TMI Tax Updates - e-Newsletter
November 8, 2014

Case Laws in this Newsletter:

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

Articles

1. CONVERSION OF SEC. 8 COMPANY INTO A COMPANY OF ANY OTHER KIND

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Initiatives to Facilitate Trade and Encourage Non-Adversarial Tax Administration

2. Shri Hasmukh Adhia Takes Over as Secretary Department of Financial Services

3. India to Provide Visa on Arrival Facility for Business Visitors Through Eighteen Airports India and Russia Develop Framework for Tracking Key Priority Projects

4. RBI Reference Rate for US $

5. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

6. Scheme for Revival of 23 unlicensed District Central Cooperative Banks in Uttar Pradesh, Maharashtra, West Bengal and Jammu & Kashmir

Notifications

Customs

1. 101/2014 - dated 5-11-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 6th November, 2014

Income Tax

2. 60/2014 - dated 3-11-2014 - IT

Control of income-tax authorities - U/s 118 of the Income-tax Act, 1961 - the Transfer Pricing Officer - hierarchy

3. 59/2014 - dated 3-11-2014 - IT

Section 120(1) and (2) of the Income-Tax Act, 1961 - Jurisdiction of Income tax Authorities Supersession of Notification No. S.O. 994(E), dated the 9th September, 2004.

4. 58/2014 - dated 3-11-2014 - IT

Section 120(1) and (2) of the Income-tax Act, 1961 - Jurisdiction of income-tax authorities (Transfer Pricing Officers)

5. 57/2014 - dated 3-11-2014 - IT

Section 120(1) and (2) of the Income-Tax Act, 1961 - Jurisdiction of Income tax Authorities Supersession of Notification No. S.O. 881(E), dated 14-9-2001.

6. 56/2014 - dated 3-11-2014 - IT

Section 118 of the Income-tax Act, 1961 - Amendment in Notification No. S.O. 359, dated 30-3-1988.

Circulars / Instructions / Orders

Central Excise

1. 989/13/2014-CX.3 - dated 7-11-2014

Excisability of Odoriferous compound/agarbathi mix arising during the course of manufacture of agarbathi – regarding.

Highlights / Catch Notes

Income Tax

• Tribunal Rules No Penalties for Cash Loans Due to Genuine Need u/ss 271D, 271E, and 273B.

  Case-Laws - HC : Levy of penalty u/s 271D and 271E – Cash Loan - The genuineness of the transaction to meet the immediate necessity was accepted by the Tribunal in the quantum appeal and that would amount to reasonable cause in terms of Section 273B - HC
  Visit to Get Source

  ---

• Court Rules Interest Computation Dispute Can't Be Resolved by Writ Petition; Must Follow Tax Law Remedies.

  Case-Laws - HC : The interpretation given by the petitioner for computation of the period for the purpose of levy of interest cannot be adjudicated in a Writ Petition and the petitioner has to necessarily avail the remedy available under the Act - HC
  Visit to Get Source

  ---

• Section 145 Amended: Interest Income Not Due or Payable Cannot Be Taxed, High Court Rules.

  Case-Laws - HC : Effect of amendment to section 145 - Merely because in the books of accounts, the interest income, which is not due and payable is shown in the account of the assessee, interst income cannot be taxed - HC
  Visit to Get Source

  ---

• Court Sets Aside Reassessment u/s 147, Finds It a Mere Pretense to Investigate Taxable Status.

  Case-Laws - AT : Reopening of assessment u/s 147 – reopening is merely pretence to examine, whether the assessee is a taxable unit or not and whether there could be possibility of loss of revenue - reassessmentn set aside - AT
  Visit to Get Source

  ---

• Interest Disallowed u/s 36(1)(iii) as Sufficient Own Funds Don't Prove Borrowings Were for Business Use.

  Case-Laws - AT : Interest u/s 36(1)(iii) disallowed – merely as because the assessee had sufficient own funds on the date of the borrowings it cannot be concluded that borrowings were not for the purpose of business - AT
  Visit to Get Source

  ---

• Assessee's Rectification Bid u/s 254(2) Misused to Re-evaluate Order, Not Just Correct Mistakes.

  Case-Laws - AT : Rectification of mistake u/s 254(2) – What assessee desires is review of the order passed on in the garb of rectification application - AT
  Visit to Get Source

  ---

Service Tax

• Court Rules on Sub-Contractor Service Tax Liability When Main Contractor Has Paid; Authorities Must Verify Claims.

  Case-Laws - HC : Levy of service tax on sub-contractor when main contractor has paid the service tax - If records are available with the Department, then there is no reason why the authority should have refused to go into the claim and verify the bona fides of such a plea of payment of service tax - HC
  Visit to Get Source

  ---

• Cenvat credit valid even for computer-generated invoices downloaded online, cannot be denied on this basis alone.

  Case-Laws - AT : Cenvat Credit - invoices which are computerised invoices have been down loaded through the internet - Cenvat credit is not to be denied on the basis of computer generated invoices - AT
  Visit to Get Source

  ---

• Bank Commitment Charges Taxable Under Service Tax, Not Exempt as Interest, Says Regulation.

  Case-Laws - AT : Whether commitment charges recovered by the Bank are to be added to the taxable service for charging service tax or these charges are to be treated as interest and no service tax was to be levied on such charges - the amount is taxable - AT
  Visit to Get Source

  ---

• Appeal Misfiled with Commercial Tax Officer, Delay in Transfer Condoned by Relevant Authority.

  Case-Laws - AT : Condonation of delay - Appeal wrongly filed before Commercial tax officer - Delay occured in transferring the appeal - delay condoned - AT
  Visit to Get Source

  ---

• Mumbai Police Event Services Not Taxable Under Security Agency Services, Says Initial Assessment.

  Case-Laws - AT : Security Agency Services - nature of services provided by the Mumbai Police to individuals or organizations in conducting various private and public events - prima facie not taxable - AT
  Visit to Get Source

  ---

• Authority to Decide Between Belated Revised Return and Original Return for Accurate Tax Liability Assessment.

  Case-Laws - AT : Whether the authority shall act on the belated revised return or on the original return - In any circumstance law has to operate for proper application to determine tax liability on the facts settled. - AT
  Visit to Get Source

  ---

Central Excise

• Court Finds Appellant's Claim of Unawareness in Scrap Procurement Implausible for CENVAT Credit Benefits.

  Case-Laws - AT : Availment of CENVAT credit - the contention of the appellant that they were not aware the nature of scarp procured by them but blindly believed what the supplier stated is difficult to accept. - AT
  Visit to Get Source

  ---

• CENVAT Credit Granted Despite Supplier Not Being Manufacturer; Duty Discharged Satisfies Entitlement Criteria.

