TMI Tax Updates - e-Newsletter
November 19, 2013

Case Laws in this Newsletter:

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

Articles

1. Care required in handling notices, reminders letters etc.

   By: DEVKUMAR KOTHARI

News

1. RBI Reference Rate for US $ and Euro

2. RBI extends Liquidity Support to Micro, Small and Medium Enterprises

3. 3rd BRICS International Competition Conference, 2013 to Facilitate Showcasing India as an Attractive Investment Destination

Circulars / Instructions / Orders

VAT - Delhi

1. F.6(7)/DVAT/L&J/2013-14/748 - dated 12-11-2013

Delegation of powers vested in Commissioner (VAT)

Highlights / Catch Notes

Income Tax

• High Court Rules: No Penalty u/s 271(1)(c) for Assessee's Failure to Prove Shareholders' Investment Capacity.

  Case-Laws - HC : Addition u/s 69 and penalty u/s 271(1)(c) - Failure of the assessee in proving the capacity of the various shareholders to invest in the share capital, could not have been a ground for initiating penalty proceedings - HC
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• Tea Blending and Processing Units Recognized as Manufacturers for Tax Exemption u/s 10B of Income Tax Act.

  Case-Laws - AT : The assessee who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B - AT
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• Income from Property Sale After Flat Construction Classified as Capital Gain, Not Business Profit, Says Ruling.

  Case-Laws - AT : Classification of head of Income – adventure in the nature of trade or sale of capital asset - sale of property after getting the flats constructed - taxable as capital gain - no business profit - AT
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• SEZ Unit's Tax Exemption u/s 10AA Continues After Conversion from Partnership to Company.

  Case-Laws - AT : Exemption u/s 10AA - SEZ unit - Conversion of partnership firm into Company - trading activity - exemption to continue - AT
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• Loan Remission u/s 41(1) Not Applicable: Unclaimed Loan Amount Not Considered as Expenditure Previously.

  Case-Laws - AT : Additions u/s 41(1) - the remission of principle amount of loan obtained from bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier year, hence, section 41(1) was not applicable - AT
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• Interest Imposed for Failure to Pay Advance Tax on Time u/ss 234B and 234C.

  Case-Laws - AT : Interest u/s 234B and 234C – assessee was liable to pay advance tax for the year under consideration - It had failed to pay advance tax on stipulated dates - levy of interest confirmed - AT
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• Section 69A Addition Confirmed Due to Lack of Evidence on Household Expense Contributions by Spouse.

  Case-Laws - AT : Addition u/s 69A on the ground of household expenses - no evidence prodced that any drawings made by wife of assessee for contribution to household expenses - addition confirmed - AT
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• Indo Denmark DTAA clarifies software payments related to shipping operations are not taxable as royalty or technical service fees.

  Case-Laws - AT : Indo Denmark DTAA - Taxability of software as Royalty or FTS - cost recovered from the various agents towards usage of software are directly connected with the shipping operations - not taxable - AT
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• Income Tax Act: Registration cancellation u/s 12AA(3) invalid if assessee can't cross-examine relied statements.

  Case-Laws - AT : Cancellantion of registration u/s 12AA(3) - Department cannot rely on party’s statements, more so, when it was not confronted to the assessee for cross examination, the same cannot be relied upon - AT
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• Special Reserve Withdrawals u/s 41(4A) Unaffected by Balance Sheet Presentation for Income Tax Purposes.

  Case-Laws - AT : Addition u/s 41(4A) - Withdrawal from special reserve account - The method of presentation in the Balance Sheet does not matter for the purposes of sec. 36(1)(viii) r.w.s. sec. 41(4A) - AT
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• Penalty Confirmed for Concealment of Income u/s 271(1)(c) of Income Tax Act to Recover Lost Revenue.

  Case-Laws - AT : Penalty u/s 271(1)(c) – the section has been enacted to provide for a remedy for loss of revenue, by reason of concealment of particulars of income - penalty confirmed - AT
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• Income from VSAT Equipment Sales Qualifies for Deduction u/s 80IA of the Income Tax Act.

  Case-Laws - AT : Allowance of deduction u/s 80IA of the Income tax Act - Income from sale of VSAT equipment – telecommunication services - deduction allowed - AT
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• Taxpayers Must Prove Expenses Are Solely for Business to Claim Deductions: Key Responsibility Highlighted.

  Case-Laws - AT : Onus on whom to substantiate an expense - The burden was on the assessee to support and substantiate his claim for the expenses by establishing that the same were wholly and exclusively incurred for the purpose of his business - AT
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• Stay Denied for Revision Proceedings u/s 263 of Income Tax Act; Application Dismissed.

  Case-Laws - AT : Application for stay of Revision proceedings u/s 263 - stay should not be granted in this case and the same stands dismissed. - AT
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Customs

• Court Rules Against Mixing Timber Conversion Factors for SAD Refunds; Round Logs & Sawnwood Factors Remain Separate.

  Case-Laws - HC : Refund of SAD - Conversion factor - the petitioner cannot make an issue by mixing and interchanging the conversion factor of round timber logs with that of the sawnwood. Both are independent of each other - HC
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• Court Rules Importers Not Liable for Misuse of Declared Discarded Tyres in India.

  Case-Laws - AT : Import of old and used tyres - Misdeclaration of goods - Goods declaraed as Old and used discarded tyres - In spite of that if some of the users in India make use of those tyres for fast moving vehicles or heavy duty vehicles, then appellants cannot be faulted with. - AT
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• Collector's Oversight: Palm Oil Confiscation Declared u/ss 111(d) and 111(f) Lacks Import Manifest Details.

  Case-Laws - AT : Confiscation under Sec. 111(d) & 111(f) - Declaration of palm oil as crude palm oil - The Collector has not specified in his order as to what is the deficiency in the declarations made in the import manifests. - AT
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• Court Rules Confiscation of Imported Hard Disks Invalid Due to Officer Inexperience; Arihant Report Credible on Non-Hazardous Status.

  Case-Laws - AT : Confiscation - Import of old but unused hard disk - The officers who have examined are not expert in the field and there is no reason not to believe the report of Arihant E-Recycling - Goods are not hazardous - AT
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Service Tax

• CENVAT Credit on Cargo Handling for Exports: No Service Tax Paid, Classified as "Exempted Service" u/r 2(e), 2004.

  Case-Laws - AT : CENVAT Credit - Cargo handling service - Since no service tax is being paid on service relating to export cargo, it has to be considered as ‘exempted service’ within the meaning of Rule 2(e) of CCR 2004 - AT
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• Appellant Must Pay Interest on Short Duty Payment; No Refund for Excess Payment Allowed.

  Case-Laws - AT : Interest demand - Excess and short duty paid - Since no refund of excess payment was admissible to the appellant, obviously the only conclusion prima facie possible would be that the appellant has to pay interest on the short payment - AT
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• Charging Entry Fee Doesn't Make Park or Stadium Use Commercial: Service Classification Explained.

  Case-Laws - AT : Classification of service - Commercial or Non commercial service - Merely because some amount is charged for using the Park / stadium as entry fee, it cannot be said that it is a commercial or industrial construction. - AT
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• Service Tax Valuation Ruling: Invoices Must Substantiate Goods' Value to Exclude Costs Under Notification 12/2003. Evidence Required.

  Case-Laws - AT : Valuation - Exclsuion of cost of goods sold - Notification 12/2003 - invoices unilaterally raised by the appellants indicating the break-up without substantiating the amount attributable to the value of the goods supplied cannot be considered as documentary proof for the purposes of the said notification - AT
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• Refundable Deposits in Rent Aren't Considered Service, No Service Tax Applies Under Renting of Immovable Property Service.

  Case-Laws - AT : Renting of Immovable Property Service - refundable deposit is not in the nature of service and hence do not represent the consideration of service tax - AT
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• Educational Institute Faces Prima Facie Service Tax Case Due to Receipts Issued in Teachers' Names.

  Case-Laws - AT : Issuance of receipts in the name of individual teachers, while the coaching was conducted under a particular name of educational institute - prima facie case is against the assessee - AT
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• Partial Stay Granted on CENVAT Credit Claim for Invoices to Unregistered Head Office as Input Service Distributor.

  Case-Laws - AT : CENVAT Credit - invoices in the name of their Head Office, whereas the Head Office was not registered as an Input Service Distributor - stay granted partly - AT
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Central Excise

• Re-testing Requests Valid Even if Initial Tests by Government-Approved Labs Are Clear and Complete.

  Case-Laws - HC : Right to Re-testing of the Product - The application may not be rejected on the ground that the testing was done by Government recognized independent labs, and that the test reports are clear and complete - HC
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• Court Finds Excise Duty Demand u/s 11D Based on Presumptions, Not Facts, Impacting Limitation Period.

  Case-Laws - AT : Extended period of Limitation – removal of input as such under the guise of manufacture charging duty of excise - demand under section 11D - The findings recorded by both the lower authorities on limitation seems to be only the presumptions and not on the factual matrix - AT
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• Reversal of Cenvat credit in returns not a misstatement; extended recovery period inapplicable for Central Excise duty.

