Simultaneous penalty u/s 76 and 78 - penalties u/s. 76 and 78 of the Finance Act are simultaneously imposable upon a assessee for the period prior to 10.05.2008 - AT Visit to Get Source Court Confirms CENVAT Credit Validity: Head Office's Distribution to Applicant Unit Stands Unchallenged as Input Service Distributor. Case-Laws - AT : Denial of CENVAT Credit - availability of credit by the Head Office had not been disputed and hence, when the same has been distributed after being registered as “Input Service Distributor“, the same cannot be questioned at the hands of the Applicant Unit - AT Visit to Get Source Residential Complex Construction for Sale Subject to Service Tax; Individual Use Doesn't Exempt Entire Complex from Taxable Services. Case-Laws - AT : Construction of residential complexes for sale - The fact that individual residential units were for residential use of the purchaser of UDS cannot take the complex outside the definition - AT Visit to Get Source Central Excise Director and VP Face Penalties for Unauthorized Removal of Goods, Highlighting Executive Accountability in Central Excise Cases. Case-Laws - AT : Clandestine removal of goods – For clandestine removal of finished goods, personal penalties are required to be imposed upon the Director and vice President of the main appellant - AT Visit to Get Source Application to Destroy Molasses Unfit for Consumption Seeks Duty Remission Approval Under Relevant Regulations. Case-Laws - AT : Application to destroy Molasses as unfit for human consumption – thus the application for the remission of the duty liability needs to be allowed - AT Visit to Get Source Denial of CENVAT Credit Unjustified for Materials Used in Manufacturing Capital Goods Consumed. Case-Laws - AT : Corrugated Ply, M.S. Beam, Channels, TMT Bars, Angles Capital goods or Input - items on which CENVAT Credit was availed, were, in fact, used for fabrication or manufacture of capital goods which were further consumed by them – thus CENVAT Credit cannot be denied - AT Visit to Get Source Court Examines Mis-Declaration Claims in Duty Evasion Case Involving Both Under and Overpayments; Challenges Intent to Evade Duty. Case-Laws - AT : Extended period of limitation – there was not only short payment but also excess payment - In such a situation it is difficult to sustain the view that there was mis-declaration with intent to evade duty on the part of the appellants - AT Visit to Get Source Commissioner (Appeals) Cannot Enhance Dues if Original Show Cause Notice is Defective; Corrective Actions Invalid. Case-Laws - AT : Jurisdiction to enhance the dues – The corrective action attempted by Commissioner (Appeals) in appeal cannot rectify the defect of the show cause notice. - AT Visit to Get Source VAT State Governments Can Tax Goods Transferred in Work Contracts, Including Dyes and Chemicals, Under VAT and Sales Tax Rules. Case-Laws - HC : Value of dyes and chemicals - State Governments are empowered to the levy tax on the goods transferred otherwise than in pursuance of contract i.e., in execution of work contract - HC Visit to Get Source Case Laws: Income Tax 2013 (11) TMI 739 Whether interest received from the debtors or customers on delayed payment was income derived from the Industrial Undertaking and Deduction under Section 80 HH and 80 I of the I.T.Act – Held that:- Reliance has been placed on the judgment of Hon’ble Gujarat High Court in the case of Nirma Industries Ltd. V. Dy. CIT [2006 (2) TMI 92 - GUJARAT High Court], wherein it was held that when interest is paid on delayed payment, it can be treated as higher sale price which is converse situation to offering of cash discount because the transaction remains the same and there is no distinction as to the source. Looking from this angle, the interest becomes part of the higher sale price and is clearly derived from the sales made and is not divorced therefrom. It is, thus, the direct result of the sale of goods and the income is derived from the Business of industrial undertaking. In the instant case, respondent assessee received interest from trade debtors on outstanding balances. The interest so received is part of contract of sale and thus it is income from industrial undertaking belonging to the respondent assessee. The very source of interest so received is as per terms of contract of sale of goods manufactured in the industrial undertaking. Hence, it is inseparable part of contract of sale. Consequently it forms part of income of the assessee from the industrial undertaking and is thus eligible for deduction under Section 80HH & 80I of the Act – Decided against the Revenue. 2013 (11) TMI 738 Circular binding upon AO – Applicability of Circular No.7 of 2009 dated 22.10.2009 – Disallowance u/s 40(a)(ia) of the Income tax act – Held that:- The assessment in question for the assessment year 2007-08 would be governed by Circular, which was operative at the relevant time. The assessee was not entitled to deduct TDS. The department could not have taken different stand in subsequent years or assessment year 2007-08, when the circulars were operative and were not withdrawn - Circulars in the relevant year was binding upon the department and assessee can challenge the affect of the Circular but that the A.O. did not have any right to ignore the circulars and to disallow non-deduction of tax at source under Section 195 and under Section 40 (a) (i) of the Act – Reliance has been placed on the judgment in Commissioner of Income Tax, Allahabad and another vs. M/s Model Exims Kanpur [2013 (9) TMI 742 - ALLAHABAD HIGH COURT] - Decided against the Revenue. 2013 (11) TMI 737 Disallowance of interest provided in terms of levy sugar Equalization Fund Act on excess sugar price realized in earlier years because the liability was a contingent one – Held that:- Benefit allowed to the assessee on the ground that they were so allowed in the previous years. Allowability of rental charges of gas cylinders – Held that:- Benefit of Rs.9,615/- on account of rental charges of gas cylinders – It is finding of fact – Decided against the Revenue. Allowability of payment of consultancy of Rs.3,50,000/- to M/s. K.L. Scientific as broker's commission for importing the gas cylinders – Held that:- This is question of fact – Payment of consultancy fee allowed – Decided against the Revenue. 2013 (11) TMI 736 Release of the seized goods and cash, if there is no tax liability pending against the assessee – Held that:- If there is no tax liability, pending against the petitioner in respect of relevant assessment years, corresponding to the search and seizure operations, there is no justification in law to continue to keep the cash and jewellery in the possession of the income tax department. The filing of the income tax appeals by the department in the Income Tax Appellate Tribunal, New Delhi will not prima facie justify the possession of the cash and jewellery. The income tax department, however, may insist upon some security for releasing the cash and jewellery and for that purpose if the attachment of the apartment as aforesaid is still continuing, the department may consider to keep the attachment alive until final disposal of the appeal by the Income Tax Appellate Tribunal - Writ petition is disposed of with directions that in case the petitioner applies for release of cash and jewellery, the said application will be decided by the ITO 23 (2), New Delhi within a month – Decided in favor of Assessee. 2013 (11) TMI 735 Allowance of claim u/s 80J - Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases - Assessee failed to comply with the mandatory provisions of section 80J(6A) of the Income Tax Act, 1961 – Held that:- Reliance has been placed on the judgment in the case of Commissioner of Income-Tax Versus Jaideep Industries [1989 (4) TMI 35 - PUNJAB AND HARYANA High Court] - No escape from the conclusion that the requirement of the audit report being filed along with the return of income is rendered mandatory by the provisions thereof - Deduction claimed shall not be admissible unless the assessee also furnishes along with the return, the audit report in the prescribed form duly signed and verified by the accountant – Decided in favor of Revenue. 2013 (11) TMI 734 Interest u/s 234B - Payer did not deduct TDS on payment to made to non-resident - Assessee contended that no interest under Section 234B can be levied because if the entire income was subject to tax in India the consequence would be that it was the responsibility of the payer to deduct tax and if he has not done so, the remedy of the Income Tax Department lies against him in terms of Section 201 and not against the assessee under Section 234B. Held that:- It is open to the assessee to deny its liability to tax in India on whatever grounds it thinks fit and proper. Having denied its tax liability, it seems unfair on the part of the assessee to expect the Indian payers to deduct tax from the remittances. It is also open to the assessee to change its stand at the first appellate stage and submit to the assessment of the income. When it does so, all consequences under the Act follow, including its liability to pay interest under Section 234B since it would not have paid any advance tax - It further seems inequitable that the assessee, who accepted the tax liability after initially denying it, should be permitted to shift the responsibility to the Indian payers for not deducting the tax at source from the remittances, after leading them to believe that no tax was deductible. The assessee must take responsibility for its volte face. Once liability to tax is accepted, all consequences follow; they cannot be avoided. After having accepted the liability to tax at the first appellate stage, it is unfair on the part of the assessee to invoke section 201 and point fingers at the Indian payers - The argument advanced by the learned counsel for the assessee that the Indian payers failed to deduct tax at their own risk seems to be only an argument of convenience or despair - It may be true that the general rule is that equity has no place in the interpretation of tax laws. But, when the facts of a particular case justify it, it is open to the court to invoke the principles of equity even in the interpretation of tax laws. Tax laws and equity need not be sworn enemies at all times. The rule of strict interpretation may be relaxed where mischief can result because of the inconsistent or contradictory stands taken by the assessee or even the revenue – Interest u/s 234B payable – Decided in favor of Revenue. 2013 (11) TMI 733 Deduction u/s 80IB of the Income tax act - Whether cutting, grinding and sieving of old rubber tyres and rubber scrap and converting the same into rubber crumbs is “manufacture” and hence entitled to the deduction under Section 80IB of that Act – Held that:- Product (Rubber crumb) produced by the assessee was commercially different from its raw material and further, it is commercially known to be different in the market. In other words, the assessee was engaged in manufacturing of the said product. Therefore, the assessee was entitled to deduction claimed under Section 80IB of the Act – Decided against the Revenue. 