  Case-Laws - AT : Denial of CENVAT Credit - supplier of the goods is not a manufacturer - Once the supplier of the goods had discharged the duty liability, the recipient can take CENVAT Credit of the duty paid - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2014 (11) TMI 240
  Interest on sticky advances/nonperforming assets - Whether the CIT(A) is justified in deleting the addition which was made in respect of interest on sticky advances – Held that:- Revenue was of the view that assessee bank has not considered the interest receivable on the sticky advances/nonperforming assets (NPA) as an income and it has not been taken to the profit & loss account but has directly taken to the balances - In Karnavati Cooperative Bank Ltd. Vs. Dy.CIT [2011 (11) TMI 367 - ITAT AHMEDABAD] the same issue has been decided and held that interest on the sticky advances/NPA advances cannot be brought to tax by following the decision in the case of Uco Bank Versus Commissioner of Income-Tax [1999 (5) TMI 3 - SUPREME Court] - Vide an explanation (d) r.w.s. 36(1)(viia) annexed to section 43-D the definition of the entities incorporated by the section have been defined and in the absence of any contrary material, the assessee is covered by one of the entities, hence the provisions of section 43-D are to be applied - The CBDT u/s.119 of the I.T. Act has power to issue Circulars in exercise of its statutory powers - If the Board consider it necessary to lay down certain Rules and then direct the sub-ordinate authorities, such directions are required to be followed and such Circular would be binding on the Department unless and until held as ultra vires by a court of law - in terms of CBDT Circular the interest is to be added as income only when actually received or credited in respect of the "sticky advances" while making assessment for a financial institution. Interpretation of the language of the statute – Concept of real income approved in the case of banking business – Held that:- If the statute has used the terminology for the chargeability of interest on the basis when "credited" or "actually received", then no ambiguity has been left by the Statute - If the statute is so clear that an interpretation can easily be made, then that exact meaning should be given to the language of the Section - section 43-D has to be applied in its letter and spirit - assessee has directly taken the interest to the Balance Sheet and it is not routed through the Profit & Loss Account – thus, there is no reason to interfere in the order of the CIT(A) – Decided against revenue.

  ---

• 2014 (11) TMI 230
  Re-computation of turnover - Confirmation of the part of sale price in excess of what is raised by the assessee in the Debit Note – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the Karnataka Lok Ayukta, in its report on mining scam had alleged mal practices on the part of the officials of the assessee-company which is a Government of Karnataka undertaking and inquiries were initiated against the relevant officials - no evidence whatsoever has been brought on record by the AO to establish that the assessee has realized from the sale of C-ore to M/s. Kalyani Steels Ltd., more than what is recorded in the assessee's books of account - MMTC price was Rs. 1058 PMT prevailing on 1st April 2007 for supplies to be made during the FY 2007-08 which is in conformity with the marketing agreement and accordingly the assessee company had raised Debit Note for the same whereas M/s.Kalyani Steels Ltd., had offered sales price at Rs. 635/- PMT and after negotiations the sale price was fixed at Rs. 700/- PMT without prejudice to the award by the Arbitrator - The assessee has to offer the balance of sale consideration in the year of arbitration award - What is contemplated to be taxed under the Income-tax Act is the real income and unless income due to the assessee has been crystallized, it cannot be brought to tax on an estimate basis - the assessee has received only Rs. 700/- PMT from M/s.Kalyani Steels Ltd. – thus, the actual price received by the assessee only shall be treated as income of the assessee during the relevant AY as the assessee has to offer difference of price charged on the final price arrived at by the Arbitrator in the year of award – Decided in favour of assessee. Sales made to M/s.Shivashankar Minerals – Held that:- The agreements between the assessee and M/s.Kalyani Steels Ltd., and also M/s.Shivashankar Minerals, are similar and the fixation of price of ore was also governed by similar set of facts - the actual price received by the assessee only is to be brought to tax. Addition on valuation of closing stock – Held that:- There is no finding by any of the authorities on this contention and this contention needs verification by the AO – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of assessee.

  ---

• 2014 (11) TMI 229
  Addition u/s 14A r.w. Rule 8D - Exempt income towards dividend earned on investments made in mutual funds – Held that:- If at all there is any investment made by assessee out of borrowed funds in the mutual funds, then, it can possibly be in the month of March' 09 only - the investments made in mutual funds could have been made out of the own funds available with assessee without utilizing the borrowed funds - when assessee was having sufficient surplus funds to make investment in mutual funds no disallowance can be made towards interest expenditure unless nexus is established between the borrowed funds and the investments made – relying upon Commissioner of Income Tax-2, Mumbai Versus HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - there was no reason to sustain the addition towards interest expenditure under rule 8D(2)(iii) - so far as disallowance @ 0.5% on the average value of investment under rule 8D(2)(III) is concerned, even where the assessee claims that he has not incurred any expenditure for earning exempt income, disallowance of expenditure deemed to have been incurred has to be worked out @ 0.5% on the average value of investments - As the AO has correctly computed disallowance in terms with rule 8D(2)(iii), it is upheld – Decided partly in favour of assessee.

  ---

• 2014 (11) TMI 228
  Power to invoke section 263 - Inadequacy of enquiry can be a ground for invoking power u/s 263 or not – Held that:- The Commissioner observed that the loans were unquestioningly accepted by the AO despite the fact that the identity and capacity of the persons to whom the loans had been given had not been established - the identity and capacity of as many as 12 lenders were not established and the Assessing Officer was directed to modify his order by adding the amount obtained from the loans - It could not be deduced merely on the basis of the order sheets of the AO that there was a due and proper application of mind to the fundamental issue which has been raised while exercising jurisdiction u/s 263 - the requirement of Section 263 has been established and the Commissioner was justified in coming to the conclusion that the order passed by the AO without application of mind was both erroneous and prejudicial to the interests of the revenue - The Tribunal has manifestly acted in excess of its jurisdiction in interfering with the order of the Commissioner - The Commissioner has, while exercising jurisdiction u/s 263, directed the AO to modify his order by adding a sum obtained through the loans – thus, the matter is required to be remitted back to the AO to enable him to scrutinize the nature and source of the loans so as to furnish the assessee a proper opportunity in consonance with the principles of natural justice for establishing the identity of the lenders and their capacity – Decided in favour of Revenue.

  ---

• 2014 (11) TMI 227
  Levy of penalty u/s 271D and 271E – Applicability of section 269SS r.w section 271D – Quantum appeal already decided in favour of assessee - Held that:- The Tribunal rightly allowed the appeals filed by the assessee with regard to the penalty levied u/s 271D and 271E of the Income Tax Act - the loans taken in the cases were genuine and the exigency that arose out of the business was a cause for taking such loan - Since in the quantum appeal, the Tribunal found that the assessee was bona fide in such transaction, the Tribunal in exercise of power u/s 273B, considering the reasonable cause submitted by the assessee, thought it fit to set aside the entire penalty by accepting the explanation given by the assessee. - taking of loan is found to be genuine and the same is for business exigency, it is not a case of undisclosed income - If the assessee had not given a reasonable cause, then certainly the initiation of proceedings for violation of 269SS and 269T would be justified. The reasonable cause for not levying penalty exists and the Tribunal was justified in allowing the assesse s appeal - the Tribunal has clearly held in the quantum appeal there was a bona fide on the part of the assessee and as a consequence finding reasonable cause, thought it fit to delete the entire penalty - The assessee has shown the receipt of cash and repayment of the same due to business exigency and that would amount to reasonable cause - The genuineness of the transaction to meet the immediate necessity was accepted by the Tribunal in the quantum appeal and that would amount to reasonable cause in terms of Section 273B of the Income Tax Act – thus, no substantial question of law arises for consideration – Decided against Revenue.

  ---

• 2014 (11) TMI 226
  Assessment of income from sale of shares - Whether the Tribunal was right in holding that the income of the assessee from sale of shares should be assessed under the head capital gains and not under the head business income – Held that:- The Tribunal rightly confirmed the order of the Tribunal that the assessee is only an investor in shares and he is not engaged in the activity of trading in shares - the shares were held by the assessee for long number of years and opined that there was no indication to show that he was engaged in the activity of trading in shares as a share broker or trader – revenue has not produced any material evidence to rebut the findings rendered by the CIT and the Tribunal - there was no borrowal of funds by the assessee and shares were purchased out of his own funds is borne out by records and the Tribunal were right in treating the income from sale of shares as capital gains – thus, the order of the Tribunal is upheld – Decided against revenue.

