Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 4, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses whether the supply of stents or valves by hospitals during heart surgeries constitutes a sale and is subject to VAT. In the case of a hospital in Noida, the Deputy Commissioner of Commercial Taxes imposed a tax on these items, treating them as sales. The hospital argued that the stents and valves are part of the medical service and not separate sales. The High Court examined the legal definitions and concluded that the implantation of stents and valves does not constitute a sale under Section 2(ac) of the Act, setting aside the tax order.
By: DEVKUMAR KOTHARI
Summary: The article discusses the concept of black money and its distinction from bad money. It emphasizes that money earned through illegitimate means should not be regularized by merely paying taxes and must be forfeited as it belongs to society. The author differentiates between legitimately and illegitimately earned money, arguing that only money earned through legal and moral means can be considered good and regular. Illegitimately earned money, akin to stolen goods, should not receive protection under double taxation agreements and must be forfeited to the government or relevant societal segment.
News
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 61.4118 on November 3, 2014, slightly up from Rs. 61.4080 on October 31, 2014. The exchange rates for other currencies against the Rupee were also reported: 1 Euro was Rs. 76.6665, down from Rs. 77.1899; 1 British Pound remained stable at Rs. 98.0624; and 100 Japanese Yen decreased to Rs. 54.48 from Rs. 55.28. The Special Drawing Rights (SDR) to Rupee rate will be determined based on this reference rate.
Highlights / Catch Notes
Income Tax
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Surcharge Tax Liability Arises Only with Real Income, Not Just Book Entries, Says Case Law on Income Tax.
Case-Laws - HC : Liability to pay tax on surcharge levied for delayed payment -where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account - HC
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Confessional Statements Require Supporting Documents to Be Used as Evidence in Income Tax Cases, Per Sub-section (4).
Case-Laws - HC : Additions on the basis of statement - This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement - HC
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High Court Confirms Interest on Loans for Share Investments Qualifies as Business Expense for Tax Purposes.
Case-Laws - HC : Classification of expenses Business expenses or not - Whether the Tribunal was right in holding that the interest on borrowed funds utilised for investment in shares can be treated as a business expenditure - held Yes - HC
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High Court Overturns Tribunal Decision on Taxing Undisclosed Income; Focuses on Anomaly, Not Section 271(1) Penalty.
Case-Laws - HC : Treatment of income recovered during search - The anomaly and the remedy was found in a different form, namely, to levy penalty, as distinguished from tax at a higher rate, on the undisclosed income - the subject-matter is not levy of penalty u/s 271(1) of the Act the order of the Tribunal cannot be upheld - HC
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Court Suggests Assessee to Appeal Post-Reassessment on Section 148 Notice Based on Retracted Statements.
Case-Laws - HC : Jurisdiction of AO to issue notice u/s 148 Assessee contended that notice under section 148 of the Act issued on the basis of the retracted statements is bad in law - assessee has to follow proper remedies of filing appeal after reassessment - HC
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High Court Quashes Reopening of Assessment u/s 148; All Facts Disclosed, Notice Issued Beyond Four Years.
Case-Laws - HC : Reopening of assessment u/s 148 assessee disclosed all the material facts in the return which was under scrutiny u/s 143(3) - if the AO had doubt about the validity of the claim in law, during scrutiny the same could have been examined - notice beyond 4 years quashed - HC
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Assessing Officer Mistakenly Adjusts Profit and Loss Account by Adding Non-Permissible Depreciation Debited by Assessee.
Case-Laws - HC : MAT - AO had committed an error in redrawing the profit and loss account by making changes by adding depreciation debited to profit and loss account by the assessee, which is impermissible - HC
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Company Found in Default for Not Deducting Tax on Software, Engineering Payments Under TDS Section 195.
Case-Laws - AT : TDS u/s 195 - Nature of amount paid to parent company abroad on account of software expenses and engineering expenses - it was not a case of either gratuitous payment made by the assessee or mere reimbursement of expenditure - assessee held to be in default - AT
Customs
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Confiscation of Goods Requires Clear Antique Status u/s 113(d) of Customs Act & Antiquities Act 1972.
Case-Laws - AT : Confiscation of goods - without a clear finding that the goods are antiques goods cannot be confiscated under the provisions of Section 113(d) of the Customs Act read with provisions in Antiquities and Art Treasures Act, 1972- AT
Service Tax
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Appellant Exempt from Service Tax as Co-Owners Rented Property; Stay Granted on Case Proceedings.
Case-Laws - AT : Renting of immovable property - Appellant only acted as a pure agent - it cannot be said that appellants have rented out the immovable property but it is the co-owners who have rented out the property - stay granted - AT
Central Excise
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Assessee Can Claim Full CENVAT Credit for Services in Rule 6(5); Trading Goods Excluded from Credit.
Case-Laws - AT : CENVAT Credit - assessee is entitled to take the CENVAT credit of services referred in Rule 6(5) of CENVAT Credit Rules, 2004 for whole of the credit attributable to dutiable as well as final exempted products - but credit in respect of trading goods are not allowed - AT
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Court Upholds Penalties for Secret Manufacture of Excisable Goods; Evidence Includes Confessions and Private Notebooks.
Case-Laws - AT : Clandestine manufacture and clearance of excisable goods - the case is not merely made on the basis of few confessional statements but also on the basis of private note books - demand upheld - AT
VAT
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High Court: Uttar Pradesh Cannot Charge Interest on Differential Tax Under Composition Scheme After Three Years.
Case-Laws - HC : Liability to pay the interest on differential tax - composition scheme after three years was turned down by the State of Uttar Pradesh - interest is not payable - HC
Case Laws:
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Income Tax
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2014 (11) TMI 67
Validity of notice for reopening of assessment u/s 147 r.w. section 148 Jurisdiction of AO Mere change of opinion No new tangible material available to AO - Held that:- The assessment order that the assessee produced complete details of purchases i.e. purchase statement the reopening is on scrutiny of assessment records - the findings of AO now rejecting the objections of the assessee recording reasons for assumption of jurisdiction u/s. 147 of the Act and reasons recorded are contradictory - nothing new tangible material was available before the AO for reopening the assessment and consequently, the AO acted on the same material, which was available before him at the time of original assessment following the decision in CIT Vs. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - section 147 of the Act, as substituted w.e.f. 01.04.1989 does not postulates conferment of power upon the AO to initiate reassessment proceeding upon his mere change of opinion - It cannot be accepted that only because in the assessment order, detailed reasons have not been recorded, an analysis of Munshi Mini Rice Mill AY 2007-08 the materials on the record by itself may be justifying the AO to initiate a proceeding u/s. 147 of the Act - When a regular order of assessment is passed in terms of section 143(3) of the Act, a presumption can be raised that such an order has been passed on application of mind the reopening u/s. 147 r.w.s. 148 of the Act is to be set aside Decided in favour of assessee.
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2014 (11) TMI 66
Denial of additional evidences Held that:- CIT(A) ought to have examined whether the confirmations are fabricated or genuine - the Directors of the assessee-company categorically stated that the transactions are not genuine - If the transactions are genuine and it is proved so, in that eventuality such amount cannot be taxed and in case, if it is proved that the confirmations are fabricated or not genuine, otherwise created to make non-genuine transaction as genuine transaction, in that eventuality the criminal liability would be attracted under the various provisions of the Act - if any credit entries reflected into the account of the assessee the assessee is required to prove the identity of the creditors, genuineness of the transaction and creditworthiness of the creditors - out of the three ingredients, the assessee has established the identity of the creditors by furnishing the PANs and confirmation from such creditors although at the stage of CIT(A) - However, the other two ingredients are required to be established by the assessee thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for adjudication Decided in favour of assessee. Admissibility of expenses Applicability of judgments relied upon by assessee - Held that:- Before the CIT(A) various judgements were relied upon by the assessee in support of its contention - There is no whisper as to how these judgements are not applicable on the facts of the present case thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of assessee.