2013 (11) TMI 732 Nature of income – Capital receipt or revenue receipt – Forfeited amount out of the payment received, a capital receipt? - Assessee had received an advance amount of Rs.4.49 crores in terms of agreements of sale dtd.15-11-1999 and 17-01-2000. However, the said agreements were terminated with the consent of both the parties on 13-1-2001 and 15-1-2001 – Held that:- As per the agreement, if the purchaser fails to perform their part of the contract, the Vendor is entitled to terminate the agreement and claim liquidated damages of Rs.25,00,000/- and Rs.5,00,000/- respectively. However, in the present case, by mutual consent of the parties, the RIL had agreed to forego Rs.1.10 crores in favour of the assessee for loss of earnings due to the cancellation of agreement and the loss sustained in the sale transaction. The amount over and above Rs.30,00,000/- has to be treated as revenue receipts - As per the agreement, the assessee is entitled to forfeit only a sum of Rs.30,00,000/- and the remaining amount of Rs.80,00,000/- has to be treated as revenue receipt and the assessee is liable to pay tax. - Decided partly in favor of revenue. Whether stock pertaining to bulk drug unit and R & D should be taken as NIL as on 30.6.2000 when its realizable value as on 30.03.2000 was Rs.12.78 crores – Held that:- The said goods were not saleable items in the market - The life of the bulk drug was expired and it cannot be sold in the market. The Central Excise Records also disclose that the said goods cannot be sold in the market. The Income Tax Appellate Tribunal, taking into consideration all these aspects of the matter and that the manufacturer has been completely stopped the manufacturing of the bulk drug, has taken the value of closing stock of bulk drug as NIL. The assessee has not adopted any colourable devices in order to avoid the tax – Decided against the Revenue. Whether the amount received in regard to noncompetition clause for three year is a capital receipt – Amount received is Rs.4 Crore - Held that:- Compensation received for refraining from carrying on competitive business was a capital receipt - In the instant case, Rs.4.00 crores received from M/s.Recon Health Care Limited towards noncompetition to discontinue the business of three years has to be held as capital receipt – Decided against the Revenue. Whether Capital gains loss computed on sale of share of M/s.Recon Agro Tech Pvt Ltd., computed by adopting cost of acquisition of Rs.0.10 per share is a colourable transaction – Held that:- Under Section 48 of the Income Tax Act, the capital gain is to be computed after reducing the cost of acquisition of the asset, cost of any improvement thereto and the expenditure incurred in connection with the transfer of capital assets. In order to avoid the stringent action being taken by the financial institution, the assessee sold the shares to its subsidiary company in order to stabilize its financial position. No document has been produced by the Revenue to show that the transaction between the assessee and its subsidiary company is a colourable device. The finding recorded by the Appellate Tribunal is purely a question of fact. The Revenue has not made out a case to interfere with the same – Decided against the Revenue. Whether transfer of technical knowhow by the assessee for a consideration of Rs.25 crores should be treated as a capital receipt, not liable to capital gains tax and not consideration received towards sale of capital asset, liable to capital gains tax – Held that:- Under Section 28(v)(a) any sum, whether received or receivable, in cash or kind, under an agreement for not carrying out any activity in relation to any business, or not sharing any knowhow, patent, copyright, trademark, license, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of the goods is intangible goods acquired on or after 1-4-1998 is a capital asset and liable to be taxed under the head ‘Capital Gain’. The technical knowhow is an intangible asset, liable to be taxed under the head ‘Capital Gain’. The order passed by the Appellate Tribunal holding that the consideration of Rs.25.00 crores received is also for not carrying out certain activities pertaining to the business in manufacture of Pharmaceutical goods. Any consideration received for not carrying out certain activity in connection with business is not taxable earlier to 1-4-2003. Therefore, the receipt is a capital receipt and not liable for the capital gain is contrary to law – Decided in favor of Revenue. 2013 (11) TMI 731 Transfer of property from old firm to the new firm - Whether the firm should be made liable to pay capital gains even when there is no distribution of capital asset/assets among the partners under Section 45(4) of the I.T. Act – Retiring partner taking out money towards his share - In the instant case, the partnership firm did not transfer any right in the capital asset in favour of the retiring partner. The partnership firm did not cease to hold the property and consequently, its right to the property is not extinguished. Conversely, the retiring partner did not acquire any right in the property as no property was transferred in their favour – The instant case is distinguished from the following case namely, Commissioner of Income Tax And Another Vs. Gurunath Talkies [2009 (7) TMI 738 - KARNATAKA HIGH COURT] and Commissioner of Income Tax Vs. A.N.Naik Associate -[2003 (7) TMI 46 - BOMBAY High Court], wherein it was held that assessee in that case is also liable to pay capital gains tax under Section 45(4). As in the present case there is no distribution of assets and hence, one of the condition precedent for invoking Section 45(4) does not exist and hence Section 45(4) is not attracted to the facts of this case - When a retiring partner takes only money towards the value of his share and when there is no distribution of capital asset/assets among the partners there is no transfer of a capital asset and consequently no profits or gains is payable under Section 45(4) of the Income Tax Act – Decided against the Revenue. 2013 (11) TMI 730 Penalty u/s 271(1)(c) of the Income tax act - Detection in the course of survey that 100% depreciation claimed in respect of the alleged sale and lease back from M/s.Bellary Steel and alloys Limited (for short “Bellary Steel”) was held to be false claim by the assessing authority - Whether levy of penalty under Section 271(1) (c) of the Act is legally sustainable in the light of the fact, which surfaced in the survey under Section 133-A of Act, that claim of 100% depreciation made by the respondent-assessee was not only false but was made in respect of non-existent goods, and that penalty is liable to be levied not only for concealing the income but also for furnishing inaccurate particulars – The respondent M/s.BPL Sanyo Finance Limited (for short “the assessee”) was in the leasing business. They had filed return of income for the assessment years 1997-98, i.e. for the financial year 1-4-1996 to 31-3-1997, on 28th November 1997 under Section 139, declaring a total income of Rs.1,26,50,375/- as applicable u/s 115JA of the Act - Till 13-3-2000, i.e., when the original assessment was made, the claim of the assessee was found acceptable and accepted as such. Held that:- It is the case of the revenue, in the present case that the information/particulars furnished in the return of Income filed for the assessment year 2002-03 was inaccurate - Assessee had claimed 100% depreciation on rolls, claiming that they had purchased the rolls from BM Steels Pvt. Ltd., (for short “BM Steel”) and leased to Bellary Steel. That led the concerned authority to conduct survey under Section 133-A of the Act at the premises of Bellary Steel on 1st June 2000. In the course of survey, various incriminating documents were seized/found. An inventory of rolls at the premises of Bellary Steel revealed that they had only 361 rolls in their stock as against 3702 rolls accounted both as purchased and leased by Financial institutions and leasing companies, like the assessee in the present case. Having regard to the admitted facts, the assessee could not and did not prove that he filed return due to fraud committed by Bellary Steel. On the facts and circumstances of the case, it cannot be stated that the assesee was completely innocent/ignorant of the fact that the assets/rolls were not in existence at all and that they claimed 100% depreciation in respect thereof without having any knowledge thereof. Similarly, it cannot be stated that the return filed was incorrect and it would not amount to furnishing inaccurate particulars or concealing of the income – Penalty levied u/s 271(1)(c) is correct – Decided in favor of Revenue. 2013 (11) TMI 729 Deduction u/s 80IB of the Income tax act – Whether Assessing Officer to exclude amount of Duty Drawback net of expenses incurred for its realization for the purpose of computing deduction u/s 80IB – Held that:- When income on DDB falls exclusively in the domain of export incentives earned by the assessee in the nature of facility provided under legislative enactments or by Government of India in its schemes and is not 'derived' from the 'business of industrial undertaking' of the assessee and lacks nexus between the profits earned and business of such industrial undertaking, even expenses incurred on receipt of such export incentives pursuant to policies and schemes of the Government, would not form part of expenses of the business. Merely because some expenses have been incurred on getting DDB incentives, which incentives have neither any direct nexus nor are derived from business of industrial undertaking and are also included in the net profits and gains of such undertaking, any expenditure having nexus with such export incentive as DDB would also not qualify for allowable deduction under Section 57 or 71 of the Act - Gross receipt of DDB incentive, without reduction of expenditure spent for its recovery, is to be excluded from allowable deductions under Section 80-IB of the Act – Decided in favor of Revenue. 2013 (11) TMI 728 Powers available to assessing officer under 133(6) of the Income tax act – Power of enquiry, when the cases are not pending - In the instant case, by the impugned notice the assessing authority sought for information in respect of its customers which have cash transactions or deposits of Rs. 1,00,000/- or above for a period of three years, without reference to any proceeding or enquiry pending before any authority under the Act – Held that:- The language of the Section 133(6) is wholly unambiguous and clear, reliance on interpretation of statutes would not be necessary. Before the introduction of amendment to Section 133(6) in 1995, the Act only provided for issuance of notice in case of pending proceedings. As a consequence of the said amendment, the scope of Section 133(6) was expanded to include issuance of notice for the purposes of enquiry. The object of the amendment of section 133(6) by the Finance Act, 1995 (Act 22 of 1995) as explained by the CBDT in its circular shows that the legislative intention was to give wide powers to the officers, of course with the permission of the CIT or the Director of Investigation to gather general particulars in the nature of survey and store those details in the computer so that the data so collected can be made use of for checking evasion of tax effectively. Reliance has been placed on the judgment in the case of Karnataka Bank Ltd. v. Secretary, Government of India and Ors., [2002 (2) TMI 1285 - SUPREME COURT], wherein it was observed that it is not necessary that any inquiry should have commenced with the issuance of notice or otherwise before Section 133(6) could have been invoked. It is with the view to collect information that power is given under Section 133(6) to issue notice, inter alia, requiring a banking company to furnish information in respect of such points or matters as may be useful or relevant. The second proviso makes it clear that such information can be sought for even when no proceeding under the Act is pending, the only safeguard being that before this power can be invoked the approval of the Director or the Commissioner, as the case may be, has to be obtained. Powers under section 133(6) are in the nature of survey and a general enquiry to identify persons who are likely to have taxable income and whether they are in compliance with the provisions of the Act. It would not fall under the restricted domains of being "area specific" or "case specific." Section 133(6) does not refer to any enquiry about any particular person or assessee, but pertains to information in relation to "such points or matters" which the assessing authority issuing notices requires. This clearly illustrates that the information of general nature can be called for and names and addresses of depositors who hold deposits above a particular sum is certainly permissible. In the present case notice was issued only after obtaining approval of the Commissioner of Income Tax, Cochin. In light of the aforesaid, Assessing Authority has not erred in issuing the notice to the assessee- financial institution requiring it to furnish information regarding the account holder with cash transactions or deposits of more than Rs. 1,00,000/- - Decided against the Assessee. 