TMI Tax Updates - e-Newsletter
December 12, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. CENVAT CREDIT TO SEZ'S

   By: Dr. Sanjiv Agarwal

2. Principal Manufacturer is entitled to avail Cenvat credit of duty paid by job worker on intermediate goods, who choose to pay duty instead of availing exemption

   By: Bimal jain

News

1. Indirect Tax Revenue (Provisional) Collections Increase from ₹ 3,06,814 Crore in April-November 2013 to ₹ 3,28,662 Crore During April-November 2014; Registering an Increase of 7.1% during April-November 2014 Over the Corresponding Period in the Previous Year; Service Tax Collections Increase by 11.5% During the Same Period

2. Hope to touch USD 100 bn trade with ASEAN by 2015: Nirmala Sitharaman Need to establish regional value chains to sustain long-term economic relationship: Rajeev Kher

3. RBI Reference Rate for US $

4. Amendments to the Insurance Laws (Amendment) Bill, 2008

5. Approval for Revised Project Cost and Extension of Contract for the Centralized Processing Center of the Income Tax Department at Bengaluru

6. Interest subvention to Public Sector Banks, Private Sector Banks, Cooperative Banks, RRBs, NABARD for providing short term crop loan to farmers

7. Establishment of 6 (Six) new Debts Recovery Tribunals (DRTs) at Chandigarh, Bengaluru, Ernakulam, Dehradun, Siliguri and Hyderabad

8. Establishment of Credit Guarantee Funds for Factoring

9. Capital requirement of Public Sector Banks - Raising capital from public markets by broad basing shareholding

Circulars / Instructions / Orders

Income Tax

1. 17/2014 - dated 10-12-2014

INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2014-15 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.

DGFT

2. 14/(RE-2013)/2009-2014 - dated 10-12-2014

Keeping in abeyance the Notification No. 93 dated 29.09.2014 in respect of item at EXIM Code 1005 Maize (Corn)

Customs

3. 14/2014 - dated 11-12-2014

Attention is invited to Board Circular No 44/2011-Cus dated 23.09.2011 regarding adjudication of appraising related cases.

Highlights / Catch Notes

Income Tax

• Section 10(23C)(via) Exemption Hinges on Meeting Essential Requirements; Limited Revenue Challenge Once Satisfied.

  Case-Laws - HC : Eligibility for exemption u/s 10(23C)(via) – if the authority is satisfied with regard to the essential requirements or ingredients of section 10(23C)(via), then, it is hardly open for the Revenue to complain - HC
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• Assessee's belief in share allotment exempts them from Section 269SS violation; Section 271D penalty deleted.

  Case-Laws - HC : Deletion of penalty u/s 271D – Violation of provisions of Section 269SS or not –assessee was under the bona fide impression that the money received was only towards allotment of shares and it is not a loan or deposit - no penalty - HC
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• Indian Company's Management Fees from Subsidiaries Not Taxable as Technical Services Due to MFN Clauses.

  Case-Laws - AT : Management Service Fees to be taxable as Fees for Technical Services or not – on the principle of the most favoured nation (MFN) clauses the payment of ₹ 5.93 Crores received by the assessee company from its Indian subsidies cannot be brought to tax - AT
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• Tax Authority's Addition of Share Application Money Deleted Due to Reliance on Third-Party Statements by Investigation Wing.

  Case-Laws - AT : Addition on share application money received – the only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing - addition deleted - AT
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• Assessing Officer to Enquire Yoga and Ayurvedic Income Before Decision as Business Income, Modifying CIT's Order.

  Case-Laws - AT : Order of the CIT is modified as instead of making addition directly, and treating income from yoga as business income, the AO is directed to conduct necessary enquiry with regard to yoga, ayurvedic treatment etc. and thereupon decide the same - AT
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• Tax Authority Must Correct Over-Assessment Errors Due to Mistakes or Misconceptions Under Income Tax Act.

  Case-Laws - AT : If an assessee, under a mistake, misconceptions or on being not properly instructed is over assessed, the concerned authority under the Act is obliged, required to assist such an assessee by ensuring that only legitimate taxes are determined as collectible - AT
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Customs

• Court Rejects Appellant's Claim on Ceramic Core Use in Porcelain Insulators for Ball Clay Import Justification.

  Case-Laws - HC : Appellant is trying to confuse the issue by stating that ceramic core is being captively consumed in the manufacture of porcelain insulator and therefore the import of ball clay should be allowed. The said claim of the appellant cannot be accepted - HC
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Service Tax

• Refund Granted for Telecom Services to International Roamers: Classified as Export, Entitled to Service Tax Rebate.

  Case-Laws - AT : Refund claim - telecommunication service to international roamers - the transaction is one of export and the appellant is rightly entitled for refund/rebate of the service tax paid in respect of such transactions. - AT
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• Applicant Reverses Provisional Sponsorship Amount; Preliminary Assessment Favors Assessee on Service Tax Obligations.

  Case-Laws - AT : Sponsorship Service - the applicant reversed the provisional amount in the subsequent financial year - prima facie case is in favor of assessee - AT
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• Court Examines Validity of Rule 5A on Auditing Service Tax Records; Respondents Temporarily Halted from Further Actions.

  Case-Laws - HC : Validity of Rule 5A - power to audit of service tax records - respondents are prevented from proceeding further in connection with the impugned communication - HC
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• High Court Rules Timing of Summons Irrelevant for Service Tax Voluntary Compliance Scheme Application in 2013 Case.

  Case-Laws - HC : Application to deposit remaining 50% of the amount under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 - summons were issued on 26 and 28.2.2013. Mere fact that summons were served after 01.03.2013 shall be of no consequence - HC
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• Tribunal Confirms Course Fees Split to Evade Service Tax; Waiver of Pre-Deposit Denied.

  Case-Laws - HC : Waiver of pre deposit - Commercial training or coaching - sale of books - Tribunal came to the conclusion that the amount received from the trainees as course fee was artificially split to avoid payment of service tax - order of tribunal sustained - HC
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• Court Rules in Favor of Appellant on Property Lease, Appellant Must Cover Bank Guarantee Costs.

  Case-Laws - SC : Recovery of cost of bank guarantee furnished by the Respondent No.5 - the issue regarding letting out of immovable property was decided in favor of appellant - appellant asessee to bear the cost - SC
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Central Excise

• Court Remands Case to Decide if Rewinding Old Motor Equals Manufacturing New Coil for Modvat Credit Under Central Excise.

  Case-Laws - AT : Modvat credit - manufacture of coils - The question whether winding an old motor would amount to manufacture of a new coil was not addressed properly - matter remanded back - AT
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• Processed Fabric Duty Unaffected by Shrinkage of Grey Fabrics; Value Determined Independently of Quantity Received.

  Case-Laws - AT : Determination of value of the processed fabrics - the quantity of grey fabrics received and later on processing shrunk, has no bearing with the specific rate of duty applied at the time of clearance of processed fabrics - AT
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Case Laws:

• Income Tax

• 2014 (12) TMI 1151
  Unexplained deposits in the bank accounts - CIT(A) deleted the addition - Held that:- On perusal of the order passed by ld. CIT(A), it appears that CIT(A) has accepted assessee’s claim merely on its face value without properly making any enquiry to find out whether assessee’s claim is correct. Further, CIT(A) is under misconception that AO has only considered the deposits without taking into account the withdrawals. As can be seen from the assessment order, AO has considered both the deposits and withdrawals and worked out the peak credit of 31,13,502 for the purpose of addition. In these circumstances, ld. CIT(A)’s finding is not sustainable. However, fact remains that AO has also not properly appreciated the facts and could not make effective enquiry due to constraint of time as assessment was getting time barred. Thus the entire issue relating to deposits into assessee’s bank account requires examination afresh in view of the claim made by assessee before the first appellate authority. - Decided in favour of revenue for statistical purposes.

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• 2014 (12) TMI 399
  Expenses on fixed assets made to be treated as unexplained investments or not u/s 69 - Held that:- Assessees have made investments in fixed assets and the source of such investments was the inflow available on the Liability Side of the Balance Sheet - Since the Assessing Officer has not properly appreciated the facts, before the CIT(A), the source was explained, and it was accepted by the CIT(A) - Having accepted the source of funds, there cannot be any addition made in this year and even in the subsequent year, i.e. in the year of sale, the source of investment cannot be disputed - the CIT(A) is not justified in giving direction to the AO to consider the source of investment in the year of sale – thus, the order of the CIT(A) is set aside and it is not a fit case for making the addition u/s 69 of the Act – decided in favour of assessee.