  ---

• 2014 (11) TMI 225
  Interest payment disallowed – What amounts to commercial expediency – Whether the Tribunal was right in disallowing the interest payment when the interest free advances given to sister concern is out of own funds and out of commercial expediency - Held that:- The assessee had borrowed from a person by paying interest, but has given non-interest bearing advances to the same person and there is no commercial expediency - The assessee has been unable to explain this transaction - once this interest portion is removed, the interest payments to the banks are but minor - the advancement of non-interest bearing funds to related parties is not compelled by any commercial expediency. The assessee has also not proved before any commercial expediency in regard to any of the interest-free advances given to the related parties - The claim of the assessee that it had adequate non-interest bearing funds to give the interest-free advances is seen otherwise insofar as the non-interest bearing funds available with the assessee is in the form of profits of the year which obviously cannot be determined until the end of the year - even assuming that these funds were available, it would have to be seen in line with the cash book of the assessee - the resolution to advance the amounts to one of the concerns was held on 22.04.2002, i.e. at the beginning of the financial year whereas the profits could be determined only during the end of the financial year – thus, the order of the Tribunal is upheld – Decided against assessee.

  ---

• 2014 (11) TMI 224
  Treatment of reversal of incorrect bill entries - Whether the Tribunal was right in not treating the reversal of incorrect bill entries as write off of bad debts – Held that:- By correcting the sale price in the invoice and filing a return on such income on the basis of the corrected invoice, the assessee cannot claim benefit of bad debt for the same financial year, viz., 2004-05 - the sum on the excess billing by the assessee on account of the wrong application of surcharge of Ferry Moly and Nickel, which were used in the manufacture of products supplied to the customer, cannot partake the character of the bad debt - the assessee found that it had billed the purchaser incorrectly and therefore issued credit notes and reduced the bill amount and correspondingly revised the debts as well - the Tribunal was correct in holding that it is not a case of writing off a bad debt - The buyer was not legally or lawfully bound to pay the surcharge amount to the assessee and the assessee was not legally entitled to recover the same from the buyer - it cannot be said that there is an of element of bad debt, which has to be written off. The assessee had complied with the requirement of the RBI Master circular C-15 for regularising the transaction, which is an export sale - The excess amount on account of surcharge which is not lawfully recoverable has to be set right, for which, permission of the Reserve Bank of India is required in a procedure prescribed - That by itself will not make the amount of Rs. 1.68 crores a bad debt - If the assessee does not follow the procedure, it would entail consequent legal action under the relevant provisions of the Foreign Exchange laws - the assessee had noticed the error and rectified the same in the balance sheet before the return was filed - It offered to tax the actual income and deleted the income, which is relatable to the erroneous claim under surcharge - Hence, the Tribunal was justified in holding that there is no question of tax on a hypothetical income – the order of the Tribunal is upheld – as such no substantial question of law arises for consideration - Decided against Revenue.

  ---

• 2014 (11) TMI 223
  Alternate remedy available - Order of the Settlement Commission – Demand of interest for delayed payment of tax u/s 220(2) – Direction made to file revision in front of CIT - Held that:- In terms of Section 220, an assessee will be treated as an assessee in default when he does not pay the tax liability in respect of a demand raised by an demand notice u/s 156 - There is a difference between the interest payable u/s 220 and the interest payable u/s 234B, which deals with interest for defaults in payment of advance tax, as the interest u/s 220 continuous still all the outstanding demand including the interest is cleared, while Section 234B would be chargeable for short-fall in the payment of advance tax till the date of regular assessment - Therefore, the date of intimation under Section 143(1) of the Act would be relevant for the purpose of interest under Section 220 of the Act - the rationale behind the provisions of Section 220 of the Act to levy interest on delayed payment of tax is not to penalise the party but to make a provision for compensation for the department on the failure of the assessee to make payment on the first notice of demand. As pointed out in the case of Vikrant Tyres Ltd., vs. ITO [2001 (2) TMI 129 - SUPREME Court] - the condition precedent u/s 220 is that there should be a demand notice and there should be a default in paying the amount so demanded within the time stipulated in the notice - the communication dated 31.03.2008, is a consequence to the order passed by the Settlement Commission dated 18.03.2008 - Therefore, the interpretation given by the petitioner for computation of the period for the purpose of levy of interest cannot be adjudicated in a Writ Petition and the petitioner has to necessarily avail the remedy available under the Act – thus, the petitioner is directed to file a Revision before the Commissioner of Income Tax under Section 264 of the Act – Decided against assessee.

  ---

• 2014 (11) TMI 222
  Expenses on adhoc basis – Whether the assessee failed to adduce proof of having incurred expenditure – Held that:- The Tribunal, taking note of the various heads under which the expenses were claimed and also considering the merits of the assessee's claim for expenditure incurred on account of travelling, wig material, makeup and other supporting professional expenses, justified the order of the CIT(A) - The assessee pleaded before the CIT(A) as well as before the AO that he is professional actor and expended amount on account of wigs, makeup and other accessories for the purpose of his profession as a cine artist and also incurred expenditure on account of his professional calling as an actor - While major part of the claim was disallowed under Section 40A(3) of the Act, the CIT(A) found that there is reasonableness in the claim of the assessee insofar as the expenses incurred towards travelling, wig, makeup, costumes, etc. - The CIT(A) has decided the issue on the basis of the statement made by the assessee and taking into consideration the overall expenditure claimed under various heads, thought it fit to allow the expenditure in a sum of Rs. 25 Lakhs under these heads for the assessment year 2007-2008 and Rs. 35 Lakhs for the assessment year 2008-2009 – as such no substantial question of law arises for consideration – Decided against revenue.

  ---

• 2014 (11) TMI 221
  Effect of amendment to section 145 - Interest on broken period as interest not accrued – Scope of total income - Held that:- It is declared U/s.5 of the Act that when interest is accrued or deemed to have been accrued, it is liable to tax - The word ‘accrued’ has defined the legal connotation - 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 - the income which has become due and payable should alone be considered as income accrue d 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 - Merely because in the books of accounts, the interest income, which is not due and payable is shown in the account of the assessee - That itself will not give right to A.O to tax unless it has become due and payable as per provisions of Section 5 of the I.T. Act - the AO has to redo the assessment regarding interest on the Government securities – Decided against revenue.

  ---

• 2014 (11) TMI 220
  Reopening of assessment u/s 147 – Reason to believe - Held that:- The assessee is a FUND and a resident of Denmark - Along with its return of income, in India, the assessee had submitted ‘Tax Residency Certificate’ issued by the Danish Authorities in order to claim the benefit of Article 14 of India-Denmark DTAA – the AO is first of all, is not clear whether the assessee is tax resident of Denmark or not, and secondly, whether AOP-Trust is taxable unit in Denmark or not - This is evident from the reasons where he observes that, there is a possibility that AOP is not a taxable unit under the tax laws of Denmark and because of this, there is possibility of loss of revenue - for assuming the jurisdiction to reopen the case u/s 147, the AO must have `reasons to believe’ that any income chargeable to tax has escaped assessment - The belief entertained by the AO must not be irrational or hypothetical but must be held in good faith and not merely as a pretence - The formation of belief must have rational connection with or relevant bearing from the material on record having live link nexus with income escaping assessment - The reasons recorded by the AO clearly shows that the reopening has been done merely on some kind of a possibility for which he himself is not sure - There is even no reference to any material that assessee’s claim for benefit under Article 14 of DTAA is false or incorrect - the reopening is merely pretence to examine, whether the assessee is a taxable unit or not and whether there could be possibility of loss of revenue. Once the Tax Residency Certificate was there in the record, then there could not have been any ground for presumption that the assessee is not a taxable entity in Denmark - He has not referred to any other information or material that the assessee is not a tax resident of Denmark and there was loss of revenue because the assessee has falsely claimed the benefit under Article 14 of the DTAA - The reasons as recorded by the AO falls in the realm of surmises and presumption de hors any material fact having live link nexus with the formation of `reasons to believe’ that income chargeable to tax has escaped assessment - on the face of the “reasons recorded”, the AO cannot assume jurisdiction to reopen the case in the case of the assessee - the entire proceedings initiated vide notice u/s 148 is bad in law and deserves to be quashed – Decided in favour of assessee.

