TMI Tax Updates - e-Newsletter
November 7, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

• PROVISIONS OF COMPANIES ACT, 2013 WHICH HAVE NOT YET BEEN NOTIFIED

Highlights / Catch Notes

Income Tax

• Assessee had claimed loss under the head income from house property’ by claiming deduction u/s 24(b) of the Act in respect of interest paid for purchase of house property and further deduction u/s 80C was claimed in respect of repayment of loan - deduction can be allowed to assessee only if property was acquired out of borrowed capital - AT
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• Rejection of application of condonation of delay u/s 119(2)(b) - CIT has exercised the discretionary power and rejected the delay condonation application, the extra ordinary jurisdiction under Article 226 of the Constitution of India cannot be invoked - HC
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• Amalgamation of two companies - once it is found that assessment is framed in the name of nonexisting entity it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B - HC
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• Condonation of delay – delay of 117 days in filing appeal and 1248 days in filing review petition – The delay does not deserves to be condoned - their presence in the Court to own the lapse and deficiency will not assist and the revenue in any manner - HC
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• Merely because tax has been deducted at source on the amounts received by the assessee, it does not lead to an automatic conclusion that the entire amount is the income of the assessee - AT
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Customs

• Refund of anti dumping duty - mere production of CA certificate does not ipso facto grant refund to the respondent unless entire material showing no duty burden passed on to the buyer is adduced by the respondent before adjudicating authority. - AT
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Service Tax

• Rectification job for defected commecial vehicles - If the argument of Revenue is accepted, every motor garage will become a technical inspection and certification agency - AT
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• Re-classification of service for the purpose of cenvat credit - no option is left with the Revenue to change the classification/ assessments of the services at the service recipient’s end. - AT
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• Activity of laying of pipelines would not come within the purview of “erection, commissioning and installation service“ and it would be more appropriate classifiable under "Commercial or industrial construction service" - AT
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• Taxability of activities in the nature of services provided by partners to the partnership firm - the nature of transactions between the two partners and the firm would be one of joint-venture or a profit sharing operation - stay granted - AT
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• Interest on delayed refund - refund of service tax paid on the services rendered to them in an SEZ unit - claim of interest allaowed - AT
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Central Excise

• Denial of CENVAT Credit on Computers - Nexus with manufacturing activity - computers have been used by the applicant for maintaining stocks in the factory - prima facie case is in favor of assessee - AT
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VAT

• Classification of polystik compound or the rain guard compound - the product in question is to be classified as an adhesive and it is neither a plant protection chemical nor a water proof material - HC
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Case Laws:

• Income Tax

• 2014 (11) TMI 191
  Payment of royalty - Capitalization of royalty expenses Held that:- The assessee company is a manufacturing company and engaged in the engineering tools - It is a 100% export oriented unit located in Gurgaon, Haryana - This unit is eligible for exemption u/s 10B of the Act on the profit earned - The assessee company was paying the royalty expenses to MACNAUGHT on the various products sold by it as agreed with MACNAUGHT on 19.11.2002. MACNAUGHT is an Australian company - It has no connection with the management of the assessee company - This royalty is being paid by the assessee for putting the trademark MACNAUGHT on the products of the assessee and using drawing etc. - This royalty was linked to the volume of sales- The assessee is using the knowhow, trademark and licenses without any right to the license - The rights remained with the licensor, this payment of royalty cannot be treated as capital in nature - It was paid for use of technology and trademark, therefore, it was revenue expenses - this expenditure has been incurred wholly and exclusively for the purpose of business of the assessee - The assessee has deducted TDS and deposited the same with the Government - The genuineness of the payment is also not in doubt - the CIT (A) was not justified in sustaining/enhancing the addition and the AO was not justified in treating the amount as capital in nature Decided in favour of assessee.

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• 2014 (11) TMI 190
  Condonation of delay – delay of 542 days – Held that:- The assessee has been diligently pursuing remedies against the order of the revenue authorities - only when they did not find any success before the CIT(A), the instructing Counsel contacted Dr. Rakesh Gupta who specialized in arguing the matters before the High Court and the Supreme Court and when the case was discussed in the conference, Dr. Rakesh Gupta brought to the notice that a mistake occurred in not filing any appeal against out the order of CIT U/s.263 - the asssese has explained the delay as it was under a bonafide belief that the remedy lies in filing an appeal against the order of the AO passed u/s 143 r.w.s.263 - It is a case of pursuing the remedy in a wrong forum - It was a case of the assessee under a mistaken advise did not file the appeal against order passed u/s 263 by the CIT - the assesee has shown a sufficient cause and reason to explain the whole of the delay covered by the period between the last day of limitation and the date on which the appeal was actually filed - the assessee was pursuing the legal remedy throughout the period and it was a case of pursuing the wrong remedy on mistaken advise – delay condoned and appeal admitted. Revision by CIT u/s 263 - Doctrine of merger - The AO in his order u/s 143(3) considered the issue of stock difference and rejected the contentions of the assessee - it cannot be said that there is non application of mind by the AO nor that the AO was negligent - the AO has applied his mind and after carefully considering the facts and circumstances of the case took a possible view - the order passed by the CIT (Central) u/s 263 is bad in law - For the proposition that the revision u/s 263 is bad in law, when the AO duly applied his mind – relying upon CIT vs. Bharat Aluminium Co.Ltd. [2007 (5) TMI 228 - DELHI HIGH COURT] - even otherwise, the issue of stock difference and the taxability of income was subject matter of appeal before the CIT(A), Ludhiana - The CIT(A) Ludhiana up held the order of the AO - Hence there is merger of the order of the AO with that of the order of the CIT(A) – thus, CIT(Central), Gurgaon does not have jurisdiction to invoke revisionary powers u/s 263 – thus, the order passed u/s 263 by the CIT(Central), Gurgaon is set aside – Decided in favour of assessee.