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• 2014 (12) TMI 398
  Non-compliance of provisions of section 245D(2D) Order passed by Income Tax Settlement Commission Abatement of proceedings u/s 245HA (1)(ii) - Whether the Commission was justified in holding that the proceedings before it abate in view of the non-deposit of the amount of additional tax together with interest as directed by it by the order u/s 245D(1) Held that:- The assessee in the application u/s 245C of the Act, had declared undisclosed income - in Ajmera Housing Corporation Anr. v. Commissioner of Income Tax [2010 (8) TMI 35 - SUPREME COURT OF INDIA] it has been held that disclosure of full and true particulars of undisclosed income and the manner in which such income has been derived are the pre-requisites for a valid application u/s 245C(1) - it was not permissible for the assessee to revise the application made by it u/s 245C(1) - it was incumbent upon the petitioner to pay the additional tax in terms of the original application made by him under section 245C of the Act, whereby he had declared the undisclosed income - the Settlement Commission committed no error in holding that the application made by the assessee u/s 245C of the Act stands abated - the Settlement Commission has expressly stated what is implied in law, inasmuch as, the abatement is by virtue of the operation of the provisions of sub-section (1) of section 245HA thus, the order of the Settlement Commission is upheld Decided against assessee. Entitlement for alternate relief - Whether the assessee is entitled to the alternate relief prayed for in the petition, namely, for restoration of the appeal filed by it before the Tribunal against the order made by the AO u/s 158BC Held that:- At the relevant time when the application u/s 254C(1) of the Act came to be made by the assessee, the assessment proceedings u/s 158BC of the Act were pending before the AO relying upon Commissioner of Income-Tax v. Damani Brothers [2002 (12) TMI 11 - SUPREME Court] wherein it has been held that the scheme of Chapter XIX-A shows that the filing of application by the assessee is a unilateral act and the department may not be aware of the same - the liability under order made by the AO u/s 158BC of the Act would exist even after the Settlement Commission passed the order u/s 245D(1) of the Act - despite the fact that the Commission has observed that the AO shall now dispose of the case in accordance with the provisions of sub-sections (2) (3) and (4) of section 245HA of the Act, the order u/s 158BC of the Act would still subsist as there is no automatic setting aside of such order thus, in the light of abatement of the proceedings before the Settlement Commission by operation of the provisions of section 245HA of the Act, the interest of justice requires that the appeal preferred by the petitioner before the Tribunal be restored - The assessee is entitled to the alternate relief prayed for in the petition, namely, for restitution of its appeal before the Tribunal Decided in favour of assessee.

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• 2014 (12) TMI 397
  Eligibility for exemption u/s 10(23C)(via) – Held that:- The Tribunal as also the Commissioner held that the objects of the Trust remained unchanged - The Trust is registered with the Charity Commissioner of Mumbai and also registered u/s 12A - The certificate u/s 80G has also been granted by the DIT(E) Mumbai - assessee had throughout maintained that it had obtained the approval from the competent authority exempting it under the relevant legal provision - The application was also made in that behalf - compliance with the legal provision was made by producing before the AO the relevant order – the order of the Tribunal is upheld. Conclusion of both essentially rests on the receipt of the order by the Assessee during the course of the assessment proceedings and referable to section 10(23C) (via) - the tendency of parties to complain to the higher Court on such issue is strongly deprecated - If the counsel in his discretion chooses not to press certain grounds, then, the complaint of this nature cannot be made subsequently and in a higher Court - if such explanations have to be accepted that would be going behind the contents of the order made by the competent authority u/s 10(23C)(via) – if the authority is satisfied with regard to the essential requirements or ingredients of section 10(23C)(via), then, it is hardly open for the Revenue to complain – thus, as such no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (12) TMI 396
  Initiation of penalty u/s 271(c) – Additions made during survey and penalty levied - Held that:- The levy of penalty is one of the deterrents provided for under the Act, to ensure that no assessee furnishes incorrect and wrong information or facts and figures in the returns – the Tribunal was rightly of the view that if the facts and figures noticed during the course of survey are accepted by the assessee, no occasion would arise for levying penalty and the absence of an endorsement or observation in the order of assessment for initiation of proceedings u/s 271 (c) of the Act would disable the AO from taking any steps in that direction – as decided in Commissioner of Income-Tax v. Reliance Petroproducts Pvt.Ltd. [2010 (3) TMI 80 - SUPREME COURT] – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 395
  Deletion of unexplained credits u/s 69 – genuineness of the transaction proved by assessee - Held that:- The Tribunal was rightly of the view that the loans were given to the assessee through cheques and all the creditors have confirmed by appearing before the Additional CIT (Investigation) stating that they had advanced loans mentioned against their names to the assessee-company - the identity of the creditors could not be disputed - The only difficulty appears to be that some of them do not have PAN numbers, but that by itself should not be a reason to discredit their creditworthiness - all the creditors are agriculturists and they do not require any filing of returns of income and that is the reason they did not have PAN number - The Tribunal considered the minute details that were gone into by the CIT(A) and the explanation given by the assessee company that the entire loan amount was a genuine transaction - assessee had given plausible explanation for having taken a loan for a sum of 37.00 lakhs, for which, the assessee had produced evidences to prove the creditworthiness and genuineness of the transaction - the assessee had fulfilled the requirements u/s 68 – as such no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (12) TMI 394
  Rejection of application of rectification u/s 254(2) – Addition u/s 68 - identity or capacity not accepted by Assessing Authority - genuineness of the transaction proved or not - Held that:- The Tribunal rightly allowed the appeal of the assessee in part deleting additions pertaining to some of the firms/company, however, the Tribunal confirmed the addition relating to M/s Vardhman Trading Company - the identity of the creditor has not been proved on a prima facie basis by filing partnership deed or any other credible evidence - The existence of 17 partners stands falsified in view of the inquiries made by the AO, which was communicated to the assessee - The creditor was not assessed in the relevant AY, and, its capacity has also not been proved on a prima facie basis - the genuineness of the transaction has obviously not been established – assessee by means of the rectification application has attempted to re-adjudicate the factum of existence of the firm M/s Vardhman Trading Company which has already been held to be a fictitious and bogus firm - Thus the finding recorded by the authorities and the Tribunal attained finality regarding transaction pertaining to M/s Vardhman Trading Company - To invoke the provisions of Section 254(2) of the Act, there must be an error apparent on the face of record – the Tribunal has no power to review its own order - In exercise of the power under sub section (2) of Section 254, Tribunal can only rectify any mistake apparent from the record – thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (12) TMI 393
  Validity of notice for reopening of assessment u/s 147 r.w. s148 – Full and true disclosure of material particulars made or not – Income escaped or not – Held that:- The recorded reasons disclose two points which have purportedly led to the issuance of the notice - The first point was that on examination of the records it was found that the assessee had not shown receipts in the Profit and Loss Account to the extent of 18,95,45,672/- which had appeared in the 16A Forms that were submitted by the assessee for the relevant previous year – the difference which is sought to be made the subject matter of the reasons for initiating an action of reassessment was in contemplation of the AO at the time of the original assessment and a full reply had been given by the Chartered Accounts reconciling the differences pointed out by the AO – the AO in the assessment order dated 30.03.2008 had not made any additions after being fully satisfied by the reply submitted on behalf of the petitioner / assessee - It is clear that the attempt to reopen the assessment on this ground would be nothing but an attempt at changing the earlier opinion, which is not permissible in law – the facts had been fully and truly disclosed before the AO at the time of the original assessment. TDS deducted u/s 40(a)(ia) or not – Held that:- Assessee pointed out that the payments were made to its own employees and were not of the nature of payments covered u/s 40(a)(ia) - even the assessment order would reveal that these payments were made to its own employees inasmuch as he had produced the muster roll and the AO at the time of the original assessment had even made an ad-hoc deduction of 4 lakhs - the reopening of the assessment order could not have been directed inasmuch as the nature of the payments by themselves indicate that it could not be covered u/s 40(a)(ia) - there was no basis for seeking reopening of the assessment – the notice and the order for reopening is set aside – Decided in favour of assessee.