  Case-Laws - AT : Once the fact of reversal of cenvat credit is indicated in their periodical returns, then it cannot be held that there was any misstatement or suppression with intention to evade Central Excise duty and accordingly extended period cannot be made applicable. - AT
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• Central Excise Law Allows Extended Limitation Period for Clandestine Goods Removal, No Mandatory One-Year Notice Requirement.

  Case-Laws - AT : Extended period of limitation - Clandestine removal of goods – There is no provision in Central Excise law that show cause notice is required to be issued within one year from the date of visit of the Central Excise officers. - AT
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• Appellant must prove legitimacy of CENVAT credit from extra copy invoices; credit denied due to lack of evidence.

  Case-Laws - AT : Onus to prove – Cenvat credit taken on the basis of extra copy invoices - CENVAT Credit has been correctly denied as its receipt and use in the factory of the appellant is not established - AT
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• Assessee Fails to Justify Ferro Manganese and Ferro Molybdenum Shortage; Revenue Not Required to Prove Actual Removal.

  Case-Laws - AT : Clandestine removal of goods - Shortage of raw materials i.e. Ferro manganese and Ferro Molybdemum – assessee failed to prove burning loss or moisture loss - the burden of explaining the shortages is upon the assessees and Revenue is not required to show actual removal of raw materials - AT
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• Cenvat Credit Distribution: Pre-Deposit Required for Structural Components Within Normal Limitation Period Under Central Excise Laws.

  Case-Laws - AT : Distribution / bifurcation of cenvat credit amongst storage tanks and structures - for demand of Cenvat Credit related to structural, pre-deposit is directed for normal period of limitation - AT
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Case Laws:

• Income Tax

• 2013 (11) TMI 841
  Addition u/s 68 of the Income tax act – Addition on account of sale of shares – Held that:- It is well established by the appellant regarding genuineness of share transaction and he has sufficiently discharged the onus cast upon him. AO's action is not well founded in position of law in adding entire amount of sale of shares as income from undisclosed and unexplained sources u/s 68 of I.T. Act - Deleted the entire amount of Rs.19,51,038/-. There is no evidence on record as referred in assessment order, to prove that the proceeds received against sale of shares represent appellant's undisclosed income. Hon'ble Apex Court in the case of Kishan Chand Chella Ram vs CIT rep[orted in [1980 (9) TMI 3 - SUPREME Court] has held "that the burden is on the Department to prove that the money belongs to the assessee by bringing proper evidence on record and the assessee could not be excepted to call the concerned person in evidence to help the Department to discharge the burden that lay upon it". Assess was in possession of the shares in question and had sold the said shares in course of ordinary transaction of sale of shares at stock exchange and if the broker did not file any evidence since the same were seized by the Revenue Department, there is no fault with the assessee. From the aforesaid facts it is clear that the shares in question were allotted to the assessee in the public issue which were held in demat a/c of Stock Holding Corporation of India Ltd. The shares were transferred to Abhipra Capital Ltd. The sale consideration was received by demand draft. Therefore, the transaction in question cannot be said to be fake and is a genuine transaction – Decided against the Revenue.

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• 2013 (11) TMI 840
  Addition u/s 69 and penalty u/s 271(1)(c) of the Income tax Act – Held that:- The revised return had been acted upon by the Assessing Authority and in fact, the loss of Rs. 13,87,540/- declared by the assessee in the revised return filed on 24.3.1992, had been accepted in toto. The bonafide of the assessee is therefore established because it was not able to produce the necessary documentary evidence for proving the capacity of the shareholders and depositors to the full extent within a short span of time as the assessment was getting barred by limitation. Even the depreciation of Rs. 24,62,390/- claimed in the revised return, had been accepted by the Assessing Officer. The share capital and the unsecured loans amounting to Rs. 12,23,100/- declared by the assessee in the revised return has also been accepted. Moreover, decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Stellar Investments Ltd. [2000 (7) TMI 76 - SUPREME Court] and CIT vs. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA], the subscription made by the various shareholders in the share capital of a company cannot be taxed at the hand of the company and can only be taxed at the hands of the shareholder under Section 69 of the Act. Failure of the assessee in proving the capacity of the various shareholders to invest in the share capital, could not have been a ground for initiating penalty proceedings – Deleted the penalty u/s 271(1)(c) of the Income tax act – Decided against the Revenue.

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• 2013 (11) TMI 839
  Whether issuance of notice u/s 143(2) of the act is mandatory and not procedural – Deeming provision under section 292BB of the Act - No valid reassessment order could be passed before issuing the said notice within the time prescribed under law – Reassessment done u/s 147 of the Income tax act - Without issuing notice under section 143(2) of the Act the Assessing Officer straight away proceeded to issue notice dated 7th January, 2003 under section 142(1) of Act calling upon the assesseee to explain the issue regarding taxability of lease rent and deduction from it the expenses regarding business income - Assessment had been framed under section 147 read with section 143(3) of the Act without issuing notice under section 143(2) of the Act which is the mandatory requirement – Held that:- Time limit for issuing notice under section 143(2) has also been fixed which was earlier twelve months from the end of the month in which the return was furnished now it has been reduced to six months by Finance Act, 2008 with effect from 1st April, 2008. The notice contemplated under section 142(1) of the Act is only in respect of furnishing information on points or matters as the Assessing Officer may require. The two notices contemplated under section 142(1) and under section 143(2) of the Act are for entirely difference purposes. Reliance has been placed on the judgment in the case of Commissioner of Income Tax Allahabad and another vs. Sh. Mukesh Kumar Agarwal [2012 (7) TMI 543 - Allahabad High Court], wherein it was held that a deeming provisions to validate the notice in certain circumstances, would not have any effect where the very foundation of the jurisdiction of the Assessing officer is on the issuance of the notice under Section 143(2) of the Act - Following the aforesaid decision, the order of the Tribunal upholding the order of the Commissioner of Income Tax (Appeals) annulling the assessment under sections 147/148 read with Section 143(3) of the Act for want of issuance of notice under Section 143(2) of the Act does not suffer from any legal infirmity – Decided against the Revenue.

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• 2013 (11) TMI 838
  Disallowance u/s 37(1) of the Income tax act - Disallowance of Rs. 2 lacs being 50% of Club Membership Fees treating as personal expenses - Assessee had debited Rs. 4 lacs as Club Membership fee in his books of accounts – Held that:- Judgment of Hon'ble Bombay High Court delivered in the case of Otis Elevator [1991 (4) TMI 53 - BOMBAY High Court] is distinguished from - In certain cases issue regarding membership of clubs has been decided, but all such cases are of corporate assessee unlike the present case where assessee is proprietor of a concern. FAA had endorsed the views of the AO that element of utilisation of facilities for himself and the family members could not be ruled out. But, neither AO nor FAA had found as what was the facilities provided by the Club and what facilities were availed by the assessee for himself or his family members during the year under consideration - So, in the interest of justice restored the issue back to the file of the AO for fresh adjudication. Disallowance in respect of Sundry Balance written off - Assessee had debited Rs. 4, 87, 189/- under the head Sundry Expenses – Contention of Revenue that amount in question was in nature of advance to suppliers, that no actual purchases were made – Held that:- Assessee had not routed the said transaction to P & L Account, that it had claimed that amount in question could not be recovered - He had given details of sundry debtors/creditors balance written to the AO - AO has not taken into consideration the submissions made by the assessee in this regard – Proper opportunity of being heard was not provided to the Assessee - In the interest of justice matter needs to be restored to the file of the AO for fresh adjudication. Disallowance u/s 40(a)(ia) of the Income tax act - Addition on account of non-deduction of TDS as per the provisions of section 194C(1) of the Act – Addition of Rs. 10. 44 lacs - Assessee had paid Rs. 10, 44, 010/- to contractor, and he did not deduct tax at source – Held that:- As per the provisions of the Act individuals and HUFs, who were subject to mandatory audit, had to deduct tax at sources from AY. 2003 -04. While introducing the amendment to section w. e. f. , 01. 06. 2002, if legislature in its wisdom did not include the individuals and HUFs, who had not to get their accounts audited u/s. 44AB of the Act, to deduct tax source than it was a case of reasonable classification. But, legal position was very clear that during the year under consideration proviso was very much applicable and the assessee had to deduct tax as his turn over exceeded the monetary limits prescribed by the provisions of section 44AB of the Act - FAA had rightly held that Proviso was applicable and assessee had to deduct tax source u/s. 194C of the Act for the payments made by him during the AY under consideration. - Decided against the assessee.

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• 2013 (11) TMI 837
  Deduction u/s 10B of the Income tax Act - Declined exemption u/s 10B on the short ground that the blending of tea does not amount to manufacture or production of tea for the purpose of claiming exemption u/s 10B – Held that:- This appeal was squarely covered by the decision of the Co-ordinate Bench of this Tribunal in assessee's own case for the immediately succeeding assessment year [2012 (7) TMI 531 - ITAT KOLKATA] wherein the Coordinate Bench of this Tribunal has held that, the assessee who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B. - Decided in favor of assessee.