  ---

• 2014 (11) TMI 219
  Admission of additional evidence under Rule 46A(3) – Held that:- The Commissioner has to record in writing as to why she had admitted the additional evidence - Sub Rule-3 contemplates that if additional evidence is taken on record, then it cannot be considered on merit, unless an opportunity to the AO is being given to comment the evidence or documents or to cross examine the witness produced by the assessee - CIT (A) has not called for production of memorandum of understanding - It must have been filed by the assessee - CIT (A) failed to give an opportunity of hearing to the AO – thus, the order of the CIT(A) is set aside and the matter is remitted back to the FAA for re-adjudication – Decided in favour of revenue. Payment of the expenses in cash exceeding the limit provided u/s 40A(3) – Held that:- The assessee has not filed any statement of facts before the Tribunal, nor filed any paper book - the assessee has contended that the AO has wrongly arrived at a figure of Rs. 4,36,180 - It also contended in the statement of facts that in the seized papers, aggregate of the payment made to these parties are mentioned - The individual payment to a large extend are within the limit prescribed u/s 40A(3) – FAA has gone through the statement of facts and recorded a finding that the assessee failed to substantiate the claim – Decided in favour of assessee.

  ---

• 2014 (11) TMI 218
  Interest u/s 36(1)(iii) disallowed – Held that:- CIT(A) found that the assessee has borrowed funds amounting to Rs. 2.09 crores only during the year - no fresh deposits in FDRs were made by the assessee during the year - in the absence of any defect pointed out by the Revenue in the order of the CIT(A) and keeping in view the fact that no fresh investment in FDR was made during the year and keeping in view the fact that no disallowance of interest on borrowed capital was sustained in the case of the assessee in the immediately preceding assessment year on account of its making investments in FDRs, there was no merit in the appeal. CIT(A) upheld the disallowance on his findings that borrowed funds were not required for immediate business needs - the need of business is to be judged from the point of view of businessmen - The assessee is having business turnover of over 211 Crores during the year under consideration - The amount which the assessee may need for his business may not be available always to the assessee - the assessee has to avail the loan amount when it is available by keeping in view the future needs which may arise in the course of business - merely as because the assessee had sufficient own funds on the date of the borrowings it cannot be concluded that borrowings were not for the purpose of business - the disallowance of interest of Rs. 10,71,797/- upheld by the CIT(A) is not sustainable – Decided in favour of assessee.

  ---

• 2014 (11) TMI 217
  Management consultancy fees disallowed – Admission of additional evidences - Held that:- Assessee has made the payment to GMM, in pursuance of management service agreement dated 24.04.2003, in terms of which the GMM would be providing services like financial, human resources, information, legal services etc. to the assessee company - The invoices have also been raised which has been placed in the paper book - the assessee has filed additional evidences in support the services rendered raised by the GMM to the assessee - These evidences go to the root of the issue, therefore, they are admitted and the matter is remitted back to the AO for examination of the evidences – Decided in favour of assessee. Loss on sale of assets disallowed – Held that:- In the statement showing computation of taxable income for AY 2003-04 filed along with return of income, the assessee had started the computation from net loss as per P&L account and thereafter has added the loss on sale of R&D assets twice - Thus the assessee has added back the loss amount at Rs. 72,60,952/-. Out of the said amount, the assessee has deducted only Rs. 36,30,476/-, which inter alia means that finally no deduction on account of loss on R&D assets have been made - the contention of the assessee appears to be prima facie correct that the assessee has not claimed any loss on sale of R&D assets in the computation of income - Hence there is no question of disallowance – the AO is directed to verify the computation of income – Decided partly in favour of assessee. Depreciation in plant and machinery – Held that:- The assessee had provided plant and machinery, equipment etc. to co-packers for the work of process/packing of flour and other food products - These plant and machineries belong to the assessee and were part of the block of assets of the assessee - Later on due to some dispute between assessee and co-packers, the business dealing was stopped and the agreement between the two parties stood terminated in the earlier year/s - the assessee had already used the asset for the purpose of its business and such asset were forming part of the block of assets - Once the plant and machinery has been used for the business purpose and is ready for use any time, then even if it has not been used for a particular period, it cannot lead to any inference that, there has been no user of plant and machinery - the assessee’s claim for depreciation on plant and machinery lying with the packers is eligible for depreciation – Decided in favour of assessee. Conversion charges disallowed – Held that:- The agreement was terminated in the month of May 2002. Before that the assessee had regular business dealing, with the said party - If the amount has been paid in pursuance of the earlier business dealing prior to the date of termination then even though payment has been made in this year, it cannot be held that same is not for the business purpose - when the payment has been made in accordance with the agreement between the parties existing earlier the same has to be allowed as business expenditure – the order of the CIT(A) is set aside - Decided in favour of assessee. Provision for leave encashment disallowed – Whether the assessee has given any actuarial valuation or not - Held that:- The assessee has provided the basis for the provision in the notes to the financial accounts in the following manner, “leave encashment benefits are provided for at 15 days salary for each employee, at current encashable basic salary” - This aspect has not been examined or verified either by the AO or by the CIT(A) – thus, the matter is to be remitted back to the AO to consider the basis for the provision made for the leave encashment as in such a situation it may not be necessary that actuarial valuation report for leave encashment has to be submitted, when the basis for leave encashment has been clearly given and there is no ambiguity about it – Decided partly in favour of assessee.

  ---

• 2014 (11) TMI 216
  Rectification of mistake u/s 254(2) – Whether non-consideration of the clause 3.4 of the cost sharing agreement by the Tribunal amounts to mistake apparent from the record – Held that:- the Tribunal has considered the agreement as a whole and not in piece meal - As far as arriving at the wrong conclusion in concerned, it does not constitute mistake apparent from record - under the provisions of section 254(2) of the Act it is not permissible for the assessee to contend that the appellate order was vitiated on the ground that the Tribunal failed to discuss all the contentions raised by counsel before it and to give reasons for coming to the conclusion which it did - If assessee finds an order defective on this ground, the remedy lay elsewhere, and not by way of a Miscellaneous Application - the Income-tax Appellate Tribunal is a creature of the statute and it is not been vested with the review jurisdiction by the statute creating it - The Tribunal does not have any power to review its own judgments or orders - What assessee desires is review of the order passed on in the garb of rectification application - The language of section 254(2) of the Act is very clear. The foundation for exercising the jurisdiction is ‘with a view to rectify any mistake apparent on the record’ and the object is achieved by ‘amending any order passed by it’ - aseessee wants reappraisal of the entire case - It is not possible under the provisions of section 254(2) of the Act – also in Commissioner Of Income-Tax Versus Ramesh Electric And Trading Co. [1992 (11) TMI 32 - BOMBAY High Court] it has been held that the power of rectification u/s. 254(2) of the Act, cannot be exercised on failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion because it is an error of judgment and not an error apparent on the record. The Tribunal had arrived at the conclusion after considering all the facts and circumstances of the case - for reimbursement there was no need to deduct tax at all, but whether in a particular payment there was reimbursement or not was to be proved by the assessee - the assessee had not led the evidence, inspite of the specific query, to prove that the payments did not have profit element - there is no mistake in the order of the Tribunal that could be rectified as per the provisions of section 254(2)of the Act – Decided against assessee.