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• 2014 (12) TMI 392
  Deletion of penalty u/s 271D – Violation of provisions of Section 269SS or not – Amount received for the purpose of allotment of shares or not - Held that:- The Tribunal was rightly of the view that in CIT vs. Rugmini Ram Raghav Spinners Ltd. [2007 (7) TMI 237 - MADRAS HIGH COURT] it has been held that share application money is neither deposit nor loan and therefore, provisions under section 269-SS and section 269-T have no application and there cannot be penalties under section 271-D and section 271-E - if the assessee proves that there is a reasonable cause, he is not subject to levy of penalty - the amount received by the assessee is only for the purpose of allotment of shares and it is not a deposit or loan - the reasonable cause is that the assessee was under the bona fide belief that the money received is only for the purpose of allotment of shares - also, there is no material or evidence or any compelling reason produced by the Revenue to prove that the money received is a deposit or loan - it is a question of fact and the order of the Tribunal is not a perverse one - the assessee was under the bona fide impression that the money received was only towards allotment of shares and it is not a loan or deposit – thus, as such no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (12) TMI 391
  Understatement of consideration for the plot of land – Statement made during survey later retracted by assessee – AO exceeds its power granted or not – Whether a retracted statement cannot constitute the sole basis for fastening liability upon the assessee or not - Held that:- The evidentiary value of a retracted statement becomes diluted and it looses the strength, to stand on its own - Once the statement is retracted, the Assessing Authority has to garner some support, to the statement for passing an order of assessment - a retracted statement cannot constitute the sole basis for fastening liability upon the assessee – assessee specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society – the AO does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction - His duty ends where the statement is recorded - If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force - the appellate authority and the Tribunal did not apply the correct parameters, while adjudicating the appeals filed before them - there was absolutely no basis for the AO to fasten the liability upon the assessee – thus, the order of the assessment is to be set aside – Decided in favour of assessee.

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• 2014 (12) TMI 390
  Ex-parte order decided by Tribunal - Order of the Tribunal to be set aside under Rule 25 of Tribunal Rules or not – Held that:- Rule 25 of the Rules empowers the Tribunal to proceed to hear the appeal even if the respondent before it fails to appear - Tribunal has extracted the letter addressed by the petitioner and mentioned the steps taken thereon - Though it is stated that the date of hearing was adjourned from 04-07-2001 to 29-08-2001, it is not clear as to whether the petitioner was put on notice about the date of hearing - the request for adjournment was made through a letter - whatever be the justification, the petitioner was awaiting the intimation of the next date of hearing - a case is made out for invoking the discretion of the Tribunal under proviso to Rule 25 of the Rules - valuable right was accrued to the petitioner on account of the order passed by the Commissioner – assessee deserves to be given an opportunity of placing their version before the Tribunal – thus, the order of the Tribunal is set aside and the matter is remitted back to the Tribunal for fresh disposal – Decided in favour of assessee.

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• 2014 (12) TMI 389
  Consideration receivable as per agreement to be treated as Industrial or Commercial Profits or not – Article III of India and German DTAA - Held that:- Assessee is a non-resident company incorporated in West Germany and derived income in the relevant previous year by way of fees from Precision Bearings India Limited - This income was derived pursuant to agreements dated 29th January, 1972, 18th August, 1979 and 3rd August, 1981, the taxability of the income derived in such agreements is governed, apart from the provisions of the Income Tax Act, 1961 also by an agreement for Avoidance of Double Taxation between Government of India and Federal Republic of Germany - The recipient of the income did not have permanent establishment in India - the Tribunal has referred the question and to seek an answer as to whether the amount received would fall within the purview of the term 'Royalty' used in para 5 Article III (sic) of this Double Taxation Avoidance Agreement - the Tribunal was rightly of the view that 80% of the amount is taxable as royalty – thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (12) TMI 388
  Management Service Fees to be taxable as Fees for Technical Services or not – Payment received from its Indian subsidies - Article 12 of India-Sweden DTAA – Principle of Most Favored Nation - Whether the assessee can be given benefit of India-Portuguese treaty on principle of MFN clause - Held that:- The assessee is tax resident of Sweden - the amount received by the assessee from its Indian subsidies is taxable in India under normal provisions of Act more particularly u/s. 9(1)(vii) r.w.s. 5(2) of the Income-tax Act – in Sandvik Australia Pty. Ltd. Versus Deputy Director of Income-tax (International Taxation) II [2013 (4) TMI 643 - ITAT Pune] wherein the decision in Commissioner of Income-tax Versus De Beers India Minerals (P.) Ltd. [2012 (5) TMI 191 - KARNATAKA HIGH COURT] followed - the expression “making available” is very much important to decide in which contracting state the amount received for rendering the services relating to the technical know-how is to be taxed - The expression “make available” is used in the context of supplying or transferring technical knowledge or technology to another - It is different than the mere obligation of the person rendering the services of that persons own technical knowledge or technology in performance of the services. The recipient after receiving of technology may use or may not use the technology - It has no bearing on the taxability aspect is concerned - When the technical service is provided, that technical service is to be made use of by the recipient of the service in further conduct of his business - merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilises for rendering technical services - unless the service provider makes available his technical knowledge, experience, skill, know how or process to the recipient of the technical service, in view of the Clauses in the DTAA, the liability to tax is not attracted - on the basis of the protocol to the DTAA between the India and Sweden the assessee can claim the benefit of the conditions imposed for bringing to tax the fees for technical services in the treaty between the India and Portuguese - on the principle of the most favoured nation (MFN) clauses the payment of 5.93 Crores received by the assessee company from its Indian subsidies cannot be brought to tax – Decided in favour of assessee.

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• 2014 (12) TMI 387
  Entitlement for deduction u/s 80P – Assessee is a co-operative society registered under the Goa Co-operative Societies Act, 2001 - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- If the co-operative society is engaged in carrying of business of banking or providing credit facilities to its members, the co-operative society is entitled for deduction on whole of the income relating to any one or more of such business - the provisions of Sec. 80P(4) mandates that the provisions of Sec. 80P will not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank but as per the provisions of Sec. 80P(2)(a)(i), a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled for deduction. Whether the Assessee is a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank – Held that:- Once the Assessee will not fall within the provisions of Sec. 80P(4), the Assessee, will be eligible to get deduction u/s 80P(2)(a)(i) in respect of whole of the income which the Assessee derives from carrying on the business of banking or providing credit facilities to its members - the assessee can receive the deposits from any person - The bye-law does not restrict the assessee for receiving the deposit only from members - the Assessee society was carrying on banking business as it was accepting deposits from the persons who were not members and was advancing loans to the non-members - the paid up share capital and reserves in the case of the Assessee is more than 1 lac - therefore, the Assessee satisfies the second condition. Sec. 21 of The Goa Co-operative Societies Act, 2001 permits admission of any other co-operative society as a member - only society registered can become the member not the co-operative society. Section 5 clause (CCV) of Banking Regulation Act, 1949 requires that the bye-laws should not permit any co-operative society to become member - The society and the co-operative societies both are different and are being registered and regulated by the different statute - Thus the third condition for becoming primary co-operative bank is also complied with - Since the assessee society does complies with all the three conditions, therefore, the assessee society does become a primary co-operative bank and in view of explanation (a) of section 80P(4) it has to be regarded as a co-operative bank and is hit by section 80P(4). The Assessee has to be regarded to be a primary co-operative bank as all the three basic conditions are complied with, therefore, it is a primary co-operative bank and the provisions of Sec. 80P(4) are applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) – thus, the order of the CIT(A) is set aside and the AO is directed not to allow the deduction to the assessee u/s 80P(2)(a)(i) – Decided in favour of revenue. Deletion of disallowance u/s 43B – Held that:- The AO invoked section 43B in respect of audit fee payable - audit fees cannot be regarded to be a tax, duty, cess or fee or the expenditure the deduction of which is restricted u/s 43B – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 386
  Denial of exemption u/s 10A in respect of Gurgaon and Chennai units – Held that:- As decided by the HC in the earlier assessment year, it has been held that CIT(A) was of the view that the assessee had not started commercial production in the year ending 3l.03.2005, but, the AO had also observed that the assessee has started production even prior to 15.03.2005, when the STPI approved the proposal - the Tribunal has recorded finding of fact that the assessee had made and issued invoices on 31.03.2005 - the assessee satisfied the requirement of commencement of production stipulated in Section l0A - assessee could not place on record the copy of the letter written by them, informing STPI about commencement of production, but, there was evidence in the form of reports for the months of January, February and April, 2006, which were examined and referred by the Tribunal - the Tribunal has rightly observed that intimation to STPI was a mere ministerial requirement and not a precondition for registration, which was granted earlier - no benefit or advantage was obtained by the assessee by wrongly claiming and raising the invoices on 31.03.2005 - even if they had raised the invoices in the next financial year, benefit of Section 10A would have been available on the invoice amount - It is accepted that benefit of Section 10A was granted in the AO in the next assessment year – decided in favour of assessee. Transfer pricing adjustment – Determination of ALP – Application of upper filter - Held that:- Assessee rightly contended that with regard to the application of upper filter up to 200 crores as the assessee was a midsized company having a turnover of 23 crores only - The comparison of a small assessee with giant sized companies having huge turnover will definitely not serve the purpose of selecting appropriate comparables – relying upon CIT Versus Agnity India Technologies Pvt. Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] – thus, the AO is directed to re-adjudicate the issue of arm’s length pricing and determine the same by excluding the comparables having turnover of more than 200 crores - The AO will also take into account the bank and finance charges as part of operating expenses of comparables for arriving at the margin – AO will only take segmental results relating to services only for comparing the companies M/s. Kals Information Systems, Avani Cincon, LGS Global Ltd. and Bothtree Consulting Systems as the consolidated results of these companies cannot be compared with the assessee, as assessee is admittedly into service providing activities - if segmental results of the companies relating to similar services as being provided by assessee are not available, then these companies will have to be excluded as comparables – Decided in favour of assessee.

