Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 27, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Whether the Tribunal is right in law and on facts in directing the AO to grant interest u/s 214 the assessee shall be entitled to interest on refund amounts up to the date of regular assessment - HC
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Once proceedings of penalty us 273(2)(a) or sec.273(2)(aa) have not been initiated in the regular assessment by AO, then penalty proceedings cannot be initiated in the reassessment proceedings and penalties are liable to be deleted - HC
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It would be just and proper, if, the income from the transactions recorded in the seized diary are determined on the basis of highest peak, as increased by the net profit of 5 per cent on the receipts and taxed accordingly - HC
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Violation of section 13(1)(d) r.w section 11(5) - Centre to be taxed on maximum marginal rate or not - once it has been held that the exemption granted by the order of the CBDT dated 12.10.2010 would apply, Section 164(2) of the Act would not be applicable - HC
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A liability, which actually exists and is also not disputed by assessee, but merely not paid, is not a contingent liability when the work or obligation has been actually performed by the third party to whom the payment is due - HC
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Loss of goods in transit - Reserve Bank of India did not permit the remittance of sale consideration by way of foreign exchange on the ground that the goods never reached the Indian source - deduction allowed - HC
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Even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves - HC
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Addition of outstanding balance of certain creditors Section 68 is not applicable in the present case the outstanding amounts in the books of account of the assessee related to business transactions of the assessee - AT
Customs
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Exemption under Notification No.21/2002-CUs dated 01/03/2002 - Since the end use not in dispute, the appellant would be entitled the benefit of Serial No. 216 even though they have not specifically claimed the exemption. - AT
Service Tax
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Denial of refund claim - scope of input services - validity of question raised in the show cause notice - reverse charge mechanism - show-cause notice itself is vitiated and completely misconceived in the facts and circumstances of the case. - AT
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Cargo handling service - activity undertaken similar to the activity undertaken by the appellants comes under the cargo handling service and not under transportation of goods - AT
Central Excise
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Classification of goods - Herbal Shikakai Powder is classifiable as cosmetic under sub-heading 3305.99 of the CETA'85 during the relevant period - AT
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It was appellant who had approached the Departmental authorities for granting of Central Excise registration on crossing the threshold limit of ₹ 1.5 crores turnover as is envisaged in Notification No.8/2003-CE - Extended period of limitation cannot be imposed - AT
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Application for supply of documents - On the ground that the petitioners are not cooperating in the inquiry/investigation, the prayer of the petitioners to supply the photocopies of the documents seized cannot be denied. - HC
Case Laws:
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Income Tax
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2014 (11) TMI 835
Addition out of land development expenses Held that:- The assessee had produced complete books of account before the AO - Details of land development expenses incurred were even produced before the CIT(A) - No substantiating evidence by way of bills or vouchers has been submitted either during the assessment proceedings or during the appellate proceedings to justify this claim of expenditure - this addition is not warranted because it is beyond the scope of provision of section 153A of the Act because this expenditure had been claimed even in the original return and was rightly allowed - The assessee did not get this work done through any sub-contractor - Therefore, no question of deducting any TDS - there is no specific objection made by the AO regarding any particular expenditure - The AO has accepted the expenditure in principle and there is no reason for making adhoc disallowance of 50% expenditure claimed by the assessee the addition is to be set aside Decided in favour of assessee. Unexplained investments - Purchase of residential plot in Balaji Nagar Yojna Held that:- As per the sale deed, investment only to the extent of ₹ 1,26,000/- is found to be incurred as investment in purchase of house and beyond that there is no evidence - The assessee claimed that the above investment of ₹ 1,26,000/- was made by the assessee, though the same was not appearing in the balance sheet but it is submitted that no addition can be made as the investment in the plot was made out of savings - The DLC value of the land could not be adopted for the purposes of considering the investment in the land - There is no provision like 50C for considering the sale consideration in section 69/69A - The assessee has claimed that this investment is out of her past savings, although there is no evidence the order of the CIT(A) is upheld Decided against revenue. Addition made u/s 40A(3) deleted - purchase of agricultural land Held that:- The payment to agriculturists were made under circumstances which are excluded under the provisions of Rules - The agricultural land cannot be converted to stock in trade until permission is obtained and the provisions of section 40A(3) of the Act cannot be invoked - Principles of section 40A(3) of the Act cannot be invoked in respect of agricultural land relying upon [1960 (9) TMI 11 - SUPREME Court] the addition is set aside Decided in favour of assessee.
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2014 (11) TMI 814
Allowability of depreciation on gas toner - Whether the Tribunal is right in confirming the order passed by the CIT(A) holding that depreciation on gas toner is allowable at the rate of 100% treating the same as gas cylinders, as against depreciation at the rate of 25% granted by the AO Held that:- As decided in assesses own case for the earlier assessment year, it has been held that the Tribunal rightly allowed 100% depreciation on the gas cylinder which was mounted on vehicle, the gas cylinder had a capacity of more than 1000 kg., still Tribunal held it to be gas cylinder because it was used for transporting gas the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 813
Validity of reopening of assessment u/s 147 Claim u/s 80HHC verified and accepted by AO or not Held that:- The Tribunal rightly relied upon Commissioner of Income Tax Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] wherein it has been held that the concept of 'Change of Opinion' on the part of AO to reopen the assessment does not stand obliterated after the substitution of Section 147 of the Income Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989 and that after the amendment, the AO has to have reason to believe that income has escaped assessment, but, this does not imply that the AO can reopen an assessment on mere change of opinion - the concept of 'Change of Opinion' must be treated as an in-built test to check the abuse of power - while allowing the claim of the assessee u/s 80HHC, detailed inquiry was made and only after verifying the assessee's contention, which was found to be correct, the AO had allowed the claim of the assessee - It goes without saying that once a query was raised and it was answered satisfactorily by the assessee at the time of original assessment and when the same attained finality, after the AO gave his clear finding in favour of the assessee, it was not open to the AO to reopen the assessment the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 812
Estimation of GP @ 12.5% or 1.03% - Whether the Tribunal was right in estimating the gross profit of 12.5% against the gross profit of 1.03% shown by the assessee without recording any cogent and convincing reasons in support Held that:- The average profit which has been considered for this industry is around 3 to 7% - The Tribunal has directed addition at the rate of 12.5% which is on the higher side assessee has fairly conceded that excess 7% is on higher side and that at the most 3% may be applied - maximum and minimum of the profit rate to be 5% - the AO is directed to apply 5% G.P rate as the rate of 12.5 % is drastically higher and 1.03% is drastically lower - Gross profit rate of 5% is the average rate of the industry - Gross profit rate of 5% be applied and income of the assessee be estimated - decided partly in favour of assessee.