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• 2014 (11) TMI 189
  Denial of claim u/s 24(b) and u/s 80C - Assessee had claimed loss under the head income from house property’ by claiming deduction u/s 24(b) of the Act in respect of interest paid for purchase of house property and further deduction u/s 80C was claimed in respect of repayment of loan – Held that:- The assessee had purchased the property on 25th day of November 2005 - ICICI Bank disbursed the amount on 31.12.2005 - the loan taken by assessee from ICICI bank cannot be said to be taken for the purpose of purchase of the property as the property was already purchased on 25.11.2005 and full payment of consideration was already paid as is apparent from the copy of the sale deed - deduction can be allowed to assessee only if property was acquired out of borrowed capital - it has been established that loan was not taken for the purpose of acquiring asset as asset was already acquired before disbursement of loan – CIT(A) had arrived at the correct conclusion that deduction u/s 24(b) and u/s 80-C cannot be allowed to the assessee. Unaccounted estimated expenses incurred on birthday of his grandson – Held that:- Assessee contended that the estimate was made without any basis and without considering that father would have incurred the expenses and moreover relatives from the maternal side would also have contributed to the expenses - The AO has made whole of the addition in the hands of the assessee which is not justified – thus, the addition is reduced at ₹ 2.50 lacs – Decided partly in favour of assessee. Addition on account of 89 liquor bottles found at the residence of the assessee – Held that:- During the assessment proceedings, the assessee had claimed that he is a non drinker and bottles were accumulated over a period of years as part of gifts from friends and relatives and since he was non drinker, the bottles kept on accumulating - he had only purchased 12 bottles for an amount of ₹ 14,400/- which was a small amount keeping in view his withdrawals - since the assessee was staying in a joint family consisting of his son and daughter in law and moreover all bottles cannot be said to have been purchased in one year and the existence of so many bottles can only point out to the fact that these must have been accumulated over a period of time – the addition of ₹ 1 lac will meet the ends of justice – Decided partly in favour of assessee. Deletion of ₹ 22 lacs out of cash found at the premises - Held that:- CIT(A) had rightly deleted the addition by holding that total cash in hand as a whole as per books of accounts was more than total cash found during survey and there was no unaccounted cash – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 188
  Reopening of assessment u/s 147/148 – Notice issued beyond four years - Held that:- The reasons recorded do not even allege that there has been any failure on the part of the assessee to make a full and true disclosure of the particulars necessary for making the assessment - there is no non-disclosure as the assessee had made it clear in the computation of income that the rate of tax applicable was 15% in view of the Article 11(2) of the India-Australia Double Tax Avoidance Treaty - the rate of tax more beneficial to the assessee would have to be applied - The rate of 15% was accepted by the AO – AO has considered this aspect of the matter and such consideration could not have been done unless and until the petitioner/assessee had made the full and true disclosure of the material particulars - the notice in this petition has not been withdrawn because the Revenue’s audit objections are still alive - the notice is without jurisdiction and it is to be set aside – Decided in favour of assessee.

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• 2014 (11) TMI 187
  Reopening of assessment u/s 147/148 – Reopening beyond the period of four years – Failure to diclose material facts or not - Held that:- The reopening of the assessment has taken place beyond a period of four years of the end of the relevant AY 2007-08 - there is merit in the submission which has been urged on behalf of the petitioner that the reasons which have been disclosed, in fact, would indicate that it is from a perusal of the assessment records that the AO formed an opinion that income had escaped assessment - besides the fact that there is not even an averment in the reasons to the effect that the assessee had failed to fully and truly disclose all material facts necessary for the assessment, it is evident that the reasons for reopening are based on the assessment records - there was no failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment, for the relevant AY - The jurisdictional condition for reopening an assessment beyond four years has hence not been fulfilled - the reopening of the assessment is contrary to law since the requirement of the proviso to Section 147 has not been fulfilled – Thus, the notice for reopening of assessment to be set aside – Decided in favour of assessee.

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• 2014 (11) TMI 186
  Rejection of application of registration u/s 12AA – Object of Trust charitable or not u/s 2(15) - Receipt of capitation fee for admission of students found during search – Held that:- The fact that capitation fee was being collected was admitted by the Treasurer of the Trust Shri. Shajahan - the object of the trust was not charitable and it was therefore that the registration u/s 12AA of the Act was rejected - the rejection of the application made was for the reason that they were collecting capitation fee for admission and not on the ground that the funds of the trust were not applied for charitable purpose – Decided against assessee.

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• 2014 (11) TMI 185
  Admission of appeal – Substantial question of law framed – Held that:- Following substantial question of law framed for adjudication - Whether the Tribunal was right in holding that the assessee, a cooperative bank, is entitled to exclude interest accrued but not paid for the purpose of taxation on assets shown under the heading ‘non-performing assets’ as per the guidelines issued by the Reserve Bank of India.

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• 2014 (11) TMI 184
  Reopening of assessment u/s 148 – Excess depreciation allowed or not - Jurisdiction for reopening – Change of opinion - Whether during the survey proceedings u/s 133A of the Act certain facts emerged which give reason to believe that the claim for depreciation on intangible assets was based on incorrect valuation - Held that:- The Assessment order u/s 143(3) of the Act for AY 2009-10 was passed on 26 December 2012 while Assessment Order under Section 143(3) of the Act for AY 2010-11 was passed on 12 December 2012 by the AO - The survey proceedings took place thereafter in September 2013 - During the survey proceedings under Section 133A of the Act statement of Managing Director of the petitioner as well as Chartered Engineer who valued the intangible assets were recorded - In his statement the Managing Director stated that he was ready to withdraw 50% of the claim for depreciation for AY 2009-10 and 2010-11 subject to fresh valuation of the intelligible assets - The acceptance of the Managing Director is itself sufficient tangible material for the AO to reopen the assessment for the purpose of considering the assessee's claim with regard to valuation of intangible assets and the claim for depreciation – the notices have not been issued on the basis of change of opinion but on the basis of fresh tangible material obtained during the survey proceedings after the assessment orders u/s. 143(3) of the Act for A.Y.2009-10 and 2010-11 were passed – thus, there was no reason to interfere with the notices – Decided against assessee.

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• 2014 (11) TMI 183
  Rejection of application of condonation of delay u/s 119(2)(b) - Non-acceptance of returns – Held that:- It cannot be said that the delay was not attributable to the Society - The statutory audit to be carried out by the department was delayed, but the auditor has specifically noticed in the audit report that the delay was attributable to the Society - there is further delay after receipt of the audit report which the petitioner seeks to balance the Chartered Accountant who, according to the petitioner has to conduct the audit under Section 44AB of the Act - The Commissioner have exercised the discretionary power and rejected the delay condonation application, the extra ordinary jurisdiction under Article 226 of the Constitution of India cannot be invoked, causing interference of the discretion exercised or the refusal to exercise it by the Commissioner – Decided against assessee.