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• 2014 (12) TMI 385
  Deletion of addition on share application money received – Amount to be treated as unexplained credit or not - Reopening was based on the information received from Investigation Wing with regard to share application money received by assessee - Held that:- Assessee has filed the relevant details which it could have filed in support of its contention of having received the share application money from each of these shareholder companies - it cannot be said that these companies were not in existence at the given addresses - The documents filed with the Registrar of Companies show that these companies were active during the relevant period – AO has not verified any of the relevant documents submitted by AO for discharging onus u/s 68 – the AO has not referred nor discussed about the so-called statement of entry providers against the assessee company - it is also not known whether assessee’s name figured in that statement - the information received by him from the Investigation department has been made the basis of addition without any further investigation - even the process of examination of the directors by issue of summons has not been taken to the logical end as after the failure of the directors to attend in response to the summons issued to them no further steps were taken. Relying upon CIT vs Fair Finvest Ltd [2012 (12) TMI 170 - DELHI HIGH COURT] - the AO has not been able to bring on record any valid material or evidence to discredit the evidences and the explanation given by the assessee company - the only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing - these statements were not recorded by the AO but were recorded by the Investigation Wing at the back of the assessee - The AO has not even referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons – thus, the order of the CIT(A) is upheld in deleting the addition – Decided against revenue.

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• 2014 (12) TMI 384
  Validity of notice for reopening of assessment u/s 148 – time for normal scrutiny u/s 143(3) was available and the A.O. - Held that:- as per Section 147 the AO is justified in issuing the notice u/s 148 and justified in making the assessment u/s144 - the Commissioner of Income tax has held that when the Assessing Officer can assess the income u/s. 143(2), it is not necessary to issue the notice u/s. 148 of the Act. But in the instant case, the Assessing Officer has not completed the assessment and pendency of the assessment order - The AO has issued the notice u/s 147 and made the assessment – thus, AO is justified in reopening the assessment as well as making the assessment u/s. 147 r.w.s. 144 - CIT (A) is not justified in action – the order of the CIT(A) is set aside – Decided in favour of revenue. Opportunity of being heard provided or not – Non-speaking order passed by CIT(A) - Amount paid to tenants to be deducted from sale consideration or not - Held that:- CIT(A) has allowed the claim of the assessee without passing any speaking order - the CIT(A) should pass the order with giving the reasons – the same has also been provided under the Instruction issued by the CBDT in Instruction No. 1592 dated 7.1.85 F. No.262/38/84ITJ - the requirement of giving reasons for an order derives its authority from the principle that justice should not only be done but it also should seem to have been done - the duty to act judicially excludes the possibility of arbitrary exercise of the power - If reasons are required to be given for an order the same would be an effective restraint or potent weapon to check the abuse of power - It excludes from consideration extraneous or irrelevant matters – thus, the matter of compensation of 28,00,000/- is remitted back to CIT(A) to decided afresh order – Decided in favour of revenue.

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• 2014 (12) TMI 383
  Jurisdiction of CIT for invocation of section 263 – nature of the income from Yoga, ayurvedic treatment etc. as business income or not – Necessary enquiries conducted or not by AO - assessee submitted that submitted that the assessee is not liable to file audit report u/s. 44AB of the Act as it has filed the audit report in Form 10B as a charitable trust. - Held that:- As held in Malabar Industries Co. Ltd., Vs. CIT [2000 (2) TMI 10 - SUPREME Court] - the Commissioner can exercise revision jurisdictional u/s 263 if he is satisfied that the order of the assessing officer sought to be revised is erroneous and also prejudicial to the interests of the revenue – in SIEMENS ENGINEERING & MANUFACTURING CO. OF INDIA LIMITED Versus UNION OF INDIA & ANR. [1976 (4) TMI 204 - SUPREME COURT OF INDIA] it has been held that while making assessment on assessee, the ITO acts in a quasi-judicial capacity - an assessment order is amenable to appeal by the assessee and to revision by the Commissioner u/s 263 and 264 - If without discussing the nature of the transaction and materials on record, the AO had made certain addition to the income of the assessee, the same would have been considered erroneous by any appellate authority as being violative of the principles of natural justice which require that the authority must indicate the reasons for an adverse order. The AO does not show any application of mind on his part - He simply accepted the income declared by the assessee - This is a case where the AO mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry - The evidence available on record is not enough to hold that the return of the assessee was objectively examined or considered by the AO - It is because of such non consideration of the issues on the part of the AO that the return filed by the assessee stood automatically accepted without any proper scrutiny - The assessment order placed is clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee - it was a fit case for the Commissioner to exercise his revisional jurisdiction u/s 263 which he rightly exercised by cancelling the assessment order and directing the AO to pass a fresh order considering the issues raised by the CIT- the assessee should have no grievance in the action of Commissioner in exercising the jurisdiction u/s. 263 of the IT Act. The assessment order dated 30/11/2011 is silent on the enquiry conducted by the Assessing officer with regard to yoga, ayurvedic treatment etc. - There is no discussion on this issue - The order of the AO is erroneous and prejudicial to the interests of the revenue on the reason that there is wrong assumption of facts – the order of the CIT is modified as instead of making addition directly, and treating income from yoga as business income, the AO is directed to conduct necessary enquiry with regard to yoga, ayurvedic treatment etc. and thereupon decide the same – thus, the matter needs fresh disposal – Decided partly in favour of assessee.