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2014 (11) TMI 811
Admission of appeal Five questions of law formulated which can be termed as substantial question or not Held that:- The matters in appeal is already decided in favour of assessee by the Tribunal the only question which can be termed as substantial question is whether the Tribunal erred in law in directing to allow deduction u/s80HHC on labour charges, since in assessee's case there was no direct nexus between labour charges receipt and export business of the assessee which can be termed as substantial question - Decided partly in favour of revenue.
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2014 (11) TMI 810
Taxability of enture undisclosed receipt or income imbedded into it - Validity of admission of new plea Discharge of onus - Whether the ITAT was justified in law in admitting a new plea contrary to the facts on record that the net profit in respect of supervision charges should be linked to the receipts of booking of flats contrary to the provisions of Rule 29 read with rule 10 of the Appellate Tribunal Rules and whether the assessee has received unaccounted receipts was justified in law in holding that the AO has to discharge onus in respect of on-money by showing that assessee has invested ₹ 1,58,59,400 out of such receipts whereas claim of assessee for extra expenditure was found to be incorrect Held that:- In Commissioner of Income Tax vs. Gurubachhan Singh J. Juneja [2008 (2) TMI 177 - GUJARAT HIGH COURT] it has been held that in absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the undisclosed sales. Following the decision in DY. CIT (ASSTT) Versus PANNA CORPORATION [2014 (11) TMI 797 - GUJARAT HIGH COURT] - The Tribunal rightly held that the entire sales could not have been added as income of the assessee, but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales - unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed, such addition could not be sustained - not the entire receipts, but the profit element embedded in such receipts can be brought to tax and no interference is required to be made in the decision of the Tribunal accepting such element of profit out of total undisclosed receipt the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 809
Whether the Tribunal is right in law and on facts in directing the AO to grant interest u/s 214 Held that:- The issue has been already decided in the judgment of Modi Industries Ltd. and Others vs. Commissioner of Income Tax and Another [1995 (9) TMI 324 - SUPREME Court] wherein it has been held that after adjustment of advance tax at the time of regular assessment, if some balance remains to the credit of the assessee, that balance is treated as excess amount of advance tax which has to be refunded with interest u/s 214 up to the date of regular assessment - interest is admissible to the assessee up to the date of regular assessment u/s 214 - the assessee shall be entitled to interest on refund amounts up to the date of regular assessment thus, the order of the Tribunal is partly modified Decided partly in favour of revenue.
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2014 (11) TMI 808
Levy of penalty u/s 273(a)(aa) when reassessment proceedings started - Whether the Tribunal was right in law in holding that penalty u/s 273(a) (aa) cannot be levied as it has been initiated in the reassessment proceedings Held that:- The Tribunal rightly was of the view that the penalty proceedings u/s 273 can be initiated only during regular assessment and as the penalty proceedings u/s 273 have been initiated in the reassessment stage which cannot be termed as regular assessment - in Modi Industries Limited And Others Versus Commissioner of Income-Tax And Another [1995 (9) TMI 324 - SUPREME Court] the meaning of 'regular assessment' has been defined - once proceedings of penalty us 273(2)(a) or sec.273(2)(aa) have not been initiated in the regular assessment by AO, then penalty proceedings cannot be initiated in the reassessment proceedings and penalties are liable to be deleted - thus, this was reassessment and therefore the provisions of Section 273(2)(aa) will not be applicable in the reassessment proceedings the order of the Tribunal us upheld Decided against revenue.