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• 2014 (11) TMI 182
  Expenses incurred in earning dividend income – Disallowance u/s 14A – Held that:- A dividend income was earned and the exemption u/s 10(34) of the Income Tax Act was claimed – the Tribunal was rightly of the view that there was interest applicable on the dividend earned and only administrative expenditure was incurred and that was estimated at 5% of the dividend earned – the decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] rightly followed wherein it has been held that disallowance should be reasonable estimation of the expenditure – thus, no substantial question of law arises for consideration – Decided against revenue. Rejection of books of accounts – opportunity of being heard not provided - Satisfaction about correctness or completeness of the Account properly recorded or not - Held that:- The tribunal rightly held that before the AO records satisfaction about the correctness or completeness of the accounts of the assessee, he ought to have given proper opportunity to the assessee - The books of account could not have been rejected casually - It was not done by giving proper opportunity to the assessee - without examining the basic parameters for rejection of the books of accounts the revenue goes in appeal before the tribunal, this is what is faulted by the tribunal - the complaint of the assessee before the tribunal was wholly justified – Decided against revenue.

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• 2014 (11) TMI 181
  Amalgamation of two companies - Assessment to be made on which entity – Held that:- The Supreme Court in Saraswati Industrial Syndicate Limited Versus Commissioner of Income-Tax, Haryana Himachal Pradesh And Delhi III [1990 (9) TMI 1 - SUPREME Court ] held that after the amalgamation of the two companies the transferor company ceased to have any entity and the amalgamated company acquired a new status and it was not possible to treat the two companies as partners or jointly liable in respect of their liabilities and assets – following the decision in SPICE ENTERTAINMENT LTD. Versus CIT [2011 (8) TMI 544 - DELHI HIGH COURT] – Tribunal rightly upheld the decision of the CIT(A) that assessment on a company, which has been dissolved/amalgamated under section 391 and 394 of the Companies Act, 1956, is invalid - There is no provision in the IT Act, to make assessment on an amalgamating company (transferor/dissolved company), even though the appellant company participated in assessment proceedings – Decided against revenue. Applicability of section 292B - Whether an assessment upon an amalgamated company is a mistake within the meaning of Section 292B - Held that:- In SPICE ENTERTAINMENT LTD. Versus CIT [2011 (8) TMI 544 - DELHI HIGH COURT] it has been held that once it is found that assessment is framed in the name of nonexisting entity it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act – thus, no substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (11) TMI 180
  Classification of income – Income from profits and gains of business or income from other sources - Reopening of assessment justified or not - Held that:- Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the machinery, plant or furniture, the income from letting, is chargeable to income-tax under the head "Profits and gains of business or profession" - If for any reason it is not so assessed, then it should be assessed under the head 'income from other 'sources' –the assessee commenced his business - At the inception he had no intention of letting out the building, machinery and licence to anyone - He set up the business for carrying on the business - He was expecting income. In 1980's because of the labour problem, as the assessee found it difficult to carry on the business, he leased this entire business as a going concern with the licence in favour of the lessee M/s McDowell and Company and thus was deriving income from such lease and treated the said lease under the head 'profits and gains of business or profession' - The assessee was so assessed. Without any justification whatsoever, notice was issued for reopening of the assessment for the AY 1997-98 and 1998-99 – The Tribunal was rightly of the view that mere change of opinion would not be a ground for reopening of the assessment especially when from 1980 onwards the assessment was made on the very same basis and, therefore, no fault could be found with that portion of the order - also, what is leased is the commercial assets of the assessee - Earlier he was personally exploiting the commercial asset - Subsequently, he allowed the lessee to exploit that commercial asset - When he gave the commercial asset to the lessee, the intention was not to lease - The intention was to exploit the commercial asset through his expertise and derive income - in view of Section 56(2)(iii) and the decision of Supreme Court in CEPT v. Shri Lakshmi Silk Mills Ltd. [1951 (9) TMI 1 - SUPREME Court] - the income should fall under the head 'profits and gains of business' and not from 'income from other sources' – Decided against revenue.

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• 2014 (11) TMI 179
  Addition of accrued interest on Government securities - Whether the Tribunal was correct in reversing the finding of the AO that the assessee was following dual method of accounting as per Section 145(1) of the Act – Held that:- the interest that becomes due or liable to be payable whether or not it is paid, the interest is accrued or deemed to have been accrued - If the interest does not become due and not liable to pay such part of the interest arise it cannot be said that the interest has become accrued - For its accounting purpose, it has shown the proportionate interest entitled to receive on the Government securities - the income which has become due and payable should alone be considered as income accrued and that should be offered as tax - The fact that the assessee in its internal books of accounting mentions the proportionate interest, which is entitled to receive, in its balance sheet for the purpose of profit and loss cannot be deemed as income accrued, unless such income has become due and payable – there was no inconsistency between the amended provisions of Sections 145 and 5 of the I.T. Act - the amended provisions of Sections 145 now insists mercantile system of accounting where on the income accrued the tax can be levied whether or not received unlike in cash system - Merely because in the books of account, the interest income, which is not due and payable is shown in the account of the assessee – Decided against revenue. Expenses to be allotted to exempted income – Held that:- Following the decision in M/s CANARA BANK Versus THE ASST COMMISSIONER OF INCOME TAX, CIT & DCIT. [2014 (1) TMI 1586 - KARNATAKA HIGH COURT] - the income is derived by the dividends u/s. 10(33) of the Act and interest on tax free bonds u/s. 10(15)(h) of the Act and interest on long term finance to infrastructure companies u/s. 10(23G) of the Act - the persons with whom the amounts are invested by the assessee are crediting the aforesaid amount to the assessee's account by way of a bank transfer - no human agency is involved in collecting these dividends and interest for which the assessee has to incur any expenditure - when the assessee has not incurred any expenditure for realizing this income, the question of holding that 2% of the gross total income is an expenditure and that has to be added back to the income is unsustainable in law – Decided against revenue. Interpretation of Section 36(1)(vii) and Section 36(1)(viia) – Held that:- The authorities did not have the benefit of judgment delivered by the SC in Catholic Syrian Bank Ltd. Versus Commissioner of Income Tax, Thrissur [2012 (2) TMI 262 - SUPREME COURT OF INDIA] – thus, the matter is remitted back to the assessing authority with a direction to decide the aspect in the terms of the judgment of the Hon'ble Supreme Court.