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2014 (11) TMI 65
Unexplained cash credits u/s 68 Addition in respect of three companies - Creditworthiness of transaction proved by assessee - Held that:- The assessee company produced the director of all the three companies and they also produced the necessary evidences i.e. photocopy of their permanent account number and their voter-ID, photocopy of the confirmation for investment in the assessee company, photocopy of confirmation of account, photocopy of acknowledgement of income tax return for the relevant assessment year and photocopy of the bank statement of the company - on what basis the AO has mentioned that from the balance sheet of these companies, the creditworthiness of the share application is not proved, is best known to the AO - CIT(A) rightly arrived at the conclusion that the assessee company has duly discharged the onus of proving the cash credit in its books of account - the assessee has duly established the identity and creditworthiness of the creditor (i.e. share applicant), and the genuineness of the transaction thus, the order of the CIT(A) is upheld Decided against revenue.
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2014 (11) TMI 64
Maintainability of appeal Tax effect less than prescribed monetary limit for filing appeal Tax effect less than Rs. 4 lacs Revision of monetary limits through circular - Held that:- Following the decision in CIT Vs M/s. P. S. Jain & Co. [2010 (8) TMI 702 - Delhi High Court] - the Board has rightly taken a decision not to file references if the tax effect less than the amount prescribed - The same policy for old matters needs to be adopted by the Department - Instruction No.5/2014 FNo279/Misc.142/2007-ITJ(Pt) dated 10th July, 2014 will apply to pending appeals also for the reason that the same is exactly identical to earlier instructions - also in The Commissioner of Income Tax v. Smt. Vijaya V. Kavekar [2013 (2) TMI 451 - Bombay High Court] it has been held that the applicability of circular was considered and the monetary limit was increased and appeals were to be filed only in cases where the tax effect exceeded Rs. 4 Lacs - no appeals would be filed in the cases involving tax effect less than Rs. 4 Lacs notwithstanding the issue being of recurring nature - the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases revenue could not point out any of the exceptions - this being a low tax effect case, the appeal cannot be admitted Decided against revenue.
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2014 (11) TMI 63
Claim of exemption u/s 10B Interest on bank deposits kept for opening Letters of Credit Interest received against public issue of shares Interest earned on ICDs Held that:- Obtaining of letters of credit is an essential activity for undertaking exports, and the deposit of amounts for that purpose is a condition precedent - If the deposits so made have yielded interest, it certainly is attributable to or can be said to be derived from, the activity of export. Assessee gone for public issue to mobilise the resources - The intending purchasers of the shares made deposits corresponding to the value of the shares, which they propose to purchase between the date of application and date of allotment of shares or rejection of application, as the case may be, the amounts yielded interest - The interest so yielded cannot be said to be an income derived from 100% export activity - Before it has allotted shares, the assessee has taken away the money deposited by the intending purchasers of shares and has invested in some companies - The interest that is earned from such deposits was sought to be clubbed with the amount representing profits and gains derived from 100% export activity - thus, the order of the Tribunal is partly set aside regarding the interest received against public issue of shares and interest earned on ICDs and the order relating to interest earned in respect of bank deposits kept for opening Letters of Credit is sustained Decided partly in favour of revenue.
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2014 (11) TMI 62
Condition for payment of 50% of the demands for granting stay Principle of hardship Winding up proceedings going on - Held that:- The assessee is already facing a petition for winding up on the file of the Company Court at the instance of the Bank of New York - the Company Court has already granted an interim order of injunction - Therefore, this is a case where the application of the principle of hardship is warranted revenue also should take note of the fact that whatever is collected now, may safeguard their interests ultimately in view of the pendency of the company petition for winding up the order is modified and the payment to be made is reduced to 20% of total demand Partial stay granted.
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2014 (11) TMI 61
MAT - Scope of section 115J - Deletion of interest from the purview of section 115J - Held that:-Assessee contended that once the amount has suffered tax and its inclusion in the book profit was only for the purpose of reflecting the financial state of affairs, there was no basis to bring it under the purview of the tax once again under Section 115J - Notwithstanding the freedom given to an assessee to state its book profit in its annual report submitted as part of its obligation under the Companies Act, he is kept under obligation to be truthful - The book profit is liable to be increased or decreased, depending upon the factors that are mentioned in the explanation - one central theme is that the profit and loss shall be with reference to the relevant previous year - for their own reasons, the assessee did not want to reflect the income on corporate deposits in any form whatever. Though the facility to bring those very amounts u/s 115J of the Act was available for two AY 1988-89 and 1989-90, that was not resorted to, obviously because an AO is precluded from making any additions, deletions, or alterations to the profit and loss account, referable to Section 115J of the Act - it is only the authorities under the Companies Act that are conferred with the power to scrutinise such accounts - the mere inclusion of those amounts in the profit and loss account referable to u/s 115J of the Act for the AY 1994-95 did not make much of difference from the point of view of income tax - Bringing those amounts to tax once again, may be, u/s 115J of the Act could have resulted in anomaly if not absurdity - no provision can be understood or interpreted in such a way as to lead an absurd or anomalous situation - This principle gets attracted with added vigour, when a situation is brought about, by operation of two different enactments the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 60
Unexplained investment u/s 69B - Spreading over of additions to various assessment years Held that:- The Tribunal was of the view that CIT (A) did not have any power for giving direction for another year, in Rajinder Nath Versus Commissioner of Income-Tax, Delhi [1979 (8) TMI 3 - SUPREME Court] it has been held that the expressions "finding" and "direction" are limited in meaning - A finding given in an appeal revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular case assessee and in relation to the particular assessment year - To be a necessary finding, it must be directly involved in the disposal of the case - the expression "direction" in s.153(3)(ii) of the Act, it must be an express direction necessary for the disposal of the case before the authority or Court - when assessee himself claims that the construction was spread over to two to three years, the finding of the CIT(A), if any, made for unexplained cost of construction, has to spread over to such years, is nothing but a finding which is necessary for disposal of the case. Applicability of Section 153(3)(ii) - Whether observation of the Tribunal was a direction necessary for disposal of the appeal - CIT(A) held that addition made by the AO was not based on any evidence found during search and, after giving such a finding, directed the AO to reopen the assessment for given AYs - neither assessments were based on any search, nor can it be said that CIT(A) had enlarged the scope of appeals by giving a direction to split the unexplained investment on cost of construction to the period of construction thus, no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 59
Requirement of service of notice u/s 143(2) fulfilled or not Notice issued beyond the period of limitation - Held that:- The assessee filed return of income on 31.10.2007 - even though the department claims to have sent a notice u/s 143(2) of the Act on 17.9.2008, the Revenue failed to produce any records to show that the said notice was despatched and served on the assessee - the department subsequently issued another notice u/s 143(2) of the Act on 27.8.2009, which, on the face of it, is beyond the period of limitation prescribed u/s 143(2) of the Act - the basic requirement of Section 143(2) of the Act having not been satisfied, the department s further proceedings becomes nonest in law the same is also held in Asst. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] - omission on the part of the assessing authority to issue notice u/s 143(2) cannot be a procedural irregularity and it is not curable and, therefore, the requirement of notice u/s 143(2) cannot be dispensed with thus, no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 58