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2014 (11) TMI 807
Grant of deduction u/s 80HHA and 80IA Ship breaking activity amounts to manufacture or not - Whether the Tribunal is right in law and on facts in holding that the assessee which is engaged in ship breaking business is entitled for grant of deduction u/s 80HHA and 80I considering the same as manufacturing activity Held that:- Following the decision in Vijay Ship Breaking Corporation and Others vs. C.I.T [2008 (10) TMI 6 - SUPREME COURT] the Tribunal was right in allowing the deduction u/s 80HH & 80I holding that the ship breaking activity gave rise to the production of a distinct & different article - ship breaking activity gave rise to the production of a distinct and different article and the assessee is entitled to deduction u/s 80HH and 80-I thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 806
Benefit of peak credit on unexplained receipts and payments upheld Nexus between receipts and payments - Materials found during the search Held that:- While appreciating a document, it is required to be considered in its entirety and it cannot be considered in part - while appreciating the papers / documents, which according to the AO, contained accounted and unaccounted transactions on the part of the assessee, she not only failed to examine it properly but also failed in assessing the income as per law - though, the AO, herself, had prepared the account of profit and loss in respect of accounted and unaccounted entries, there was no reason assigned as to why the profit and loss account of unaccounted transactions of the assessee cannot be believed to be true also the AO also did not take into consideration the explanations tendered by the assessee vide letters dated 10.12.2008 and 29.12.2008 - even, the working of the peak based on the seized diary given by the assessee for the concerned AYs was also overlooked by the AO and there was no reason was assigned for the same - the CIT(A) rightly held that it would be just and proper, if, the income from the transactions recorded in the seized diary are determined on the basis of highest peak, as increased by the net profit of 5 per cent on the receipts and taxed accordingly, for the relevant assessment years the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 805
Violation of section 13(1)(d) r.w section 11(5) - Effect of amendment Taxability of income Held that:- The Tribunal rightly held that the assessee Society had not parked any of their funds in Crιdit Industriel et Commercial, Paris, France either as an investment or as deposit - Grants from the Government of France, which were parked in the account - The respondent Centre was earlier exempt u/s 35(1)(ii) of the Act for all years prior to 01.04.2003 - after the said provision was withdrawn and become inapplicable, the grant by the French Government could not be utilized as per the mandate of the French authorities, for insistence and enunciation that the Centre should remain a non-taxable entity/institution. The order by the CBDT affirms and accepts that the objects were charitable and in categorical and positive terms, the order grants exemption from entire income held under trust applied in accordance with the objects of the Centre, without any other stipulation - The exemption is for the period covered by AYs 2005-06 to 2009-10 - It is not averred that the income derived from the property held under trust was not applied in accordance with the objects of the Centre - Application of income is different, from accrual - the interest earned applied for the purpose/objects of the Centre will not form a part of the total income - in respect of the income, there would be no violation of Section 11(5) read with Section 13(1)(d) of the Act. Application of proviso to section 164(2) Centre to be taxed on maximum marginal rate or not Held that:- The respondent Centre had excess of expenditure over income in the Profit and Loss Account for the AY 2008-09 - the Centre had suffered a loss - However, the AO held that the interest in the foreign bank account would be taxable at the maximum marginal rate - Because of that finding, benefit of carry forward to the assessment year 2009-10 was denied - In any case, once it has been held that the exemption granted by the order of the CBDT dated 12.10.2010 would apply, Section 164(2) of the Act would not be applicable Decided against revenue.
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2014 (11) TMI 804
Provisions for network repair and maintenance and credit verification cost, provision of consultancy charges and provision for car hiring charges disallowed Held that:- The assessee follows mercantile system of accountancy - The term "expenditure" donates idea of spending, paying out or away, it is something which is gone irretrievably - In mercantile system the term expenditure is not necessarily confined to money actually paid towards a liability, but would cover a liability accrued or has been incurred in praesenti, although the discharge could be at a future date - a liability accrues or is incurred when it is an ascertained liability and not a contingent liability, i.e. liability which may or may not accrue and is uncertain - A liability, which actually exists and is also not disputed by assessee, but merely not paid, is not a contingent liability when the work or obligation has been actually performed by the third party to whom the payment is due. When the assessee accepts performance of the work or obligation and accepts liability to pay, it partake the character of actual liability in praesenti and is not dependent upon future happening of an event, which would result in creation of liability subsequently. In the former cases, the liability has incurred or accrued, but actual payment remains unpaid and would be made in the next year(s) - a "provision" can be made in respect of amounts which have become due and payable in the relevant previous year and therefore could be debited to the profit and loss account, once they represent ascertained liability in Calcutta Company Ltd. Vs. Commissioner of Income Tax, West Bengal [1959 (5) TMI 3 - SUPREME Court], wherein it was held that if liability has been definitely incurred in form of unconditional contractual liability, it would not become contingent because payment has to be paid in future. These principles were applied to allow deduction of "provision" for gratuity, in case of serving employees and to whom the gratuity was payable only on retirement/termination, subject to condition that the amount so estimated was sufficiently certain to be capable of being valued - Gratuity payable in future was an obligation arising out of the present engagement and the estimated liability was ascertainable - as a present obligation, it could be allowed as a deduction in the profit and loss account Decided against revenue. Brand launch expenses revenue expenses or not Held that:- The Tribunal was rightly of the view that the assessee in this regard has incurred expenditure which are in the nature of brand launch expenses the expenditure incurred upto the pre-operative period has been capitalised and expenditure incurred after the operation has started have been debited to revenue - there is no concept of deferred revenue expenditure in taxation laws - In the matter of taxation, expenditure is either to be capitalized or is revenue in nature - the expenditure involved is revenue in nature and has been incurred wholly and exclusively for the purpose of business - The amount has actually been incurred by the assessee as such the same is allowable in the entirely the same has been held in Commissioner of Income Tax, Delhi-IV versus Industrial Finance Corporation of India Limited [2009 (9) TMI 877 - DELHI HIGH COURT] the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 803
Undisclosed income deleted - Return filed and available on record - Whether the Tribunal is right in deleting the addition as undisclosed income of the assessee received from M/s. Patira Packaging on the ground that the assessee had filed return for three AYs and the returns were on the record of the Income Tax Department and the income cannot be treated as undisclosed income of the assessee in view of the provisions of Section 158BB Held that:- The Tribunal has not committed any error while coming to the conclusion that the income representing their shares from the partnership firm cannot be treated as undisclosed incomes of the assessees - the intention of the assessees is clearly reflected in so much as she had already filed the return before the date of search - assessee filed their returns, though beyond the due date specified u/s 139(1) of the Act, but before the date of search on 08.09.1995 - The returns of the income of the assessees were already on the records of the department before the date of search and it cannot be said that the assessees tried not to disclose their incomes from the partnership firm - when section 158BB(3) is read with section 158B(b), which defines undisclosed income, for income to be considered as disclosed income, it should have been disclosed in the return filed by the assessees before the search or requisition the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 802
Trading loss disallowed - details provided by the assessee to substantiate the claim or not Held that:- The entries in the books of Accounts will not be a new loss or payment, which is established from the record and which is required to be considered - Further, the payment is made at the Stock Exchange, otherwise also the assessee is registered as a Stock Broker and hence, all the authorities have committed an error in not considering the amount of ₹ 23,00,000/- as the loss the amount is to be treated as business loss Decided in favour of assessee.