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• 2014 (11) TMI 178
  Condonation of delay – delay of 117 days in filing appeal and 1248 days in filing review petition – Held that:- The explanations offered are an after thought and to cover up the lapses - There is complete silence as to why a statement is made that the department was unaware of the Courts order and at the same time annexing photo copies of the order passed on 17th June, 2009 and 23rd July, 2009 both of which indicate the presence of the revenue/ department counsel when these orders were passed - the Court matters are taken lightly and casually and an impression has been created that the State or the Revenue seeks to get away or take a easy route of offering routine explanations and blaming officers or their advocates - If the cause shown cannot be said to be bonafide and demonstrating utter negligence and callousness, then, we do not see how it can assist the revenue any longer - The appeal which is lodged in the year 2008 remained on the file and was pending for removal of office objections. None bothered to have them removed until this Court noted in June 2009 that the Revenue has failed to comply with the office objections or the rules in that behalf - Time was given to comply with that and it is only thereafter that the Court visited the Revenue with the consequences in law - though the appeal stood dismissed and without any further reference to the Court in 2009, the revenue did not lodge a Review Petition until January 2013 and to be precise the lodging date is 22nd January, 2013 - The Review Petition also remained unattended and we have from the original record found that there were office objections and which were to the knowledge of the advocate filing the Review Petition - the explanation is offered for this enormous delay and which is to be contained in the affidavit in support of the application for condonation of delay. The delay does not deserves to be condoned - their presence in the Court to own the lapse and deficiency will not assist and the revenue in any manner when they filed affidavits and made solemn statements before this Court but which are contrary to the record - once the successors to those who were incharge in 2008-09 are trying to cover up the past lapses, then, it is evident that the whole attempt is to ensure that none is ever held responsible and accountable for these state of affairs - each of the notice of motions fail and they are dismissed – Decided against revenue.

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• 2014 (11) TMI 177
  Denial of deduction u/s 80P(2)(a)(i) – Nature of assessee – Cooperative bank or not – Held that:- Following the decision in The Asst. Commissioner of Income Tax Versus M/s Bangalore Commercial Transport Credit Co-operative Society Ltd. [2011 (4) TMI 1222 - ITAT BANGALORE] wherein it has been held that section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies - The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks - This view is clarified by Central Board of Direct Tax vide its clarification No.133/06/2007-TPL dated 9th May, 2007 - The new proviso to section 80P(4) which is brought into statute is applicable only to cooperative banks and not to credit cooperative societies - The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks - Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application and it is entitled to deduction u/s 80P(2)(a)(i) of the Act – Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee’s case and it is entitled to deduction u/s 80P(2)(a)(i) of the Act – thus, the AO is directed to grant deduction u/s 80P(2)(a)(i) – Decided in favour of assessee.

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• 2014 (11) TMI 176
  Validity of reopening of assessment Allowability of deduction u/s 80IB(10) - Prorate provision for allowing 80IB claim – Held that:- CIT(A) has given categorical finding that there was no reason or evidence to believe that the flat in question was exceeding area of 1,000 sq. ft. - The unit No.105 & 106 of ‘B’ Wing was not the area of flats but it was a prayer hall having area of 1593 sq. ft., which area was treated by the assessee as non-residential area in original assessment proceedings and no deduction u/s 80IB(10) was claimed in respect of that area - Even a survey was conducted on 03.02.06 and the assessee had reduced the deduction in respect of car parking and deposits etc. also - Flat Nos.105 & 106 of ‘A’ Wing were combined was also wrong - It was established before the Ld. CIT(A) that in ‘A’ Wing instead of 105 & 106, the office premises was constructed and in all 11 offices were constructed in ‘A’ Wing upon which no deduction u/s 80IB(10) was claimed - the loose papers upon which the figure was written were not suggestive of the fact that the assessee had received any amount in cash - Even the assessee had properly explained and reconciled the figures before the CIT(A) - there was no reason to believe that the income of the assessee had escaped assessment. Revenue could not draw any document on the file which was found during the second survey action from which it can be said that the AO had reasons to believe that the income of the assessee had escaped assessment - the AY in question being 2004-05, the clause ‘d’ was inserted to section 80IB(10) from 01.04.05 had prospective effect and the assessee was even entitled to claim deduction on the commercial area as decided in CIT v. Brahma Associates [2011 (2) TMI 373 - BOMBAY HIGH COURT] - the deduction u/s 80IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted under the Development Control rules/regulations framed by the respective local authority and that the clause ‘d’ was not applicable to the projects approved before the insertion of the said clause i.e. from 01.04.05 - the assessee itself has not claimed any deduction in respect of the commercial area - so far the reopening of the assessment is concerned, there was no infirmity in the order of the CIT(A) while holding that the reopening was bad in law – Decided against revenue.

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• 2014 (11) TMI 175
  Validity of reopening of assessment u/s 147 – Proceedings u/s 154 – Rectification of mistake apparent on record - Held that:- Assessee is engaged in transport business as a transport commission agent - the AO issued a notice u/s 154 on 12.1.2009 proposing rectification of a mistake apparent on record - It is well settled that the requirements prescribed under the Act for involving the provision of S.147 have to be fulfilled as decided in CIT vs. Rajesh Jhaveri Stock Brokers P.Ltd. [2007 (5) TMI 197 - SUPREME Court] - The word “reason” in the phrase “reason to believe” would mean cause or justification. If the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment - a perusal of the Profit and Loss a/c demonstrates that the assessee has not claimed any expenditure on payments made to lorry owners, nor has he shown any income - In fact for AY 2005-06 and AY 2006-07 the total gross receipts disclosed consisting of freight income and commission income besides interest on securities - There is no expenditure claimed on account of freight charges paid - the reopening of assessment is valid for the reason that the AO had material to come to a conclusion that the assessee has under stated its receipts - The assessee has also not furnished any explanation to the AO during the original assessment proceedings on these matters as there is no occasion for doing the same – the decision in CIT vs. Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] is applicable as it cannot be held that there is a presumption of application of mind on this issue when the original assessment order was passed u/s 143(3) of the Act - Pending or disposal of proceedings u/s 154 does not result in the reopening proceedings becoming illegal. Applicability of section 40(a)(ia) – Held that:- The assessee is a transport commission agent who arranges goods carriers for various parties through truck operators/drivers is not disputed by the Revenue - The parties to whom the assessee arranges trucks, make part payment to the operators/drivers as advance and the balance amount is routed through the assessee - What the assessee gets is only commission - The amount is received by the assessee as a Trustee - The assessee is only a pass through entity - The amount is received on capital account and payment also is made on capital account - The assessee never had the right to receive this amount as its income - Merely because tax has been deducted at source on the amounts received by the assessee, it does not lead to an automatic conclusion that the entire amount is the income of the assessee - The amount is never claimed by the assessee as its income nor was paid by the truck owners as an expense – thus, the amount cannot be treated as gross receipts of the assessee on revenue account - as the assessee has not claimed any expenditure on account of freight payments the question of disallowance u/s 40(a)(ia) does not arise – Decided in favour of assessee.