  ---

• 2014 (11) TMI 215
  Reopening of assessment u/s 147/148 – Whether the only requirements before issue of a notice u/s 148 are that the AO should have reason to believe that income had escaped assessment and the same was fully met – Held that:- From the reading of the copy of the reasons recorded by the AO for issuance of notice u/s 148 of the Act, there is no mention of date therein - the details given are only with regard to name of the bank and its branch, address of the beneficiary, instrument no., date of transaction and amount is mentioned but in the operative part of the reasons recorded, there is no mention of the nature of transaction, much less to establish that the impugned transactions were in the nature of accommodation entries in the garb of gift - the AO proceeded to record reason to believe as required for issuance of notice u/s 148 of the Act in a mechanical manner only after mentioning detailed reason from Investigation Wing of the Department in a CD Form without applying its independent mind and even without mentioning the date of recording of reason to believe that the income has escaped assessment. In the main part of reason to believe, there is no mentioning of nature of transaction to establish and fortify the fact that the transactions were in the nature of accommodation entries - there is no mentioning of date and it can safely be presumed that the AO had not examined the assessment record of the assessee which was processed u/s 143(1)(a) of the Act on 15.3.2005 for forming a belief that the income of the assessee had escaped assessment - CIT(A) rightly was of the view that there was no material on record to show that the AO had applied her independent mind in forming a belief which may result in the required reason to believe as per provisions of section 147 and 148 of the Act - the CIT(A) was right in following the ratio of the decision CIT vs Sun Engineering Works Pvt. Ltd. [1992 (9) TMI 1 - SUPREME Court] - the CIT(A) was justified and reasonable in quashing the notice u/s 148 of the Act and entire reassessment proceedings – Decided against revenue.

  ---

• 2014 (11) TMI 214
  Rejection of books of accounts u/s 145(3) – Estimation of profit - Confirmation of GP addition – Low GP in comparison to previous year – Interest disallowed – Expenses incurred wholly and exclusively for the purposes of business or not – Held that:- The assessee had declared GP rate of 1.88% as against GP rate of 2.83% declared during the preceding year - The reason for fall in GP rate in the concern was explained to be on account of non-receipt of any government Tender during the year as against the government Tender of Rs. 10.16 crores received during the preceding year – the contention of the assessee is accepted that because of the variation in the markets, there may be variations in the GP rate and no trader in food grains items can declare the same GP rate from year to year as the items dealt in by the assessee are market dependent - Another reason for fall in GP rate during the year was the non-receipt of the government Tender which was approximately sales of Rs. 10.16 crores during the preceding year - The marginal fall in GP rate in the other two concerns i.e. trading of Sony products and trading of ITC products was too marginal and merits to be accepted being fall in market trend especially, where the assessee has maintained complete stock records vis-à-vis purchases, sales, opening stock and closing stock - In the absence of any evidence found to establish that the assessee had made any sales outside the books of account and the stock being completely tallied, there was no merit in the addition. In the absence of any defects being pointed out in the books of account maintained by the assessee merely because there was a fall in the GP rate as compared to the preceding year and the nature of the trade being carried on by the assessee being sale and purchase of gold jewellery, where the rates of gold had increased, there was no meir in the rejection of books of account and the estimation of profits – Decided in favour of assessee. Valuation of the closing stock – Held that:- The CIT(A) has rightly given a finding that the AO had not controverted the valuation of the stock shown in the books of account which was valued on the basis of the last purchase price - no evidence of out of books investment in stock-in-trade had been brought on record by the AO - the valuation given to the bank was on estimate basis – Decided against revenue.

  ---

• 2014 (11) TMI 213
  Deletion of unexplained investment in hospital building – Held that:- The addition on account of unexplained investment in the construction of hospital building is not justified - In the course of survey, assessee did offer additional income on account of unexplained investment in the construction of the hospital building - such a declaration made was retracted within a short span of time and of course much before the due date of filing of return for the assessment order - The assessee explained that the declaration was based on a mistaken fact-situation inasmuch as the valuation report of Shri Madhukar Dhere dated 20.02.2009, which formed the basis for the declaration, was unreliable - CIT(A) has noted that the construction of the building started in the AY 2005-06 was still continuing on the date of survey and therefore it was imperative for the Valuer to take into consideration the cost of construction in the respective periods. The absence of such an approach in the report of the Valuer justifiably renders such report as unreliable in order to establish the estimated cost of construction of the building - the total investment in the hospital building was adopted by the AO which was reflected in the books of account maintained for AY 2007-08 and it did not take into consideration the expenditure incurred by the assessee for the period from 01.04.2007 upto the date of survey - CIT(A) considered the report of a Government Approved Valuer and compared the value estimated by him with the cost of construction recorded in the books of account - The CIT(A) correctly noted that the difference between the two figures was insignificant, which cannot be ruled-out because valuation report is ostensibly only an estimation - the CIT(A) was justified in deleting the addition made by the AO – Decided against revenue. Unexplained investment in interior decoration – Held that:- The CIT(A) made no mistake in sustaining the addition on account of unexplained money spent on furniture, fixture and interior decoration - The explanation furnished by the assessee in the course of assessment proceedings has been aptly considered by the CIT(A) and found to be incorrect – there was no reason to interfere with his conclusion on this aspect – Decided against assessee.

  ---

• 2014 (11) TMI 212
  Jurisdiction of CIT u/s 263 – Validity of assessment order passed u/s 153A r.w. s 143(3) – Held that:- CIT(Appeals) has failed to arrive at a firm conclusion as to how the assessment orders are erroneous and prejudicial to the interest of the revenue - the orders u/s 263 are not sustainable on this fold of submissions also - it cannot be segregated in two different proceedings i.e. partly before the Learned CIT(A) and partly before the Commissioner u/s 263, the apprehension of revenue is concerned that 35% amount of the unrecorded sales has not been added by the AO, it will not travel to the Learned CIT(A) is concerned, the CIT(A) has powers co-terminus with that of AO and while evaluating the evidence demonstrating the appropriate amount of unaccounted sales, if any, to be considered in the hands of the assessee, would authorize him to consider the total amount and in that situation Learned CIT(Appeals) has jurisdiction to issue notice for enhancement - The observations made while considering the appeals of assessee u/s 263 for issuing notice for enhancement will not be considered as expression of any opinion on the merits of the issues - all the orders passed u/s 263 of the Act is to be set aside – Decided in favour of assessee.