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2014 (11) TMI 801
Eligibility to deduction u/s 80HHC Minerals include salt or not - Whether the Tribunal was justified in holding that the expression "Minerals" does not include salt and therefore the assessee Company was eligible to deduction u/s 80HHC Held that:- The Tribunal was rightly of the view that the Constitution has made a clear distinction between minerals and salt - salt did not form part of the exception from the meaning of the term 'Minerals' - there is no reason or basis to interpret the word "mineral" as inclusive of salt the assessee is held to be entitled for the deduction u/s 80HHC in respect of export of salt the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 800
Eligibility of deduction on loss of goods in transit - Trading of importing timber logs in bulk quantity - Reserve Bank of India did not permit the remittance of sale consideration by way of foreign exchange on the ground that the goods never reached the Indian source Held that:- Once the title of goods has passed to the assessee and the goods was transported at his risk and when he accepted the document negotiated through the bank and acknowledged the liability and when the goods did not reach him, he did sustain loss of the value of goods which he has purchased. In the books of account of the assessee, necessary entries were made though loss was not claimed - The assessee banker approached the RBI for permission to make payment by way of foreign exchange which was refused by RBI - The assesee approached the Insurance company to settle the claim, to which they declined - The assessee was constrained to file the Civil Suit in Mangalore Court against the ship owners, charterers, Insurance company claiming the amount - the assessee did not make entry in the book of accounts for the year 1994-95 showing the loss - However, for the subsequent year, necessary entries were made showing loss and in the return filed and also claimed deduction - When it was not allowed in the subsequent year after writing off the losses, deduction was claimed - both the Appellate Authorities were justified in upholding the claim of assessee and in allowing the deduction there was no error or infirmity in the order passed by the Appellate Authorities Decided against revenue.
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2014 (11) TMI 799
Stay application Direction to pay the demand in installments by Tribunal Held that:- The order of the Tribunal may not have been placed before the second respondent - it could be true that it was placed, but he did not take note of it - In either case, the order is vitiated either for non-application of mind or for not having the benefit of the order of the Appellate Tribunal the order is set aside and the matter is remanded back to the revenue for a fresh consideration of the stay application revenue shall take note of Instruction No.1914 dated 02.12.1993, issued by the Central Board of Direct Taxes Stay granted.
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2014 (11) TMI 798
Allowability of service charges including travelling expenses Held that:- Assessee was right in the complaint that it made - Even on that occasion, the Tribunal had chosen to restore the claim/disallowance in relation to service charges to the file of the AO for a decision afresh and in accordance with law assessee pointed out that the foundation or basis on which the Tribunal proceeded earlier was erroneous inasmuch as there was adequate and enough material on record to deal with and decide the claim in relation to service charges - Therefore, the apparent mistake was required to be corrected by the Tribunal itself - the Tribunal ought to have adjudicated upon the issues and decide any specific issues if they were found to be necessary - The Tribunal has not considered the specific issues raised in the appeal and had passed an order of remand to the AO without adverting to any of the materials that were already before it thus, the matter was restored to the file of the Tribunal and for a decision in accordance with law Decided in favour of assessee.
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2014 (11) TMI 797
Addition of undisclosed income on money receipts and sale of row houses - Whether the Tribunal is right in law and on facts in deleting the addition made on account of undisclosed income earned by the assessee out of on money receipts from the sale of row houses done during the block period Held that:- The partnership firm received on money of ₹ 62 lakhs during the block period for sale of the flats - the Tribunal rightly confirmed the findings arrived at by the AO - However, the Tribunal did not permit the revenue to collect the tax on the entire receipt believing the it was only the income embedded in such receipt which can be subjected to tax in Commissioner of Income Tax v. President Industries [1999 (4) TMI 8 - GUJARAT High Court] the same was decided by court - the entire sales could not have been added as income of the assessee, but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales - unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed, such addition could not be sustained - even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves thus, not the entire receipts, but the profit element embedded in such receipts can be brought to tax the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 796
Addition of outstanding balance of certain creditors Failure to comply with notices issued u/s 136(6) Held that:- AO failed to offer any comment on the evidences filed by the assessee and insisted for sustenance of disallowance on the basis that notices u/s 133(6) remained uncomplied with - details submitted by the assessee before CIT(A) wherein the invoices raised by the parties along with the copies of bank statement from where the payments were made, are placed the action of CIT(A) in confirming the addition on the basis of non filling of confirmations, is not justified - CIT(A) should have considered the evidences filed by the assessee during appellate proceedings but he failed to consider the same and exclusively relied upon the remand repot of the AO - assessee had demonstrated that credit balances were due to genuine business transactions and in succeeding years, the payments were actually made to these parties - Section 68 relied upon by Ld. CIT(A) is not applicable in the present case as Section 68 relates to unexplained credit outstanding in the books of account of the assessee whereas the outstanding amounts in the books of account of the assessee related to business transactions of the assessee Decided in favour of assessee. Ad hoc disallowance on Administrative expenses Held that:- The AO failed to provide any adverse comments during remand proceedings and, therefore, ad-hoc addition of 10% of expenses without furnishing any cogent reason is not justified and CIT(A) has deleted the same - decided against revenue.