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• 2014 (12) TMI 382
  Transfer Pricing Adjustments - Treatment of foreign exchange fluctuation – Operating in nature or not – Held that:- The assessee has bought material from its AE and the pricing was done in foreign currency which means that the currency fluctuation is directly related and is inbuilt in the pricing policy which the assessee has been following with its AEs therefore, there is no reason or merit in excluding it from the computation of the operating mark-up earned by the assessee – Decided against assessee. Rejection of comparable companies – Daiichi Karkaria Ltd and NLC Nalco India Ltd. - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the exclusion of Dai-ichi Karkaria Ltd. Is directed from the eventual list of comparable - in so far as the exclusion of NCL Nalco India Ltd., after considering the facts, the DRP has rejected because the RPT is more than 25% - as no distinguishing fact has been brought on record, the order of the DRP is upheld – Decided against assessee. Rejection of Thirumalai Chemicals Ltd. - Functionally different company - Held that:- The factors which have been considered by the DRP are common to the entire industry and the entire industry has been affected because of those factors - the rejection of the comparable is not on the facts of the case - the products of the assessee are dependent on global markets with recession in world market, the business of the assessee has also suffered - if M/s. Thirumalai Chemicals Ltd., was working at 50% of capacity utilization, then the assessee was also working at 46% of its capacity utilization – there was no error in rejecting M/s. Thirumalai Chemicals Ltd., as a comparable – thus, the matter is remitted back to the AO to consider M/s. Thirumalai Chemicals as a comparable case for determining the ALP after giving reasonable opportunity of being heard to the assessee – Decided in favour of assessee. Inclusion of Gwalior Chemical Industries Ltd and Sunshield Chemicals Ltd. as a comparable companies – Held that:- The assessee stated that the restructuring in the case of Gwalior Chemical Industries Ltd has actually taken place in the subsequent year and fairly conceded to its inclusion - so far as M/s. Sunshield Chemicals Ltd., is concerned, in immediately preceding AY i.e. A.Y. 2008-09, this company was included by the assessee but excluded by the TPO in the list of comparables - Since the Tribunal has excluded this company from the final list of comparable in A.Y. 2008-09, the same should be excluded from the final list of comparables for the year under consideration also – the AO is directed to exclude the same – Decided in favour of assessee. Management service charges paid disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that ALP of an international transaction in the nature of expense claimed can be computed at Nil, if the assessee fails to prove the factum of having availed any services from the AE - Even if the services are availed, the consideration paid has to be proved at ALP, failing which adjustment is inevitable - the assessee claims to have availed such services in the past as well for which deduction was not denied - as the assessee failed to substantiate its claim for deduction in this regard before the AO/TPO and it is further claimed that adequate opportunity was not provided by the concerned authorities – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Sundry balance written off – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the sundry balances written back as well as excess provision written back and whether the same amounts to operating revenue - if the uniform approach is adopted, unless any contrary material has been brought on record, there is no infirmity in such basis of the calculation - provisions written back relate to guarantee commissions waived by the AE and provision for inventory is no longer required - these transactions were entered in the usual course of the business activity of the assessee - the miscellaneous income is earned by the assessee out of day to-day operations which consists of sale of scraps and discount received - since the assessee is following consistent accounting standards and policies, there is no reason why this income/write back should not be considered as operating income – Decided against revenue.

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• 2014 (12) TMI 381
  Reimbursement of interest borne by partners – Applicability of provisions of TDS – Tax withholding obligations u/s 194A discharged or not - Held that:- The assessee claimed that it had made payment of interest to Shraddha Credit Souharda Sahakari Niyamit on behalf of the partners who have obtained loan for the purposes of business of the partnership firm - as per section 194 and 191 of the Act, which provides that the person shall be deemed to be an issue in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly - the deductor cannot be treated as assessee in default in respect of no/short deduction of tax if the payee has discharged his tax liability. In order to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax, it was amended in section 201 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident payee shall not be deemed to be an assessee in default in respect of such tax if such resident payee has furnished the return of income u/s 139, secondly has taken into account such sum for computing income in such return of income and thirdly has paid the tax due on the income declared by him in such return of income and the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed – following the decision in Rajeev Kumar Agarwal Versus Additional Commissioner of Income Tax [2014 (6) TMI 79 - ITAT AGRA] – the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• 2014 (12) TMI 380
  Validity of rectification order u/s 154 – Eligibility for deduction u/s 80P(2)(a)(i) - Whether the credit cooperative societies are cooperative banks as the deduction u/s. 80P(2)(a)(i) of the Act was available to credit co-operative societies providing credit facilities to its members – Assessee under a mistake could not file for the claim of deduction, rectification application filed for the purpose - Held that:- CIT(A) was rightly of the view that the co-operative banks are not entitled to deduction u/s 80P(2)(a)(i) as per the amendment to section 80P(4) by Finance Act, 2006 w.e.f. 01.04.2007 - the meaning of co-operative credit society is separately given and it does not include co-operative bank other than co-operative land mortgage bank – also, CBDT circular bearing No.3/2008 dated 12.03.2008 also makes it clear that the amendment to section 80P(4) has withdrawn the deduction u/s 80P in respect of co-operative banks - the amendment to section 36(1)(viia) by Finance Act, 2007 w.e.f. 01.04.2007 also provides that the deduction in respect of bad debts shall be allowable also to co-operative banks - credit co-operative societies are not covered by the meaning of Cooperative Banks as defined in part V of the Banking Regulation Act, 1949 and are entitled to deduction u/s 80P(2)(a)(i) of the Act - similar issue has been decided in ITO v. Jankalyan Nagri Sahakari Pat Sanstha Ltd. [2012 (9) TMI 288 - ITAT, PUNE] - the CIT(A) was justified that co-operative society is not a co-operative bank and therefore, the assessee credit co-operative society is entitled to deduction u/s 80P(2)(a)(i) of the Act. Also in CIT v. Smt. Archana R. Dhanwatey [1981 (1) TMI 27 - BOMBAY High Court] it was held that under the I.T. Act, 1961, the authorities are obliged to act in accordance with law - Tax has to be collected as per the provision of the Act - If an assessee, under a mistake, misconceptions or on being not properly instructed is over assessed, the concerned authority under the Act is obliged, required to assist such an assessee by ensuring that only legitimate taxes are determined as collectible - If particular levy is not permissible under the Act, the tax cannot be collected – thus, the CIT(A) was justified in holding that the assessee is eligible for deduction u/s.80P(2)(a)(i) of the Act and the assessee society is eligible for deduction u/s 80P(2)(a)(i) of the Act – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 379
  Reopening of assessment u/s 148 on the basis of AIR information – Jurisdiction of the CIT(A) – Affidavit filed by assessee to misguide the AO - Opportunity to cross examine not availed - Held that:- The reopening of the assessment within four years, the AO has wide power but he did not receive the AIR information on 31/12/2008, therefore he made the office-note along with the original assessment order - When the information received from the Head Office of the HDFC Bank, Mumbai he recorded the reasons and issued the notice u/s.148 of the Act - the reopening of the assessment was on valid reasons and as per law - assessee filed an Affidavit to misguide the AO and had not extended the co-operation with the AO to complete the original assessment by considering the copy of the bank account - The AO recorded the statement of Shri Amit kumar Patel and also allowed the assessee for cross-examination, but he has not availed this opportunity – thus, the matter is required to be remitted back to the AO and he is directed to provide a copy of the statement of Shri Amit kumar Patel and also allow the cross-examination to the assesse – Decided in favour of revenue.

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• Customs

• 2014 (12) TMI 403
  Denial of refund claim - Levy of countervailing duty - petitioner had only produced a Chartered Accountant's certificate to substantiate his claim with regard to the absence of unjust enrichment and had not produced any further document to show the absence of unjust enrichment - Held that:- while the 3rd respondent has chosen not to rely on the certificate of the Chartered Accountant produced by the petitioner, it is evident that the petitioner was not given any further opportunity to produce documents to substantiate the correctness of the said certificate, on the 3rd respondent entertaining a doubt regarding the correctness of the said certificate. I am of the view that if the 3rd respondent had any doubt regarding either the genuineness of the certificate or the correctness of the contents therein, it should have informed the petitioner of the same and given the petitioner an opportunity of producing additional documents to substantiate his claim for refund. That procedure not having been adopted by the 3rd respondent, I am of the view that Ext.P10 order passed by him cannot be legally sustained. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 402
  Detention of goods - Necessary clearance not obtained - Held that:- When a given consignment comprises both offending and non-offending goods, placed separately, it is desirable to release the non offending part of the goods and detain the offending part of the goods for the purpose of initiating adjudication proceeding - The learned counsel while accepting the notice on behalf of the respondent, has submitted that at this stage of the matter, the merits of the case cannot be gone into. But, if sufficient time is granted to the authority, the respondent will consider the petitioner's representation dated 6.11.2014 - respondent is directed to consider the representation of the petitioner dated 6.11.2014 on merits and in accordance with law within a period of three weeks from the date of receipt of a copy of this order. The petitioner is directed to enclose a copy of the representation dated 6.11.2014 along with the copy of this order and submit the same by appearing in person before the respondent. - Writ disposed of.