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• 2013 (11) TMI 836
  Classification of head of Income – adventure in the nature of trade or sale of capital asset - sale of property after getting the flats constructed - whether it is case of conversion of property (capital asset) into the stock in trade u/s 45(2) - Whether the income falls under the head Capital Gains or Business income - Held that:- Arrangement between these co-owners and GPIL cannot be termed as commercial arrangement for the simple reason that the piece of land including the bungalow inherited by these co- owners was a capital asset - Character of these asset, which was capital in nature, remained the same even after construction - Sale consideration received by these co-owners was on account of sale of capital asset – Decided against the Revenue.

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• 2013 (11) TMI 835
  Exemption u/s 10AA - SEZ unit - Conversion of partnership firm into Company - trading activity - The definition of `services' under the SEZ Act includes `trading' activity’ – Held that:- Trading activity has been permitted by the Competent authority under the SEZ Act. As such, there can be no question of denial of exemption u/s. 10AA of the Act – Reliance has been held in the case of DCIT v. Goenka Diamond & Jewellers Ltd.[ 2012 (3) TMI 258 - ITAT JAIPUR] in which it has been held that trading of the eligible goods entitles the assessee to the benefit of section 10AA of the Act – Judgment of Hon’ble Mumbai Bench in M/s Gitanjali Exports Corportion Limited v. ADCIT [2013 (11) TMI 563 - ITAT MUMBAI], reiterates the above order – Decided against the Revenue. Non- fulfillment of requisite condition as per Section 10AA(4)(iii) of the Act – Condition that undertaking should not be formed by transfer of machinery or plant to a new business which was previously used for any purpose – Held that:- Assesssee-company is successor of the partnership firm which was originally approved by the competent authority under the SEZ Act to do this business. The said firm claimed exemption u/s. 10AA of the Act for two years before the partnership firm got converted into assessee- company - Assessment of the firm was completed u/s. 143(3) of the Act in which benefit of exemption under this provisions was allowed. The granting of such exemption in earlier years implies that the AO got satisfied with the requisite conditions as per section 10AA(4). Since the assessee-company is nothing but the conversion of the erstwhile firm, at this stage it can not be said that the condition required under clause (iii) is not satisfied – Allowed exemption u/s 10AA of the Act – Decided against the Revenue.

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• 2013 (11) TMI 834
  Application of section 41(1) of the Income tax act - Assessee has incurred losses and has obtained waiver of principle as well as interest - Assessee company received financial assistance of Rs. 598 lakhs under venture capital fund scheme comprising convertible rupee term loan of Rs. 480 lakhs and subscription of 100 lakhs to the equity share capital and 17.5% redeemable convertible accumulative preferential shares of 98 lakhs - Further received financial assistance of 104 million under project finance scheme for the expansion cum up- gradation project for the manufacture of smart cards by way of term loan from IDBI - Since Assessee ended up in losses, it has entered into one time settlement for the dues – Held that:- Loan sanctioned is not received in the course of trading transaction, this being a capital receipt for purpose of purchase of assets/ business. All amounts received during the course of business cannot be considered as amount received in the course of trading transaction - Relied upon Hon'ble Supreme Court decision in the case of CIT Vs. Tosha International [2009 (7) TMI 1149 - SUPREME COURT], on similar issue, held that Assessee had not got any deduction on account of acquisition of capital assets as it has been reflected in the balance sheet and not in the P&L A/c and the remission of principle amount of loan obtained from bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier year, hence, section 41(1) was not applicable. Relying upon the judgment of Hon’ble Supreme Court in the case of Nector Beverages (P) Ltd. [2009 (7) TMI 5 - SUPREME COURT], it has been held that if Assessee has not got any deduction as a trading liability in any of the earlier years, provisions of section 41(1) does not apply - Unless principle amount pertains to any amount received during the course of trading activity, the same cannot be brought to tax as income of Assessee particularly only in those situations as stated by the Hon'ble Supreme Court in the case of TVS Sundaram Iyyengar & Sons [1996 (9) TMI 1 - SUPREME Court] – Decided in favor of Assessee. Jurisdiction u/s 263 of the Income tax Act – CIT directed u/s 263 to treat entire amount of Capital receipt as Income – Held that:- Direction of CIT to treat the entire capital amount as income is not correct on the facts of the case and also on the principles of law - Once a decision was taken by AO on the said facts, the CIT cannot review the same under the provisions of section 263. When there are two views possible, one of the plausible opinion taken by the AO cannot be dissented by CIT under section 263. Therefore, CIT lacks jurisdiction and so the direction of CIT is cancelled – Reliance has been placed on the judgment in the case of Malabar industrial Co. Ltd. Vs. CIT, [2000 (2) TMI 10 - SUPREME Court] – Decided in favor of Assessee.

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• 2013 (11) TMI 833
  Monetary limit for filing an appeal - ‘Tax effect’ less than the prescribed limit – INSTRUCTION No.3/2011(F:No.279/MISC.142/2007-ITJ) dt.9.2.2011 – Reference to Board's instruction No. 5/2008 dated 15-5-2008 – Held that:- Since this appeal has been filed by department on 21.04.2011 and the tax effect in this appeal is Rs.2,33,155/-, the above instructions of CBDT are applicable and the appeal filed by department is liable to be dismissed as the tax effect in this appeal is below Rs.3 lakhs – Decided against the Revenue.

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• 2013 (11) TMI 832
  Taxability of income from Surrender of tenancy rights - capital gains - exemption u/s 54 – Held that:- Surrender of tenancy rights;as contemplated in clause 16 of the impugned agreement;had not taken place during the year under consideration, that there was no taxable event giving rise to capital gains on account of the impugned agreement, that asssessee had not to pay any tax on alleged capital gains - Inspector of the AO had visited the place and from his on-the-spot-report it was proved, beyond doubt, that till he visited the premises alleged transaction had not fructified. Tax has to be paid by an assessee, if he earns some taxable income or some income accrues to him. An unexecuted agreement does not give rise to earning or accrual of income. Tax can be imposed on real income and not on hypothetical income. It is true that a tripartite agreement was entered into among the tenants, including the assessee, developer and the owner of the property. But it is also a fact the because of the orders of the BMC said agreement could not be implemented - Inspector proved that on that particular date property was occupied by the assessee as a tenant, that there was no change in his position vis-à-vis the owner, that rent receipts, electricity and MTNL Bills, Passport proved that assessee was in possession of the tenanted premises – Decided against the Revenue.

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• 2013 (11) TMI 831
  Block assessment - Penalty u/s 158BFA(2) of the Act – Undisclosed income - Entries made in the peace of paper separate from the regular books of accounts – Held that:- If the time limit for filing return of income has not expired, then the income from the transactions entered in the books of account or any other documents maintained in the regular course of business has to be excluded from the computation of income. In this case, what was found during the course of search operation is the amount shown as receivables. Though the assessee claims that this is the document maintained in the regular course of business, this Tribunal is of the considered opinion that the amount shown as receivables in a piece of paper cannot be treated as books of account maintained in the regular course of business in the absence of a corresponding entry in respect of the credit sales in the books of account maintained in the regular course of business. What was recorded in a piece of paper as amount receivable has to be treated as turnover outside the books of account. Therefore, this Tribunal is unable to accept the contentions of the assessee that the seized document which discloses the amount receivables on credit sale has to be treated as document maintained in the regular course of business – Decided against the Assessee. However, penalty reduced from 200% to 100%. - Decided partly in favor of assessee.

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• 2013 (11) TMI 830
  Interest u/s 234B and 234C of the Income tax act – Application of section 210 which requires payment of advance tax as calculated u/s. 209 - Advance tax must not fall short by more than 10% of the assessed tax – Contended that Assessee was not liable to pay any advance tax as the taxes paid by way of TDS were more than 90% of the Assessed tax and hence there was no interest chargeable u/s. 234 B and 234 C – Held that:- One of the reasonable mode of collection is to collect taxes in instalments. If assessees fail to adhere to schedule of payment, provisions have to be made to compensate the exchequer. Payment of interest or imposition of penalty can be considered justified modes of compensation. Assessee had the liability to pay advance-tax as provided in sections 207 and 208 within the time prescribed u/s. 211 of the Act, that the liability to pay such tax existed on the last date for payment of advance tax as provided under the Act or at least on the last date of the financial year preceding the assessment year in question - It is not the case that such liability arose subsequently, when the last date for payment of advance tax or even the last date of the financial year preceding the assessment year was over and the assessee had no liability to pay advance tax. In these circumstances it has been held that assessee was liable to pay advance tax for the year under consideration - It had failed to pay advance tax on stipulated dates. Therefore, the order passed by the FAA u/s. 154 of the Act; to recalculate the interest u/s. 234B and 234C of the Act, after giving credit to the taxes paid by the assessee;does not suffer from any legal infirmity – Decided against the Assessee.