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Customs
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2014 (11) TMI 818
Exemption under Notification No.21/2002-CUs dated 01/03/2002 - Non submission of certificates for finished goods - Revenue contends that in the absence of such a certificate from DGHC, the coated pipes, which are manufactured under bond is liable to import duty at the time of clearance from bond and accordingly issued show-cause notices proposing to demand Customs duty on the entire value of the coated pipes - Held that:- Both the bare pipes as well as the coated pipes were for use for oil exploration/exploitation and the essentiality certificate issued by the DGHC clearly evidence this fact. Though, the certificate specifically mentions serial No.215 of the Notification NO.21/2002, the finished products are also specified therein and the said finished products figure in List 12 to Notification No.21/2002, which also exempts the said goods from import duty vide Serial No. 216 subject to production of essentiality certificate from DGHC. Since the end use not in dispute, the appellant would be entitled the benefit of Serial No. 216 even though they have not specifically claimed the exemption. Since the assessment of duty liability has to be done by the Customs, notwithstanding the fact that the appellant did not claim the benefit of exemption, the same should have been extended to the respondent importer. Further, we observe that the demands covered under show-cause notice dated 07/04/2010 and 17/07/2009 are clearly time barred, inasmuch as the entire transactions were fully known to the department and the respondent's clearance of coated pipes to Bombay High under shipping bills were also approved by the Customs authorities concerned - Decided against Revenue.
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2014 (11) TMI 817
Waiver of pre deposit - Benefit of exemption Notification No. 26/2000-Cus. dated 1.3.2000 - origin of goods - Free Trade Agreement between the Democratic Socialistic Republic of Sri Lanka and Republic of India - contravention of the conditions of the Rules, 2000 - Confiscation of goods - Imposition of interest and penalty - Held that:- the importer shall prove to the satisfaction of the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, in accordance with the Customs Tariff (Determination of Origin of Goods under the Free Trade Agreement (ISFTA) between the Democratic Socialistic Republic of Sri Lanka and Republic of India), Rules, 2000 published with the Notification of the Govt. of India in the Ministry of Finance, Department of Revenue, Notification No.19/2000-Cus. dated 6.3.2000 that the goods in respect of which the benefit of this exemption is claimed are the origin of Sri Lanka. letter of the Department of Commerce, Sri Lanka that the cost statement were not declared in respect of import from France and South Korea. It is also seen that the DRI officers had also found several materials which would reveal the doubt in respect of the authenticity of the certificate of country of origin. Thus, there is a factual dispute, which would be examined at the time of hearing the appeal at length. applicant has not made out a strong prima facie case for waiver of entire amount of dues - Partial stay granted.
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2014 (11) TMI 816
Confiscation of goods - Redemption fine and penalty - Violation of condition 5 of the Notification 29/97 - Held that:- As in this case the appellant has opted to shift from zero duty EPCG licence to 10% duty EPCG licence, the same has been accepted by the DGFT and the amendment of the licence has been made retrospective. Therefore, the customs authorities have no authority to demand duty in violation of the condition 5 of the Notification 29/97 from the appellant - Decided in favour of assessee.
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2014 (11) TMI 815
Confiscation of goods - Redemption fine and penalty - performing office M/s.Bureau Veritas, Madagascar does not figure in Appendix 28 of Hand Book of Procedures (Vol.I) - Held that:- The goods were examined and found to be as declared. Further, the goods were accompanied with pre-shipment certificate of M/s.Bureau Veritas, Mumbai along with certificate of M/s.Bureau Veritas, Madagascar. following the decision of Senor Metals Pvt. Ltd. (2008 (8) TMI 238 - GUJARAT HIGH COURT), the impugned order is set aside
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Service Tax
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2014 (11) TMI 834
Business Auxiliary Service - Penalty u/s 76 & 78 - Held that:- Equal amount of penalty under Section 78 of the Finance Act has been imposed and the learned Commissioner (Appeals) has dropped the penalty under Section 76 on the ground that once penalty under Section 78 is imposed, penalty under Section 76 is not justified, as held by the Hon'ble Punjab & Haryana High Court in the case of CCE vs. First Flight Courier Ltd. reported in [2011 (1) TMI 52 - High Court of Punjab and Haryana] - it appears that the Commissioner (Appeals) has rightly waived the penalty under Section 76 in the light of the decision of the Hon'ble Punjab & Haryana High court cited supra. Hence I do not find any infirmity in the impugned order - Decided against Revenue.
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2014 (11) TMI 833
Waiver of predeposit of service tax - Telecom service - Held that:- The adjudicating authority has demanded service tax on BSNL Cellular Division on the Inter-connect usage charges for BSNL Landline Division. BSNL is a PSU entity who has taken separate registration for each Division/Zone for the purpose of discharging service tax liability. There is no dispute on the fact that BSNL has one single PAN number and one Profit and Loss/Balance Sheet. The definition "to any person" defined in the Section 105 (zzzx) of Finance Act, 1994 refers to a separate legal entity". The citation relied upon by the appellant in the case of Precot Mills Ltd. Vs CCE Tirupati (2006 (2) TMI 25 - Appellate Tribunal, Bangalore) and IOCL (2007 (5) TMI 135 - CESTAT, KOLKATA) is squarely applicable to the facts of this case. Following the ratio of the aforesaid decisions, prima facie the appellant has made out a case for waiver of predeposit. Accordingly, we waive the requirement of predeposit of entire service tax along with interest and penalties and stay its recovery till disposal of the appeal - Stay granted.
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2014 (11) TMI 832
Waiver of predeposit of tax - levy of service tax on bill discounting charges in the course of purchase and sales - Banking and Other Financial Services - Held that:- Prima facie, we are unable to accept the contention of the Commissioner (Appeals). As per Section 65 (12) (a) (ix), "Banking & Other Financial Service" would include the bill discounting services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern. Apparently, the bill discounting are related to processing charges collected by the said institutions from the recipient of service. But, in the present case, the bill discounting is during the course of sale of goods between the buyer and seller and prima facie, no service tax is leviable. - Prima facie case in favour of assessee - Stay granted.