2013 (11) TMI 727 Addition u/s 41(1) on account of cessation of liability – Addition of sum of Rs.35,02,308/- - The assessee is in the business of Cine Laisoning/Co-ordination, and had in the course of its regular business incurred liabilities to the extent of the impugned sum in an earlier year – Held that:- Apart from the statement of the liability in her accounts, the assessee has furnished no positive material to establish the subsistence of the liability as at the year-end (31.03.2008) – As per Dy. CIT vs. Hotel Excelsior Ltd. [2010 (12) TMI 1080 - ITAT DELHI] there could be no cessation of liability solely on the ground that it is over three years old - Under the circumstances, it is fit and proper that the matter is restored back to the file of the assessing authority to decide the matter by issuing definite findings of fact. Addition u/s 68 in respect of unexplained cash credit – Held that:- Addition is not toward unexplained cash credits, but only toward unexplained source of the cash deposits in bank (Rs.44.30 lacs), stated to be sourced in part by way of receipt back of advances from various parties, i.e., at Rs.17.85 lacs - It would only be fair and in the interest of justice to allow assessee an opportunity to plead its case before the ld. CIT(A) qua this ground. Disallowance of expenditure in respect of expenses pertaining to electricity, professional fee, staff salary, etc – Held that:- This is not a case of a temporary lull in the business. The same stands discontinued since f.y. 2003-04, with the assessee having not commenced any new project since. In fact, by own admission, she could not do so as she had admittedly not settled her dues to several persons in relation to her last project - In fact, it was found that she to be having even no resources for being able to undertake any such project. The assessee, as it would appear, has been engaging herself in laisoning/coordination business. The film production business having been discontinued for the past several years, with no signs of revival - Assessee's claim for business expenditure does not satisfy the test of s. 37(1) r.w.s. 28 of the Act, and stands rightly disallowed – Decided against the Assessee. 2013 (11) TMI 726 Deduction u/s 80IB of the Income Tax Act - Assessee claimed deduction of Rs. 74,34,997/- under section 80IB(10) of the IT Act. The AO disallowed the claim of deduction on the ground that the assessee acted only as an agent of the land owner, and therefore, is not qualified as a developer, as there is no constructive ownership of the land with the assessee - Learned CIT(A) confirmed the action of the AO on the very same ground, and also further observed that one corner house flat was of 1517.47 sq.ft., i.e. more than 1500 sq.ft. – Held that:- Issue of land ownership is squarely covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - Lower authorities were not justified in disallowing the claim of deduction under section 80IB of the Act, on such ground. For the disallowance on the ground that unit size exceeds 1500 sq.ft., reliance has been placed on the judgment in the case of M/s.Aakar Associates Vs. ITO [2013 (11) TMI 719 - ITAT AHMEDABAD] - Following the above judgment, issue restored to the to the file of the AO with direction to restrict the disallowance under section 80IB(10) of the Act only in respect of profit derived from one corner flat of 1517.47 sq.ft. only, and allow the deduction under section 80IB(10) of the Act in respect of profit derived from other flats where it is not in dispute that they are of 1500 sq.fts. or less than that – Decided in favor of Assessee. 2013 (11) TMI 725 Conflict in head of income – Whether the income falls under the head ‘Short term capital gains’ or ‘Business income’ - Assessee had shown income of Rs. 5,55,334/- as short term capital gains earned on shares - Holding period ranged from 1 to 6 months and the number of companies in which the assessee had traded were around 60 companies – Held that:- Assessee has filed the details and working of the capital gains earned giving various details therein. She has also filed the copy of the bank book of the Assessee in support of her contention that she was having own funds and further her own funds have been used for the purpose of making investments. She has also filed copy of balance sheet - To meet the ends of justice and fair play the matter needs re-examination by CIT(A) and therefore restored the issue to the file of CIT(A) for him to decide the issue after considering the submissions of the Assessee - Allowed in favor of assessee for statistical purpose. 2013 (11) TMI 724 Deduction u/s 80IB of the Income tax act - Assessee is engaged in the business of manufacturing aluminum foil for flexible packaging materials - The unit is located in Daman which began its manufacturing activities prior to 31-3-2004 thereby being eligible for deduction under section 80IB of the Act - Manufacturing activities had commenced before 31.3.2004 - Deduction claimed under section 80IB was denied by the AO on the ground that the assessee commenced production after 31.3.2004 – Held that:- The Assessing Officer has not been able to establish that there was no production and no sales/job work claimed to have been made before March 2004 by the appellant. The job work carried out in the months of February 2004 and March, 2004 is duly shown in Sales Tax returns filed by the Firm. The Sales Tax authorities have completed the assessment also. In the appellant's case, It was further seen that the goods produced at the factory in the months of February 2004 and March 2004 were sold to various pharma companies by M/s. Flex Art Goa after paying the excise duty and all these sales are recorded in the Excise records and excise returns have been filed by M/s. Flex Art Goa. It is also a fact that Ess Dee Aluminium was having factory license prior to commencement of this business. The partnership Firm has permanent registration as 831 and registration with Sales Tax Authorities. In summary, what is required to be fulfilled for eligible deduction u/s.80-IB is not in dispute – Decided in favor of Assessee. Incomes not eligible for deduction u/s 80IB of the Income Tax Act - Assessee claimed deduction under section 80IB without excluding the interest income - Assessee contended that he has also incurred interest expenses, and therefore, only net interest, if any, ought to be excluded for computing the business income derived from eligible industrial undertaking, and therefore, not eligible for deduction under section 80IB of the Act – Held that:- Interest on FDRs cannot be held as income derived from industrial undertaking in view of the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. Vs Commissioner of Income-tax, [2003 (4) TMI 3 - SUPREME Court] - The only contention by the assessee before us is netting of interest income with the interest expenditure of the assessee - When deposit in FDRs is made with the borrowed funds, then, only net income can be said to be the interest income derived from FDRs - In the instant case, the AO has categorically recorded that the assessee has brought no material before him to show that borrowed funds were utilized for making the FDRs - Assessee could not bring any material to show that there was any nexus between the interest expenditure and the interest income earned on FDRs. by the assessee – Decided against the Assessee. Debts written back are eligible for deduction under section 80IB of the Act - Assessee has written off sundry credit balance, and added the same to the income of the current year. The assessee has claimed deduction under section on the same income – Held that:- Sundry credit balance written back are the amounts payable to the creditors for purchases made by the assessee for raw-material used in the production of the goods for the eligible undertaking of the assessee - Thus, in the year of purchases, the income from the eligible undertaking of the assessee is reduced, on account of the purchases debited in the profit & loss account, and the corresponding credit, as payable to the sundry creditors. Therefore, in the year of writing back of these liabilities, as not payable, and credited the same amount in the profit & loss account, the character of the receipt remains to be profit to the eligible undertaking, and hence, eligible for deduction under section 80IB of the Act – Reliance has been placed on the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs. Prathan Developers, [2013 (8) TMI 112 - GUJARAT HIGH COURT] – Decided in favor of Assessee. 2013 (11) TMI 723 Addition made u/s 40A(3) of the Income Tax Act for addition for cash payment – Contention of the assessee is that these payments were made to agriculturists and there are no banking facilities are available at the place where the payments were made – Held that:- Assessee being dealer in land and the places where the payments are made and received are having banking facilities. Being so, it is incumbent upon the assessee to make payment by crossed cheques or DDs - These payments were made in excess of the sales consideration shown in the documents registered and it was paid because of insistence of the recipients and mostly on bank holidays. This claim of the assessee as being totally unsubstantiated comprising bald statement advanced only to meet the exigencies with a view to align its inference of the provisions of the statute. Most of the parties mentioned hereinabove were in Hyderabad. The properties sold by them might be situated outside Hyderabad. Being so, it cannot be concluded that the recipients were having no bank accounts or access to the banking facilities. As such it cannot be said that the assessee's case is covered under the exception provided in Rule 6DD of the Income-tax Rules, 1962 – In the present case, assessee has failed to establish the exception provided in Rule 6DD – Decided against the Assessee. Addition on account of unexplained investment - Payment to CSK group under the head "CSK land payment" at Rs. 3,84,00,000. However, the entry in the cash book shows an amount of Rs. 38,80,000. The difference was worked at Rs. 3,45,20,000 and the same was considered for making addition by the AO as unexplained investment – Held that:- Total payment to CSK Realtors is only Rs. 3.84 crores for which the AO invoked the provisions of section 40A(3) and payments were duly explained by the assessee but neither the CIT(A) nor the AO had gone through the cash book of the assessee by incorporating the entries relating to actual payments to CSK Realtors as per the slip found during the survey – This issue remitted back to the AO for fresh consideration. Method of valuation of closing stock - Deletion of addition made towards valuation of closing stock- The Assessing Officer adopted the value of closing stock by taking into account the probable sale price of the land and reducing there from 8% of the net profit offered by the assessee - Assessee had to incur various items of expenditure other than the cost of land. The assessee had to incur expenditure on office, on sales like commission and various other items of expenditure which do not increase the value of closing stock. Therefore, the method adopted by the AO is not correct as observed by Commissioner(A) - Held that:- 8% profit so as to determine the closing stock figure. As the assessee did not furnish the details in support of the claim of the closing stock, the closing stock is to be valued at cost or market price, whichever is lower, and the method is to be followed consistently from year to year. Accordingly, remitted the issue back to the file of the AO with a direction to the assessee to furnish full details of the method of valuation of the closing stock. Thereafter, the AO shall determine the value of closing stock, if necessary, he may make necessary addition on this count. 2013 (11) TMI 722 Additions u/s 68 of the Income tax act - Search was conducted in the case of the assessee on 20.01.2006 when certain incriminating documents were seized. Subsequently, notice u/s 153A of the I. T. Act, 1961 were issued requiring the assessee to furnish the return of income for the current year as well as last six years which was duly filed and after due notice to the assessee and considering the reply, assessments were framed and certain additions were made - Additions of the amount of remuneration paid to Mrs. Mukta Chaudhary – Held that:- It is just and appropriate to uphold the order of Ld. CIT(A) with respect to the additions made on the basis of second remand report in which the A.O. has agreed with the material submitted by the assessee – Addition deleted – Decided against the Revenue. 