Liability to pay tax on surcharge levied for delayed payment - Whether surcharge for delayed payment reflected in the bills raised by the assessee and its accounts, would invite payment of a tax dehors recovery/payment/receipt of surcharge Held that:- The amount was added by the AO as reflecting levy of surcharge on delayed payment of bills - this amount has neither been paid nor recovered by the assessee - the surcharge is a disputable item and may at any time be reduced or waived and, therefore, despite the fact that the assessee maintains a mercantile system of accounting - income tax is fundamentally a levy on income and though the Act may prescribe different points in time at which liability to taxation enures still remains a tax on receipt of income - A hypothetical income that may or may not materialise should not be made subject matter of tax merely because of an entry in the accounts books maintained by an assessee - in Commissioner of Income-tax Vs. Shoorji Vallabhdas and Co.[1962 (3) TMI 6 - SUPREME Court] it has been held that where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 57
Additions on the basis of statement - Whether the statement can be treated as the one, under sub-section (4) of Section 132 of the Act - Held that:- The search was conducted in the premises of the assessee on 09.01.1996 - nothing incriminating was found or recovered during the search - It was only two and half months thereafter i.e., on 20.03.1996, that a statement was recorded - the statement was not recorded during the course of search or seizure - Such a statement cannot at all, be brought under the fold of Section 132 (4) of the Act - nothing was recovered during the search - hence, there was no occasion or basis to record the statement, even if it is done when the search was in progress - there is a basic infirmity in the very foundation of the case, upon which the revenue sought to rest their block assessment - the question of a statement of that nature being treated as the clinching evidence, by itself, leading to any penal action does not arise. As decided in Commissioner Of Income-Tax Versus Shri Ramdas Motor Transport [1998 (8) TMI 51 - ANDHRA PRADESH High Court] - the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account - when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers u/s 132(4) does not arise - This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 56
Basis for reopening of assessment u/s 147 Power of the AO to make additions during reassessment - Income chargeable to tax came to notice subsequently in the course of proceedings u/s 147 Held that:- In Majinder Singh Kang Versus Commissioner of Income-tax [2012 (6) TMI 616 - Punjab and Haryana High Court] considering the scope of Explanation 3 to section 147 of the Act it has been held that the AO is empowered to make additions even on the ground on which reassessment notice might not have been issued where during the reassessment proceedings, some other income has escaped assessment which comes to his notice during the course of the proceedings for reassessment u/s 148 of the Act - The provision nowhere postulates or contemplates that the AO cannot make any additions on any other ground unless some addition is made on the ground on which reassessment had been initiated the decision in CIT v. Shri Ram Singh [2008 (5) TMI 200 - RAJASTHAN HIGH COURT] is distinguished as being decided prior to the insertion of Explanation 3 to section 147 of the Act - thus, the order of the Tribunal is set aside Decided in favour of Revenue.
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2014 (11) TMI 55
Classification of expenses Business expenses or not - Whether the Tribunal was right in holding that the interest on borrowed funds utilised for investment in shares can be treated as a business expenditure Held that:- It is beyond any cavil that capital was borrowed by the assessee and interest was paid on the borrowed capital - The amount so borrowed was invested in shares and debentures for the purpose of business - when the amount is utilized for business purpose, the interest paid will have to be allowed as deduction in terms of Section 36(1)(iii) of the Act - The scope and ambit of Section 36(1)(iii) of the Act was considered by the Calcutta High Court in CIT v. Rajeeva Lochan Kanoria, [1994 (2) TMI 42 - CALCUTTA High Court] - when the assessee claims deduction of interest paid on capital borrowed, all that the assessee has to show is that the capital which was borrowed was used for the business purpose in the relevant year of account and it does not matter whether the capital was borrowed or not to acquire revenue asset or capital asset - if the funds are borrowed by an investment company for making investment in shares which may be held as investment or as stock-in-trade or for the purpose of controlling interest in other companies, interest paid on such borrowed funds will be deductible under section 36(1)(iii) of the Income-tax Act - there is nothing in Section 36(1)(iii) of the Act that would dis-entitle the assessee to claim deduction in respect of interest paid on the capital borrowed for the purposes of business thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 54
Benefit of investment on capital gains u/s 54EC(1) - Whether the first proviso to Section 54EC(1) would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period Held that:- Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months - There is no cap on the investment to be made in bonds. The first proviso to Section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees - from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied - It would have made a difference, if the restriction on the investment in bonds to Rs. 50,00,000/- is incorporated in Section 54EC(1) of the Act itself thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 53
Treatment of income recovered during search - Whether the amount, which is discovered during the search, has the effect of just reducing the losses for the block period or it can be treated as income separately for the block period Held that:- In CIT v. Harprasad and Co. P. Ltd. [1975 (2) TMI 2 - SUPREME Court] - if an assessee has incurred losses, more than the income, in an assessment year, he does not incur any tax liability, and if the loss spills over the concerned AY, he shall be entitled to claim adjustment against profits, if any, in the subsequent assessment year and for that purpose, filing of a return, albeit showing loss; is necessary - the undisclosed income attributed to the assessee did not have the effect of wiping off the accumulated losses - whatever may be the character of the undisclosed income, vis-a-vis the "total income", it cannot be treated as "income" within the connotation of Chapter XIV-B of the Act - there was nothing to be brought under the tax regime of Chapter XIV-B of the Act. The immediate concern of the Revenue was that the result of a search and unearthing of undisclosed incomes was proving futile, if it was being pitted against the aggregate or accumulated losses, and thereby, a device to penalise such concealments was invented - where the undisclosed income has the effect of just reducing the loss, thereby, disabling the Revenue, to levy any tax, whatever - The anomaly and the remedy was found in a different form, namely, to levy "penalty", as distinguished from "tax at a higher rate", on the undisclosed income - the subject-matter is not levy of penalty u/s 271(1) of the Act the order of the Tribunal cannot be upheld Decided in favour of assessee. Adjustment against amount of undisclosed income - Whether he is entitled to seek adjustment against any amount of undisclosed income, noticed in the search when there is unabsorbed depreciation available to an assessee in the previous assessment years Held that:- The irregularities committed by the assessee remain unpunished, if such a course is adopted - There is no substance in the submission - whenever an undisclosed income is noticed against an assessee, and if it is set at naught, through accumulated depreciation, the corresponding amount of depreciation would not be available to be utilized by the assessee at a future date - The assessee feels the brunt of his concealment, to that effect - the ITO or Tribunal, have just to implement, what Parliament has handed out to its citizens, and they can neither expand nor restrict the scope of the relevant provisions Decided in favour of assessee.
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2014 (11) TMI 52
Jurisdiction of AO to issue notice u/s 148 Assessee contended that notice under section 148 of the Act issued on the basis of the retracted statements is bad in law - Event when assessee can challenge the jurisdiction of AO for issuing issue - Held that:- The reasons recorded by the AO are sufficient to issue notice u/s 148 of the Act - in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - AO has no power to review - he has the power to reassess - But reassessment has to be based on fulfilment of certain pre-condition and if the concept of 'change of opinion' is removed, then, in the garb of reopening the assessment, review would take place - the only remedy open to the assessee, in the facts and circumstances of the case and more particularly in view of the detailed reasons recorded by the AO, while dealing with all objections/contentions urged on behalf of the assessee including the question of jurisdiction to issue notice u/s 148 of the Act, is to file an appeal after the reassessment order u/s 147 of the Act - the AO did follow the due procedure and recorded sufficient reasons All the contentions of assessee kept open to be raised before AO - Decided against assessee.