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• 2014 (11) TMI 174
  Sustenance of addition of loans and gifts - Addition made based on DVO’s report - Receipts have already been surrendered - Held that:- There is no reason to disbelief the claim of the assessee - the contention of the assessee is accepted and the addition is directed to be deleted. The cost of service extra items and amount estimated at 3% architects fee is directed to be deleted from the estimated cost of investment - rebate of 15% on the total investment estimated by the DVO is to be given for the reason that plinth area rates have been adopted for valuation by the DVO and it has been decided in various orders of the Tribunals that there would be a variation of 15% in the value when plinth area rates are applied as compared to detailed valuation on the basis of quantities - further reduction of 15% of the cost estimated by DVO is directed - deduction of 10% in the cost of construction for the various factors pointed out by the assessee is directed – Decided in favour of assessee.

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• 2014 (11) TMI 173
  Deletion of GP rate – Held that:- The assessee had submitted the copy of audited balance sheet and profit and loss account along with the auditor’s report, copy of sales tax returns, copy of bank account of the assessee, copy of details of ledger account of assessee, copy of VAT paid by the assessee and confirmation from debtors and creditors etc. – AO had not pointed out any specific defect in the books of accounts - There was no basis to estimate such income - It was completely baseless addition, thus, the order of the CIT(A) is upheld – Decided against revenue. Deletion on account of gifts - Opportunity to cross examine the donor not provided by CIT(A) - the assessee has not produced the donor, Shri Dinesh Bansal before the AO - CIT (A) should have granted an opportunity to the AO also for cross examination of Shri Dinesh Bansal who appeared before him - It is against the basic principle of natural justice – thus, the matter is to be remitted back to the AO for cross examination of Shri Dinesh Bansal (Donor) with regard to the gifts given to the assessee – Decided in favour of revenue. Deletion of unsecured loan – Held that:- The assessee has submitted loan confirmation from all these parties - The loan shown from Smt. Raj Rani was outstanding from previous year and it was a carry forward balance and this amount was not taken during the year - The confirmation has been submitted with regard to the loan taken of ₹ 1,30,000/- from M/s. Pardeep Bansal HUF and the details of the bank statement and the income-tax details of the persons from whom amount was taken, was also submitted - Similarly with regard to amount of ₹ 1,68,000/- received from Smt. Preeti Bansal, sister-in-law, necessary confirmation was submitted - Copy of the return of income was also submitted along with the copy of bank statement – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 172
  Disallowance u/s 14A - Investment in assets related to exempted income under Rule 8D(2)(ii) and (iii) – Held that:- The assessee has earned the dividend income for which it has claimed expenditures - the quantum of expenditures does not commensurate with the exempted income claimed by the assessee - the AO has every reason to doubt the correctness of the expenditures claimed by the assessee for earning the exempted income - the AO has to re-compute the expenditures relating to the dividend income which does not form part of total income under this Act and for computing the expenditures, the AO has no other option but to adopt the formula laid down under rule 8D of the Rules and he did the same – the AO has not determined the amount of expenditures directly related to the income which does not form part of the total income of the assessee as per sub-rule (2) (i) of rule 8D - the order of the CIT(A) restricting the disallowance cannot be upheld – thus, the order of the CIT(A) is to be set aside and the matter is remitted back to the AO for re-verification of the calculation of disallowance of expenditures as per rule 8D – Decided in favour of revenue.

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• 2014 (11) TMI 171
  Classification of expenses - Capital or Revenue expenditure - Software expenditure – Held that:- The system software did not form part of the profit-making apparatus of the assessee, that the business of the assessee was that of manufacturing of piston ring, casting ring etc., that Software was an enterprise resource and it facilitated the assessee's trading operations or enabled the management to conduct the assessee`s business more efficiently or more profitably - But, it would not make the software a profit-making apparatus - So, the expenditure incurred by the assessee has to be held to be revenue expenditure – following the decision in CIT Versus Raychem RPG Ltd. [2011 (7) TMI 953 - Bombay High Court] – Decided in favour of assessee. Disallowance u/s 40A(3) – Held that:- The assessee had made a payment to one of the employees, who had bank account and her salary and other emoluments were deposited in that account - the assessee auditor of the company in his report has specifically mentioned that the amount was paid in violation of the provisions of section 40A(3), the assessee had not produced any evidence before the auditor or the AO to prove that the payments were covered by the exceptions mentioned in Rule 6DD of the Rules - the assessee had not proved that 'exceptional and unavoidable circumstances' existed – thus, the order of the FAA is upheld – Decided against assessee. Adhoc disallowance @ 20% of the miscellaneous expenses(ME) – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the addition made by the AO under the head ME is to be set aside as there was no scope for making ad hoc disallowance – Decided in favour of assessee. Expenses incurred for business purposes disallowed – Held that:- FAA had specifically directed the AO to allow the expenditure in the earlier AY, if same was not already allowed in that year - the expenditure was incurred for business purposes and has to be allowed in one of the years - It is not uncommon business practice that in some cases bills are received in subsequent year for a particular item - But, that does not mean that the assessee is not entitled to claim the expenditure only because it is following mercantile system of accounting - the expenditure claimed by the assessee has to be allowed in the year – Decided in favour of assessee. Calculation of claim made u/s 80HHC – Held that:- The assessee had not furnished the details of the miscellaneous income before the AO or the FAA, that FAA culled out necessary details and had decided the issue on merits, that he had partly allowed the issue of sale of scrap in favour of the assessee, that he had followed the decision with regard to the benefits of ₹ 92.79 lakhs - the order of the FAA does not suffer from any legal infirmity – Decided against assessee. Interest expenses on investment disallowed – Held that:- The AY involved is prior to 2008-09 and as per the decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] the provisions of section 14A r.w.r.8D cannot be invoked for making proportionate disallowance - reasonable disallowance could be made in earlier AYs - disallowance sustained by the FAA i.e.5% of the exempt income is reasonable and does not need interference – Decided against revenue.