2013 (11) TMI 721 Rejection of Books of accounts - Method of accounting - Percentage completion method or project completion method - Held that:- The Assessing Officer in this case rejected the accounts on the sole ground that the assessee has not followed Accounting Standard-7 and AS-9 for recognition of revenue which required him to deduce income on the basis of Percentage Completion Method by working out the profits at the end of each financial year as the projects are spread over in the series of financial years. The assessee admittedly is engaged in the business of construction as a builder/real estate developer. He has also maintained complete books of account, which are duly audited by duly qualified Chartered Accountants. The assessee has also maintained its account on mercantile basis by regularly applying Project Completion Method. The assessee in assessment for assessment year 2009-10 has also consistently followed the same method as was applied for assessment year 2009-10. The auditors have reported no change in method of accounting adopted by the assessee. The assessee has clearly demonstrated that it has regularly employed the project completion method of accounting - Accounting Standard-7 issued by the Institute of Chartered Accountants of India recognizes the position that in the case of construction contracts the assessee can follow either the project completion method or percentage completion method. It is the option of the assessee to follow either the completed contract method or the percentage completed method. The completed contract method in the present case in appeal followed by the appellant, therefore, could not be faulted with by the revenue authorities and on that basis it is neither correct nor justified to say that the accounts did not present correct and complete picture of its profits. The accounts rejected by the Assessing Officer on the basis adopted by him are thus not found tenable - recognition/identification of income under the 1961 Act is attainable by several methods of accounting. It may be noted that the same result could be attained by any one of the accounting methods. The Completion Contract method is one of such methods. Under the Completed contract method, the revenue is not recognized until the contract is completed. Under the said method, costs are accumulated during the course of the contract. The profit and Loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. The method leads to objective assessment of the results of the contract. On the other hand the Percentage of Completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognized under this method is determined by reference to the stage of completion and can be looked at under this method by taking into consideration the proportion that costs incurred to date bears to the estimated total costs of contract - Decided in favour of Assessee. 2013 (11) TMI 720 Disallowance u/s 40(a)(ia) - TDS deducted after end of financial year - Held that:- There is no doubt that TDS was not deposited before the end of the AY. under consideration. But it is also a fact that same was deposited before the due date of filing of the return of income. We find that amended provisions of Section 40(a)(ia) have to be considered while deciding the issue of deduction/deposit of tax as per the TDS provisions. Therefore, in the interest of justice, matter is restored back to the file of the AO to decide the issue afresh in light of the amended provisions. He is directed to afford a reasonable opportunity of hearing to the assessee - Decided in favour of assessee. Disallowance of commission - Principal of natural justice - Held that:- reasonable opportunity of hearing was not given to the assessee. From the orders of the AO and the FAA it is clear that assessee was given only two days’ time and evidences produced by the assessee-firm before the FAA were rejected - issue should have been decided after considering the evidence produced by the assessee. Therefore, in the interest of justice matter is restored back to the file of the AO to adjudicate afresh the issue of disallowance of commission payment to three parties - He is directed to afford a reasonable opportunity of hearing to the assessee-firm - Decided in favour of assessee. 2013 (11) TMI 719 Deduction u/s 80-IB – Whether proportionate deduction be allowed - Held that:- The project completed by the appellant had two units above 1500 sq. ft – The conditions prescribed u/s 80-IB(10) are not fulfilled in respect these two units only - If an assessee has developed a housing project, wherein the majority of residential units have a built up area of less than 1500 sq. ft. and only a few residential units are exceeding the built up area of 1500 sq. ft.- It would be fair and reasonable to allow deduction on proportionate basis i.e. on the profit derived from construction of the residential units which have a built up area of less than 1500 sq. ft. – Partly allowed in favour of assessee. Customs 2013 (11) TMI 758 Condonation of delay - Appeal time barred - Service of order delayed by 10 years - Held that:- order was sent by registered post and it came back undelivered and thereafter, it was tried to be served by sending a person and the same also could not be done because the appellant was absconding. It is also seen from the records that the order was displayed on the notice board. Therefore the service of the order, as envisaged under Section 153 of the Customs Act, had been completed by way back in June 2002. Therefore the plea of the appellant that he got the order only in October 2012 after a gap of more than 10 years cannot be accepted. Modes of service provided in Section 153 are alternate methods by which attempts can be made to serve an order or decision under the Customs Act. Therefore, service by any of the modes is sufficient for the purposes of the said section. Viewed in this perspective, the service has been completed in the instant case way back in 2002. If the appellant had changed the address, it was his duty to inform the change of address to the respondent which he has not done. On the other hand, it is evident that the appellant was absconding in view of the COFEPOSA detention order issued against him and the proclamation made for his appearance by canceling the ball. In other words, the appellant was eluding the law and therefore such a person cannot be given the benefit of condonation of any delay - Following decision of Chellappan Vs Addl. Collector of Customs [1975 (10) TMI 24 - High Court of Kerala at Ernakulam] - Condonation of delay denied. 2013 (11) TMI 757 Maintainability of appeal- Notification No. 11/97-Cus dated 1.3.1997- Order passed u/s 130 - Jurisdiction u/s 130E - Held that:- it is apparent that against an order of the Appellate Tribunal relating to the determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment shall lie before the Supreme Court and the High Court has no jurisdiction to entertain an appeal against such order. Having regard to the fact that controversy involved in the present case directly relates to the question of determination of rate of duty of customs, the appeal is not maintainable before this Court - Decided against Revenue. 2013 (11) TMI 756 Refund of SAD - failure to make declaration on the Invoice for non availment of credit - Import of human growth hormone injections under 7 Bills of Entry - Benefit of Notification No. 102/2007-Cus., dated 14-9-2007. - Held that:- The purpose of a declaration as stipulated in para 2(b) of Notification No. 102/2007-Cus., dated 14-9-2007 is to deny double benefit i.e. the buyer of the goods takes the credit of the SAD paid, while the seller gets refund of the SAD paid. In order to prevent this, the aforesaid declaration has been prescribed in the Notification. However, in the present case, the appellant is not a registered dealer who is authorized to issue Cenvatable invoices. Secondly, the invoices issued by the appellant, copies of which we have perused, do not indicate the SAD paid. Cenvat credit can be availed only when the invoices are issued by a manufacturer or an importer or a registered dealer. Inasmuch as the appellant is not a registered dealer, the question of taking credit on the strength of invoices issued by him does not arise at all. Further, the invoices do not indicate the amount of SAD paid. In the absence of such a detail, the question of availing Cenvat credit also does not arise. Thus, the object and purpose of the declaration is achieved in the present case. The appellant has paid SAD at the time of importation and they also paid Sales Tax/VAT while selling these goods and therefore, the appellant is rightly entitled for the benefit of refund under the aforesaid Notification subject to the bar of unjust enrichment - Decided in favour of asseessee. 2013 (11) TMI 755 Import of helicopter - non-scheduled air transport services (passenger) - Misuse of helicopter - Held that:- appellant had undisputedly imported the helicopter for non-schedule operator service (passenger) by availing benefit of Notification No. 21/2002-Cus., giving an undertaking for adhering to condition No. 104 of the said notification. - there are two views on the very same issue viz. in the case of COMMISSIONER OF CUSTOMS, NEW DELHI Versus SAMEER GEHLOT [2010 (11) TMI 85 - CESTAT, NEW DELHI] and KING ROTORS & AIR CHARTER P. LTD. Versus C. C. (ACC & IMPORT), MUMBAI [2011 (6) TMI 276 - CESTAT, MUMBAI] - on an identical issue, when two views are possible and the Condition No. 104 having been substituted, the appellant has made out a prima facie case for waiver of pre-deposit of the amounts involved. - Stay granted. 2013 (11) TMI 754 Stay application - Waiver of pre deposit - Classification - Import of saccharomyces Boulardii - Held that:- The imported goods is, admittedly, "yeast" which is appropriately classifiable under Heading 2102 of the Schedule to the Tariff Act - The claim of the appellant to classify the goods as "medicament" under Heading 3003 by reason of Note 1 (f) to Chapter 21 is apparently hit by the terms of the Note itself inasmuch as, for exclusion of the product from the ambit of Chapter 21, it should be shown that the imported item was ‘put up as a medicament' at the time of importation itself - no prima facie case exists for the appellant and they should make reasonable predeposit under Section 129E of the Customs - Following decision of Kasturi Foods & Chemicals Vs CCE Bangalore [1994 (12) TMI 208 - CEGAT, NEW DELHI] - Stay denied. 2013 (11) TMI 753 Classification of goods - Classifiable under CTH 8753 or CTH 8477 - Injection Moulding Machine for moulding articles of thermoplastic materials such as TPR and not machines for making articles of Hides, Skins or Leather - Anti dumping duty - Notification No. 39/2010 dated 23-3-2010 - Held that:- It is a known fact that hides, skins and other cannot be subjected to injection moulding and, therefore, the claim of the appellant that the machinery is classifiable under CTH 8453 is not sustainable and the same is dismissed. CTH 8477 deals with machinery for working rubber or plastics or for the manufacture of products from these materials and CTH 8477.10 specifically covers Injection Moulding Machines and, therefore, Injection Moulding Machines for working of plastics would come under Heading 8477.10. Therefore, the classification proposed in the impugned order by the customs authorities is correct in law - Following decision of Jama Corporation Pvt. Ltd. v. Commissioner of Customs (Import), Nhava Sheva [2012 (8) TMI 630 - CESTAT, MUMBAI] - Decided against assessee. 2013 (11) TMI 752 Smuggled goods - Burden of proof - Departmental Clarifications - Confiscation of betel nuts - Held that:- betel nuts are non-notified items in which case, the onus to prove that the goods are smuggled lies heavily upon the Revenue and is required to be discharged by production of positive evidences - Revenue cannot first show laxity in investigation and then seek to shift the burden to prove that the goods are not smuggled especially when there is not even any evidence produced to show illegal importation of seized non-notified goods - It is well settled law declared by various judicial as also quasi-judicial authorities as discussed in detail in the impugned order that in terms of non-notified items, burden lies on the Revenue to proved legal entry into the country and to show that the goods were smuggled - Following decision in the case of Sultan Dharani [2007 (9) TMI 469 - CESTAT, MUMBAI] - There is no infirmity in the order of the Commissioner (Appeals) - Decided against Revenue. Corporate Laws 2013 (11) TMI 751 Winding up of company - Non payment of dues - Payment not made for services rendered to defendants - Contract not reduced to writing - Held that:- The proposal of the petitioner was accepted by the respondent and the fact that there was no contract which was reduced into writing cannot lead to the conclusion that the petitioner did not render any services. The respondent paid an advance of Rs. 1,00,000/- to the petitioner and stipulated that the duties of the petitioner would start from 20.12.2010 on the site. The petitioner was also directed to meet Mr. Sachdeva and Mr. Gupta deputed by the respondent to show the site and meet the contractors. Thereafter, there is a series of correspondence which would prima facie show that the petitioner did commence the rendering of the services for which it was engaged - AHLCON was the company which was engaged by the respondent for construction of the hotel. A copy of this letter which is dated 29.12.2010 is seen marked to the petitioner for information. The letter speaks of corporate guarantees for performance and mobilisation advance to be given by AHLCON to the respondent. This shows that the petitioner was kept in the loop. correspondence between the petitioner and AHLCON and copies being marked to the petitioner in respect of the initial correspondence entered into between AHLCON and the respondent indicate that the petitioner did render some services to the respondent for which payment was due. As to what exactly was the amount due to the petitioner for the services may be in dispute but the fact that there was a dispute does not in all cases mean that no amount was due by the respondent - there was no justification on its part to dispute the claim that the petitioner rendered services merely on the ground that no formal contract was concluded between the parties. The respondent could not have been unaware that copies of the letters written by AHLCON to it were marked to the petitioner. If no formal contract had been concluded and if the respondent had not engaged the services of the petitioner, the respondent ought to have told AHLCON that the petitioner had nothing to do with the hotel project and, therefore, copies of the correspondence need not be marked to the petitioner. Moreover, AHLCON could not have possibly come to know that the petitioner was engaged as consultant of the hotel project, except on being informed by the respondent. An advance of Rs. 1,00,000/- was given to the petitioner with a request to start the work on site from 20.12.2011. All this leads to the reasonable inference that the petitioner s services were engaged by the respondent. For the services, the petitioner has to be paid and merely because the amount payable is disputed and is not acceptable to the respondent, it cannot be said that there is no case for winding-up the respondent - Decided in favour of appellant. 