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2014 (11) TMI 51
Reopening of assessment u/s 148 Amount recognised as claim u/s 35D was a sufficient disclosure of material facts or not Reopening of claim beyond four years without any basis - Held that:- Notice for reopening has been issued beyond the period of four years from the end of the relevant AY - As per section 35D of the Act, the expenditure clarifying such deduction would be spread over a span of ten assessment years - when such claim was made and as pointed out by the assessee in the note forming part of the return, the same was accepted in a scrutiny assessment for the first year of the claim, the rest was a matter of computation - the assessee disclosed all the material facts - as held in Calcutta Discount Co. Ltd. v. ITO [1960 (11) TMI 8 - SUPREME Court] - the duty is on the assessee to disclose all the facts which had a bearing on the question of a claim - if the AO had doubt about the validity of the claim in law, during scrutiny the same could have been examined - beyond the period of four years, it would not be open for the AO to disturb such claim in the absence of failure on the part of the assessee to disclose fully and truly all material facts Decided in favour of assessee.
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2014 (11) TMI 50
Reassessment order u/s 143(3) r.w. section 147 Notice issued within prescribed time or not Requirement of section 143(2) not fulfilled - Held that:- In Deputy CIT v. Mahi Valley Hotels and Resorts [2005 (8) TMI 84 - GUJARAT High Court] it has been held that the limitation prescribed u/s 143(2) is mandatory, the format of provision being in negative terms - if the requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language, that is to say, if the statute enacts that it shall be done in such a manner and in no other manner, such requirements are, in all cases absolute and neglect to attend to such requirement will invalidate the whole proceeding also in Asst. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] it has been held that the AO has to necessarily follow the provisions of section 142 and sub-sections (2) and (3) of section 143 - both the CIT(A) and the Tribunal have held that the procedure prescribed of issuance of notice u/s 143(2) has not been followed at all - This realm of fact has not been disputed by the Revenue - the assumption of the jurisdiction of issuance of notice of reopening itself would not be sustainable - in the absence of fulfilment of mandatory requirement of issuance of notice u/s 143(2) both the authorities rightly and validly held against the Revenue Decided against revenue.
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2014 (11) TMI 49
Minimum Alternate Tax - Entitlement to adopt the rates of depreciation Adoption of rate of depreciation for arriving book profits u/s 115J(1)(a) - Assessee claimed depreciation at the rates as provided under the Income Tax Rules instead of adopting the rates as prescribed in Parts-2 and 3 of Schedule VI of the Companies Act, 1956 - Held that:- It is well settled in Apollo Tyres Ltd., Vs. C.I.T. [2002 (5) TMI 5 - SUPREME Court] that it is impermissible for the AO to redraw the profit and loss account as long as the same is prepared in terms of the Companies Act, and the same is required to be adopted for the purpose of calculating the profits u/s 115-J of the Act - the AO while computing the income u/s 115-J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been property maintained in accordance with the Companies Act - the AO does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115-J thus, the AO had committed an error in redrawing the profit and loss account by making changes by adding depreciation debited to profit and loss account by the assessee, which is impermissible thus, the order of the order of the Tribunal is set aside Decided in favour of assessee.
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2014 (11) TMI 48
Addition of unexplained cash balance justified or not Held that:- Tribunal was rightly of the view that the stock is valued on a given date according to the method of accounting following consistent basis to ensure that settled position is not unsettled by unreasonable suspicion and surmises - no material has been discovered to make a departure of valuing the stock giving rise to block assessment and resorting to practice of adoption of GP rate so a deficit will come out - the goods are valued by the Department on M.R.P. basis without due regard to the cost thereof - the decision on the issue is an adjudication of a factual aspect - even if two views are possible, the view taken by the Tribunal is not liable to be interfered with u/s 260A no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 47
Undisclosed investment for the purchase of land and construction of house Held that:- The DVO's estimation of cost of construction without furniture and fixture and that of the assessee's valuer, there is a minor difference of Rs. 1.22 lakhs - even if the AO had accepted the DVO's report in its entirety, the total addition under the head could not have exceeded Rs. 1.22 lakhs - the AO divided the undisclosed investment in the cost of construction in the three years - Even if this be so, we fail to see how the total of these three years of expenditure could exceed Rs. 1.22 lakhs which was the difference between the DVO's valuation and that of the valuation of the assessee's valuer, on the basis of which he filed the return - the assessee had made no disclosure towards the purchase of land in his statement during the search proceedings - The addition was made merely on the basis of the DVO's report without there being any other material - the DVO had also substantially relied on jantri rates and had made other references for arriving at the valuation as such no question of law arises for consideration Decided against revenue.
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2014 (11) TMI 46
Non-speaking order - Notice for reopening of assessment u/s 148 - Mandatory provisions of sections 147 and 151 are complied with before initiating the proceedings of re-assessment or not - Assessment reopened after four years - Default or failure on the part of the assessee to disclose fully and truly material facts as envisaged in the first proviso to section 147 or not Held that:- CIT(A) did not advert to all the grounds raised before him - It was specifically urged before him that the provisions of sections 147 and 151 of the Act were not complied with there was no whisper in the order qua this submission - It was also submitted that proceedings were initiated after lapse of four years and same is barred by time - The assessee had also pointed out that the objection against reopening were disposed by composite assessment order, but not by way of separate order - Such act is not permissible as decided in GENERAL MOTORS INDIA PVT. LTD Versus DEPUTY COMMISSIONER OF INCOME-TAX [2012 (8) TMI 714 - GUJARAT HIGH COURT] - none of the submissions is considered and decided in the order - Non-consideration of same is not justified and smacks arbitrariness thus, the objections dismissed by the AO in a composite order is not proper, therefore the assessment so framed vide order dated 18/01/2013 deserves to be quashed on this ground alone - CIT(A) has not decided the specific ground in respect of assessment being time barred, non-compliance of the mandatory provisions of sections 147 & 151 of the Act thus, the order of the CIT(A) is set aside Decided in favour of assessee.