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• 2013 (11) TMI 829
  Addition u/s 69 of the Income tax act - Relevancy of third party evidence to explain the investment made and addition made u/s 69 of the Income tax act – Held that:- In reply to remand report, the Ld AR submitted that all queries made by the Assessing Officer and replies given by the assessee were already on the file of the Assessing Officer as these replies were given by the appellant during assessment proceedings itself and therefore it was submitted that the Assessing Officer's finding that it was difficult to verify the capacity and genuineness of transaction should not be accepted as the Assessing Officer was not able to find anything wrong or missing from third party evidence. The Assessing Officer without going through the third party evidences filed by the assessee continued to direct assessee to file proofs of income tax returns of earlier years in support of his acquiring assets ion earlier years and made additions because of non compliance which is not justified specially in view of the fact that he did not find any defect in the documents filed by the assessee - In view of the above, set aside the case to the file of Assessing Officer for re-adjudication who on the basis of any enquiries from third parties in respect of their confirmations may arrive at the conclusion of addition if any u/s 69 of the Act. Addition u/s 69A on the ground of household expenses – Held that:- There is no other yard stick to measure household expenses of a person other than on the basis of facts and circumstances of that person with respect to size of the family, school going children, assets owned by that person and other surrounding circumstances – Assessee relied upon the case of Shri G.S. Bhatia [1997 (5) TMI 402 - ITAT MUMBAI], wherein it was held that unless and until it is established with evidence that it was only the assessee who had incurred all the household expenses, revenue was not justified in invoking the deeming provision of section 69A - In the present case, Ld AR did not bring to our notice any drawings made by wife of assessee for contribution to household expenses. Therefore the case laws relied upon by Ld AR do not hold force as the facts and circumstances of the present cases are distinguishable – Addition upheld – Decided against the Assessee.

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• 2013 (11) TMI 828
  Stay petition against the operation of order passed u/s 263 – Held that:- Relying upon the case of Narendra Kumar Mehta [2013 (11) TMI 821 - ITAT KOLKATA], it has been held that no purpose would be served by staying proceedings in respect of giving effect to the order passed under section 263 rather than delaying in time available to the assessee to respond to the requisition by the Assessing Officer in the interest of natural justice, stay should not be granted in this case and the same stands dismissed - Decided against the Assessee.

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• 2013 (11) TMI 827
  Indo Denmark DTAA - Taxability of software as Royalty or FTS - Shipping Business - income from software usage which has been developed and maintained by the assessee – Held that:- Article-9(1) of Indo Denmark DTAA provides that the profits derived from operations of the ships in international traffic shall be taxable at a place where the effective management of the enterprise is situated and such a profit is exempt from tax in the other contracting State. The term "Profit" under this Article has to be construed more broadly so as to include not only the activities directly connected with the shipping operations but also to include income from activities which facilitates or support such operation as well as any ancillary activities - The OECD commentary on Article-8 (similar to Article-9 of the Indo-Denmark DTAA) also expresses the same view. If any activity is directly linked with carrying on shipping operations and results into some kind of an income, then it has to be treated as a part of such shipping operations only. In assessee's own case of the earlier year, it has been held that the cost recovered from the various agents towards usage of software are directly connected with the shipping operations then the same has to be treated as covered under Article-9(1) and, hence, it cannot be taxed in India. Thus, respectfully following the judicial precedence, held that any kind of receipts recovered by way of software usage/development cost from MIPL cannot be taxed in India under Article-9(1) of DTAA. Further, this receipt also cannot be taxed as fees for technical services or royalty independently because in the present case, the assessee is not rendering any service of managerial, technical or consultancy to its agent or group entities by allowing its group companies to be usage of software. The assessee's main income is only from freight receipt received from operations of ships and it is not providing any technical service to them. It has developed a software for running of shipping business globally in a more effective and efficient manner and access of such software has been provided to various agents/group companies all over the world who are using this software for facilitating the freight receipts from shipping, for which they are reimbursing the cost to the assessee without any mark-up. Such a recovery of a cost cannot be held to be fees for technical services – Decided against the Revenue.

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• 2013 (11) TMI 826
  Cancellantion of registration u/s 12AA(3) of the Income tax Act - Assessee is running a medical college at Karimnagar and has also established a 750 bedded hospital at Nanganur village of Karimnagar District - For the first reason put forth for cancellation of registration, viz., collection of capitation fee, it is submitted that in the course of search, one Excel sheets were found containing the names of students, names of parents and the amount. In the course of search and, thereafter, statements of chairman of the assessee trust were recorded on a number of occasions, with reference to the entries in these Excel sheets. It was explained that circumstances in which the Excel sheets were found was not ascertainable. It was contended that uncorroborated notings in the Excel sheets should not be acted upon to derive any inference against the society - Reasons for cancellation of registration are that the assessee has violated the provisions of sections 11 and 12 of the Act and the assessee has not conducted itself in accordance with the object for which it was established and registered u/s. 12A of the Act. Seized material in the form of Excel sheets said to be recovered from the assessee's office cannot be considered as sufficient evidence so as to decide collection of capital fees by the assessee as it lacked independent corroboration. The Department failed to collect sufficient evidence to show that the assessee has actually collected the amount mentioned in the Excel sheets and the statement of Sri B. Srinivasa Rao is also not supporting the collection of capitation fees by the assessee. Moreover, no data confirming the contents of Excel sheets were recovered from the seized computer hard disk. In the absence of corroborative material, the Excel sheets recovered from the computer cannot be considered as a sufficient evidence so as to confirm collection of capitation fee. The seized material being Excel sheets which is an unsigned document and not being identified by the Department regarding author of these Excel sheets and it cannot be considered as an independent evidence. Being so, it has no evidentiary value as held by the co-ordinate Bench in the case of Smt. K.V. Lakshmi Savitri Devi vs. ACIT [2013 (11) TMI 805 - ITAT HYDERABAD] Evidence collected by the Revenue authorities is not sufficient to establish the stand that the assessee has collected the capitation fee/excess fee for admission under management quota seats in assessee society - Entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and conduct and human probability - Applying this principle to the present case, difficulty in rejecting the assessee's plea as opposed to the normal course of human conduct. The circumstances surrounding the case also not strong enough to reject the assessee's plea - Department cannot rely on party’s statements, more so, when it was not confronted to the assessee for cross examination, the same cannot be relied upon - Assessee society cannot be deprived of the registration granted to the assessee u/s. 12AA of the Act – Decided against the Revenue. Re-opening of assessment u/s 147 of the Income tax act – Search u/s 132 has unearthed material which revealed collection of amounts by the assessee over and above the fee prescribed by the Government for admission into medical courses particularly in respect of students admitted in the academic years 2006-07, 2007-08 and partly for 2009-2010. The said material found at the time of search did not reveal anything specifically relating to assessment year 2003-04, which is the year under appeal – Held that:- In the absence of any specific and concrete material possessed by the assessee to suggest collection of amounts over and above the prescribed fee, at the time of initiating proceedings under S. 147, the reopening of assessment cannot be held to be legal or valid, and it has to be held to be just based on the suspicion that the assessee might have collected such amounts even in the year under appeal - Issue relating to the legality and validity of the reopening of assessment under S. 147 decided in favour of the assessee.

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• 2013 (11) TMI 825
  Addition u/s 41(4A) - Withdrawal from special reserve account - In the Balance sheet, the assessee has reduced the Special Reserve Account with certain amount. According to the assessee, it is a contra adjustment only and it has made corresponding reduction from "Loans and Advances account" also. According to the assessee, it was required to do so as per the directions issued by IDBI, which the assessee is required to comply with. According to the said guidelines, the Assets and Liabilities should be reduced to the extent of Provision utilised from the cumulative balance of reserves created u/s 36(1)(viii), i.e., the assets are to be shown as net of provisions. Held that:- As per the guidelines of the IDBI, the assessee is required to classify its assets, mainly loans and advances, into four categories, viz., Standard assets, Sub-standard assets, Doubtful assets and Loss assets. The purpose of classification of the assets in the above categories appears to be to ascertain about the intrinsic strength of those assets - IDBI has also specified the criteria or basis for classifying the assets in the four categories stated above. According to the said guide lines, the assessee is also required to make provisions against the assets classified as Sub-standard, Doubtful and loss category, possibly these categories bear risk of recovery. According to the said guidelines, the SIDCs are required to determine the amount of provision for bad and doubtful debts. According to the guidelines issued by IDBI, the amount available in the Special Reserve Account u/s 36(1)(viii) of the Act is admissible for provision purposes. SIDCs can take into account the amount available in the Special Reserve Account while determining the amount of provision - The provision for bad and doubtful debts is created only to safeguard the financial institution against bad debts, i.e., the possible bad debts risk is evened out to a number of years. Hence, the permission given by IDBI for utilising the amount available in Special Reserve Account for making provision does not mean that the SIDC has actually utilised the Special Reserve Account. The said relaxation only allows the SIDC to determine the amount of "Provision for bad and doubtful debts" that is required to be made as per the guidelines issued by IDBI, i.e., in terms of IDBI guidelines, the provision for bad and doubtful amount shall be computed by aggregating the amount available in Special Reserve account with the amount available in Provision for bad and doubtful account. Provisions of sec. 41(4A) would not apply so long as the SIDC maintains the Special Reserve Account intact in its books of account. The method of presentation of the same in the Balance Sheet also, does not matter for the purposes of sec. 36(1)(viii) r.w.s. sec. 41(4A) of the Act, there is no reason to invoke the provisions of sec. sec. 41(4A) of the Act, on the basis of Balance sheet, wherein certain adjustments have been made by the assessee for the purpose of presenting it to the share holders and the regulator - Deleted the impugned addition of Rs. 53.96 crores – Decided against the Revenue.