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2014 (11) TMI 831
Denial of refund claim - scope of input services - validity of question raised in the show cause notice - reverse charge mechanism - The appellant states that the very show-cause notice is bad and illegal in terms of the directions of the Ministry of Finance issued in its Circular dated 9.8.2005. In view of this Circular, there is no scope for getting into the definition of input service and the Revenue have totally misconceived in issuing the show-cause notice dated 9.11.2006. Thus, the whole proceedings are vitiated and the impugned order is fit to be set aside. Accordingly, the appellant pleads to allow the appeal. Held that:- show-cause notice itself is vitiated and completely misconceived in the facts and circumstances of the case. Thus, the appeal is allowed and impugned order is set aside. - refund allowed - Decided in favour of assessee.
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2014 (11) TMI 830
Waiver of pre-deposit of service tax - Manpower Recruitment or Supply Agency service - Held that:- applicant informed the Revenue vide letter which was received on 19.9.2006 explaining their activity after obtaining legal opinion and this letter was produced during investigation in 2011 by the Director of the applicant. Therefore, prima facie the applicant has made out a strong case for waiver of dues on limitation. The pre-deposit of the dues is waived and recovery therefore stayed for hearing the appeal - Stay granted.
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2014 (11) TMI 829
Cargo handling service - Held that:- appellants have undertaken the activity under the work order which is for hiring of tipper for loading of coal from mines to B.G. Siding at Saoner and also hiring of loaders for loading of coal into tippers and thereafter loading of coal to the wagons. The contention of the appellant is that this activity comes under the scope of transportation of goods by road whereas the Revenue held that the activity comes under the scope of cargo handling service. after taking into consideration the activity undertaken in the mines, which is similar to the activity undertaken by the appellant, held that the activity such as hiring of pay loader for mechanical transfer within the mining area comes under the service of taxable service of cargo handling service. Tribunal in the case of Om Shiv Transport (2013 (5) TMI 110 - CESTAT NEW DELHI) after relying upon the decision of the Hon'ble Orissa High Court, held that the activity undertaken similar to the activity undertaken by the appellants comes under the cargo handling service and not under transportation of goods - Decided against assessee.
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Central Excise
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2014 (11) TMI 828
Classification of goods - Classification of Herbal Shikakai Powder under the name of "Ragaa" - Classification under sub-heading 3003.39 as "other medicaments" or under Chapter Heading 3305.99 as per Note 2 to Chapter 33 read with Chapter Note 1 (d) to Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985 attracting 30% adv - Held that:- issue relates to classification of Herbal Shikakai Powder is no longer res integra in view of the decision of the Tribunal in the case of Commissioner of Central Excise, Trichirapalli Vs Medi Herbs - [2006 (7) TMI 25 - CESTAT, CHENNAI]. It has been held that Herbal Shikakai Powder is classifiable as cosmetic under sub-heading 3305.99 of the CETA'85 during the period September 1996 to December 1997 and September 1996 to March 1997. The Hon'ble Karnataka High Court in the case of Shri Ramakrishna Soapnut Works Vs Superintendent - [2001 (7) TMI 153 - HIGH COURT OF KARNATAKA AT BANGALORE] held that Shikakai Powder (used as a shampoo for cleaning hair) would fall under Heading 33.05 of the CETA under the residuary item 'others'. Tribunal in the case of CCE Tiruchirapalli Vs Medi Herbs (2006 (7) TMI 25 - CESTAT, CHENNAI) on the same product in the context of Board's Circular No.333/49/97-CX dt. 10.9.97 held that assessee was bound to pay duty on the goods in question for six months prior to 10.9.1997 by following the judgement of the Hon'ble Supreme Court in the case of ITW Signode India Ltd. Vs Collector - [2003 (11) TMI 114 - SUPREME COURT OF INDIA]. Hence, the demand of duty for the period prior to 10.9.97 is sustainable and the findings of the Commissioner (Appeals) to that extent is liable to be set aside. However, we agree with the finding of the Commissioner (Appeals) that demand increased by way of corrigendum to SCN is hit by limitation - assessee is liable to pay demand of duty for six months prior to 10.9.1997 - Decided partly in favour of Revenue.
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2014 (11) TMI 827
SSI Exemption - Notification No.8/2003-CE dt.01.03.2003 - Clearance of vitrified tiles - Mis-declaration of goods - Demand of differential duty - Imposition of interest and penalty - whether the confirmation of demand of the duty on the appellant along with interest and penalties imposed by invoking extended period is correct or otherwise - Held that:- show cause notice dt.21.01.2010 is barred by limitation and extended period cannot be invoked as the appellant may be guilty of not informing the Department about the manufacturing activity, but it was definitely not a willful suppression or mis-statement with intention to evade duty. On perusal of the records, we find that it was appellant who had approached the Departmental authorities for granting of Central Excise registration on crossing the threshold limit of ₹ 1.5 crores turnover as is envisaged in Notification No.8/2003-CE. We also find from the records that the main appellant had recorded all the manufacturing activities and all clearances in the books of accounts, which is evident from the fact that show cause notice has been issued based upon such records only. On the background of such factual matrix, we agree that the appellant cannot be charged with willful suppression of the fact with intent to evade payment of duty. This our view is due to the fact that the appellant may have mis-read the notification No.8/2003-CE. In our view, the reading of Notification No.8/2003-CE is itself confusing and may be a situation wherein the appellant, as claimed by the ld. Counsel, are not highly literate. extended period can be invoked only when there is an intention to evade payment of duty and not mere failure to pay duty. Their lordships have also held that there should be something more i.e. the assessee must be aware that duty was leviable and it must be deliberately avoiding paying duty. As the appellants themselves had approached the Departmental authorities for granting of licence after crossing the threshold limit - Appellant has made out a case. The impugned order is unsustainable and liable to be set aside. - Following decision of Tamil Nadu Housing Board [1994 (9) TMI 69 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2014 (11) TMI 826
Cenvat Credit - Input services - Credit of insurance premium amount - Held that:- Tribunal has failed to refer to the background facts. It has also not referred to the fact that whether the services and termed as input services in the case of Idea Cellular (2011 (1) TMI 811 - CESTAT, NEW DELHI) are identical or similar to one involved in the present case. - Having perused the order passed by the Tribunal and being totally dissatisfied with inadequate and crypt reasoning that the present Appeal is allowed. The impugned order of the Tribunal is quashed and set aside. - Matter restored before the tribunal - Decided in favor of revenue.