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2014 (11) TMI 45
Rejection of books of accounts - Difference in the sales and quantitative details of the assessee or not - Estimation of income by applying a profit of Rs. 3200 per bike - Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that the CIT(A) found the stand taken by the assessee to be correct - The Form 3CEB filed before the AO was found to be not about the number of motorcycles produced by the assessee during the period, rather, it was found to be concerning the royalty paid by the assessee company during the relevant quarter - CIT(A) noted that besides, the assessee had furnished a complete reconciliation before the AO, as also incorporated in the assessment order - This reconciliation had been arbitrarily rejected by the AO - CIT(A) rightly held that the AO had erred in concluding that there had been a difference in the sales and quantitative details of the assessee. Royalty payment to 100% holding company Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that the It cannot be gainsaid that any expenditure incurred wholly and exclusively for the purposes of business is an allowable expenditure, even though, as in the present case, the payment is made to a 100% shareholding company of the payer - That apart, u/s 40A(2) of the Act, it is only the fair value of such expenditure, which is allowable - the arms length price provisions take care of the payment in such transactions being at arms length - Neither Section 40(a)(i) nor Section 2(22)(e) of the Act are applicable Decided in favour of assessee. Set off of brought forward business losses and unabsorbed depreciation Held that:- Restoration to the AO would have been justified if despite his requiring the assessee to lead further evidence in support of its explanation, the assessee had failed to do so and the ld. CIT(A) had accepted the assessees contention without getting comments from the AO - the AO did not raise any further query on the submissions made before him in this regard revenue has brought no material on record to demonstrate any fallacy in the explanation tendered on behalf of the assessee - no useful purpose will be served in once again sending the matter back to the AO for carrying out the examination of the claim for the fourth time Decided in favour of assessee. Sales price charged on realization of motor cycle understated or not Held that:- CIT(A) observed that there was no justification for the AO to make an assumption that the sale price charged by the assessee during the year was lower than that in the preceding year - Now, when the Assessing Officer has, neither in the assessment order, nor in either of the remand reports, been able to rebut the categorical assertions of the assessee in this regard, as to how the CIT(A) has erred in accepting the assessees contention, has not been made out - merely since the realization per motor cycle for the year was low as compared to that in the preceding year, this by itself cannot lead the AO to assume that the sale price charged by the assessee company was under-stated and the AO evidently erred in making such assumption - unless there is material evidence to disprove the contention of the assessee, the sale stated in the books of account needs must be accepted. Losses incurred by it as compared to the profits earned by other competitors acceptable or not Held that:- Profit can only be made when there is ability to do so - The factors pointed out by the assessee for not being able to make sales, have not been refuted - Therefore, in the presence of the said factors, without a doubt, the losses suffered by the assessee cannot be said to be either bogus, or inflated - nothing was brought to establish that the assessee had been charging a sale price higher than that noted in the books of account - CIT(A) has correctly held the rejection of the books of the assessee by the AO is incorrect - the assessee had been selling motorcycles at a lower price to its holding and subsidiary companies as compared to its domestic sales - in absence of material, the AO could not tinker with the price determined by the TPO thus, the rejection of books of account of the assessee by the AO does not hold good - Decided in favour of assessee. Adjustment of ALP - Motor bike exported by the assessee company to AE Held that:- The rejection of the resale price method by the TPO was not justified - There has to be continuity and uniformity in the approach of the Revenue towards an issue and particularly in the case of the same assessee - the TPO was not correct in recording this finding that the assessee has not been able to corroborate its analysis - where an assessee has followed one of the standard method for determining the arms length price, such a method cannot discarded in preference over other method - the transactional net margin method i.e. TNMM should be applied only when standard or traditional methods are incapable of being applied because while traditional method seeks to compute the price at which international transactions would normally be entered into by the associated enterprise but for their interdependence and relationship, transactional profit method seeks to compute the profit that the tested party would normally earn on such transaction with unrelated parties - TNMM method applied by the TPO for determining the arms length price is not the most appropriate method. The assessee company has furnished all the relevant data of the foreign party and it is not the case of the TPO that information as called for about the foreign party has not been furnished by the assessee company - by application of the TNMM method in the case of the assessee company, the price worked out is not a realistic price - The whole objective of the transfer pricing study is to find out an arms length price of the product purchased or sold by the assessee company - addition made by TPO and as confirmed by the DRP are unjustified and the same is directed to be deleted Decided in favour of assessee.
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2014 (11) TMI 44
TDS u/s 195 - Nature of amount paid to parent company abroad on account of software expenses and engineering expenses - reimbursement of expenses or not - Whether the assessee company can be treated as an assessee in default u/s 201(1) - AO observed that the remittance made by the assessee to ATI Technologies, Canada constituting income from other sources was chargeable to tax in the hands of the said foreign company at the rate of 40% with surcharge and education cess as - Held that:-the amount in question was paid by the assessee company to ATI Technologies, Canada for the benefit it derived in the form of services procured from Soctronics India Private Limited and provided to it by ATI Technologies, Canada, and it is not a case of any payment of extra profit/cash by the assessee company to ATI Technologies, Canada as alleged by the authorities below, the next issue that arises for our consideration is whether it was a case of a mere reimbursement of actual expenses incurred by the ATI Technologies, Canada on cost basis without any profit element involved therein as claimed by the assessee. The amount in question was remitted by the assessee company to ATI Technologies, Canada for certain benefits received by it in the form of services procured by ATI Technologies, Canada from Soctronics India Private Limited and provided to the assessee company, and it was not a case of either gratuitous payment made by the assessee or mere reimbursement of expenditure incurred by the ATI Technologies, Canada, the question that now arises for our consideration is what exactly is the nature of this payment. Almost similar view, as taken by us on this issue, has been taken by the Commissioner of Service Tax vide his order dated 23.7.2012. In their respective orders, the Assessing Officer as well as the learned CIT(A) have observed that if one were to go by the conclusion of the Commissioner of Service Tax, the amount in question paid by the assessee to ATI Technologies, Canada for services procured from Soctronics India Private Limited and made available to the assessee company will be in the nature of fee for included services which is chargeable to tax in the hands of ATI Technologies, Canada as per the domestic law as well as India Canada DTAA. The assessee company was liable to deduct tax at source from this amount as per the provisions of S.195, and having failed do so, it has to be treated as an assessee in default under S201(1) to the extent of tax payable by ATI Technologies, Canada in India on the mount in question which is in the nature of fee for included services. Decided against assessee. TDS u/s 194J - Amount paid to Soctronics India Private Limited for the services availed through its parent company ATI Technologies, Canada Held that:- The amount was remitted by the assessee company to its parent company in Canada for the services procured by the said company from Soctronics India Private Limited and provided to the assessee for which the assessee company was charged with profit the order of the CIT(A) is upheld Decided against assessee. Unreasonable and Excessive payment to parent company - Held that:- The entire amount claimed to be paid by the assessee to ATI Technologies, Canada for use of software licences was included in its cost and the same was subsequently recovered from ATI Technologies, Canada, alongwith mark up, which clearly shows that there was no ulterior motive on the part of the assessee to pay any extra profit or cash to ATI Technologies, Canada in the guise of software application cost - the authorities below are not justified in treating 50% of the software licence cost paid by the assessee company to ATI Technologies, Canada as excessive and unreasonable - the claim of the assessee of having paid the entire amount in question to ATI Technologies, Canada for use of software licences/applications is accepted Decided in favour of assessee. Whether the nature of payment is Royalty Article 12 DTAA Held that:- In the absence of details and due to lack of proper examination/verification by the authorities below, it is not possible to ascertain the claim of the assessee that the amount was paid by it to ATI Technologies, Canada only for use or right to use a copy righted article, i.e. software and not for the use or right to use the copy right in the said software, and it was thus not in the nature of royalty within the meaning of Article 12 of the India-Canada DTAA thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of assessee.
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Customs
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2014 (11) TMI 70
Fulfillment of export obligation - Demand of differential amount of duty - Confiscation of goods - appellants have been granted extension of time for installation of Plant and Machinery up to 30th August 2014. - Held that:- If the installation period itself is extended, naturally it would amount to postponement of export obligation also. Having regard to all these circumstances, in our opinion, the order passed by the original authority has to be set aside and original authority has to be directed to wait for the extension period granted for installation to be over for initiating further action. - matter remanded back - Decided in favour of assessee.