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• 2013 (11) TMI 824
  Penalty u/s 271(1)(c) of the Income tax act – Allegation of concealment of particulars of income - Shri Gopal G. Pairkh interrogated u/s. 131 on 20.11.1995 and who is the partner of M/s. Madhuri Developers and admitted this transaction of sale of land was unrecorded - Assessee offered for taxation Rs.28 lacs as unaccounted own money taken in various land transaction. Even he did not disclose after admission of additional income before the A.O. in regular return which was relevant to A.Y. 96-97 but filed VDIS before the Commissioner, which was rejected on the basis of not paying tax – Held that:- Apex court decision in the case of Union of India vs. Dharamendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] clearly point out that the penalty is leviable for deliberate deception of the claim. Thus, the levy of penalty would depend on the existence or otherwise of the conditions calling for levy of penalty. The object behind the enactment of section 271(1)(c), read with the Explanations, indicates that the section has been enacted to provide for a remedy for loss of revenue, by reason of concealment of particulars of income - Thus, the assessee filed inaccurate particulars of income and concealed income – Penalty under section 271(1)(c) leviable – Decided in favor of Revenue. Quantum of penalty u/s 271(1)(c) of the Income tax act being 125% of the tax concealed – Held that:- The penalty imposed @ 125% which is reduced to 100% of tax sought to be evaded. Therefore, A.O. is directed to re-calculate the penalty @ 100% - Decided against the Revenue.

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• 2013 (11) TMI 823
  Allowance of deduction u/s 80IA of the Income tax Act - Income from sale of VSAT equipment – Held that:- These equipments are essential equipments for enabling assessee to the telecommunication services. The Govt. has put up various restrictions on import of such items because of security reasons. If the assessee is unable to provide these items to its customer then it might not be possible for it to provide telecommunication services – Held that:- Following the judgment of the ITAT in the assessee’s own case in the previous year, it was held that Considering the nature of equipments and their relation to the nature of services provided by the assessee, the receipt received by the assessee for supply of these items is inextricably links to the business of its telecommunication services. The A.O. is not justified in excluding these receipts – Deduction allowed u/s 80IA as the situation in this year does not change – Decided against the revenue. Computation of disallowance under Rule 8D read with Section 14A of the Income tax Act – Held that:- Following the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT], it was held that The provisions of Rule 8D of the Income tax Rules which have been notified with effect from 24 March 2008 shall apply with effect from Assessment year 2008-09 - In view of Hon'ble Mumbai High Court judgment, there is no dispute that Rule 8D is applicable prospectively from A.Y. 2008-09 onwards, however, since the assessee has not filed any details of expenses on earning from old investment of Rs. 80 lacs, set aside the orders of authorities below and restore the matter back to the file of AO to decide the same afresh in accordance with law after affording an opportunity of being heard to the assessee.

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• 2013 (11) TMI 822
  Onus on whom to substantiate an expense - Best judgment assessment u/s 144 of the Income tax Act – Disallowance of expenditure on estimate basis – Held that:- CIT(A) was not justified in holding that the burden was on the A.O. to bring on record some positive adverse material to show that the expenses claimed by the assessee to the extent of 20% were not genuine so as to justify the disallowance of such expenses - The burden was on the assessee to support and substantiate his claim for the expenses by establishing that the same were wholly and exclusively incurred for the purpose of his business and when this burden was not discharged by the assessee, the ld. CIT(A), should have remanded the matter to the A.O. with a direction to the assessee to produce the relevant documentary evidence to support and substantiate his claim for the expenses – Matter remanded to the AO for fresh adjudication. Onus to prove creditor - Addition on account of sundry creditors treating the same as unexplained/unproved – Addition u/s 68 of the Income tax Act – Held that:- Onus in this regard was on the assessee to establish that the concerned creditors were genuine and since this onus was not discharged by the assessee by producing the supporting documentary evidence, this issue also should be restored to the file of the A.O. for deciding the same afresh.

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• 2013 (11) TMI 821
  Application for stay of Revision proceedings u/s 263 - revenue contended that, stay of proceedings in respect of the consequential order passed under section 263. It was the submission that once stay petition is granted, normally it operates for 180 days and another extension of 180 days could be granted resulting a total loss of one year time - Held that:- stay should not be granted in this case and the same stands dismissed. - Decided against the assessee.

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• Customs

• 2013 (11) TMI 860
  Waiver of pre deposit - Appellant employee of the custom house agent - 50% of penalty already deposited - Held that:- prima-facie appellant may not be entirely responsible for the infraction that has led to imposition of penalty. The appellant has already deposited 50% of the penalty in compliance with interim order - The appeal is accordingly disposed of by directing the Customs, Excises & Service Tax Appellate Tribunal, New Delhi, to accept 50% of the penalty as satisfaction of the condition of predeposit - Decided in favour of appellant.

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• 2013 (11) TMI 859
  Conviction under NDPS Act - Admissibility of evidence - Whether or not the statement made by the accused before the Customs Officer is admissible in evidence - Held that:- retracted confessional statement made by an accused before the Customs Officer, alone is not enough to bring home guilt to the accused. It is required to be substantially corroborated by other independent and cogent evidence. It is admitted fact that the alleged confessional statements of the accused in the present case are retracted ones. Therefore, prosecution was required to prove its case by leading corroborative and cogent evidence - The prosecution projected these accused to connect the co-accused/appellants, with the crime. However, once the story put forth by the prosecution qua accused, Harbans Singh and Baljit Kaur stands disbelieved by the trial Court, on the same set of evidence, the story qua remaining three accused, also becomes doubtful. In the instant case, the owner of the car from which the alleged recovery was effected, has not been associated by the prosecution. It has also not been able to make out a case that the accused-appellants were earlier known to each other and were in conspiracy. Non examination of witness - held that:- PW-6, H.K. Kaushik, Inspector, Customs and Excuse, deposed that the case property was never produced before the Court after 20.07.1992. The alleged recovery in the instant case is of 20.07.1992 itself. On 11.12.1992, Judicial Magistrate 1st Class, Amritsar, came to the Customs Office. The seizing officer took out the case property from the Malkhana and the same was produced before the Magistrate - it is not proved that the present surviving appellant was in conscious possession of the case property. He was not aware as to what luggage he was carrying for his master, being the driver of the car. He has also explained as to how he came in possession of the contraband in the form of luggage. The defence version put forth by the accused appears believable and probable than the prosecution version. So, the benefit is extended to the accused/appellant - case is full of discrepancies, the alleged recovery has not been proved beyond all reasonable doubts, and in the absence thereof, benefit has to go to the accused - Appellant is so poor that even after grant of bail on 27.01.2004, he could be released only on 26.11.2007, as he could not furnish bail bonds earlier - Therefore, The appellant is stated to be on bail, his bail bonds shall stand discharged - Decided in favour of appellant.

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• 2013 (11) TMI 858
  Quantification of punishment - Conviction u/s 135 - Appellants do not contest conviction but only period of imprisonment - Held that:- petitioners are senior citizens and are facing the agony of trial for the last more than 23 years and no purpose would be served by sending them behind bars after such a long period, the petitioners are stated to be first offenders and they are having no criminal background as no criminal case is pending against them, they have also undergone actual custody of 01 year 02 months and 24 days against the total sentence of three years and keeping in view the limited prayer of the petitioners as the learned counsel for the petitioners does not want to contest conviction, the sentence of the petitioners is reduced to the period already undergone, if not required in any other case - However, amount of fine increased - Decided partly in favour of appellants.

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• 2013 (11) TMI 857
  Refund of SAD - import sawnwood - post-import sawing of wood and subsequent sale - Conversion factor - Conversion factor 1.8027 or conversion factor 1.416 - Applicability of clarification / circular dated 26-4-2012 - Notification No. 102/2007-Customs dated, 14-9-2007 - Held that:- The conversion factor is, therefore, relatable to round timber logs which on import is liable to payment of Special Additional Duty and consequent refund, based on VAT paid thereon - it may not apply to a case of sawnwood. Therefore, the petitioner cannot make an issue by mixing and interchanging the conversion factor of round timber logs with that of the sawnwood. Both are independent of each other. If the import is round timber logs and sale is also the same, then, the clarification will apply. If the import is of sawnwood and sale is also sawnwood, the natural consequence is that VAT paid will be reckoned for the purpose of refund of Special Additional Duty. Two different factors cannot be clubbed together to confuse the issue on conversion of factor - Since the notification is specific and clear that it deals only with the round timber logs and not any other form, the writ petition filed by the petitioner on the misconception about the subsequent modification of the timber at his will is of no relevance to the circular/clarification - Following decision of Union of India v. Madras Steel Re-Rollers Association [2012 (8) TMI 788 - SUPREME COURT OF INDIA] - Decided agsinst Petitioner.