  ---

• 2014 (11) TMI 211
  Bad debts written off to pharma division – Held that:- The assessee actually wrote off which is what the assessee had claimed as a deduction against income of the discontinued business - prima facie even though sale of unit has been made on going concern basis, the debtors are transferred only on realization @ 95% since admittedly bad debts cannot exceed 5%, and, to that extent, the assessee continues to have financial exposure for realization of debtors - as there is no clear factual and legal findings about the very basic aspects of this disallowance, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Disallowance u/s 14A r.w. Rule 8D – Held that:- The provisions of rule 8D can only be applied prospectively and, there was no relevance so far as assessments for the assessment years prior to 2008-09 – relying upon Maxopp Investments Ltd Vs CIT [2011 (11) TMI 267 - Delhi High Court] - there are no direct expenses incurred in earning this dividend income, the amount is restricted by the disallowance u/s 14A to dividend income – Decided partly in favor of assessee. Advertisement expenses yield any benefit to the assessee or not – Held that:- The TPO has accepted profitability of these transactions on the basis of TNMM and yet picked up this reimbursement, which constitutes a charge on such profitability, for rejection – the expenses were incurred on behalf of the assessee, and this position remains uncontroverted - Whether the assessee was under an obligation to incur these expenses or not is, therefore, not really relevant - The question of incidental benefit to the assessee, for expenses incurred by the AE, would arise only when the expenses are incurred by the AE in its own right though for the common benefit of group as a whole – thus, the order of the CIT(A) is to be set aside – Decided in favour of assessee.

  ---

• Customs

• 2014 (11) TMI 235
  Exemption under the Notification No. 93/2004 - Cus. dated 10.09.2004 - discharge of export obligation - Held that:- Appellant had failed to fulfill the conditions enumerated in the Notification No. 93/2004 - Cus. dated 10.09.2004 regarding achievement of the export obligation. Thus, as per the declaration furnished in the executed bond, the authorities below have rightly confirmed the foregone duty demand along with interest. Further, during the appeal proceedings before the Additional Director General of Foreign Trade, the appellant undertook to pay the customs duty along with interest. - Partial stay granted.

  ---

• 2014 (11) TMI 234
  Denial of refund claim - Unjust enrichment - Held that:- If it is observed that bar of unjust enrichment is applicable then also the appellant has discharged their burden to prove that duty incidence has not been passed on the buyer as they have been able to produce Chartered Accountants certificate to that effect and shown the revenue deposit as receivable from the customs. Therefore, without going into the merits, I hold that they have passed the bar of unjust enrichment. Therefore, they are entitled for refund claim - Decided in favour of Assessee.

  ---

• 2014 (11) TMI 233
  Valuation of goods - Refund claim of excess claim of duty - Held that:- Enhancement of value at the time of import of the goods by the Customs authorities, stand set aside by the Tribunal. On success of their appeal, the appellant is entitled to the consequential relief on the same, otherwise the entire litigation done by the appellant would loose importance. The said consequence of allowing the appeal is that whatever higher duty the appellant has paid at the time of clearance of goods, should be refunded to them. Where the assessee has produced chartered accountant certificate, the invoice showing the stamp of non-passing of duty to the customers and profit and loss account showing the said duty is recoverable from the Revenue, the denial of same on hyper technical point of non-production of original invoice is neither justified nor fair - Decided in favour of assessee.

  ---

• 2014 (11) TMI 232
  Valuation of goods - Toys imported from china - Imposition of penalty - Held that:- appellant admitted to the undervaluation of the goods at the time of importation and informed the customs authorities that he has misdeclared the value of the goods to the extent of 50% of the actual value and this statement has not been retracted. The appellant subsequently also did not lead any evidence to show that the value accepted by him is not true and correct and the accepted value was on the higher side compared to contemporaneous imports of similar/identical goods - It is a well settled position of law that admitted facts need not be proved as held by the Hon’ble High Court of Madras in the case of Govindasamy Raghupathy - [1997 (6) TMI 356 - MADRAS HIGH COURT]. In the present case, the appellant has not led any evidence to show that the value admitted by him is incorrect. Therefore, the adoption of the value as admitted by the appellant in the facts of the case cannot be faulted. Consequently, the appellant is liable to discharge the duty liability. Inasmuch as the value has been misdeclared, imposition of penalty is also sustainable in law - Decided against assessee.

  ---

• Service Tax

• 2014 (11) TMI 253
  Levy of service tax on sub-contractor - Waiver of pre deposit - appellant's plea is that the principal contractor RNS Infrastructure Limited have deducted the service tax liability and had paid the same to the Department. - Manpower Recruitment or Supply Agency service - Held that:- Appellant has produced relevant documents before the Tribunal as well as before this Court. If the stand of the appellant that the service tax liability is discharged is proved to be correct on the basis of the records furnished, the Department ought to have consider payment of service tax in the light of such statement. This stand is not a new one taken at the first time before the Tribunal, but has been communicated by the principal contractor at the earliest point of time even before the Adjudicating Authority. The appellant is only a civil contractor working under the principal contractor. If records are available with the Department, then there is no reason why the authority should have refused to go into the claim and verify the bona fides of such a plea of payment of service tax. At this point of time, we are not testing the merits of the documents furnished, namely, ST-3 returns and other connected documents. But that will be a prima facie material for us to consider that the issue requires to be properly considered by the Department in the light of what has been stated on 04.10.2010 and supported by the documents. If it is found true, then the consequence will flow therefrom. - Tribunal to verify the claim - stay order of tribunal directing the assessee to deposit entire amount of service tax modified and stay granted partly.

  ---

• 2014 (11) TMI 252
  Rejection of the declaration made under Section 106 - Voluntary Compliance Encouragement Scheme - Held that:- It is to be noticed that at an earlier point of time when recovery proceedings were initiated during the pendency of the 1st appeal filed under Section 85, petitioner was before this Court. In that writ petition, a specific contention was taken up by the Department, that no appeal would be maintainable under Section 85. Evidently, there is a further appeal to the Central Excise and Service Tax Appellate Tribunal as provided under the Finance Act, 1994. The petitioner cannot be permitted to bye- pass such remedy and approach this Court, especially since on a reading of the judgment of this Court, rendered in the earlier round, it is evident that there is a dispute with respect to the satisfaction of the 50% amounts as directed in Section 107 also.

  ---

• 2014 (11) TMI 251
  Denial of refund claim - Notification No. 17/09-CUS dated 7/7/09 - Non submission of original invoices - Service provided by assessee are not port services - Service provider registered under different category - Non mention of goods on invoices - CHA has charged other charges which do not fall under the CHA services - refund claim was filed by describing the transportation of the goods by road, whereas the actual transportation was rail - the claim was filed under the category of THC instead of CHA - Held that:- invoices which are computerised invoices have been down loaded through the internet - Cenvat credit is not to be denied on the basis of computer generated invoices. Any services provided on the port are ‘port services’ - refund cannot be denied on the ground that service providers are not registered for any particular services - admittedly the said invoices have cross reference to either invoice number or the shipping bill number and/or container number. From the said cross references the description of the goods can be found out and the denial of the claim on the said ground is not justified when admittedly the services have been used for the export of the goods. - much as and as long as the CHA paid the service tax on the entire consideration under the category of CHA services, the service recipient would be entitled to the benefit of the same. No such objection was raised by the Revenue at the time of collection of service tax from the CHA and allowing them to raise such an objection at the time of grant of refund would be against the principles of justice. There are the inadvertent mistakes having occurred in the hands of the person preparing the refund claim. Similarly claiming the service tax under a different service category by referring to a wrong sub-Section should not result in denial of the refund, if otherwise due to the appellant on merits. - Matter remanded back - Following decision of CCE vs. Gokul Refoilds & Solvents Ltd. reported in [2012 (6) TMI 245 - CESTAT, AHMEDABAD], Western Agencies Pvt. Ltd. vs. CCE reported in [2011 (3) TMI 528 - CESTAT, CHENNAI (LB)] and CCE vs. Dishman Pharmaceuticals & Chemicals Ltd. reported in [2010 (10) TMI 355 - CESTAT, AHMEDABAD] - decided in favour of assessee.