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2014 (11) TMI 69
Confiscation of goods - antiques goods - Held that:- without a clear finding that the goods are antiques goods cannot be confiscated under the provisions of Section 113(d) of the Customs Act read with provisions in Antiquities and Art Treasures Act, 1972. It is also necessary that such certificate is issued by the competent authority. In this case, both the requirements are not complied with. Therefore, confiscation is not sustainable in law. However, since there is a suspicion about the goods being antiques, it is only proper that these goods are not allowed to be exported but allowed to be taken back to town by the first appellant without payment of redemption fine and penalty - Decided in favour of assessee.
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2014 (11) TMI 68
Confiscation of goods - Redemption fine and penalty - Whether by an Order passed under Section 129B of the Customs Act, 1962, the Tribunal should set aside the said Order and remand the case back to Commissioner of Customs (Appeals) for re-fixation of fine and penalty or pass any other such order as may deem fit - Held that:- since the petitioner had failed in its duty in pointing out the fact that the Departments appeal was pending when the Tribunal took the assessees appeal for hearing, it was no longer open to the petitioner to turn round and to point a finger at the Tribunal in these circumstances. While they are able to appreciate the anxiety now being shown by the Department, they are unable to accept Mr. Radhakrishnans submission that the decision of the Tribunal as also of the High Court, should be set aside in order to accommodate the Department which had failed to point out to the Tribunal that the appeals preferred by the Department were also pending. Such an order would unsettle matters which have already been settled and would amount to giving premium to the negligence of the Department especially when the Commissioner of Customs, CESTAT and the High Court had all held in favour of the noticees and have directed return of all the 78 bars of gold to them. More than 8 years have passed since the gold bars were seized and there can be no justification for the matter to be dragged on further on account of the laches of the Department. It is legally not feasible for this appellate authority, which is subordinate to the Honble CESTAT to entertain this appeal. The appellant-department is directed to approach the Honble CESTAT and seek a proper resolution for their ineptness - matter remanded back - Decided in favour of appellants.
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Service Tax
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2014 (11) TMI 87
GTA services - reverse charge - commercial concern or proprietor - Held that:- Section 65(50b) of Finance Act, did not cover a case of proprietary commercial concern to be treated as Goods Transport Agency and set aside the order of CESTAT that the expression commercial concern would include a proprietary concern also. - Decided in favor of assessee.
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2014 (11) TMI 86
Renting of immovable property - pure agent - joint venture - according to the Memorandum of Understanding entered into between 14 co-owners and the appellant, the appellant was allowed to enter into lease agreement/rental agreement and pay the co-owners in accordance with percentage fixed in the agreement, the amount received by them after retaining a percentage as their commission - Held that:- Appellant only acted as a pure agent - it cannot be said that appellants have rented out the immovable property but it is the co-owners who have rented out the property. In view of the decision of the Tribunal in the case of Manju Champaklal Bafna: [2013 (12) TMI 907 - CESTAT AHMEDABAD] wherein in a similar situation, unconditional waiver of pre-deposit was granted where there were co-owners of the property, we consider that, in this case also, a similar treatment is required to be extended. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.
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2014 (11) TMI 85
Waiver of pre deposit - Clinical testing service - Technical testing and analysis service - Held that:- Services received by the appellants are similar to the services in dispute before the Tribunal in the case of Glaxosmithkline Consumer Healthcare Ltd. [2014 (1) TMI 258 - CESTAT NEW DELHI] and accordingly, we consider that the appellants have made out a prima facie case for complete waiver. the requirement of predeposit is waived and stay against recovery is granted - Stay granted.
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2014 (11) TMI 84
Goods Transport Agency services - Imposition of penalty - Held that:- demand was made by issuing a show cause notice in the year 2007 i.e. after retrospective amendment. At the time of retrospective amendment, no proceedings were pending against the appellant in respect of Service Tax. - Decision of The Honble High Court of Gujarat in the case of Eimco Elecon Ltd (2010 (7) TMI 477 - GUJARAT HIGH COURT) followed - Decided in favour of assessee.
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2014 (11) TMI 83
Waiver of pre deposit - Renting of immovable property service - Held that:- As regards renting of immovable property service there is no prima facie case for the appellant in view of the fact that Honble Supreme Court has directed the Members of the Indian Retailers Association to deposit 50% of the tax and provide Solvency Certificate for the balance which would show that there is no prima facie case in favour of the parties who were challenging the same [2011 (10) TMI 12 - Supreme Court of India]. Under these circumstances we consider that appellant also may be required to deposit at least 50% of the tax with interest and for the balance 50%, should give Solvency Certificate to the Commissioner. what is important and relevant to consider about the liability of service tax is the understanding between the service provider and the receiver and the liability of the service to the tax. In this case, admittedly, the agreement for renting of immovable property is between the service receiver and the appellant and the Methodist Church is nowhere in the picture. From the records what emerges is that the appellant is a service provider and M/s. Pantaloon Retail (India) Ltd. is the service receiver. Therefore at this stage we are not in a position to consider this submission - appellant is directed to deposit 50% of the tax with proportionate interest - Partial stay granted.
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2014 (11) TMI 82
Sponsorship service - matches conducted by the Indian premier League (IPL) - Held that:- issue is now settled by the decision of Hero Hondo Motors Ltd vs CST in [2013 (6) TMI 447 - CESTAT NEW DELHI] whereby the Tribunal held that the sponsorship of sports events are exempted from the taxable service - Decided in favour of assessee.
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2014 (11) TMI 81
Modification of stay order - Held that:- On going through the order dated 25.09.2013 passed by us, there cannot be any error apparent found in the order. This is because, the Tribunal after hearing both sides has come to the conclusion that the stay order passed by the Honble Supreme Court is required to be followed. If there is a grievance, the remedy lies in filing the appeal and not in seeking modification. In the absence of any error apparent from the order, we consider the submissions made by the learned A.R. to be appropriate and accordingly the application is rejected. However, in the interest of justice appellant is given another eight weeks time to fulfill the directions - Decided partly in favour of assessee.