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• 2013 (11) TMI 856
  Import of old and used tyres - Misdeclaration of goods - Goods declaraed as Old and used discarded tyres - Assessee contenda that goods were classifiable under CTH 40122010 and 40122020 whereas Revenue contends that goods were classifiable as waste and scrap of CTH 40040000 - Absolute confiscation of goods - Imposition of redemption fine and penalty - Held that:- nearly a time of one-and-half year has passed from the date of import and being live consignments appellants may have to incur additional expenditure on account of litigation, demurrage and other port expenses. Looking to the facts and circumstances of the present appeals, it will be appropriate to order that the declared assessable value should be enhanced by 100% and allowed clearance by imposing a redemption fine of 15% on the enhanced value and by imposing a penalty of 10% of the enhanced value. For the waste and scrap tyres, being in the nature of hazardous waste, the exact quantity may be determined during allowing clearances and re-exported at the expense of the importers. The redemption fine and penalty with respect to waste and scrap of tyres, ordered to be re-exported, is deemed to be included in the redemption fine and penalties already imposed as no separate quantity and value of the waste and scrap of tyres, classifiable under 40040000, is available on record. there is no evidence with the Revenue that extra amounts have been remitted by the appellants for the current imports to the supplier of the goods. Appellants have also given correct description of the imported goods that old and used tyres are not fit for use for fast moving vehicles or heavy duty vehicles. In spite of that if some of the users in India make use of those tyres for fast moving vehicles or heavy duty vehicles, then appellants cannot be faulted with. It is not a fit case for holding that there was a mis-declaration of value or description of goods and accordingly provisions of Sec 111(m) of the Customs Act 1962 cannot be invoked - Decided in favour of assessee.

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• 2013 (11) TMI 855
  Confiscation under Sec. 111(d) & 111(f) - Misdeclaration of goods - Declaration of palm oil as crude palm oil - benefit of Notification No. 21/2002-Cus. - Whether a description of imported cargo given in the IGM will make those goods reliable to confiscation under Section 111(f) and Section 111(m) of the Customs Act, 1962 - Held that:- no evidence on record to show that any instructions were given by or on behalf of the appellants to the Shipping Corporation of India in respect of the declarations to be made in the import manifest. The Import Manifest (Aircraft) Regulations, 1976 provide that every import manifest shall cover all the goods carried in the Aircraft and consist of, inter alia, a cargo manifest in Form III - The description of goods is also given broadly, such as machinery, electronics, articles of goods etc. and precise description of goods contained in each consignment which may comprise a large number of packages does not appear to be a requirement. The Collector has not specified in his order as to what is the deficiency in the declarations made in the import manifests. We do not therefore, see any justification for confiscating the goods under Section 111(f) of the Customs Act. primary responsibility for declaration in the manifest is that of the owners or the agents of the vessel or the aircraft and if they are exonerated, it would not be appropriate to confiscate the goods under Section 111(f) of the Customs Act particularly when there is no evidence to show that the declarations in the manifest were made under the instructions of the appellants - there could be other categories of crude palm oil of edible grade, which do not have an acid value and bjta carotene value as specified in Notification No.21/2002-Cus, as mentioned. The only will be that such Crude Palm Oil of edible grade will not be eligible to get the benefit of Notification No. 21/2002-Cus. - Decided in favour of assessee.

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• 2013 (11) TMI 854
  Confiscation of goods - Import of old but unused hard disk - Goods confiscated as held to be hazardous - Held that:- goods imported are 800 pieces of hard disk drive. Further, the appellant themselves are claiming that these are produce of the year 2008, 2009 and 2010 and were imported by them in 2012. They have imported these 2/3 years old items are available at lower rates. We find that in the report of Arihant E-Recycling, it is clearly stated that no data or files were found in the hard disk drive and it shows that these were not installed previously. They have also certified that such situation is possible with new hard drive - three reports given by the officers of Customs are at variance while the first talked of old and used; the second talked of old and the third talked of old, obsolete and refurbished. The officers who have examined are not expert in the field and there is no reason not to believe the report of Arihant E-Recycling and the Customs authorities have not been able to bring out any evidence to prove that the goods are used or hazardous waste - impugned order as also the original order are set aside - Decided in favour of assessee.

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• Corporate Laws

• 2013 (11) TMI 853
  Scope and extent of CLB's order - Due to allegations of oppression and mismanagement in the appellant's majority share company funds invested in a fixed deposit as per CLB's order for 45 days - Appellant claimed interest on the funds after maturity - Consent decree - Held that:- it was clarified by the CLB that it meant and intended that both the principal and the interest accrued shall be reinvested. When once the clarification was given, there was an end of the matter so far as what the CLB intended and that cannot give rise to any question of law - no appeal is maintainable against a consent order - Decided against appellant.

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• 2013 (11) TMI 852
  Violation of Regulations 4(2)(a),(b) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - Appellants were connected entities and had executed synchronized reversal trades, cross trades executed by Crystal, through its broker - Held that:- No ground to interfere with the impugned order that the Appellants were guilty of violating the FUTP Regulations - However, in consideration to facts and circumstances of case penalty imposed on the appellants is reduced to 50% - Decided partly in favour of appellant.

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• FEMA

• 2013 (11) TMI 861
  Violation of Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 - Confiscation of foreign and Indian currency - Tribunal sustained the confiscation of Foreign Currency but the confiscation of Indian Currency and Indira Vikas Patra Certificates was set aside - Bar of limitation - Held that:- The writ application is disposed of by directing the concerned respondents to forthwith refund the proceeds of the Indira Vikas Patra along with further interest that might have accumulated thereon within a fortnight from the date of communication of this order. The Indian Currency and the balance penalty deposited by the petitioner shall also be refunded to the petitioner along with interest as per Section 42 sub-section (3) of the FERA, within the aforesaid period - The petitioner having unnecessarily been dragged to this Court shall be entitled to the costs of this proceedings assessed at 300 GMs to be paid to the petitioner along with the amounts refundable - Decided in favour of appellant.

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• Service Tax

• 2013 (11) TMI 872
  CENVAT Credit - Cargo handling service - Held that:- When tax is not paid on a service, it has to be considered as an exempted service in view of definition at Rule 2 (e) of CCR 2004 and consequently provisions of Rule 6 will apply in the instant case - Since no service tax is being paid on service relating to export cargo, it has to be considered as ‘exempted service’ within the meaning of Rule 2(e) of CCR 2004 - Prima facie case not in favour of assessee - Assessee directed to make a pre deposit - stay granted partly.

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• 2013 (11) TMI 871
  Interest demand - Excess and short duty paid - Refund not claimed for excess duty - Held that:- Wherever excess payment has been made, no refund has been claimed because the receiver of the final products has availed CENVAT credit and the duty burden has been passed on by the appellant. Under these circumstances, the question of refund of excess payment of duty does not arise at all - revenue neutrality is not a ground and the interest is liable to be paid. Since no refund of excess payment was admissible to the appellant, obviously the only conclusion prima facie possible would be that the appellant has to pay interest on the short payment - Following decsion of Bayer ABS Ltd. vs. CCE, Vadodara [2010 (9) TMI 904 - CESTAT,AHMEDABAD] - stay granted partly.

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• 2013 (11) TMI 870
  Classification of service - Commercial or Non commercial service - Whether the Sports Complex Stadium constructed for the purpose of holding games can be considered as a commercial or industrial construction - Held that:- Sports Stadia is used for public purpose. Merely because some amount is charged for using the facility, it cannot become a commercial or industrial construction. Even in a Children's Park, entry fee may be levied for maintenance of the Park. Merely because some amount is charged for using the Park, it cannot be said that it is a commercial or industrial construction. Adopting the same logic, the Sports Stadia in the present case is also a non-commercial construction for use by the public. Therefore, we are of the considered view that the Sports Stadium constructed for conducting Commonwealth Games, is a non-commercial construction - Following decision of B.B. Nirman Sahakari Samiti Vs. State of Rajasthan [1979 (11) TMI 256 - RAJASTHAN HIGH COURT] - Decided in favour of assessee.

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• 2013 (11) TMI 869
  Valuation (Service Tax) - Goods and materials sold by service provider to recipient of service - Retreading of tyres on job work basis - Maintenance and Repair service - tax paid on labour charges shown in the invoices and did not include cost of tread material procured - Notification No.12/03-ST – Held that:- Service provider is required to produce documentary proof specifically indicating the value of the said goods and materials so sold by them - invoices unilaterally raised by the appellants indicating the break-up without substantiating the amount attributable to the value of the goods supplied cannot be considered as documentary proof for the purposes of the said notification - assessee has not proved that the conditions under Notification 12/03 ST dated 20.06.2003 have been satisfied and, therefore, they are not entitled to the benefit of deduction of cost of raw materials consumed in providing the impugned service - Following decision of Safety Retreading Company Vs. CCE, Salem [2012 (6) TMI 719 - CESTAT, CHENNAI (THIRD MEMBER)] - Stay granted partly.

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• 2013 (11) TMI 868
  Stay application - Renting of Immovable Property Service - Demand of service tax - Held that:- amount collected by the applicant on renting is a taxable service and they are paying tax. It is a security deposit which is returned after the completion of the tenure agreement. We also notice that the Board in the ‘Service Tax Education Guidelines’ clarified that refundable deposit is not in the nature of service and hence do not represent the consideration of service tax. In view of that, we find the applicant has made out a prima facie case for waiver of pre-deposit of entire amount of dues. Accordingly, we grant waiver of pre-deposit of service tax and penalty along with interest and stay its recovery during the pendency of the appeal - Stay granted.