2013 (11) TMI 750 Interim Injunction under order 39 Rule 1 and 2 of Civil Procedure Code – telecast of a television commercial of defendant’s Lifebuoy Soap, which as per the plaintiff is disparaging and denigrating the reputation and goodwill of the plaintiff in the commercial market. - Held that:- Ad interim relief as to the injunction was granted to the plaintiff and as against the defendant thereby restraining the defendant from telecasting the impugned advertisement - the defendant will be well within its rights to telecast the same only after following the conditions of the judgment - Defendant was also restrained from inserting or adding any such kind of piece/feature in the advertisement which would otherwise directly or indirectly result in disparaging the said product of the plaintiff till the final disposal of the case. It was clear that the advertisement disparages the plaintiff's antiseptic liquid and it was not an advertisement which seeks merely or only to promote the superiority of the defendant's “LIFEBUOY’ soap over an ordinary antiseptic liquid - When the commercial was displayed before the public at large, the basic principle that was followed was that the public tried to find the connectivity and the impact that advertisement probably creates on them - Dabur India Lmt V. Colgate Palmolive India Ltd. [2004 (9) TMI 603 - DELHI HIGH COURT ] - If “X’ would raise the standards of its product by claiming the rivals products “Y’ to be bad and not effective displaying similar/ comparative attributes of the two, the same would be bad in law - If it were a case of mere promotion of superiority of the defendant's product, alone, the plaintiff would not have had a case as that would have only betokened a permissible "better" or "best" statement - The advertisement comprises of two parts; one which denigrates and disparages the product of the plaintiff and the other which promotes the purported superiority of defendant's LIFEBUOY soap. There was a hint of some malice involved in the commercial in respect of the defendant’s product - indeed, it would be appropriate to delete certain relevant attributes of the defendant’s advertisement which clearly hits on the plaintiff’s product and portrays the same in bad light - Without a doubt comparative advertising was beneficial as it increases consumer awareness and therefore, it was permissible but not by pulling down the reputation of your competitor by showing its product in debauched light - advertising is a medium through which an advertiser can establish his brand in the market, but at the same time there are certain set of laws that cannot be deserted - Denigrating or causing direct harm to one’s product which has attained appreciation in its genre in terms of usage and application, would amount to slander, which would also cause great prejudice to the public interest, as the question is not of deciding which product is better, but also of public awareness - Because, misleading and disparaging advertisement would not only mellow down the faith of the public but would also result in misleading them. Whether the advertisement merely puffed the product of the advertiser, or in the garb of doing so, was denigrating the product of the plaintiff - It was palpable to state as per the assertions made by the plaintiff and the aforesaid discussion, it was clear that the advertisement aims at denigrating the product of the plaintiff by indicating to existing and future customers that the product of the plaintiff was ineffective - A significant aspect of the manner in which puffery should be interpreted in the case was the broadly liberal attitude adopted towards untrue and imprecise statements - The emphasis of the Court in this regard was to prevent any loss or injury to the interests of the competing manufacturer or seller, with any active disparagement of a competing product being impermissible. Based on the triple test for the grant of ad-interim injunction viz (1) whether the plaintiff has strong prima facie case to succeed on merits (2) whether the balance of convenience lies in favour of the plaintiff and (3) whether the plaintiff will suffer irreparable loss and injury if the injunction was not granted in its favour - the court finds that all the three principles lean in favour of the plaintiff and against the defendant - The plaintiff had been able to established a prima-facie case in its favour - If the plaintiff was not granted interim injunction, the telecast of the television commercial by the defendant in the aforesaid manner definitely pose disparagement against the plaintiff’s product, and was definitely detrimental to plaintiff’s interest and would also cause an irreparable loss and injury to the plaintiff - The balance of convenience also lies in favour of the plaintiff and against the defendant. The defendant can telecast the advertisement only after deleting the attributes as to remove the “toys’ in the advertisement - remove the phrase “two dhakkans” and the particular portion featuring the lady shown pouring liquid in the bucket by holding the bottle of the antiseptic liquid in her hand - Remove the shot showing the cloud formation - green was the colour majorly associated with “Dettol’, therefore also change the colour scheme showing the comparison between the two products in the television commercial and change the green colour to a different shade. FEMA 2013 (11) TMI 759 Bar of limitation - Whether the show cause notice issued was time barred - Tribunal has quashed the show-cause notice as time barred - Held that:- order of the Tribunal is self-explanatory and the reasons mentioned in the impugned order to the effect that the action, if any, for the alleged breach under Foreign Exchange Regulation Act, 1973 (hereinafter referred to as 'FERA') could be taken within a period of two years, which has, in any case, expired on 1.6.2002, whereas the memorandum of the show-cause notice is on 26.7.2005. Even if the receipt of the report for the first time by the Assistant Director to the Special Director is considered, the same was on 5.5.2005. Under these circumstances, even if the earliest date is considered in respect of the report for the alleged breach under FERA, the period of limitation for two years for initiation of the action under FEMA under Section 49(3) had, in any case, expired - Decided against Revenue. Service Tax 2013 (11) TMI 769 Utilization of CENVAT Credit on capital goods for payment of service tax under reverse charge - Demand of service tax on Intellectual Property Rights Service - Assessee discharged service tax liability by paying major portion of service tax by availing CENVAT Credit - Whether Cenvat credit can be utilized for payment of service tax on 'Intellectual Property Rights Service' received by them or not - Held that:- according to Rule 3(4)(e) of Cenvat Credit Rules, 2004, Cenvat credit may be utilized for payment of service tax on any output service. According to provisions of Section 66A(1) of the Finance Act, 1994, for all purpose, when demand are made under Section 66A, the service received has to be treated as 'output service'. Restriction applies for availing credit of duty only in respect of excise duty paid on input or service tax paid on any input services and not capital goods. In such a situation, the appellant has made out prima facie case in their favour for correctness of payment made by them. However, it seen that payment was made after two years from the receipt of services and therefore, the appellant is liable to pay interest - STay granted partly. 2013 (11) TMI 768 CENVAT Credit - Invocation of extended period - Whether appellant was right in taking credit on the basis of debit notes issued by M/s. Arvind V. Joshi & Company, Gandhidham (CHA) to the appellant - Held that:- It is seen from the representative copy of the debit note No. 538/2003-2004 dated 09.8.2003 relied upon by the appellant that the same describe an amount paid as Service Tax by the CHA on appellant s behalf to Kandla Dock Labour Board / Kandla Port Trust. However, the enclosed document dated 10.7.2003 issued by Kandla Dock Labour Board nowhere describe that CHA is acting or paying tax on behalf of the appellant. There is also no documentary evidence or contract to the effect that CHA was working as an agent of the appellant. A cenvat credit case can be taken only with respect to the services availed by the service recipient and the document indicating duty payment is in appellant’s name. So far as invocation of extended period is concerned, it is seen from the case records that ST-3 returns filed by the appellant has described CHA as the input service provider and the type of activities done by CHA are weighment, ground rent, port w/fage, handling charges, container lifting, Kandla Dock Labour Board charges etc. These ST 3 returns do not specify at all that Kandla Dock Labour Board charges and service tax are paid by the CHA on behalf of the appellant. The document indicating payment of service tax to Kandla Dock Labour Board and Kandla Port Trust also does not contain the name of appellant as service recipient . In view of the above, there is a misstatement on the part of the appellant and extended period will be attracted in this case - Decided against assessee. 2013 (11) TMI 767 Taxability of services provided to customers situated abroad - Consideration received in convertible foreign exchange - Appellant is providing market research service which is liable to tax. Prior to 1.3.2003, they were availing the benefit of Notification No.6/99-ST dated 9.4.1999 and from 20.11.2003 onwards, they were availing the benefit of Notification 21/2003-ST dated 20.11.2003 - Held that:- services rendered by the appellant have to be considered as export of service and would not be liable to service tax. We also find that this tribunal has taken similar view in the case of SGS India Pvt. Ltd. vs. CST, Mumbai reported in [2011 (2) TMI 54 - CESTAT MUMBAI] - The appellant is paying service tax from Mumbai main office in respect of all the branch offices and, therefore, we do not find anything wrong in taking credit just because the invoices are in the name of branch offices. The appeal on this count is allowed - Decided in favour of assessee. 2013 (11) TMI 766 Penalty u/s 78 - Simultaneous penalty u/s 76 and 78 - Period of applicability - Held that:- penalties u/s. 76 & 78 of the Finance Act, 1994 can be simultaneously imposed prior to the amendment of section 78 w.e.f. 10.05.2008 - Following decision of Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2011 (8) TMI 423 - DELHI HIGH COURT] and Anand Decoreters & Hirers Vs. Commissioner ST, Ahmedabad [2013 (8) TMI 374 - CESTAT AHMEDABAD] - penalties u/s. 76 and 78 of the Finance Act are simultaneously imposable upon a assessee for the period prior to 10.05.2008 - Decided in favour of Revenue. 