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Central Excise
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2014 (11) TMI 79
Benefit of Sr. No. 12 of exemption notification No. 14/2002-CE - processed knitted and crocheted cotton fabrics - appropriate duty has not been paid on the grey fabrics - Held that:- In the present notification, Sr. No. 10 of table annexed to Notification No. 14/2002-CE exempts all goods knitted or crocheted fabrics of cotton subject to the condition that such fabrics is made out of yarn on which appropriate duty is paid and no credit is taken on inputs and capital goods. Similar condition exists in Sr. No. 12 of the same notification. The words like appropriate duty of excise leviable, read with any notification for the time being in force duty has been paid and no credit of duty paid on inputs or capital goods has been taken have been used in condition -3 pertaining to Sr. No. 12 of Notification No. 14/2002-CE. All these expressions have been interpreted by various orders of CESTAT and Courts, including the Apex Court. On top of all this Explanation II of Notification No.14/2002-CE creates a fiction that for the purpose of condition of this notification taxable yarn or fabrics shall be deemed to be duty paid even without production of documents evidencing payment of duty. For a claim under Sr. No. 12 of Notification No.14/2002-CE by an assessee it can not be presumed that all grey cotton fabrics received by a textile processor is not duty paid because Sr. No. 10 of the same notification exists. It is also relevant to note that exemption under Sr. No. 10 of this exemption notification is not unconditional but is subject to certain conditions. Thus, the grey fabrics available in the market may not be 100% grey fabrics on which no duty has been paid. That is why a fiction is created under Explanation-II that for the purpose of condition of this notification textile yarn or fabrics shall be deemed to have duty paid even without production of duty paying documents. There is no expression like, except good which are clearly recognizable as non duty paid in Explanation-II of Notification No. 14/2002-CE, to have any doubt. It is evident from the above Explanatory Notes that framers of Notification No.14/2002-CE wanted to extend the benefit of this exemption to the manufacturers subject to the only condition that no cenvat credit is taken/ not taking of such cenvat credit was not only restricted to inputs but was also to capital goods. It is further clarified that benefit of rate of duty should be allowed without insisting upon any documentary proof of payment of duty. In view of the above legislative intent, we do not agree with the views expressed by CESTAT two Member judgment in the case Auro Textile vs. CCE Chandigarh (2009 (11) TMI 447 - CESTAT, NEW DELHI) in Para 25 that reliance of the appellant on Explanatory Notes to Budget of 2002 cannot be of any assistance to the assessee. It has been rightly argued by the Senior Advocate in the present proceedings that if the views of the Revenue are accepted than it will lead to chaos and absurdity because making a manufacturer to pay duty again after breading cenvat chain by not taking credit, will burden small processing manufacturers to pay duty again on the processed fabrics when no credit on inputs is taken. Indirectly all the textile processors will be forced to adopt cenvat credit route only to avoid cascading effect of taxation. It will not be in the interest of Small operators to follow only the cenvat credit mode. Decisions taken in the case of CCE Ludhiana vs. Prem Industries (2009 (5) TMI 193 - CESTAT, NEW DELHI), Simplex Mills Co. Limited vs. CCE (2005 (4) TMI 406 - CESTAT, MUMBAI) and Morarjee Gokuldas Spg. & Wvg. Co. Limited vs. CCE (2005 (5) TMI 170 - CESTAT, MUMBAI) were correct interpretation of exemption Notification No. No.14/2002-CE dated 01.03.2002. Accordingly, benefit of Sr. No. 12 of Notification No. 14/2002-CE will be admissible to the appellants by considering the fabric received for processing as deemed duty paid as per Explanation -II of Notification No. 14/2002-CE. Any other interpretation will make this explanation redundant. Further such a deemed fiction was not existing before the Hon'ble Supreme Court while delivering judgment in the case of CCE vs. Dhiren Chemicals Limited (2001 (12) TMI 3 - SUPREME COURT OF INDIA). - Decided in favour of assessee.
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2014 (11) TMI 78
Clandestine manufacture and removal of goods - Suppression of value of final products - confirmation of interest and imposition of penalties - Revenues entire case is based upon the investigations conducted by them in respect of entries made in the balance sheet - Income accepted by Income Tax authority held fraudulent by Central Excise Authority - Held that:- Central Excise authorities have no jurisdiction to interfere in the appellate orders passed by Income Tax authorities and to hold that transaction which stand accepted by the Income Tax authorities were not genuine transactions. The Tribunal in the case of R A Casting Pvt. Ltd. vs. CCE, Meerut I [2008 (6) TMI 197 - CESTAT NEW DELHI] has dealt with an identical question. By referring to the Honble Gujarat High Court decision in the case of Arabian Express Line Ltd. vs. Union of India [1994 (4) TMI 25 - GUJARAT High Court], it stand held by the Tribunal that law does not entitle the Revenue to disregard all the statutory excise records as well as audited financial accounts and records of the assessee-company, which have been duly verified and accepted by the competent authorities from time to time not only for central excise but also for purposes of income tax etc. Decision of R.A. Casting was upheld by the Supreme Court [2011 (1) TMI 1302 - Supreme Court of India]. There is virtually no evidence produced by the Revenue as regards the clandestine manufacture and clearances of appellants final product. It is well settled law that the allegation of clandestine manufacture and removal are required to be proved by production of sufficient evidence in the shape of production of raw material, the actual manufacture of the goods, transportation of the same or in the shape of identification of the buyers. There is no statement of any persons indicating or admitting that income as reflected in the appellants balance sheet stand derived from clandestine activities of manufacture and clearance of their final products. Infact we find that where the excess income not even entered in the balance sheet so surrendered by an assessee to the income tax authorities, it stand held by various Courts that same cannot be attributed to regular business of appellant unless there is evidence to that effect. there is not even an iota of evidence to indicate that excess income reflected by the appellant in their balance sheet and the other statutory records, which also stand assessed by the income tax authorities, was relatable to the manufacturing activities of the appellant. In the absence of any evidence we find no merits in the revenues stand - Reference in this regard can be made to the Tribunal's decision in the case of CCE Ludhiana vs. Zoloto Industries [2014 (3) TMI 788 - CESTAT NEW DELHI] as also Punjab and Haryana High Court decision in the case of CCE, Ludhiana vs. Mayfair Resorts [2011 (3) TMI 175 - PUNJAB AND HARYANA HIGH COURT]. - Decided in favour of assessee.
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2014 (11) TMI 77
Recovery of amount collected u/s 11D - amount collected from customers despite availing benefit of exemption (Set off) notification Notification No. 432/86-CE dated 06.08.1986 - whether or not set-off claimed by the appellant as per Notification No. 432/86-CE dated 06.08.1986 is a duty assessed and paid on the gate passes - Held that:- notification is issued under Rule 8(1) of the Central Excise Rules, 1944 and exempts certain final products to an extent equivalent to duty of excise already paid on the input Naphthalene. There is no indication that duty paid on Naphthalene is eligible as credit and this notification is also does not prescribe any register to be maintained by the manufacturers of the finished goods for availing any credit. However, there is definitely an indication that duty equivalent to the duty paid on inputs (Naphthalene) is required to be set-off while arriving at the duty payable on the finished goods. As there is one-to-one correlation with respect to inputs used, duty paid on such inputs and the extent of exemption, therefore, this has to be considered only an exemption notification in which the extent of exemption is determined by the duty paid on the inputs. The extent of set-off available shows that there is no payment of duty and the same is not required to be paid on the finished products manufactured by the appellant. Demand period is April 1990 to April 1992 and the show cause notice has been issued on 01.11.1993 therefore, the same is issued within reasonable period. So far as addition of the excess amount in the invoices from the customers in the guise of duty paid as set-off it is also observed that the fact of set-off being recovered from the customers was not brought to the notice of the Revenue and accordingly, show cause notice has to be considered as issued in reasonable time as held by the Hon'ble High Court in the case of Inductotherm (I) Pvt. Limited (2012 (12) TMI 856 - GUJARAT HIGH COURT). Further the additional consideration so received/ recovered has to be included in the assessable value under Section 4 of the Central Excise Act, 1944 - Decided against assessee.
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2014 (11) TMI 76
CENVAT Credit - Whether the assessee is entitled to take CENVAT Credit as per Rule 6(5) of Cenvat Credit Rules, 2004 or not - Held that:- There is no bar to avail CENVAT credit on the services covered under Rule 6(5) by a unit who is engaged in the activity of manufacturing on both dutiable as well as exempted goods and engaged in dutiable as well as exempted services. Therefore, we hold that in this case the assessee is entitled to take the CENVAT credit of services referred in Rule 6(5) of CENVAT Credit Rules, 2004 for whole of the credit attributable to dutiable as well as final exempted products and for taxable or exempted services but the assessee is not entitled to take CENVAT credit attributable to the activity of trading as during the relevant time, the trading activity was neither excisable nor an exempted service at all. Therefore, the quantification of inadmissible CENVAT credit is required to be done at the end of adjudicating authority to disallow the CENVAT credit attributable to trading activity. Whether the learned Commissioner has jurisdiction to reallocate the CENVAT credit or not - Held that:- Commissioner has no jurisdiction to reallocate the CENVAT credit to the assessee in question as there was no such allegation in the show-cause notice and he cannot go beyond the allegation in the show-cause notice to decide the issue. - Matter remanded back - Decided in favour of Revenue.