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2014 (11) TMI 825
Confiscation of goods - clandestine removal - goods kept at residential premises of appellants - SSI Exemption - Whether the decision of the Customs, Excise and Service Tax Appellate Tribunal upholding demand of ₹ 58,54,825/- and confiscation of 24 air-conditioners along with duty and penalty demand of ₹ 3,16,800/- is perverse and contrary to the facts on record - Delhi High Court admitted the appeal of the assessee against the decision of CESTAT New Delhi [2014 (2) TMI 1094 - CESTAT NEW DELHI (LB)].
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2014 (11) TMI 824
Waiver of pre-deposit - Wrongful availment of CENVAT Credit - Held that:- The proceeding was initiated on an allegation that the petitioners have not done any manufacturing activities and there was a wrongful availment of the Cenvat credit. It does not admit any debate that the Cenvat credit is as good as cash provided the same is availed in the manner permissible under the relevant rules and the statute. It is no doubt true that the statement of the persons made before the authority if adversely affect the interest of the assessee, the authority must provide an opportunity to the assessee to cross-examine the same witness. This plea appeared to have been taken by the petitioners before the original authority as well as appellate authority. The said authorities did not find any substance therein. However, the matter is at large before the Tribunal where the Tribunal shall consider all the factual aspects at the time of deciding the appeal finally. The Tribunal found that the petitioners have been able to make out an arguable case and have granted waiver to the extent of 75% so far as it relates to the demand and 90% of the penalty imposed on the director of the company and a total waiver of the statutory penalty. Such discretion cannot be said to be perverse and so unreasonable that it cannot be allowed to stand for a moment - Decide against assessee.
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2014 (11) TMI 823
Application for supply of documents - petitioners require the photocopies of the documents/files seized under the panchnama, dated 7-12-2013, which have been seized from the possession of the petitioners, in his day-to-day business and while having correspondence with different authorities - Held that:- Petitioners have demanded the photocopies of the record and documents seized from them under the cover of the panchnama, dated 7-12-2013, which came to be seized from the possession of the petitioners. It is required to be noted that as such the petitioners are not demanding the original of the record and documents seized under the cover of the panchnama, dated 7-12-2013. The petitioners are ready and willing to bear the expenditure towards the photocopies of the record and documents seized and are ready and willing to deposit ₹ 10,000/- more towards the manpower, etc. The aforesaid request has been denied mainly relying upon Clause 55(m) of the Central Excise Intelligence and Investigation Manual as well as on the ground that the petitioners are not cooperating in the inquiry/investigation. An affidavit-in-rejoinder is filed on behalf of the petitioners disputing that the petitioners are not cooperating. On the ground that the petitioners are not cooperating in the inquiry/investigation, the prayer of the petitioners to supply the photocopies of the documents seized cannot be denied. If, it is found that, the petitioners are not cooperating in the inquiry/investigation, it will always be open for the Department to proceed further with the inquiry/investigation ex parte on the basis of the material on record and proceed further with the same. On considering Clause 55 of the Central Excise Intelligence and Investigation Manual as a whole it confers certain right upon the assessee/occupant of the premises at the time of search and seizure. One of the right conferred is Clause 55(m). However, there is no specific bar and/or provisions under which the petitioners can be denied the photocopies of the documents seized that too when it is asked at the cost of the petitioners. - As such there is no justification on the part of the concerned respondents in not providing photocopies of the documents seized under the panchnama, dated 7-12-2013 - Decided in favour of assessee.
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2014 (11) TMI 822
Recovery of CENVAT Credit - removal as such - rollers/cylinders were used for printing and when they became worn out, the same were again cleared to their vendors for new engraving/dechroming - Bombay High Court admitted the appeal of the assessee against the order of Tribunal [2013 (9) TMI 167 - CESTAT MUMBAI] on the following substantial questions of law : Whether, the CESTAT was correct in confirming the duty demand when the law is settled by the decisions of the two High Courts? Whether, the CESTAT was right in relying upon the decision of the Larger Bench of the Tribunal which was not passed in terms of Rule 3(5) of Cenvat Credit Rules 2004?