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• 2014 (11) TMI 170
  Stay applications on outstanding demand - assessment of trust as Association Of Persons (AOPs) - all the mutual fund beneficiaries were treated as AOPs. - Held that:- Following the decision in Indian Corporate Loan Securitisation Trust 2008, C/o IL & FS Trust Co. Ltd. Versus Income Tax Officer [2013 (8) TMI 183 - ITAT MUMBAI] - the assessee has a prima–facie case for grant of stay of the demand and there are various issues which warrant adjudiction and in such a situation, stay should be granted - since the date of hearing is announced in the open Court – Stay granted.

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• Customs

• 2014 (11) TMI 195
  Import of old and used worn clothings without proper license - confiscation, redemption fine and valuation - Held that:- Goods imported were restricted in nature and importation thereof requires license and in absence of such license, importation results in violation of law. That makes the goods to be smuggled goods and liable to confiscation. Such fact remained undisputed - moment the goods submit for confiscation, redemption fine and penalty shall be imposable. Looking to the value of the goods involved and the nature of violation of law committed, there appears no reason to interfere to the concurrent finding of both authorities below - Decided against assessee.

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• 2014 (11) TMI 194
  Denial of the conversion of shipping bill from DEPB to duty drawback scheme - Misdeclaration of goods - Held that:- Fact that during the period October 2000 to March 2001, the appellant filed shipping bill claiming the benefit under DEPB scheme. On examination, the goods were found misdeclared for availing the benefit of DEPB scheme. In these circumstances, the appellant applied for conversion of shipping bill from DEPB to duty drawback scheme. The provisions of conversion of DEPB to duty drawback scheme came on 28.01.2003 through CBEC Circular no. 6/2003-Cus. The letter dated 20.10.2001 have no legal sanctity in the matter as it is a mere communication between the department. Therefore, I do not find any infirmity in the impugned order; same is upheld - Decided against assessee.

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• 2014 (11) TMI 193
  Valuation of goods - Enhancement in value - Import of two consignments of cooker hoods of various models in SKD condition and carbon filters - Held that:- There is a finding of fact by the Commissioner (Appeals) in the impugned order that the respondents are registered with the Central Excise department and also paying Central Excise duty on cooker hoods manufactured by them out of SKD kits. There is a finding by the adjudicating authority also that the respondents are also selling the parts of kits in SKD condition in the same packing. This finding of fact is not challenged by the Revenue in the present appeal as the respondents are paying Central Excise duty after manufacturing the cooker hoods out of SKD kits, therefore we find no infirmity in the impugned order - Decided against Revenue.

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• 2014 (11) TMI 192
  Refund of anti dumping duty - unjust enrichment - Notification No. 11/2007-Cus., dated 31-1-2007 - Held that:- The provision of Section 27 of Customs Act, 1962 being applicable to the refund of anti-dumping duty by virtue of amendment of Finance Act, 2000, respondent has to undergo the test of unjust enrichment to get refund. There is no shortcut to that process of law. Therefore mere production of CA certificate does not ipso facto grant refund to the respondent unless entire material showing no duty burden passed on to the buyer is adduced by the respondent before adjudicating authority. So far as bar of limitation is concerned, Notification No. 11/2007, dated 31-1-2007 gave rise to the refund. That shall be the date to calculate the limitation. Accordingly, learned Authority shall look into all the refund applications in accordance with law taking the date as 31-1-2007 to be the date applicable - Matter remanded back - Decided in favour of Revenue.

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• Service Tax

• 2014 (11) TMI 210
  Technical Inspection and Certification service - appellants engaged in manufacture of body building of buses, trucks etc., also undertake repair maintenance and servicing of commercial vehicles - AGPL after conducting inspection and taking rectificatory action as recorded in the vehicle data sheets send the vehicles back to TML for export - whether the service provide by AGPL is Technical Inspection and Certification Agency Service - Held that:- On receiving this work order AGPL undertakes the jobs as indicated in the vehicle data sheet. The data sheets give details of defects and rectificatory action under various Heads, namely Leakages, Electricals, Mechanicals, Body, Paint, Body Fitments. The rectification job of these defects certainly seem to be activities conducted by any vehicle repair shop. If the argument of Revenue is accepted, every motor garage will become a technical inspection and certification agency. This would lead to a ridiculous situation. Revenue appears to have misread the meaning of technical inspection and certification. We note that the definition conveys the purpose of certification alongwith inspection to meet specified standards. The job card or vehicle data sheets clearly indicate that AGPL are merely rectifying/replacing some damaged/defective parts etc. By no stretch of imagination can this activity be termed as technical inspection and certification. We therefore set aside the order-in-original confirming the demand of duty on the activities undertaken by the appellant. Whether a service would amount to 'renting of immoveable property' or to 'storage and warehousing service' - Held that:- facts are clearly in favour of AGPL. AGPL has merely rented space out to TML. Although they arranged for security, the expenses on this account are met by TML. The Ld. A.R. stated that it is not clear from records whether the management and safekeeping of the vehicles is done by AGPL. On the contrary, we find that there is a clear finding of the Commissioner that handling, management and safekeeping of the vehicles is the responsibility of TML. Even the security is paid for by TML and so are the telephone expenses and diesel expenses. We find that none of the ingredients which are essential part of 'warehousing and storage service' are fulfilled so as to cover the activity of AGPL under this service - Decided in favour of assessee.

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• 2014 (11) TMI 209
  Re-classification of service for the purpose of cenvat credit - Management Consultancy Service or Business Auxiliary Service - Whether or not duty determined and classification of services made at the service provider's end can be charged by the authorities having jurisdiction over the service recipient's end - advocate explained that if the classification of the services is under Section 65 (105) (r) then 100% credit of input services is admissible to the appellant as claimed - if the classification is made under Section 65 (105) 22b) then credit admissible for use will be 20% of the total credit as claimed by Revenue - Held that:- In view of the interpretation of law made by the Courts, including the Apex Court [2007 (11) TMI 23 - SUPREME COURT OF INDIA], no option is left with the Revenue to change the classification/ assessments of the services at the service recipient’s end. The service tax paid by M/s. IHCL was at the behest of the department and was not altered during the disputed period. Credit of service tax paid on the invoices cannot be denied or utilisation reduced on the grounds that classification of the services was wrongly done at the service provider’s end. - Decided in favour of assessee.