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2014 (11) TMI 75
Clandestine manufacture and clearance of excisable goods - 8 note books recovered from the appellants during the search operations. - Held that:- One of the arguments taken by the appellants is that the said eight note books were recovered from the residence of Shri Chnadulal M Vohera and not from the factory premises. It is not appreciated as to what difference it will make when appellants are not disputing the correctness of the facts stated in these eight note books when the same were maintained by either the appellants or their employees. It is also observed from the case records that suppliers of some of the raw materials, who received the finished goods have confirmed the correctness of the entries made in the eight note books maintained by the appellant. Therefore, the case is not merely made on the basis of few confessional statements but also on the basis of private note books which are further corroborated by the statements of some of the raw materials suppliers. No justification in interfering with the order passed by the adjudicating authority - Decided against assessee.
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2014 (11) TMI 74
Admissibility of cenvat credit - Invocation of extended period of limitation - Held that:- there is no specific mention of elements; suggesting fraud wilful misstatement etc., with intention to evade payment of duty; in the show cause notice. admissibility of cenvat credit on items used for erecting support structure of capital goods was a disputed issue on which different interpretations were being given by courts. The issue was finally settled by CESTAT Larger bench in the case of Vandana Global Ltd [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)]. Respondent had thus a bonafide belief that such credit was admissible. All the credit entries and the cenvatable documents were available with the Respondents which were examined by Internal Audit parties but only Local Audit party could raise the objection. In the above factual matrix of the facts extended period cannot be made applicable to the present case - Decided against Revenue.
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2014 (11) TMI 73
Validity of order passed - mechanical order passed - Held that:- When the extract in the Final Order in [2014 (10) TMI 369 - CESTAT NEW DELHI] is read with Para 4 of the present impugned order. Learned authority had a pre-determined mind to pass mechanical order as that was noticed in the past, while disposing this appeal also. Therefore, appeal is allowed for such mechanical order not being sustainable - Decided in favour of assessee.
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2014 (11) TMI 72
Clearance to 100% EOU - exemption from NCCD - Exemption under Notification No. 22/2003-C.E., dated 31-3-2003 - clearance of POY to job worker for manufacture of grey fabrics - Held that:- Circular No. 641/32/2002-CX, dated 26-6-2002 was followed by C.B.E. & C. Circulars 60/1/2006-CX, dated 13-1-2006 and 232/16/2004-CX, dated 30-1-2006, issued under Section 37B of the Central Excise Act, 1944 - With respect to chargeability of NCCD on captive consumption of goods, it has been held that NCCD is not leviable. In view of the latest view point held by this Bench NCCD is not payable by the appellant. Secondly, C.B.E. & C. circulars issued on an issue are binding on the departmental officers and cannot be challenged in appeal - Decided in favour of assessee.
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2014 (11) TMI 71
Denial of CENVAT credit - conversion of DTA to 100% EOU - Held that:- on conversion of DTA to 100% EOU the assessee is entitled to avail CENVAT credit on inputs as well as capital goods lying in their factory at the time of conversion. - Following decision of Sandoz Pvt. Ltd. vs. CCE [2013 (10) TMI 145 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (11) TMI 80
Liability of the petitioner to pay the interest on its turnover of sale of jewellery articles and bullion - petitioner had opted for payment of composition fee as envisaged under section 7-D of the U.P. Trade Tax Act and the said composition scheme after three years was turned down by the State of Uttar Pradesh - Whether petitioner having deposited the requisite amount in lieu of the tax under the scheme, can be held as defaulter in payment of admitted tax due so as to hold him liable to pay interest - Held that:- Petitioner has deposited the tax payable by him under the composition scheme i.e. under section 7-D of the Act. In other words, tax which is payable under the Act. Even the Explanation which defines the "tax payable" provides that it means the tax which is payable under this Act. Logically, it follows that it will include the amount of tax payable under section 7-D paid in lieu of tax payable under the Act. The aforesaid relied upon judgment fully supports the stand of the petitioner. The aforesaid decision of the Apex Court is a constitution bench decision and has been followed subsequently in Frik India Limited and another vs. State of Haryana and others, (1994) 5 SCC 559, a case under Haryana General Sales Tax Act holding that the additional amount of tax found due after the dealer had deposited the entire tax due as per return without wilfully omitting any material information, interest charged to such amount is not proper. Dealer disputed its liability to pay the tax on realized rental charges for glass, bottles and crates. Subsequently, it was found that the stand of the dealer is not justified in view of the decision of Apex Court in the case of State of Orissa vs. Asiatic Gases Limited [2007 (5) TMI 322 - SUPREME COURT OF INDIA]. The dealer then urged that as he was bonafidely disputing the liability of payment of tax on the aforesaid item, the interest should be charged under section 8(1B) of the Act i.e. from the date of the assessment. In this factual background, the Apex Court held that the tax becomes admittedly payable once it has been held that the tax is payable under the Act, the interest would be payable in the terms of sub-section (1) of section 8 and not in terms of sub-section (1B) of section of the Act. We may point out that the U.P. Trade Tax Act provides for the payment of interest on different rates under different circumstances. Under section 8(1) interest @ 2 per cent per mensem is payable when the admitted tax is not paid or short paid. While under section 8(1B) interest at the rate of 1.5 per cent per mensem is payable if the tax assessed is not paid within the specified time. The scheme provides that the State Government shall review the scheme from time to time to ascertain the fact as to whether it has been opted for by the requisite number of dealers or not. It further provides that the scheme can be cancelled by the State Government without giving any prior notice. The condition No. Ta provides that unless 30000 dealers opt for the scheme within a period of three months from the date of its commencement, the scheme shall be effective only then. None of the conditions in the scheme can be read in isolation. The scheme should be read as a whole and its every condition should be given harmonious construction. While giving meaning to the various conditions of the scheme, one should also bear in mind the liability which was incurred by such dealers who opted for the scheme. The condition No. Jha provides that a dealer who has opted for the scheme has been injuncted to realise the tax from the purchasers. Such dealer has been denied any other type of concession which might be available otherwise under the Act. It also casts an obligation on the State Government to review the situation periodically to find out the response of the scheme. 04th of November, 2005 is the cut off date fixed under the scheme beyond which no dealer could opt for the scheme even after the payment of late fee, interest etc. The least which could be expected from the State Government to have given consideration to the number of applicants who opted for the scheme and the amount collected under the scheme on the cut off date i.e. 04th of November, 2005 or shortly thereafter within a reasonable period of time. It appears that the State Government slept over the matter and did nothing. State Government failed to adhere the cut off date and to review the scheme periodically, which resulted such lapse of time solely on account of inaction at the end of the State Government, the petitioner who has changed his position by opting the scheme cannot be asked to pay the interest on the differential amount even if the scheme is held to be still born. There can hardly be any dispute with the right of the State Government either to withdraw any such scheme or not to enforce it any further but it does not mean that such dealer who has complied with the letter and spirit of the scheme, may be saddled with the liability to pay the interest on the differential amount of tax. The scheme captured the attention of the dealers but it failed as it could not achieve the target, for no fault of the persons like the petitioner. - Decided in favour of assessee.
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