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• 2013 (11) TMI 867
  Stay application - Waiver of pre deposit - Issuance of receipts in the name of individual teachers, while the coaching was conducted under a particular name of educational institute - Held that:- Assessee’s counsel is disputing the service tax liability to an extent that the appellants were not conducting commercial and coaching classes. The submission of the assessee that they have only hired out the place for the individual teachers needs to be gone into detail as there were no evidences indicating that the amounts for imparting coaching classes, were conducted in the name of the individual teachers and that the appellants were hiring out the place. It is also noted that on specific request from the bench, no evidences viz. balance sheets during the relevant period are produced. In the absence of any evidence, the argument needs to be gone into detail which can be done only at the time of final disposal of appeal - Prima facie case not in favour of assessee - Stay granted partly.

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• 2013 (11) TMI 866
  CENVAT Credit - Penalty u/s 78 - Held that:- Applicant had availed the CENVAT Credit of Rs.54.40 lakh on the invoices in the name of their Head Office, whereas the Head Office was not registered as an Input Service Distributor, as required under the relevant provisions of CENVAT Credit Rules, 2004. Regarding the amount of Rs.55,22,860/-, prima facie, we find that the said Service Tax demand is confirmed against the Applicant by including the re-imbursement expenditure in the gross taxable services received from their clients under Rule 5(1) of the Service Tax Valuation Rules, 2006. We find that the said Rule has been struck down by the Hon’ble High Court in the Inter-Continental case (supra). Accordingly, the Applicant could able to make out a case for total waiver of predeposit of the said amount of Rs.55,22,860/-. On the other hand, prima facie, we find that the laid-down procedure has not been followed by the Applicant in availing CENVAT Credit on the input invoices raised in the name of Head Office - Prima facie not in favour of assessee - Stay granted partly.

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• 2013 (11) TMI 865
  Stay application - Waiver of pre deposit - Held that:- Accepting the claim of the Chartered Accountant for the Applicant that they had deposited Rs.8.86 crore from the total demand of Rs.12.13 crore, pursuant to the passing of the impugned Order, prima facie, we are of the opinion that the amount deposited is sufficient for the purpose of disposal of the Stay Petition. In these circumstances, predeposit of the balance dues adjudged is waived and its recovery stayed during pendency of the Appeal - Prima facie case in favour of assessee - Stay granted.

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• 2013 (11) TMI 864
  Stay application - Demand of service tax - Held that:- Applicant rendered various services like Industrial or Commercial Construction Service, Management, Maintenance or Repair Service, Rent-a-Cab Service etc. during the financial years 2004-05 and 2006-07. Even though the Applicant had received payments against these services from the service recipients, but failed to discharge the service tax on the gross amount received by them - Prima facie case not in favour of assessee - Stay granted partly.

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• 2013 (11) TMI 863
  Stay application - Demand of service tax - Transport of Goods by Road & Cab Operators - Held that:- On scrutiny of the documents of M/s Durgapur Steel Plant, it was revealed that the applicant had failed to discharge service tax on the said services. The ld. Commissioner after careful consideration and discussions of evidences on record and the Balance Sheets of the respective years, came to a finding that the applicant had failed to discharge the service tax at the appropriate rate, even though they have received the taxable value from such services being rendered to M/s Durgapur Steel Plant during the Financial years 2004-05 to 2008-09. The Commissioner rightly concluded that the applicant is liable to pay service tax - Prima facie case not in favour of assessee.

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• Central Excise

• 2013 (11) TMI 851
  Right to Re-testing of the Product under CBEC' Excise Manual of Supplementary Instruction 2005 – Held that:- The right of retesting given by the statute cannot be prima facie denied on the ground that the reports obtained by the department are complete and that the department has no doubt, to its correctness - the denial of the statutory right for retesting the sample amounts to violation of principles of natural justice resulting into serious civil and criminal liability. Whenever a right is given by a Statute for retesting, the reasons for dissatisfaction of the manufacturer with the test carried out by the chemical examiner are not relevant - It is sufficient to state that the assessee is dissatisfied with the test carried out by the chemical examiner - his application to Deputy/Assistant Commissioner, Central Excise within the prescribed period of 90 days and deposit of prescribed fee is sufficient for direction to retest the samples. Where the application for retesting, comply with these conditions, it should be invariably allowed. The application may not be rejected on the ground that the testing was done by Government recognized independent labs, and that the test reports are clear and complete - the reasons given for denial of retesting are not relevant - The right of retesting, for which samples are specifically drawn by by the department in accordance with the instructions issued under the Central Excise Rules 2004, could not be denied, to the assesse – directions issued to retestify the samples – Decided in favour of Petitioner.

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• 2013 (11) TMI 850
  Extended period of Limitation – removal of input as such under the guise of manufacture charging duty of excise - demand under section 11D - Held that:- The assesse has made out a case on limitation - It is to be noted that the said ER-1 specifically indicates that invoices under which the goods were cleared and remarks also talks about clearance of moulds on sales - the extended period of limitation cannot be invoked are also fortified from the statements of Director recorded on the date of visit of factory premises by the Preventive Officers - There cannot be any dispute or motive attached to the said payment of Central Excise duty by the appellant on the mould which were billed to their clients - The findings recorded by both the lower authorities on limitation seems to be only the presumptions and not on the factual matrix as the first appellate authority has recorded that contention of the appellant is quite astute and pre-meditated one. Period of limitation for demand under section 11D - revenue relied upon the decision in the case of CCE, Ahmedabad-II vs. Inductotherm (I) Pvt. [2012 (12) TMI 856 - GUJARAT HIGH COURT] that period of limitation is not applicable under section 11D - held that:- As regards the submissions of learned Additional Commissioner (AR) that the show cause notice, even if it is indicating wrong Section or Rule, does not preclude from demanding duty under the correct provisions, seems to be misplaced, inasmuch as the provisions of Section 11D are different provisions and needs to be invoked in a situation where it demands whereas, in the case in hand, it is very clear that the Revenue authorities invoked the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944, which in my view cannot be sustained due to the fact that appellants have made out a case on limitation. - Decided in favor of assessee.

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• 2013 (11) TMI 849
  Concessional Rate of Duty on Textile – Benefit of Exemption Notification No. 29/2004 and 30/2004 – Condition of Making separate books of Accounts - Reversal of Cenvat credit as per Notification No. 30/2004 – Waiver of Pre-deposit – Held that:- Appellants have correctly worked out the cenvat credit pertaining to the exempted goods and the same has been reflected in their ER-1 returns. - department is not able to give any records on the basis of which it can be said that there is a short reversal of cenvat credit - in the show-cause notice also it was not taken up by the department that there was any less reversal of cenvat credit and that it is not necessary that cenvat credit should be reversed before the clearance of the goods - Extended period has been made applicable in the present proceedings when the fact of reversal of cenvat credit was reflected in their periodical ER-1 returns filed with the Department - Once the fact of reversal of cenvat credit is indicated in their periodical returns, then it cannot be held that there was any misstatement or suppression with intention to evade Central Excise duty and accordingly extended period cannot be made applicable. Prima facie the department has no basis whatsoever to indicate that appellants have less reversed the cenvat credit with respect to inputs as per the provisions of notification No. 30/2004-CE read with CBEC clarification dt. 28.07.2004 - appellants have made out a prima facie case on time barred because details of reversal of cenvat credit have been duly reflected in their ER-1 returns - Prima facie appellants have made out a case for complete waiver of the demand confirmed against them – stay granted.

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• 2013 (11) TMI 848
  Cenvat / Modvat credit – Cenvat Credit on Inputs lying in stock after availing SSI exemption - Interpretation of the Deemed Credit Order issued by Excise Ministry dated 1.3.94 vis-a-vis., Notification No.1/93-C.E. - Effect of the trade note No.81/94 issued by the Chandigarh Central Excise Collectorate – Held that:- following M/s. Sood Steel Industrial (P) Ltd. Versus Commissioners of Central Excise & Anr. [2009 (4) TMI 62 - HIMACHAL PRADESH HIGH COURT] - The benefits under this notification were limited to clearances of Rs. 75 lacs but this does not mean that manufacturers whose clearances exceeded Rs. 75 lacs were not availing the exemption under the notification – the trade note No.81/94 limiting this benefit to those manufacturers whose clearances do not exceed Rs. 75 lacs is totally illegal and against the deemed credit order issued by the Ministry - though the department may be bound by its trade note, the industry is not bound by the same – Assessee was entitled to avail benefit of the deemed credit order since he was availing benefit of the notification dated 28.2.1993. The Tribunal mis-interpreted the deemed credit order dated 1-3-1994 and the assesse was entitled to avail benefit of the deemed credit order since he was availing benefit of the notification dated 28-2-1993 - the trade note No. 81/94 dated 25-7-1994 cannot override the deemed credit order and the said trade note is illegal – Decided in favour of Assessee.