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• 2014 (12) TMI 401
  User of imported Ball Clay in the manufacture of Ceramic core that are captively consumed for the manufacture of Porcelain insulators - Benefit of Notification 25/99 Cus dated 28.2.1999 - Import of ball clay - Captive consumption - concessional rate of duty for the manufacture of excisable goods) Rules, 1996 - Rejection of registration - Held that:- Tribunal has rightly held that the registration obtained by the appellant was for the manufacture of 'electric insulators' and not for the manufacture of 'resistors' nor they claimed that 'resistors' are the same as 'insulators'. It also held that to avail the benefit of concession under the Notification, the appellant should have claimed that the imported ball clay is to be used in the manufacture of 'ceramic cores/substrates for resistors'. Since the appellant had not claimed so, they are not entitled to the benefit of the above entry. In our view, the said findings of the Tribunal are perfectly in order, as the entries in the exemption Notification should be strictly construed. when the Notification clearly provides the benefit of concessional duty only for manufacture of ceramic cores/substrates for resistors, which is not the claim of the appellant, we are not inclined to accept the case of the appellant that ceramic cores are nothing but porcelain insulators. As has been rightly held by the Apex Court [2008 (3) TMI 452 - SUPREME COURT OF INDIA], we are not inclined to read something more into the Notification, which are not found therein. Accordingly, we answer the first substantial question of law in favour of the department and against the assessee. Tribunal has rightly upheld the order of the original authority for rejecting the application of the appellant for manufacture of porcelain insulator, inasmuch as the porcelain insulator to be manufactured by the appellant is not known in the market / trade parlance as 'ceramic core' and therefore the concessional rate of customs duty cannot be extended to the imported ball clay for the manufacture of porcelain insulator. Accordingly, the second substantial question of law is answered in favour of the department and against the assessee. Finding of the appellate Commissioner has no relevance to the issue, because the original authority has not granted the benefit of registration for import of ball clay for the manufacture of ceramic cores used in the insulators. If the appellant manufactures ceramic cores, there can be no difficulty in granting the exemption. But what the appellant, in their letter dated 30.10.2003, requested was for import of ball clay for the manufacture of various types of high tension porcelain insulators, which cannot be allowed under the Notification. Therefore the relief was rightly denied by the original authority. However, the first appellate authority, on a misreading of the Notification, relying upon the certificate issued by the Chartered Engineer, wrongly set aside the order of the original authority. In our view, the said error has been rightly corrected by the Tribunal on the facts of this case. Substantial question of law is answered in favour of the department and against the assessee. If the import of ball clay is used in ceramic core/substrate for resistors, the appellant would be entitled to get the benefit of the Notification and in that case, there is no need to manufacture porcelain insulator. But the appellant is trying to confuse the issue by stating that ceramic core is being captively consumed in the manufacture of porcelain insulator and therefore the import of ball clay should be allowed. The said claim of the appellant cannot be accepted for the reasoning given by the Tribunal. Accordingly, the last substantial question of law is also answered in favour of the department and against the assessee. - Decided against assessee.

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• 2014 (12) TMI 400
  Conviction u/s 21 of NDPS Act - Intelligence Officer had received a secret information “that a person of Indian origin, would be handing over some narcotic substance to a African person - Nothing incriminating was found in the personal search of the accused - Packet of heroine found in the bag of accused - Appellant forcible made to copy already written statement and sign it - Trial convicted appellant u/s 21(c) of NDPS Act - Held that:- It was impossible for the DRI officers to know in advance, even before the search of the bags, that the accused were in possession of heroin packets. It must be recollected that the secret information reduced to writing (Ex.PW-1/A) only referred to the information that a person of Indian origin would be handing over “some narcotic substance” to a medium built African person. The trial Court appears to have completely overlooked the above glaring lacuna. This shows that the notice under Section 50 NDPS Act could not have possibly been issued prior to commencing the search of the bags as contended by the DRI but much later. The trial Court also failed to notice another important aspect of the matter regarding the truthfulness of the so-called confessional statement made by the Appellant under Section 67 NDPS Act. The Appellant in both retraction statements, i.e., one dated 20th February 2009 and the subsequent dated 8th December 2010 stated that he had been picked up from his rented house at Patiala. Both the statements of retraction formed part of the record. Despite repeated reminders by the DRI to the Ministry of External Affairs, High Commission of Nigeria, High Commission of Nigeria, and Qatar Airways (City Office), Mumbai to confirm whether the visa stamp issued by the Indian Commission in Nigeria, no information was forthcoming. Additionally, Mr. Aggrawala placed on record a copy of letter dated 2nd December 2014 received from the Deputy Commissioner of Police, Special Branch-II, CID & FRRO, Mumbai that the name of the Appellant did not figure in the list of registered foreigners at the said office. Computer data showed that the Appellant, a Nigerian national, having the same passport a photocopy of which had been produced by the Appellant, did arrive at Mumbai on 19th October 2009 by Qatar Airways. Documents which expose the falsehood of the case of the DRI could have been easily verified by the DRI itself. The Court would add that when an accused offers an alternative theory and produces documents in support thereof, the DRI can itself verify their genuineness without waiting for the order of the Court. For an accused in judicial custody, it is only to be expected that it would be difficult for him to produce witnesses. This difficulty is further compounded when the accused is a foreign national. Unfortunately this difficulty was not been appreciated by the trial Court. It unfairly cast the burden on the Appellant to further lead evidence to prove the details of his passport and visas stamps. It may be further added here that according to the Appellant, his original passport was with the Nigerian Embassy in India. The Appellant has been in judicial custody throughout and it is obvious that he does not have his passport with him. It is surprising that the trial Court overlooked the fact the reports of the IO himself in the case showed that addresses of the two panch witnesses were non-existent. This is very different from the situation where the addresses are correct but the panch witnesses are not available. In such a scenario, it is understandable that after repeated attempts, the DRI was unable to ascertain the whereabouts of such witnesses. However, when the address is shown to be non-existent, then questions arise as to the genuineness of the entire exercise involving the panch witnesses. It must be remembered that the addresses of the panch witnesses are recorded in the panchnama proceeding and notices are served upon them for recording their statements under Section 67 NDPS Act. It is possible that, as explained by Mr. Aggarwala, even during the panchnama proceeding, notices are served upon the panch witnesses and both of them appeared later in this case on 11th February 2011 for recording their statements. It is also possible, as contended by Mr. Aggarwala, that even if the DRI officials could not have insisted at that very moment that the panch witnesses should produce some identity document, it should always be possible for the DRI officials to verify the correctness of the address in the next few days. No serious attempt in this case was made by the DRI, despite knowing that the address was non-existent, to ascertain the correct present address of the panch witnesses and secure their presence at the trial. 33. The Court is unable to agree with the approach of the trial Court in not drawing adverse inference against the DRI. In a situation where the panch witnesses are unable to be produced, because their addresses are non-existent, it is not sufficient for the DRI to simply drop the panch witnesses and avoid the consequence of an adverse inference being drawn. - record of the trial Court speaks for itself. It exposes the untruthfulness of the evidence placed before the Court by the DRI officers. The Court cannot help observing that the evidence of PWs 5 and 9 can hardly be stated to be reliable or truthful. On the contrary, the Appellant has been able to probablise his defence that he came to India by air as a tourist with a valid India visa stamp on his passport. These facts have been verified by the FRRO, Mumbai. As explained by the Supreme Court in State of U.P v. Zakaullah (1997 (12) TMI 635 - SUPREME COURT), that a conviction can be based even on the evidence of police officers but the evidence of DRI officers should inspire confidence. In the present case, the record of the trial Court speaks for itself. It exposes the untruthfulness of the evidence placed before the Court by the DRI officers. The Court cannot help observing that the evidence of PWs 5 and 9 can hardly be stated to be reliable or truthful. On the contrary, the Appellant has been able to probablise his defence that he came to India by air as a tourist with a valid India visa stamp on his passport. These facts have been verified by the FRRO, Mumbai. The Court accordingly, set asides the impugned judgment dated 9th July 2013 and the order on sentence dated 20th July 2013 of the trial Court. The Appellant is hereby acquitted for the offence under Section 21 (c) of NDPS Act. The Appellant will now be released to the FRRO for further steps for deporting him. His bail bond and surety bond will continue for a period of three months in terms of Section 437-A Cr PC. - Decided in favour of appellant.

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• Service Tax

• 2014 (12) TMI 422
  Rectification of mistake - Refund/rebate claim - Unjust enrichment - Held that:- There is no whisper anywhere of the unjust enrichment being involved, except in one case. Therefore, the lower appellate authority is not required to given any finding on an issue which was not urged before him. Therefore, the ground taken by the Revenue that it had urged this point before the lower appellate authority is not borne out from the records and, therefore, it cannot be said that there is an error apparent on the face of the record committed by this Tribunal. We further observe that while disposing of the appeal filed by the Revenue, we have also observed that the transaction involved is one of export, and therefore, the service provider is rightly entitled for the refund of the service tax paid. The learned counsel for the respondent also submits that even in respect of the export transaction, if tax is recovered from the customers, the same would not disentitle the tax payer from claiming refund as held by the hon'ble Bombay High Court in the case of Uttam Steel Ltd. vs. Union of India [2003 (8) TMI 55 - HIGH COURT OF JUDICATURE AT BOMBAY]. In Rashtriya Chemicals & Fertilizers Ltd. [2013 (3) TMI 478 - CESTAT MUMBAI], this Tribunal observed that even if grounds have been taken in appeal memorandum but if the same is neither urged nor argued at the time of hearing there cannot be any mistake which involves rectification. The same view was affirmed by the hon'ble High Court of Bombay in the same case reported in [2013 (10) TMI 1193 - BOMBAY HIGH COURT] - there is no merit in the contention urged in the Rectification of Mistake Application filed by the Revenue - Rectification denied.