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• 2014 (11) TMI 208
  Erection, installation and commissioning services - laying of submarine pipelines - Held that:- Board's own Circular dated 24/05/2010 makes it absolutely clear that unless the activity undertaken results in the emergence of an "erected, installed and commissioned plant, machinery, equipment or structure", the activity will not come under the category of erection, commissioning and installation service. Pipelines cannot be construed as a plant, machinery or equipment or structure. Further, the said circular also clarifies that laying of cables under or alongside road or railway tracks, etc. is not a taxable service under Section 65(105) of the Finance Act, 1994. If laying of cables cannot be a taxable service, adopting the same logic, the laying of pipeline also cannot be construed as a taxable service. - laying of submarine pipelines would not come within the purview of erection, commissioning and installation service. Further, in the case of PSL Ltd. [2013 (12) TMI 1063 - CESTAT AHMEDABAD] this Tribunal noted that laying of pipelines for water supply projects would come under the "construction service" and since only commercial construction is liable to service tax and the pipelines for water supply are not commercial activities, the same would not be taxable. Thus, it may be seen that this Tribunal has consistently been holding the view that the activity of laying of pipelines would not come within the purview of "erection, commissioning and installation service" and it would be more appropriate classifiable under "Commercial or industrial construction service". laying of pipelines would not come within the category of "erection, commissioning and installation service" and therefore, the impugned order is not sustainable in law - Following decision of Hyundai Heavy Industries Co. Ltd. [2013 (11) TMI 917 - CESTAT MUMBAI] - Decided against Revenue.

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• 2014 (11) TMI 207
  Waiver of pre deposit - taxability of activities in the nature of services provided by partners to the partnership firm – Whether allowing trademarks of overseas partner to be used by partnership firm in India is taxable under the category of "intellectual property service" – Whether activity of Indian partners allowing their land, building and other properties to be used by the firm is taxable under category of 'business support service' – Held that:- When the firm is not a legal person and is not a distinct entity and is not distinct and independent from partners, it is difficult to accept the view upheld by the learned Commissioner that there is a service receiver-provider relationship between the two partners and the firm. When the firm is not at all a person and is not distinct from the partners, this observation is difficult to sustain. Naturally the entire amount of gross profit received cannot be attributed to licence even if it is assumed that it is so. Further the submission made by the learned counsel that somehow many of the licences for which licensing agreement provided for usage by HDC were actually developed by the firm itself and according to the appellants, the registration had to be done in the name of one of the partners, because the partnership firm has no legal personality. At the same time to enable the firm to use the name and since the products were manufactured in the name of the firm, a licence agreement would be required. In our opinion, even if it is assumed that a firm is a distinct entity, the nature of transactions between the two partners and the firm would be one of joint-venture or a profit sharing operation and it is difficult to sustain the stand that there is a service receiver and provider relationship. – Stay granted.

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• 2014 (11) TMI 206
  Interest on delayed refund claim - whether the appellant is eligible for interest on the refunds sanctioned belatedly - Held that:- refund has been ordered under Rule 5 of the Rules and there was a delay in sanctioning the refund, in the circumstances, the provisions of Section 11BB of the Act would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB of the Act are clearly applicable to the facts of the present case and as such the respondent is entitled to interest on delayed refund of Cenvat Credit as claimed by it. As per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilisation of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari materia to the provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under rule 5 of the Rules, which instructions are binding on the revenue. - Decided against Revenue.

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• 2014 (11) TMI 205
  Interest on delayed refund - refund of service tax paid on the services rendered to them in an SEZ unit - Whether the appellant is eligible for interest on the refunds sanctioned belatedly. - Held that:- It is undisputed that the appellant had filed the refund of service tax paid on the services rendered to them in an SEZ unit - admittedly the refund has been ordered under Rule 5 of the Rules and there was a delay in sanctioning the refund, in the circumstances, the provisions of Section 11BB of the Act would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB of the Act are clearly applicable to the facts of the present case and as such the respondent is entitled to interest on delayed refund of Cenvat Credit as claimed by it. Another aspect of the matter is that when Section 11BB of the Act had newly been inserted by the Finance Act, 1995, the Government of India, Ministry of Finance (Department of Revenue) has issued Circular : 130/41/95-CX., dated 30th May, 1995 (which finds reference in the impugned order of the Tribunal) issuing instructions regarding refunds claimed under Section 11BB of the Act. The Annexure thereto provides for the checklist of documents which are required to be filed with refund claims. Item No. 3 thereunder relates to Refund of credit of duty paid on excisable goods used as input in accordance with Rule 57FD. Thus, as per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilisation of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari materia to the provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under rule 5 of the Rules, which instructions are binding on the revenue. - impugned orders rejecting the claim of interest of the appellant are incorrect - Decided in favour of assessee.

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• Central Excise

• 2014 (11) TMI 203
  Clandestine removal of goods - Investigation not conducted by Revenue - Held that:- It is observed from the statements of Respondents recorded in the show cause notices that Respondents themselves have confirmed the factual details regarding clandestine activities given in the registers recovered from their premises. The statements given were voluntary as the same were not retracted for nearly four years. It can not be expected from the Revenue to investigate for alternate evidences when respondents did not retract the statements during investigation/ adjudications. It is also evident from the records that no purchase bills were found with respect to purchase of scrap shown in the registers recovered from the premises of the respondents for which payments were only made in cash as admitted. Clandestine activities are corroborated by the transporters. When respondents did not give details of the buyers of the goods clandestinely removed Revenue cannot be faulted with for not investigating the area of extra raw materials purchased or extending investigation into the buyers of the goods clandestinely removed etc. In view of the above appeals filed by the Revenue are required to be allowed by setting aside the orders passed by the first appellate authority - Decided in favour of revenue.

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• 2014 (11) TMI 202
  Shortage in stock - Clandestine manufacture and removal of goods - Held that:- adjudicating authority himself has held that Panchnama so recorded, cannot be relied upon as the same was found to be recorded by unfair means. If the drawal of Panchnama was itself doubtful, the entire case booked by preventive branch cannot be allowed to stand on its own legs. What falls in part, cannot be upheld in whole. Inasmuch as the adjudicating authority himself has disbelieved the story of investigation and drawal of Panchnama, the allegations of shortages and resultant clandestine removal cannot be upheld. As rightly observed by Commissioner (Appeals), the various statements recorded by the officers during the course of investigation being corroborative of each other, would constitute evidence against the assessee in the normal course, but such general norms cannot be accepted in the present case, inasmuch as the Panchnama itself has not been accepted by the original adjudicating authority. specific findings of Commissioner (Appeals) do not stand rebutted by Revenue in their memo of appeal - Revenue has no case regarding clandestine removal of goods - Following decision of CCE Ahmedabad-I vs. Mukesh Industries Limited [2008 (8) TMI 667 - CESTAT, AHMEDABAD] - Decided in favour of assessee.