2013 (11) TMI 765 Penalty u/s 78 - Simultaneous penalty u/s 76 and 78 - Period of applicability - Held that:- penalties u/s. 76 & 78 of the Finance Act, 1994 can be simultaneously imposed prior to the amendment of section 78 w.e.f. 10.05.2008 - The decision delivered by a two Member bench will prevail upon the judgment delivered by a Single member bench - Following decision of Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2011 (8) TMI 423 - DELHI HIGH COURT] and Anand Decoreters & Hirers Vs. Commissioner ST, Ahmedabad [2013 (8) TMI 374 - CESTAT AHMEDABAD] - penalties u/s. 76 and 78 of the Finance Act are simultaneously imposable upon a assessee for the period prior to 10.05.2008 - Decided in favour of Revenue. 2013 (11) TMI 764 Denial of CENVAT Credit - Penalty under Rule 15 (4) of Cenvat Credit Rules, 2004 - Applicant has availed cenvat credit during the period from 15.9.2008 to 07.01.2009 on the basis of invoices issued by their Head Office, who has been registered as "Input Service Distributor" w.e.f. 2005 - Held that:- Applicant was denied cenvat credit on the invoices issued by the Head Office as "Input Service Distributor" on the ground that such services were not attributable to the manufacturing unit. It is the plea of the Applicant before the ld. Commissioner (Appeals) was that since the credit has been availed by their Head Office and distributed in favour of the Applicant Unit and no question had been raised about the admissibility of credit on such input services by the Jurisdictional Commissionerate, therefore, eligibility/availability of credit on such services, cannot be questioned in the hands of the Applicant Unit. availability of credit by the Head Office had not been disputed and hence, when the same has been distributed after being registered as "Input Service Distributor", the same cannot be questioned at the hands of the Applicant Unit, who availed credit on the basis of such invoices. Also, we find that the Applicants are registered as "Input Service Distributor" and the input services on which the cenvat credit has been availed for the purposes of distribution as "Input Service Distributor", are held as eligible to cenvat credit by various pronouncement by this Tribunal. In these circumstances, the applicants are able to make out a prima-facie case for total waiver of duty and penalty, hence, predeposit of all dues adjudged is waived and its recovery stayed during pendency of the appeal - Stay granted. 2013 (11) TMI 763 Penalties under Sec. 76 & 78 - Assessee failed to file regular returns from 01/04/2000 to 31/03/2004 and also did not deposit the service tax payable - But entire Service Tax, along with interest, was paid by the assessee before issue of show-cause-notice - Applicability of amnesty scheme introduced by CBEC as per Chennai Commisonarate-III Trade Notice No. 18/2004-ST dt. 23/09/2004 - Held that:- A plain reading of the above scheme reveals that the same is applicable to those service providers who were not registered and who filed a prescribed registration upto 30.10.2004. However, such non registered unit, whether due to ignorance or for any other reasons, were entitled to a complete waiver of penalties. In the case of the appellant the period involved is also prior to 30/10/2004. However, no declaration has been filed by the appellant before 30/10/2004 as required under the Extraordinary taxpayer friendly scheme (ETFS). Secondly ETFS scheme was initiated by the Central Govt, only for those units which were not registered and not for those units which were already registered and filing returns. There was a delay in payment of service tax liability and statutory provision exist to the effect that service tax due can be paid by an assessee belatedly along with payment of interest as prescribed. The same has been paid by the appellant and thus it cannot be a case of suppression with intention to evade service tax on the part of the appellant. Revenue was also not barred from taking any recovery action when periodical returns were not being filed by the appellants. In view of the above penalty under Sec. 78 of the Finance Act, 1944 is not attracted upon the appellant and is set aside. Appellant did not file the prescribed returns as required under the Service Tax law therefore, penalty under Sec. 76 has been rightly imposed upon the appellant and is upheld - Decided partly in favour of assessee. 2013 (11) TMI 762 Taxability of service - Construction of residential complexes for sale - Relationship between assessee and buyers - Bar of limitation - Held that:- there is a relationship of service provider and service recipient between the applicant and the prospective buyers of the individual residential units as it is evidenced by the contract between the two parties. The contract is not for sale of flats but for providing construction service - residential complex was not for the residence of the applicant but the individual residence units were constructed for residential use of the persons for whom such units were constructed. The fact that individual residential units were for residential use of the purchaser of UDS cannot take the complex outside the definition. Any interpretation to the contrary will make the entry otiose. Adjudicating authority has not extended abatement as per the Notification No. 1/06-ST towards the value of the materials used in the construction activity which the applicant is prima facie eligible for. Since the demand is based on information unearthed during investigation and not voluntarily disclosed, we are prima facie not in agreement with the argument that the demand is time barred - Assessee directed to make a pre deposit - Stay granted partly. 2013 (11) TMI 761 Business Auxiliary Service - applicant is engaged in the business of cargo handling service and they are also booking space for cargo transportation in Airlines/Ships and pay charges for the same. They collected charges in excess of the charges paid to airlines/ships. According to Revenue, this amount will be taxable under the Business Auxiliary Service. - Held that:- In view of the decision in M/s. Leaap International Pvt. Ltd. Versus The Commissioner of Service Tax [2013 (5) TMI 112 - MADRAS HIGH COURT], prima facie case is against the assessee - stay granted partly. 2013 (11) TMI 760 Waiver of pre deposit - Consultant Engineering Service - Held that:- applicants have not produced documentary evidence for the reimbursable expenses. Upon pre-deposit of balance amount of tax, along with interest and penalty shall stand waived and recovery thereof stayed during pendency of appeal - Prima facie case not in favour of assessee - Stay partly granted. Central Excise 2013 (11) TMI 749 Eligibility to avail abatement – Electricity meter reading for claiming exemption - Alternative method of assessment Compounded levy scheme u/s 3A(4) of central excise act,1944 r.w. sub-Rule 3 of Rule 96ZO of the Central Excise Rules, 1944 –Held that:- Rule 96ZO (3) of the Central Excise Rules provides for an alternative method of assessment - The conditions given in the Rule require the appellant to give electricity meter reading for the purposes of claiming abatement - During inspection it was found that factory was not running at the relevant period - It was not denied that factory did not have electricity connection - No other material was available to have denied the abatement of 15 days claimed by the assessee of which the intimation was given in time. Law does not insist on impossibility for complying with the provisions of the Act for claiming any exemption or abatement - Where it is established that the party did not have electric connection and was using only DG set, the insistence of providing electricity meter reading for abatement of liability was an absurd suggestion - The other circumstances namely that factory was not found running during inspection and that intimation was given in time was sufficient to grant abatement for relevant period – there was no question of law arise for consideration in the appeal – Decided against appellant. 2013 (11) TMI 748 Reduction in the amount of Pre-deposits ordered – Financial distress in the balance sheet - Held that:- Prima-facie, the revenue may not be entirely incorrect, in adding the sales effected by M/s Robot Industries to sales affected by the assesse - but the matter merely relates to pre-deposit and the balance-sheet appended with the appeal, does indicate a degree of financial distress – Thus the assesse directed that in addition to the sum of Rs.25 lacs already deposited, he shall deposit another sum of Rs.49 lacs as a pre-condition to the hearing of its appeal – Decided partly in favour of Appellant. 2013 (11) TMI 747 Hearing of stay application - Recovery proceedings relying upon circular dated 01.01.2013 – Held that:- Following Manglam Cement Limited Vs. The Superintendent, Central Excise Range-III Kota & Ors. [2013 (4) TMI 102 - RAJASTHAN HIGH COURT] - the appellate authority/CESTAT was directed to hear and decide the stay application of the petitioner as early as possible but preferably within a period of eight weeks of appearance before the authority - in the meantime, no coercive steps for recovery of the demand shall be initiated – Decided in favour of Petitioner. 2013 (11) TMI 746 Clandestine removal of goods – Common records in one premises maintained for three premises - Shortage of finished goods found on examination – Held that:- Stock taking of the finished goods was undertaken by the officers in the presence of appellants and appellant never raised any objection to the method of stock taking - Any representation made afterwards has to be considered only as an afterthought when the duty liability, worked out on the shortage of finished goods manufactured and cleared by the appellants, was voluntarily paid without protest – thus, Duty demand has been correctly confirmed by the appellant along with imposing penalty equivalent to the duty involved. Imported Nickel cathodes Purchased on high sea sale basis admissible for cenvat credit or not – Held that:- Following Commissioner vs. Dhanlaxmi Tubes & Metal Industries -[2012 (10) TMI 263 - GUJARAT HIGH COURT ] - as there is no independent positive documentary evidence/statement confirming that imported Nickel has in fact has been diverted elsewhere and has not reached appellant’s factory - No Nickel was found short at the time of Stock taking by the visiting officers of Central Excise and no quantity diverted - Nickel was seized anywhere in the proceedings, it cannot be appreciated that imported Nickel was diverted in and around Delhi - cenvat credit with respect to imported Nickel was correctly availed by the appellant as their duty paid character and use in the manufacture of end product has been established by the records maintained by the appellant along with their confirming statements that inputs have been used for the manufacture of the finished goods. Penalty u/s 11AC of the central excise act, 1944 - Penalty on Director and vice president under rule 26 of central excise rules, 2002 and rule 15 of cenvat credit rules 2004 – Held that:- As the credit with respect to Nickel has been held to be admissible, personal penalties imposed upon all the appellants under Rule 15 of the Cenvat Credit Rules, 2004 set-aside and corresponding equal penalty imposed under Section 11AC read with Rule 15 (2) of the Cenvat Credit Rules, 2004 also set aside - For clandestine removal of finished goods, personal penalties are required to be imposed upon the Director and vice President of the main appellant under Rule 26 of the Central Excise Rules, 2002 as they could not satisfactorily explain the shortages/ clandestine removals – Decided partly in favour of Assessee. 