  ---

• 2014 (11) TMI 250
  Valuation of service - Whether commitment charges recovered by the Bank are to be added to the taxable service for charging service tax or these charges are to be treated as interest and no service tax was to be levied on such charges - Held that:- commitment charges are the Charges imposed on the client who decide not to draw the amount of loan that has been at their disposal. These charges are basically to compensate for the loss of interest that the bank would have earned if the customer had drawn money from loan account. It is seen that the charges are related to lending of money to the client and; in order to give limit/overdraft facility, the bank keeps the fund available for the same. Under such circumstances, it is evident that such charges are integrally connected with the lending which is a taxable service. Therefore, commitment charges cannot be separated from lending service. I, therefore, hold that the commitment charges are chargeable to service tax and the amount of Rs. 46,902/- is recoverable from them. - Decided against assessee.

  ---

• 2014 (11) TMI 249
  Waiver of penalty - Delayed payment of service tax - service tax paid before issuance of SCN - Held that:- it is observed that appellants have clearly admitted in their of submissions that amount was paid as pointed out by the audit. This fact itself does not prove their bonafide that they have deposited the amount before the issue of Show Cause Notice suo moto. - penalties are rightly leviable on the appellants. Availment of Cenvat Credit - Availment of credit on furniture - Held that:- table, chair, stool, cot etc. were of the same genre and were in the nature of office furniture and were not eligible for availment of Cenvat Credit - Decided against assessee.

  ---

• 2014 (11) TMI 248
  Classification of service - On-Line Information and Database Access and/or Retrieval Services or Business support service - Held that:- In consideration for the services rendered, the foreign entity, Reuters Ltd., U.K., is required to pay a fee to the appellant in an amount equal to 108% of the costs and expenses incurred by the appellant in providing those services. Thus, as per the agreement, the services rendered is one of collecting, collating, verifying data and transmission of the same to the foreign-sister concern of the appellant. The information has to be transmitted either electronically or otherwise and the consideration is paid on cost plus basis. Thus, the services rendered by the appellant does not seem to be of the nature of any management or repair services as alleged in the show cause notices and as concluded in the impugned order. The data furnished by the appellant is used by the foreign entity for inclusion in their products for dissemination to the customers situated worldwide. In other words, the activity of the appellant supports the business undertaken by the foreign entity abroad. Thus, we find there is merit in the argument of the appellant that the activities undertaken by them, merits classification under ‘Business Support Services'. Appellant has rendered the services from India and the appellant has received the consideration in convertible foreign exchange. In view of the above factual position, the services rendered by the appellant would merit classification as ‘export of services' from India. On export of services, service tax liability is not attracted. appellant had not declared any dividend whatsoever. Thus, factually also the impugned order is incorrect inasmuch as no dividends have been declared by the appellant during the impugned period and therefore the question of repatriation would not arise at all. Thus, the impugned orders lack merits. - Decided in favour of assessee.

  ---

• 2014 (11) TMI 247
  Condonation of delay - Appeal wrongly filed before Commercial tax officer - Delay occured in transferring the appeal - when an appeal is filed before a wrong authority, whether that can be taken as the date of filing appeal even if appeal was received by proper appellate authority subsequently - Management, Maintenance or Repair Service - Held that:- there was definitely a mistake committed in filing appeal even though it was drafted correctly and the authority was correctly mentioned. It has to be noted that even Commercial Tax officer did not bother to take any action and did not bother to look into the papers. If they were to do so properly, the appeal papers would have been returned to the appellant or would have been forwarded to the proper authority. This aspect also has to be taken into account. The Govt. office also has to take action on the papers received and no action was taken on the papers received from a citizen of the country. We cannot simply deny a citizen s appellate right just because they filed appeal with a wrong authority. because of the peculiar circumstances in this case, it would be appropriate not to deny opportunity to the appellant in this case and accordingly, we take a view that date of filing appeal before Commercial Tax officer has to be taken as the date on which appeal was filed. Since the date of filing appeal before Commercial Tax officer is within the period of limitation, appeal could not have been rejected on the ground that the same has been filed beyond the period of condonation. - matter remanded back - Decided in favour of assessee.

  ---

• 2014 (11) TMI 246
  Waiver of pre deposit - Security Agency Services - nature of services provided by the Mumbai Police to individuals or organizations in conducting various private and public events - Held that:- prima facie the services provided by deployment of additional police force, either to individuals or for public events, partakes the nature of maintenance of peace and preservation of order. Further, the costs paid by the service recipients gets credited to the consolidated fund of the State, which is also suggestive of statutory/sovereign nature of the function. appellant has made a strong case for grant of stay - Following decision of Security Guards Board vs. Comm. Of Central Excise, Thane II [2011 (9) TMI 113 - BOMBAY HIGH COURT] - Stay granted.

  ---

• 2014 (11) TMI 231
  CENVAT Credit - Adjudication on the basis of revised return - Whether the authority shall act on the belated revised return or on the original return - Held that:- In any circumstance law has to operate for proper application to determine tax liability on the facts settled. If the facts and circumstances establish that there was proper discharge of tax liability and Cenvat credit was available in accordance with law and also these aspects are evident from the record there shall not be difficulty to pass appropriate adjudication order. By this we do not say that a belated return shall receive consideration. Since there are difficulties expressed in understanding the material facts and figures by both sides due to the situation of belated return, we dispense with requirement of pre-deposit and remand the matter to the learned adjudicating authority to grant fair opportunity to the appellant to support its claim - Decided in favour of assessee.

  ---

• Central Excise

• 2014 (11) TMI 244
  Penalty u/s 11AC - option of avail benefit of reduced penalty of 25% - Clearance of goods without payment of duty – duty paid before SCN issued - Held that:- While the duty demand confirmed against the appellant is Rs. 2,71,144/-, earlier in the first round of litigation, in pursuance of the Tribunal’s stay order dated 13/07/2000, they had deposited an amount of Rs. 6,00,000/- under TR-6 challan No. 30 dated 02/09/2000 and it is not disputed that this amount is still with the Department. The denovo adjudication order was passed on 31/12/2000. Thus, even before the adjudication, the entire amount of duty and interest had been paid by the appellant. The denovo adjudication order, in spite of the proviso to Section 11AC, did not give an option to the appellant to avail of the benefit of lower penalty by paying 25% of the penalty within period of 30 days of the adjudication order. In view of these facts, in our view, the judgment of Hon’ble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. Union of India (2008 (1) TMI 296 - HIGH COURT OF DELHI) would be applicable and therefore the benefit of lower penalty in terms to proviso to Section 11AC cannot be denied. The penalty on the appellant under Section 11AC is accordingly reduced to 25% - Decided partly in favour of assesee.

  ---

• 2014 (11) TMI 243
  CENVAT Credit - Negligent in taking credit as invoice is incomplete - Held that:- Duty is payable fortnightly i.e. for the first fortnight the duty is payable by 15.6.2000, in the facts and circumstances, and not at the time of clearance of the goods. Further, there is no obligation cast on receiver of the goods to monitor the payment of duty by the manufacturer clearing the goods and accordingly, the contention of the Revenue is untenable and their appeal fit to be rejected - Decided against Revenue.