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• 2014 (11) TMI 201
  Application of deferment of order of pre-deposit - appellants contend that since these appellants have only recently approached the High Court, their appeals should not be dismissed for default in pre deposit - Held that:- No merit in the contentions of those appellants, who argue that their appeals should not be dismissed for failure of pre deposit in terms of Section 35F of the Central Excise Act, 1944, merely since they had chosen to prefer appeals against the order dated 11.7.2014. It is axiomatic that an order of CESTAT, interim or final including an order directing pre deposit, is an operative order. It is subject however to appellate or judicial review scrutiny, by the High Court. The order dated 11.7.2014 considered the merits of the appeals as also the financial distress pleaded by some of the appellants; and that is the reason why the specified quanta of pre deposit were ordered in respect of each of the appellants, though no prima facie case was found in their favour. The pre deposits ordered are not even of the whole of the duty liability assessed in respect of the each of the appellants let alone the interest and penalty components. - various appeals dismissed for failure of pre deposit.

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• 2014 (11) TMI 200
  Invocation of extended period of limitation - Classification of Bleached Woven Fabrics - Misdeclaration of goods - Suppression of facts - Held that:- Department got the clarification in the year 2001. The impugned demand for differential cess duty pertaining to the period from July, 2000 to June, 2001 was issued on 09.07.2004 invoking extended period of terms of the proviso to Section 11A (1) of the said Act. But there was no fraud, collusion, wilful mis-statement, suppression of fact or contravention of the Act or rules with the intent to evade payment of duty in the instant case. Hence there is no justification for invoking longer period of time. The demand for the period from July, 2000 to June, 2001 issued on 09.07.2004 is therefore barred by limitation and the same is not maintainable. When the demand fails to survive, the question of charging interest thereon and imposition of penalty cannot arise. - Decided against Revenue.

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• 2014 (11) TMI 199
  Valuation of goods - whether the expenses incurred to dealers by way of debit note raised by the appellant for the supply of diaries to the dealers can be included in the assessable value of the excisable goods manufactured by the appellant - Held that:- Following decision of assessee's own previous case [2010 (10) TMI 342 - CESTAT, CHENNAI] - Decided in favour of assessee.

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• 2014 (11) TMI 198
  Wavier of pre-deposit - Denial of CENVAT Credit on Computers - Nexus with manufacturing activity - Held that:- computers have been used by the applicant for maintaining stocks in the factory. In these circumstances, prima facie, I am of the view that these computers are having nexus to the manufacturing activity of the applicant therefore, they are entitled to take input credit. Accordingly, I waive the requirement of pre-deposit of the entire amount of duty, interest and penalty and stay recovery thereof during the pendency of the appeal - Stay granted.

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• 2014 (11) TMI 197
  Waiver of pre-deposit - Suo moto credit - Payment of duty without clearance - Later on suo moto credit taken - Revenue is of the view that suo motu credit is not available assessee have to file refund claim - Held that:- issue has been considered by the Hon'ble High Court in the case of ICMC Corporation (2014 (1) TMI 1473 - MADRAS HIGH COURT), therefore, applicant has made out a case for 100% waiver of pre-deposit. Accordingly, I waive the impugned demands and stay recovery thereof during the pendency of the appeal.

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• 2014 (11) TMI 196
  Maintainability of appeal - Monetary limit for admission of appeal - Held that:- Central Excise law does not lay down any monetary limits for admission of an appeal except where the amount involved is ₹ 50,000/- or less, which can be admitted at the discretion of the Tribunal. In the present case, the amount involved is more than ₹ 50,000/- and therefore, we do not find any merit in the contention of the appellant that the appeal be heard on out of turn basis as the same is not maintainable - Decided against assessee.

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• CST, VAT & Sales Tax

• 2014 (11) TMI 204
  Classification of goods - whether the item polystik compound or the rain guard compound can be classified as an adhesive or a rain guard coat or a chemical for the protection of plants - Held that:- The very process of rain guarding, as mentioned above, shows that a thin coating of a bitumen-based adhesive is smeared on the scraped portion of the trunk of the rubber tree. Then a frilled polythene skirt like material is put, which is covered with a kora cloth and then both kora cloth and polythene cover are stapled to keep it in the proper place and again another coating of adhesive is applied so as to keep the rain guard leak proof. As we understand from this literature, bitumen based compound is mainly used for the rain guarding of rubber trees, because of its high quality of adhesive nature. No doubt, water proofing quality is also one of the properties of the product, but, the fact that, it is used below the polythene sheet and again above the polythene sheet would only indicate that to safeguard the placement of the polythene sheet and kora cloth over the scrapped portion of the trunk of the rubber tree, this product is used. If it is used for the main purpose of coating on scrapped portion of the rubber plant, there was no reason why the second coating is applied on the polythene and kora cloth, as the protection is intended to the rubber plant because a leak proof material is put above the scrapped portion. Therefore, the very exercise how this compound is used during rain guarding process indicates only as a double proof to see that no water enters the scrapped bark of the rubber tree, they make the polythene guard as the skirt affixed to the trunk with double layers of rain guarding compound. The literature in local language (Malayalam) published by the Rubber Board, refers to the rain guarding compound as an adhesive product for the purpose of rain guarding during the rainy season. By no stretch of imagination, the entire process of rain guarding refers to the user of rain guard compound as a chemical or a water proof. If this has to be used as a water proof, then there is no use of polythene and kora cl to affix the polythene material to the rubber plant as such. Therefore, the entire process, what we understand from the literature and also how the product is marketed, would only indicate, that it is marketed as a strong adhesive compound rather than anything else. Therefore, the predominant use of the product would come into play and one has to go by the predominant use of the product rather than other incidental uses of the product in question. In none of the literature, it refers the user of the product as a plant protector, though, at some places, it says, the bitumen can be used as a water proof material. So far as the predominant use of the material and how it has to be dealt with is concerned, we refer to Appplico v. State of Kerala [1999 (12) TMI 844 - KERALA HIGH COURT] - the product in question is to be classified as an adhesive and it is neither a plant protection chemical nor a water proof material - decided in favour of Revenue.

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