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2014 (11) TMI 821
SSI benefit under notification No. 8/2000 C.E., dated 1-3-2000 - whether the Small Scale Industry exemption granted to the respondent can be extended till 23-9-2000, since the respondent has been amalgamated with other Textile Company, by name, Palani Andavar Cotton and Synthetic Spinners Limited on 1-4-2000 - Held that:- High Court has not given specific date with regard to effect of date of amalgamation. But, admittedly the respondent has been amalgamated with Palani Andavar Cotton and Synthetic Spinners Limited on 1-4-2000. Since in the order passed by the High Court no specific date has been given apart from the date of amalgamation i.e., on 1-4-2000 and also on the basis of the decision referred to supra, it is made clear that in the instant case the Court can very well come to a conclusion that the so called amalgamation has been given effect to from 1-4-2000. Since amalgamation is having its effect from 1-4-2000, the Small Scale Industry exemption granted till 23-9-2000 to the respondent cannot be accepted. To put it in short, after 1-4-2000 i.e., from the date of amalgamation the respondent has been clothed a new company. Under the said circumstances, the respondent is not entitled to avail Small Scale Industry exemption which has been granted earlier till 23-9-2000. CESTAT, without considering the fact that no specific date is available in the order passed by the High Court with regard to effect of amalgamation and also without considering the resolution passed by the Board of Directors of the respondent to the effect that amalgamation has come into effect from 1-4-2000, has erroneously allowed the appeal and thereby set aside the order passed by the Commissioner of Central Excise (Appeals) and in view of the discussions made earlier, the argument advanced by the learned counsel appearing for the appellant is really having merit, whereas the argument putforth on the side of the learned counsel appearing for the respondent does not hold good and further the substantial questions of law raised on the side of the appellant are having substance and altogether the present Civil Miscellaneous Appeal is liable to be allowed - Decided in favour of revenue.
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2014 (11) TMI 820
Maintainability of appeal - Clandestine removal and manufacture of goods - Held that:- appeals are not maintainable under Section 35L of the Central Excise Act, 1944 since the issues raised are of clandestine removal of manufactured goods and clandestine manufacture of goods. Solicitor General seeks leave to withdraw these appeals with liberty to file an appropriate appeal in the High Court under Section 35G of the Act. In the event of an appeal being filed under Section 35G of the Act within three months from today, the High Court shall consider the appeal without raising any question regarding limitation - Decided against Revenue.
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2014 (11) TMI 819
Valuation of goods - Inclusion of royalty in assessable value of goods - Held that:- Tribunal [2014 (5) TMI 944 - CESTAT MUMBAI] has not assigned any reason while upsetting the order of the Commissioner (Appeals), we are of the view, without going into the merits/demerits of the case, that the matter should be reconsidered by the Tribunal - Decided in favour of Revenue.
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CST, VAT & Sales Tax
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2014 (11) TMI 839
ABUSE OF PROCESS OF COURT - discretionary jurisdiction of this Court, under Article 226 of the Constitution of India - Jurisdiction of assessing authority under Central Sales Tax - Bogus C Forms - entire turnover of the petitioner was assessed to tax at 12.5% - we refrain from exercising the discretionary jurisdiction, under Article 226 of the Constitution of India, to entertain these Writ Petitions which have been filed questioning the very same assessment orders of the 1st respondent dated 05.11.2012 which were under challenge in W.P. No.9175, 9176 and 9168 of 2013. As filing of these Writ Petitions is an abuse of process of Court, they are dismissed with exemplary costs of ₹ 25,000/-, in each of these three Writ Petitions, which the petitioner shall pay to the State Government within four weeks from the date of receipt of a copy of this Order.
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2014 (11) TMI 838
Challenge to the pre-assessment notice - Sale in the course of import - Exemption under Section 5(1) & 5(2) of the CST Act - import of refined palm oil is sold locally - branch transfer/consignment sale under Section 6(A) of CST Act - Held that:- this Court is of the view that the impugned notices cannot be interfered by issuing a writ of certiorari and the petitioners should be directed to respond to the notices. - the learned senior counsel at the conclusion of the arguments submitted that though the issues were being agitated before this Court and writ petitions were pending, the petitioners have furnished the documents, remitted taxes wherever they were unable to produce documents, have agreed to pay the taxes. If that be the case, it is all the more a reason, that the petitioners should respond to the impugned notices by submitted their objections/replies before the authority. - writ petition dismissed.
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2014 (11) TMI 837
Cancellation of Registration - Exercising power of revision under Section 75 read with Section 100 of the Gujarat VAT Act - violation of principle of natural justice - illegal acts and omissions by a trader - Held that:- Principles of natural justice are not empty formalities. They are required to put a person likely to be visited with adverse order to notice why a proposed action not be taken for prima facie grounds indicated in the notice. When the very notice suggested exercise of powers under Section 75 which was for taking the order of subordinate officer under revision for appropriate reasons to be recorded, it would be in gross violation of principle of natural justice then to permit the authority to pass final order under entirely different provision which clothed the authority with vastly different powers. The error committed by the Deputy Commissioner does not end here. He, in fact, passed his final order under purported exercise of power under Section 75. Even while passing of the order he was not aware that the registration should or could be cancelled under Section 27(5) of the VAT Act and not be revised under Section 75 thereof. the order cannot be viewed as mere reference to a wrong statutory provision tracing the power of cancellation. It was rather a situation where the authority passed an order assuming jurisdiction under a wrong provision exercising powers of entirely different nature which powers were not available to him for revising the order of registration. Such order cannot be saved or cured by an affidavit suggesting that he intended to pass the order under Section 27(5) and there was a mere wrong reference to Section 75 read with Section 100 of the VAT Act. - all petitions allowed - Decided in favor of assessee.
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2014 (11) TMI 836
Denial of deduction on account of freight from sales price - representation of the freight in respect of the goods sold by the appellant, asserting that they had been charged for separately - high court has observed that, the buyer pays the catalogue price less transport rebate allowed, irrespective of the amount paid for freight charges by the assessee. Fluctuation in freight charges is not the concern of the buyer as he is bound to pay only the catalogue price or F.O.R. price. Thus, the agreed price being inclusive of freight subject to fixed transport rebate allowed, it would be a matter of indifference to the customer as to what is the amount of freight Following decision of Tungabhadra Industries Ltd. Kurnool [1960 (10) TMI 51 - SUPREME COURT OF INDIA], decision of high court upheld - Decided against assesee.
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