2013 (11) TMI 745 Denial of CENVAT Credit on the input service i.e. Goods Transport Agency service – Waiver of Pre-deposit of duty and penalty under Rule 15 of cenvat credit rule r.w. Section 11AC of central excise act, 1944 - Held that:- Relying upon Commissioner of Central Excise, Chandigarh-I vs. Punjab Steels [2010 (7) TMI 252 - PUNJAB AND HARYANA HIGH COURT] The Commissioner should examine the entire issue afresh and record a categorical finding on the basis of evidences/records that would be produced by the Appellant before him - Since the case in relation to the major portion of the demand of Rs.2.45 Crores remitted, the other issue also needs to be remanded to the Ld. Commissioner who would examine the eligibility of CENVAT Credit availed on GTA Services, for bringing the inputs inside the factory which were later cleared, as such, without reversal of proportionate CENVAT Credit on such input service - The applicant directed to deposit an amount of Rs. 20.00 Lakhs as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted Clearance of Manganese Ore from factory without reversal of SAD - Held that:- The Manganese Ore had been cleared from the mixed stock of imported as well as indigenous goods were only imported Manganese Ore - It is the claim of the Appellant that even though these were imported as well as indigenous stock, and stocked together, however, they could establish from the records maintained by them that during the relevant period they have only cleared Manganese Ore procured indigenously and not cleared the Manganese Ore imported by them on which SAD has been paid - The records produced by the Appellant, to some extent show that the Appellant have cleared Manganese Ore from their indigenous stock only - the quantity of 16952.665 M.T. though pertains to the period prior to import of the Manganese Ore, but wrongly included in the demand. - matter remanded back. 2013 (11) TMI 744 Application to destroy Molasses as unfit for human consumption – Molasses has more than 50% of the water content - Claim for remission of the duty – Held that:- The sample of molasses does not conform to the density characteristics mentioned for Cane Molasses and the percentage of water content indicates 61.9 - the letter dated 04.11.2011 from the office of the Prohibition and Excise Department of the Government of Gujarat which specifically directed the appellant to destroy the molasses - Following Shakumbari Sugar & Allied Ind. Vs. Commissioner of C.EX., Meerut-I [ 2006 (3) TMI 640 - CESTAT, NEW DELHI] - the molasses were declared to be unfit for human consumption - In this situation, the demand of duty on the drainage out quantity of molasses is not justified. There is link between the test report given by the Dy. Chief Chemical Examiner and the letter of the Inspector of Prohibition Excise as regards the contents of Molasses 430.830 MT. in tank No. 1 of the appellant factory - it is an admitted fact that the molasses contents more than 50% of the water and is not usable and not marketable – thus the application for the remission of the duty liability needs to be allowed - the goods which are indicated as unfit for human consumption, needs to be destroyed – order set aside – Decided in favour of Assessee. 2013 (11) TMI 743 Corrugated Ply, M.S. Beam, Channels, TMT Bars, Angles Capital goods or Input - Eligibility to avail Cenvat credit – Assessee manufactured Flanges and Fittings - Whether the inputs can be considered as capital goods or input – Held that:- The inputs on which CENVAT Credit was taken, may not qualify to be capital goods, in strict sense, but can be qualified as input for manufacturing of excisable goods under the provisions of Rule 2(k) of CENVAT Credit Rules, 2004 – Relying upon KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX., MEERUT-II [2009 (10) TMI 742 - CESTAT NEW DELHI] - an assessee is eligible to avail CENVAT Credit of the items under input category, it cannot be denied on the ground that the credit was claimed as capital goods - The appellant has demonstrated by producing Chartered Engineer’s certificate that the items on which CENVAT Credit was availed, were, in fact, used for fabrication or manufacture of capital goods which were further consumed by them – thus CENVAT Credit cannot be denied to the appellant – Decided in favour of Assessee. 2013 (11) TMI 742 Disallowance of Transitional cenvat credit – manufacturing of Cotton Fabrics, Man made Fabrics and Knitted/Hosiery Fabrics - Requirement to make declaration of stock as on 31.03.2003 as per Notification No.40/2003 – Held that:- The Government of India intended that so long as the assessee keeps the records of production, clearance, particulars of receipt of inputs and pays the applicable duty, all procedural lapses, if any, should be ignored - The appellant filed declaration for their stock as on 31-03-2003 for stock lying in their factory - The appellant qualifies and satisfied the Government of India’s scheme and has kept the records of production, clearance, particulars of receipt of inputs processed it and paid the applicable excise duty on clearance of their final products – Following OMKAR TRADERS Versus COMMISSIONER OF C. EX., AHMEDABAD [2009 (10) TMI 795 - CESTAT AHMEDABAD] - one time transitional credit under Rule 9A allowed to the appellant - I have also taken into consideration all factors relating to the case and come to conclusion that if such one-time credit is not allowed as envisaged in scheme of transforming ‘deemed basis’ into ‘actual basis’, it will cause injustice to the appellant in the facts of the case at the transformation stage itself when the appellant has also paid actual duty while processing inputs on which appellant had taken only credit and also reversed credit. These are the clinching evidences in favour of the appellant apart from the facts of this case, CBEC Circulars, press note and decisions relied upon by the appellant - the revenue has not discharged their burden to prove that the fabrics in question declared as of 31-03-2003 were in fact pertained to period after 01-04-2003 onwards - Revenue has not produced any evidences to prove that the input fabrics were received only after 01-04-2003 - Had it been so, then such fabrics would have been under the cover of duty paying documents. Documents submitted beyond the time limit – Held that:- The appellant’s declaration dt. 13-06-2003 received in the department on 16-03-2003 involving credit - In fact 15-06-2003 was Sunday and declaration dt. 13-06-2003 which was received on 16-03-2003 can be accepted as valid declaration made for claiming onetime credit in terms of Section 4 of the Limitation Act 1963 – Decided in favour of Assessee. 2013 (11) TMI 741 Invocation of Section 11A (2B) or not – Extended period of limitation – Wrong procedure for cenvat credit – Actually the amount should have been reversed – short payment of duty as well as excess payment - Held that:- The appellants have misunderstood the legal provisions and have paid duty on transaction value over a period of five years - there was not only short payment but also excess payment - In such a situation it is difficult to sustain the view that there was mis-declaration with intent to evade duty on the part of the appellants - As regards suppression of facts it cannot be invoked since there was no need for the assessee to report the methodology followed by them for payment of duty on the inputs cleared as such - thus the extended period could not have been invoked - Penalty under Rule 15(2) read with Section 11AC of Central Excise Act 1944 could not have been invoked. Penalty under Rule 15(1) of CCR 2004 – Refund of Excess amount paid – Held that:- The appellant clearly misunderstood the legal provisions and the appellant is expected to apply the relevant Rule correctly - appellants have not applied the Rule relating to clearance of inputs as such correctly – thus penalty of Rs. 5,000/- imposed under Rule 15(1) of CENVAT Credit Rules 2004 upheld - the contention that they are entitled to refund of the excess amount paid before the issue of show-cause notice is valid - according to Section 11A(2B) itself, if the amount paid by the appellant is subject to verification and in this case issue of show-cause notice invoked extended period it is obligatory for the department to refund the amount which has been deposited in excess - the revenue is bound to refund the amount – decided in favour of Assessee. 2013 (11) TMI 740 Jurisdiction to enhance the dues – Neither the extended period nor penalty invoked u/s 11AC of the central excise Act - Whether Commissioner (Appeals) has the jurisdiction to enhance the dues confirmed and penalty imposed by the first adjudicating authority – Transitional provisions for Textile and Textile Articles. - Held that:- In the original show cause notice dated 28.6.2004 was issued for an amount and extended period was not invoked - In the show cause notice dated 16.11.2006 issued by Commissioner (Appeals) demand has been proposed to be enhanced but extended period of five years has not been invoked by Commissioner (Appeals) nor penalty under Section 11AC of the Central Excise Act has been invoked – Relying upon Collector of Central Excise, Pune vs. Maharashtra Scooters Limited [1996 (10) TMI 93 - SUPREME COURT OF INDIA ] - The show cause notice issued by Commissioner (Appeals) cannot be sustained as neither proviso to Section 11A regarding extended period has been invoked nor provisons of Section 11AC of the Central Excise Act, 1944 have been pressed into operation - The corrective action attempted by Commissioner (Appeals) in appeal cannot rectify the defect of the show cause notice. Filing of multiple declarations allowed or not - Whether appellant is entitled to file more than one declaration under Notification No. 35/2003 – Held that:- Once the time limit for filing declarations was extended from time to time up to 15.6.2003, then it has to be understood that any declaration filed up to that date is a valid declaration – Relying upon L.B. Textiles vs. CCE Ahmedabad-I [2008 (2) TMI 769 - CESTAT, AHMEDABAD ] - there is no requirement under the provisions of Rule 9A of the Cenvat Credit Rules, 2003, as amended from time to time, for filing only one declaration. Entitlement for credit on grey textile fabric under Notification No. 35/2003 – Held that:- From the provisions of Rule 9A (1) it is clear that a first stage dealer or a second stage dealer is entitled to the service tax credit equal to the duty credit on inputs contained in the finished goods - the word finished goods used in the Rule for dealers will only mean ‘Yarn’ and or Unprocessed fabrics - For unprocessed fabric the input on which credit is admissible will be only the yarn contained in the finished goods (unprocessed fabric) - Yarn as credit admissible input with a dealer could be in the form of yarn as such lying with a dealer or contained in the finished unprocessed fabric – Decided in favour of Assessee. CST, VAT & Sales Tax 2013 (11) TMI 771 Value of dyes and chemicals - Work contract - Held that:- tax liability is drawn in the ambit of definition of sales in clause (i) and (ii) of S.2(t) of M.P. Vanijyik Kar Adhiniyam, 1994 and, therefore, material used and transferred in the same form or otherwise, it is deemed sales and is liable to tax under the provisions of Act that those materials like fuel, water, labour, which are consumed but not transferred to the contractee are not deemed sales whereas material which are transferred in the same form or in other form are deemed sale, according to the case of Gannon Dunkerley (1992 (11) TMI 254 - SUPREME COURT OF INDIA) - The High Court of Madhya Pradesh has rightly held that goods used in process of sizing of yarn is transferred to the contractee and is liable to tax. Consequently we find that no error or fault could be found in the impugned order passed by Divisional Deputy Commissioner in revision petition and we hold that according to 46th amendment of Constitution of India as already held above, the State Governments are empowered to the levy tax on the goods transferred otherwise than in pursuance of contract i.e., in execution of work contract and hence undoubtedly the State is entitled to levy tax on the value of material involved in the execution of job work/work contract - Decided against assessee. 2013 (11) TMI 770 Tax on the turnover upto the level of base production, in which stock transfer and consignment would not be included - Exemption with reference to the turnover of sales - Held that:- if the interpretation suggested by the petitioner is accepted in that event the unit will be entitled to exemption on branch transfer as well as on consignment sale without paying any trade tax either in the State of U.P., or Central, and would also at the same time be entitled to the exemption from, or reduction in trade tax on the production, over and above the base production, which was not the intention of the notification. The exemption on the stock transfer, or transfer of goods for consignment sale, is by the operation of law inasmuch as they do not fall within the purview of sale. This benefit is available even to the existing Units. Under Section 4-A of the Act and the notifications issued thereunder the benefit of exemption to the existing units, which have undergone expansion, diversification or modernisation is contemplated on the quantity of the goods in excess of the base production. The quantity of base production is determined only once on the consideration of the capacity of the production and maximum production of any one year of preceding five consecutive years. Such determined quantity of base production is the basis for the exemption for the period, for which the unit is entitled for exemption. The unit which has undergone expansion is thus entitled for the exemption on the turnover of the quantity in excess of the "quantity of base production" plus stock of the base production of the previous years - Decided partly in favour of assessee.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter November 16, 2013