  ---

• 2014 (11) TMI 242
  Denial of CENVAT Credit - Invoices issued by two dealers - Held that:- Revenues case is mainly based upon the statements recorded during investigations. The finding portion of the impugned order refers to certain developments and evidence to come to conclusion that the manufacturing units were availing credit without actual receiving the goods. Some of the manufacturing units have taken a strong objection to the fact that they were not even using the scrap generated at the washer manufacturing units and as such, the allegations and findings are general in nature. We also note that Commissioner has not dealt with the evidence available and relatable to each and every manufacturing unit and by making general observation credit stand denied to such units. Further, the deponents of the statements have also not been offered for cross examination. impugned order of the Commissioner is not dealing with the evidence available in each and every case and the observation made by him are too general without relating to transactions in the bank accounts and without even referring to alternative source of procurement of raw materials, we deem it fit to set aside the impugned order and remand all the matters to the Commissioner for fresh decision - Following decision of CCE vs. Juhi Alloys Ltd. [2014 (1) TMI 1475 - ALLAHABAD HIGH COURT], Luxmi Metal Industries vs. CCE, Delhi II [2013 (3) TMI 143 - CESTAT NEW DELHI] and Rajan Engineering Works vs. CCE, Faridabad [2011 (7) TMI 626 - CESTAT, DELHI] - Decided in favour of assessee.

  ---

• 2014 (11) TMI 241
  Waiver of pre-deposit of duty - Availment of credit of duty paid on the material without any document - Held that:- duty paid SIM cards which were found to be defective were received in the factory and credit was availed on the duty paid on such SIM cards and subsequently the same after rectification of the defects were cleared on payment of appropriate duty, the applicant had a strong case for waiver of pre-deposit of the dues. The pre-deposit of the dues is waived and recovery thereof stayed for hearing the appeal - Stay granted.

  ---

• 2014 (11) TMI 239
  Availment of CENVAT credit - appellant deliberately and with mala fide intention supplied invoices enabling the recipient to take benefit of the CENVAT credit without supplying the corresponding goods - Held that:- Shri Shiv Govind Pandey, Director of M/s Indian Steel and M/s Jai Ambe Multi Trade in statement given under Section 14 has clearly admitted to supply of bazaar scrap under the cover of Central Excise invoices to the appellant M/s MTC Business Pvt. Ltd. Shri Lalit Inderchand Baliya, Director has also admitted that they have purchased the scrap from M/s Indian Steel and M/s Jai Ambe Multi Trade on visual examination basis and after verifying the quantity of the goods supplied. He has also confirmed that when the goods were purchased, they supervised and again checked the quantity. If the appellant had verified the scrap on visual examination basis and also verified the quality and quantity as admitted by Shri Lalit Inderchand Baliya in his statement the appellant should have certainly known that the scrap procured by them from M/s Indian Steel and M/s Jai Ambe Multi Trade was not manufactured scrap but bazaar scrap. The appellant cannot take plea that they did not know the various types of scrap. Therefore, the contention of the appellant that they were not aware the nature of scarp procured by them but blindly believed what the supplier stated is difficult to accept. Therefore, I am of the view that the appellants have not made out a case for complete waiver of penalty adjudged against them. In these circumstances, I direct the appellants to make a pre-deposit of 25% of the penalty imposed on them within a period of six weeks - Partial stay granted.

  ---

• 2014 (11) TMI 238
  Denial of CENVAT Credit - supplier of the goods is not a manufacturer - Held that:- Goods supplied by M/s Amul Industries Pvt. Ltd. is an excisable product and the appellant procured the goods on payment of excise duty. Once the supplier of the goods had discharged the duty liability, the recipient can take CENVAT Credit of the duty paid and use the same in further manufacture of dutiable final product. Accordingly, I set aside the impugned order - Following decision of Cipla Ltd. [2011 (7) TMI 253 - CESTAT, MUMBAI] - Decided in favour of assessee.

  ---

• 2014 (11) TMI 237
  Shortage of goods - Petroleum products - Held that:- Duty has been demanded on the shortage of goods found at the end of the buyer which is less than 0.5% of the clearance made by the appellant. In appellant's own case, the Hon'ble High Court [2013 (3) TMI 481 - BOMBAY HIGH COURT] has held that shortage of 1% as transit loss based on the CBEC circular 55/89 dated 15.12.1989 and in this case the shortage if 0.5%. Therefore, I hold that in this case proceedings against the appellant were not warranted. - Decided in favour of assessee.

  ---

• 2014 (11) TMI 236
  Waiver of pre deposit - Denial of the benefit of SSI exemption Notification No.08/2003 dated 01/03/2003 - fabrication of structures - appellant is undertaking both the supply of goods as well as supply of service and on the service portion, they have discharged service tax liability. - Held that:- Duty demand for the normal period works out to Rs. 7.00 lakhs. Considering that the appellant might be eligible for the Cenvat credit on the inputs, pre-deposit of Rs. 3.00 lakhs would be appropriate. The appellant has already paid a sum of Rs. 2.5 lakhs. Considering the payment made, we direct the appellant to make a pre-deposit of another Rs. 50,000/- within a period of six weeks and report compliance by 18/03/2014. On such compliance, pre-deposit of balance of dues adjudged against the appellant shall stand waived and recovery thereof stayed during the pendency of the appeal. - Partial stay granted.

  ---

• CST, VAT & Sales Tax

• 2014 (11) TMI 245
  Levy of 16 per cent tax on the sale of deep freezers - Held that:- Tribunal, the last fact-finding authority, in our opinion, has misconceived the principles underlying the virtue of brevity. In annexure C order it merely says that since the appellant purchased deep freezer from exempted class of dealers and no tax was paid, the assessment levying 16 per cent tax on its sale is in accordance with law. The Tribunals would do well to examine the facts of the transaction and relate it to the law applicable, being the last fact-finding authority, so as to give a clearer picture. In the absence of such examination, we have thoroughly examined the assessment order as such. The entire controversy revolves around the sale of deep freezers and the levy of 16 per cent on turnover of Rs. 5,15,860. Admittedly on first sale of deep freezers no tax was payable since the sale was by SSI units, eligible for exemption. The discussion above would show that if the assessee purchased it for sale, then the subsequent sale if to another registered dealer for sale, then the liability to tax on such sale would be 12 per cent and any subsequent sale which is the last sale would be leviable at four per cent. However, if the assessee's sale is to a registered dealer not for sale or to an unregistered dealer, then necessarily the assessee's liability would be 16 per cent. If the assessee has purchased it as capital goods and effecting sale of used freezers, whatever be the period of use, then tax would be payable only on the amount of such sale as indicated above. The contention that the assessee leases out the deep freezers and since the definition of "sale" includes a lease cannot hold good. The transfer of right to use resulting from a transaction of lease is taxable at the rate of eight per cent under sub-clause (iii) of sub-section (1) of section 5 of the Act. Assessment order also does not give us a complete picture. The action of the assessing officer in adding gross profit and the submission of the assessee that they are intermediary dealers within the State would make the transactions fall either under the first limb of the proviso or the second limb of the proviso; depending upon "to whom" the sale is effected. However, we also find from the reconciliation statement of the assessee extracted in page 5 of the assessment order that depreciation has been claimed on deep freezers and loss of sales on fixed assets had been deducted to the profit and loss account. This reveals an improper marshalling of facts by all the authorities concerned. Whether the assessee is an intermediary seller and if so whether the sale is to a registered dealer for sale or otherwise has essentially to be determined before the rate of tax leviable is decided. In such circumstances, the sale price of the assessee would be relevant for determination of the turnover on which the rate of tax is to be applied. There is no room for deducting depreciation or loss because then it is a sale of goods and not sale of fixed assets. However, if the assessee is making second hand sales of deep freezers, then again what is taxable is the consideration for such sale and there can be no addition of gross profit to the purchase turnover. We are afraid that the authorities below have not examined the facts in the proper perspective - Matter remanded back - Decided in favour of Assessee.

  ---