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• 2014 (12) TMI 421
  Waiver of pre deposit - Cenvat credit - admissibility of credit on inputs/capital goods, namely structures of iron and steel towers and pre-fabricated buildings etc. - Held that:- As regards the impugned Cenvat Credit of 1,13,90,700/- relating to input services the appellants have referred to several judgments mentioned above in their support where full waiver has been granted even in respect of this issue. Appellants have categorically stated that the situation of the type referred to by the Ld. AR does not exist in their case. Appellants have not sought waiver of pre-deposit of credit of 4,99,997/- denied for being availed of without proper documents - partial stay granted.

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• 2014 (12) TMI 420
  Refund claim - telecommunication service to international roamers - Export of service - Held that:- service rendered by the respondent is the telecom service provided to customers of foreign telecom service provider as international inbound roamers while they are in India. Such services, have been held to be services provided to foreign telecom service providers for which consideration has been received in convertible foreign exchange. Therefore, this Tribunal in the order cited supra held them to be export of services in terms of the Export of Service Rules, 2005 following the precedent decision of the Tribunal in the case of Paul Merchant Ltd.- [2012 (12) TMI 424 - CESTAT, DELHI (LB)]. Thereafter, the same ratio has been followed by this Tribunal in a series of decisions in GAP International Sourcing (I) Pvt. Ltd vs. Comm of ST- [2014 (3) TMI 696 - CESTAT NEW DELHI], Simpra Agencies - [2014 (6) TMI 354 - CESTAT NEW DELHI], SGS India Pvt. Ltd. - [2014 (5) TMI 105 - BOMBAY HIGH COURT]. Therefore, in the present case also, the transaction is one of export and the appellant is rightly entitled for refund/rebate of the service tax paid in respect of such transactions. - Decided against Revenue.

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• 2014 (12) TMI 419
  Waiver of pre-deposit of tax - sponsorship Service - Held that:- demand of service tax of 15,29,400/- on the amount, that the applicant created provision ‘Sponsorship expenses’ every year in their books of account. The learned Counsel for the applicant drew the attention of the Bench to the relevant portion of the Adjudication Order on this issue. On a perusal of the table at Para 9.01 of the order, we find that the applicant made a provisional arrangement for sponsorship in the books of accounts for every year, which was reversed in the subsequent financial year. It is seen from the table that reversed the amounts for the year 2006-07 to 2008-09 as mentioned provisions were reversed in the subsequent financial year. The dispute relates to provisions made in 2009-10. The applicant had contended before the Adjudicating authority that the said amount was reversed in the subsequent financial year 2010-11. Prima facie, we find that the applicant reversed the provisional amount in the subsequent financial year. - applicant has made out a strong prima facie case for waiver of pre-deposit of entire amount of tax along with interest and penalty till disposal of the appeal. Accordingly, pre-deposit of the entire amount of tax along with interest and penalty is waived and recovery thereof stayed till the disposal of the appeal - Stay granted.

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• 2014 (12) TMI 418
  Condonation of delay - Power of appellate authority to condone delay beyond period of 90days - Held that:- in particular sub section (3A) and its proviso, clearly shows that the period of two months is provided for filing of appeal before the appellate authority. However, the appellate authority, if satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the said period of two months, has power to allow filing of appeal within a further period of one month. Thus, total period that is allowed by this provision is or outer limit for preferring appeal is three months i.e. two months as a matter of right and next one months for sufficient cause. It is clearly seen that beyond the said outer limit of three months, there is no enabling provision for the appellate authority to either entertain the appeal or condone the delay. In our opinion, that is the plain reading of the provision. appellate authority under section 85 (3A) of the Act does not have authority to condone the delay beyond 90 days, that being the outer limit as per the said provision. - Decided against petitioner.

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• 2014 (12) TMI 417
  Validity of Rule 5A - power to audit of service tax records - Validity of communication dated 24.09.2014 as at Annexure¬B to the petition under which the Assistant Audit Officer of Principal Director Auditor (Central) has communicated the petitioner that the audit of service tax revenue records of the petitioner's unit would be conducted by a party from the office of the Principal Director Auditor (Central), Gujarat, Ahmedabad in the last week of September 2014 - Held that:- Delhi High Court in case of Travelite (India) Ltd. (2014 (8) TMI 200 - DELHI HIGH COURT) has struck down Rule 5A as unconstitutional. However, Allahabad High Court in case of A.C.L. Education Centre (P.) Ltd. v. Union of India reported in [2014 (1) TMI 1562 - ALLAHABAD HIGH COURT], upheld the vires of the Rule on a concession being made by the counsel for the Union that for the purpose of collecting the information from the assessee to assess the correct tax, the Commissioner may appoint a Chartered Accountant for the purpose of audit and that audit will not be done by any other officer on his behalf. Prima facie, therefore, if Rule 5A is not valid, a serious question of the powers of the authority to issue the impugned communication would arise. Subsidiary question would be, even if Rule 5A is valid, would the communication in question be covered within the powers of the Commissioner as envisaged under sub¬rule (1) of Rule 5A, which empowers the Commissioner to authorize any person to carry out the inquiry with respect to the accounts of an assessee. Whether such authorized persons can be an outsider of the organization of the Commissioner would also be an issue. - Learned Standing Counsel Shri Qureshi waived rule on behalf of the Union of India. - respondents are prevented from proceeding further in connection with the impugned communication - Application disposed of.

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• 2014 (12) TMI 416
  Waiver of pre deposit - Business Auxiliary Service - Suppression of the actual value of service - Tribunal ordered pre deposit - Held that:- The main plea of the appellant is that due to financial hardship, they are not able to comply with the conditional order of the Tribunal. However, for the plea of financial hardship, the appellant has not filed any particulars to substantiate the plea of financial hardship in the application filed for pre-deposit before the Tribunal. Hence, the plea of financial hardship without any relevant particulars is not a ground for this Court to entertain this appeal filed as against the final order passed by the Tribunal dismissing the appeal for non-compliance of the conditional order - No reason to modify the order of the Tribunal, which has been considerate enough in ordering pre-deposit of approximately 25%, which we find consistently followed by the Tribunal. - Decided against assessee.

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• 2014 (12) TMI 415
  Application to deposit remaining 50% of the amount under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 - declaration made under Section 106 - by virtue of issuance of summon dated 26/28.02.2013, inquiry or investigation, was already initiated before 01.03.2013 - whether the case of the petitioner falls under Sub section (2) of Section 106 of the Finance Act - Held that:- summons were issued on 26 and 28.2.2013. Mere fact that summons were served after 01.03.2013 shall be of no consequence. Thus the first condition of Section 106(2) that such an inquiry or the investigation was initiated before 1.3.2013 was satisfied. The later condition of such an inquiry or the investigation being still pending as on 01.03.2013 was also satisfied. The designated authority was justified in rejecting the declaration of the petitioner. Equally, merely because the petitioner filed a declaration and summons along with such declaration would not compel the department to accept the same de hors to the provisions of the scheme. Merely filing of the declaration and disclosure of issuance of summons before 01.03.2013 do not give any vested right to the petitioner that such a declaration must be accepted irrespective of the provisions of the scheme. - Decided against appellant.