Articles

1. PARTNER'S REMUNERATION WHETHER TAXABLE UNDER SERVICE TAX

Highlights / Catch Notes

Income Tax

Interest on Delayed Payments Qualifies for Deductions u/s 80HH and 80I, High Court Confirms.

Tax Department Must Follow Circular 7 of 2009; Assessing Officer Can't Disallow Non-Deduction u/ss 195 & 40(a)(i.

Income Tax Department Cannot Retain Cash and Jewellery if No Tax Liability Exists for Relevant Assessment Years.

Taxpayers must submit a signed audit report with their return to claim Section 80J deductions.

High Court Confirms Interest u/s 234B for Non-Deduction of TDS on Payments to Non-Residents by Indian Payers.

High Court rules rubber crumb production from old tyres is "manufacture" u/s 80IB, qualifying for tax deductions.

Monetary Compensation to Retiring Partner Not a Capital Asset Transfer, No Tax u/s 45(4) of Income Tax Act.

DDB incentive receipt must be excluded from deductions u/s 80-IB without expense deductions.

AO Rightly Demands Financial Institutions Report Account Holders with Transactions Over Rs. 1,00,000 u/s 133(6) IT Act.

Section 41(1): Time Alone Doesn't Prove Liability Cessation; Requires Concrete Evidence or Circumstances Beyond Three Years.

Liabilities Written Back Qualify for Deduction u/s 80IB; Receipt Character Remains Profit for Eligible Undertaking.

Section 40A(3) Addition: Cash Payments on Holidays Questioned Due to Banking Access in Hyderabad Property Transactions.

Debate Over Income Recognition: Percentage Completion vs. Project Completion Method Under Income Tax Act 1961.

Customs

Appeal Dismissed Due to 10-Year Delay in Service; Appellant Denied Condonation for Avoiding the Law.

Refund of Special Additional Duty Granted Despite Non-Declaration on Invoice; Assessee's Lack of Registration Not a Barrier.

Helicopter import case: Prima facie established for waiving pre-deposit amid dual interpretations and amended Condition No. 104.

Machinery for Hides and Skins Not Classifiable Under CTH 8453 Due to Inapplicability of Injection Moulding Process.

Burden of Proof Stays with Authorities in Smuggling Cases if Investigations Are Lax, Emphasizing Thorough Procedures.

Corporate Law

Court Rules Disputed Amount Doesn't Prevent Winding-Up Proceedings for Non-Payment of Dues.

Court Grants Injunction Against Lifebuoy Soap Ad for Alleged Disparagement, Halting Further Broadcast.

Service Tax

CENVAT Credit Restriction Applies to Excise Duty on Inputs and Services, Not Capital Goods for Reverse Charge Payments.

CENVAT Credit Denial: Invoices Must Be in Service Recipient's Name, Not Customs House Agent's, for Eligibility.

Appellant in Mumbai Justified in Taking CENVAT Credit Despite Invoices Issued to Branch Offices.

Simultaneous Penalties Possible Under Finance Act Sections 76 and 78 for Pre-May 10, 2008 Periods.

Court Confirms CENVAT Credit Validity: Head Office's Distribution to Applicant Unit Stands Unchallenged as Input Service Distributor.

Residential Complex Construction for Sale Subject to Service Tax; Individual Use Doesn't Exempt Entire Complex from Taxable Services.

Central Excise

Director and VP Face Penalties for Unauthorized Removal of Goods, Highlighting Executive Accountability in Central Excise Cases.

Application to Destroy Molasses Unfit for Consumption Seeks Duty Remission Approval Under Relevant Regulations.

Denial of CENVAT Credit Unjustified for Materials Used in Manufacturing Capital Goods Consumed.

Court Examines Mis-Declaration Claims in Duty Evasion Case Involving Both Under and Overpayments; Challenges Intent to Evade Duty.

Commissioner (Appeals) Cannot Enhance Dues if Original Show Cause Notice is Defective; Corrective Actions Invalid.

VAT

State Governments Can Tax Goods Transferred in Work Contracts, Including Dyes and Chemicals, Under VAT and Sales Tax Rules.

Case Laws:

Income Tax

Customs

Corporate Laws

FEMA

Service Tax

Central Excise

CST, VAT & Sales Tax

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TMI Tax Updates - e-Newsletter
November 16, 2013