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• 2013 (11) TMI 847
  Time limit to issue Show cause notice after the visit of the officer - Clandestine removal of goods – Held that:- There has been a clandestine activity on the part of the appellant by processing and clearing of fabrics without recording the same in statutory records and without payment of duty - It is a case of fraud and suppression with intention to evade Central Excise duty - There is no provision in Central Excise law that show cause notice is required to be issued within one year from the date of visit of the Central Excise officers. Penalty to be imposable under which section in case of fraud and suppression – Held that:- It was a case of fraud and suppression with intention to evade Central Excise duty, therefore the correct provision applicable will be Section 11A(1A) of Central Excise Act, 1944, where appellant was also required to pay 25% penalty imposable under Section 11AC of Central Excise Act, 1944 along with interest applicable under Section 11AB of Central Excise Act, 1944 - the adjudicating authority also gave them an option to pay reduced penalty of 25% under Section 11AC of Central Excise Act, 1944 if the payments are made within one month from the date of receipt of OIO - no such option was exercised by the assesse – Decided against assessee.

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• 2013 (11) TMI 846
  Denial of Cenvat credit – Onus to prove – Cenvat credit taken on the basis of extra copy invoices - Held that:- The appellant was required to establish with documentary evidences and records maintained by them, that all the inputs/capital goods were received in their Unit-I under proper documents and were in fact used in their present unit - On the contrary, appellant is trying to explain that it does not make any difference if documents are not in the name of the appellant but in the name of other unit of the same group of companies - the appellant has got five units and credit is taken on the basis of extra copies of invoice, or on the basis of invoices in the name of other units, Department has every right to ask the appellant to justify the receipt of the inputs/ capital goods in the factory and its use in the factory of the appellant. Under Rule 9(5) of the CENVAT Credit Rules, 2004, the onus is on the appellant to take appropriate care and satisfy himself properly regarding admissibility of credit before taking the credit - receipt of goods in the factory premises of the appellant has not been established by the appellant – thus, CENVAT Credit has been correctly denied as its receipt and use in the factory of the appellant is not established – Decided against Assessee. Penalty under Rule 15(2) of CENVAT Credit Rules, 2004, r.w Section 11AC of the Central Excise Act, 1944 and under Rule 25 (1)(a) of Central Excise Rules, 2002 – Held that:- The penalty is not attracted in the case because it has not been brought out and established by the Revenue that CENVAT Credit available in appellant’s CENVAT Credit account at any stage for the period March 2004 to March 2007 was less than Rs.8,62,554/- so that the goods cleared can be considered to have been cleared without payment of duty - in recorded transactions, there cannot be any intention to evade any Central Excise duty when the credit is got recovered from the appellant – thus, penalty imposed upon the appellant under Rule 25(1) of Central Excise Rules, 2002 set aside – Decided in favour of Assessee.

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• 2013 (11) TMI 845
  Clandestine removal of goods - Shortage of raw materials i.e. Ferro manganese and Ferro Molybdemum – Held that:- Shortages were worked out as per the records maintained by the appellant - The argument that the shortage could be due to burning loss, is not acceptable because burning loss of these raw materials will result only when these raw materials are heated with ferrous metals in furnace to make SS Billets - The burning loss cannot be take place at raw material stage. The contention of the appellant that difference in weight of raw material could be on account of moisture content in the raw material is also not justified and explained with the help of any documentary evidence - the moisture contain throughout the year will vary and will not make any difference in the overall weight recorded by the appellant - Appellants have therefore, could not explain the shortage of raw materials properly – relying upon RUTVI STEEL & ALLOYS Versus COMMISSIONER OF CENTRAL EXCISE, RAJKOT [2009 (7) TMI 231 - CESTAT, AHMEDABAD] - the burden of explaining the shortages is upon the assessees and Revenue is not required to show actual removal of raw materials. Penalty on Shri Pravin C. Jain – Held that:- He was fully aware of clandestine activities undertaken by M/s. Chandan Steel Limited and the shortages were not explained properly - He was aware of entire operations undertaken by the main company M/s. Chandan Steel Limited - Accordingly, penalty was correctly imposed upon him – Decided against Assessee.

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• 2013 (11) TMI 844
  Distribution / bifurcation of cenvat credit amongst storage tanks and structures - Waiver of Pre-deposit of duty and penalty under Rule 15 (2) of cenvat credit rules r.w. Section 11AC of CEA,1944 – Held that:- Prima facie, the applicant’s case relating to storage tanks involved a total credit of Rs.17.17 Crores and claimed to be relating to Storage Tank - on a verification report submitted by the Department, it is claimed by the Revenue that from the said Rs.17.17 crores, around Rs.9.74 crores relates to structural - at this stage, it would be difficult to say that what quantum of Cenvat Credit relatable to Storage Tanks and structures - This has gone to laying down of storage tank in their factory – for Cenvat Credit on pipes and fittings following Commr.of Central Excise, Chennai Vs. Pepsico India Holdings Ltd. [2000 (10) TMI 122 - CEGAT, CHENNAI] – relying upon Vandana Global Ltd. Versus CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) ] – for demand of Cenvat Credit related to structural, pre-deposit is directed for normal period of limitation – assesse directed to submit Rupees One Crore as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2013 (11) TMI 843
  Penalty under Rule 15 (1) of cenvat credit rules 2004 – Retrospective amendment in Rule 6 of cenvat credit rules 2004 for proportionate reversal of credit – part of generated electricity utilizing the inputs on which cenvat credit availed, were sold outsiders, therefore, the Appellants are not eligible to cenvat credit - Held that:- In view of the specific Explanation contained in the retrospective amendment no penalty could be imposed – the Commissioner himself had acknowledged that both the Department and the Assessee were in a wrong notion on the applicability of relevant provisions during the said period – there was no merit in imposing penalty on the Assessee – Thus, imposition of penalty of Rupees two lakhs under Rule 15 (1) of the Cenvat Credit Rules, 2004, set aside – Decided in favour of Assessee.

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• 2013 (11) TMI 842
  Eligibility for cenvat credit – Goods Input or not - Plates, joists and channels used for fabrication of capital goods – Held that:- The rolling mill is covered by the Chapter heading 84.55 therefore, would be covered by the definition of ‘capital goods’ as given in Rule 2(a) of the Cenvat Credit Rules - since it is the cooling bed on which the rolling takes place, the same has to be treated as a component of the rolling mill, even though for installation of the rolling mill, the cooling bed has to be permanently fixed to the earth - Relying upon Union of India v. Associated Cement Company Ltd. [2010 (10) TMI 550 - CHHATTISGARH HIGH COURT] - the steel items have been used in fabrication of the cooling bed, have to be treated as input having been used in fabrication of the components of rolling mills, which are covered by the definition of capital goods – thus, they would be eligible for Cenvat credit, as the definition of input in Rule 2(k) also covers the inputs used for fabrication of capital goods for use in the factory – Decided in favour of Assessee.

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• CST, VAT & Sales Tax

• 2013 (11) TMI 873
  Applicability of Section 62 - Alternate remedy available to plaintiff - petitioner prays for issuance of a writ of certiorari quashing show cause notices - Held that:- the petitioner has an alternative remedy of filing an appeal, under the VAT Act. The petitioner's pleas, in essence, are that the impugned order is erroneous on facts, and in law. A due consideration of the arguments reveals that the impugned order may, at best, disclose an erroneous exercise of jurisdiction but does not disclose an assumption of jurisdiction where there is none. Where a statute confers an alternative remedy, power under Article 226 of the Constitution may be exercised if the impugned order discloses an assumption of jurisdiction, where there is none. Where, however, the impugned order, prima facie, discloses an erroneous exercise of jurisdiction, the party aggrieved would be required to approach the appellate forum. The petitioner's case pertains to an erroneous exercise of jurisdiction, namely, exigibility to sales tax of `slump sale', applicability of the Full Bench judgment of the Andhra Pradesh High Court in Coromandal Fertilisers Limited versus State of AP and others [1998 (10) TMI 525 - ANDHRA PRADESH HIGH COURT] and legality of the penalty and, therefore, can be validly urged before the appellate forum. The petitioner has approached this Court, as a precondition to the filing of an appeal is the requirement to pre-deposit a part of amount claimed by the revenue. We are not inclined, to entertain the appeal merely because the petitioner is statutorily required to pre-deposit tax and penalty - Decided against assessee.

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• Indian Laws

• 2013 (11) TMI 862
  Refusal to provide documents under RTI application - Ten rupee Indian Postal Order No. 11F067916, dated 23-4-2013 attached with the said RTI application, has not been made payable to anyone - Appellant requested Copies of all note sheets relating to the RTI application No. 3281 dated 14-4-2011 and note sheets regarding hearing dated 21-3-2012 of Appeal No. CIC/SS/A/2011/002042 by CIC - Held that:- As to the contention of the Appellant that the postal order could have been completed/filled in by the CPIO with regards to the details of the Public Authority, the First Appellate Authority held that ‘keeping in view the spirit of the RTI Act, I agree with the suggestion and the CPIO is advised to take note of this for future’ - order passed by the CPIO is incorrect and against the spirit of Right to Information Act, 2005 and liable to be set aside - Decided in favour of appellant.

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