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• 2014 (12) TMI 414
  Waiver of pre deposit - Commercial training or coaching - Computer Training Services - Held that:- Even as per the statement originally made, the appellant is registered as commercial training and coaching service. 50% of the service tax has been discharged and for the balance, it was claimed that it relates to sale of course material, eligible for exemption. This plea was primarily declined in the order of the Tribunal in [2013 (12) TMI 215 - CESTAT CHENNAI] stating that only standard text books will be considered for exemption and the plea of the appellant was not accepted in the order. On the contrary, on verifying the sample receipts and invoices, the Tribunal came to the conclusion that the amount received from the trainees as course fee was artificially split to avoid payment of service tax. We, therefore, find no error in the order of the Tribunal. The next plea that Notification No.24/2004-ST dated 10.9.2004 provides exemption for vocational training imparted by vocational training institutes. The said Notification was amended by Notification No.19/2005-ST, which inserted a proviso and explanation, and makes it clear that Notification No.24/2004 will not apply to taxable services provided in relation to commercial training or coaching by a computer training institute. According to the Department, the appellant is a computer training institute. The Tribunal was justified in distinguishing the interlocutary order passed by the Bangalore Tribunal in the case of Rayudu Vision Media Ltd. Vs. Commissioner of Central Excise, Hyderabad reported in [2013 (12) TMI 52 - CESTAT BANGALORE], as it found that it related to a case of training in 2D and 3D animations and it was not a case of computer training, but only a vocational training conducted with the aid of computers. Nevertheless, we find no reason why the Tribunal in the present case should be bound by the interlocutary order passed by the Bangalore Tribunal in the case of Rayudu Vision Media Ltd. Vs. Commissioner of Central Excise, Hyderabad reported in [2013 (12) TMI 52 - CESTAT BANGALORE]. The order passed in the stay petition cannot have binding force. Tribunal may re-consider the discretion already exercised in Miscellaneous order based on the additional grounds raised. However, prima facie the Tribunal came to the conclusion that the proviso to Notification No.24/2004-ST dated 10.9.2004 clearly excludes the case of the appellant. At this stage, we do not find any reason to differ with the finding of the Tribunal, more so, in view of the decision of the Apex Court in the case of Commissioner of Central Excise V. Sunwin Technosolution P. Ltd. reported in [2010 (9) TMI 71 - SUPREME COURT OF INDIA]. Even on merits, we find that the appellant has not made out any prima facie case to interfere with the order of the Tribunal - Decided against assessee.

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• 2014 (12) TMI 413
  Recovery of cost of bank guarantee furnished by the Respondent No.5 - High Court in [2014 (8) TMI 102 - DELHI HIGH COURT] held that the transaction between the appellant and Respondent No.5 regarding letting out of immovable property would not fall within the taxable service of “airport services” under clause (zzz) of Section 65(105) prior to 01.07.2010 - Held that:- As regards the liability to pay the costs for obtaining the bank guarantee furnished by Respondent No.5 it observed that the appellant was fully aware and had consented to the arrangements as recorded in the award dated 30.03.2011 and as such it was not open for the appellant to seek that Respondent No.5 deposit the entire amount of service tax as the same was contrary to the consent award dated 30.03.2011. It was further observed that despite having such Consent Award in its favour, the appellant insisted on Respondent No.5 securing it by a bank guarantee and as such it is the appellant who must bear the cost for the bank guarantee furnished by Respondent No.5. The High Court thus directed the appellant to pay to Respondent No.5 a sum of 1.06 crores, being the cost of bank guarantee. Supreme Court affirm the view taken by the High Court. The interest of the appellant was well secured by the Award dated 30.03.2011 which was a Consent Award. Respondent No.5 had an interim order in its favour passed by the High Court and it was only because of the insistence on part of appellant that Respondent No.5 was directed to furnish the bank guarantee. It is, therefore, but logical and consequential that the appellant must bear the costs for securing such bank guarantee. - Decided against appellant.

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• Central Excise

• 2014 (12) TMI 412
  Modvat credit - manufacture of coils - Non production of documents - Held that:- when the assessee himself brought to the notice of the department that they are entitled to Modvat credit and the documents have been produced to the investigating officer, the observation that modvat credit has been claimed without documents is surprising. The adjudicating authority simply said that the documents were not produced before him. We also find that coils which are prepared for repair amounts to manufacture of new coil is not coming out. This aspect has not been considered at all. The ground taken by the Revenue is that the appellant is able to sell coils and therefore, the coils can be said to have been manufactured and marketed and since the same is happening in the other unit. In the activity of replacing the coils for repairing motor / generators, the coils can be said to have been manufactured. The question whether winding an old motor would amount to manufacture of a new coil was not addressed properly. Since nothing is clear, we consider it appropriate that the matter should go back to the original authority to begin a fresh proceeding, proper verification of all the documents with regard to the appellant s claim of Modvat credit and quantification of duty payable, etc. - Decided in favour of assessee.

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• 2014 (12) TMI 411
  Waiver of pre deposit - Whether the appellant is liable to pay duty on the software supplied along with telecom equipments to BSNL - Held that:- appellant had given the details of clearances, copy of purchase order and also the basis for their plea that as to why software cost need not to be included. In our opinion, it shows that there was ground for the appellant to claim limitation. Moreover, the appellant reiterated his serious financial hardship and submitted that they had suffered loss of 170 crores during the financial year 20012-13 and the companys proposal for financial restructure has been approved only in the previous year. In these circumstances, we consider that on the issue of limitation and also on financial difficulties, the appellant has made out prima facie case for waiver of pre-deposit. Accordingly, the requirement of pre-deposit of the adjudged dues is waived and stay against recovery is granted during pendency of the appeal - Stay granted.

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• 2014 (12) TMI 410
  Reversal of CENVAT Credit - whether the reversal of the credit taken is sufficient or the appellant should discharge duty liability on the value of such goods cleared in terms of sub-rule 1(c) of Rule 57AB - department was of the view that similar parts were cleared from the appellant s warehouse for sale purposes and, therefore, the value of such goods was available and the appellant should have discharged duty liability on such value and not by merely reversing the credit actually taken - Held that:- As regards the National Engg. India Ltd. (2010 (4) TMI 674 - CESTAT, NEW DELHI) relied by the Revenue, we note that the facts are different from those involved in the present appeal. In that case, the goods though cleared on reversal of credit were actually resold by the sister concern and, therefore, a value was available for payment of duty. It was in that context, it was held the price of the goods sold should be basis for payment of duty and mere reversal of credit would not suffice. In the present case, there is no sale or resale of the goods. The goods are cleared from the factory to meet the warranty obligations free of charge. Therefore, the ratio of the said decision would not apply. It is in this context, one has to see larger Bench s decision which dealt with an identical matter in the case of Eicher Tractors [2005 (9) TMI 340 - CESTAT, NEW DELHI] and held that reversal of credit would suffice and there is no need for re-determination of value in view of the Board s Circular dated 25.4.2005 - Decided in favour of assessee.

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• 2014 (12) TMI 409
  Fraudulent availment of Cenvat Credit - No Opportunity for cross examination given - Held that:- the non-receipt of the goods by the appellants is duly supported by the statement of transporter, the type of the vehicles used and the communication received from the Octroi authorities and this is sufficient to prove the case against the appellant that they did not receive the goods. Therefore, the denial of cross examination of the broker or of the suppliers has not prejudicially affected the appellants as the case against the appellant can be established even without these statements. It is clear that the entire availment of credit is only on the strength of documents without actual receipt of the goods. Therefore, we are of the prima facie view that the appellant has not made out any case for grant of waiver of pre-deposit of dues adjudged against the appellant. However, in the absence of a prima facie case, the interest of revenue needs to be protected. Accordingly, we direct the appellant to make a pre-deposit of 50% of the duty demand confirmed against the appellant within a period of eight weeks - Partial stay granted.

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• 2014 (12) TMI 408
  Determination of value of the processed fabrics - applicant had taken the cost of grey fabrics per square meter at the time of its clearance but not the cost of grey fabrics that were received - Held that:- It is clear from the said observation that for the purpose of determination of duty, it is the intrinsic value of the grey cloth and the value of job work and manufacturing profit, expenses etc. would be relevant. It is also made clear that the assessee would be entitled to abatement on the profit element,if any, of the raw material supplier/Trader if included in the assessable value. On perusal of the declaration filed by the Traders/Raw material suppliers, we find that while calculating the assessable value, profit earned by the traders had also been included. We do not agree with the contention of the Revenue that since profit which had been included in processing charges, therefore, cannot be deducted. during the relevant period i.e. from June, 1991 to February, 1994, the rate of duty levied was specific-cum- ad valorem rate of duty. By virtue of relevant Notification, the duty required to be paid was the specific rate @ 0.50 paisa per square meter plus 5% ad valorem. We find that the dispute relates to determination of value on account of shrinkage in the supplied grey fabrics and nothing to do with the specific rate of duty charged per square meter on the processed fabrics at the time of its clearance from the factory. Therefore, the quantity of grey fabrics received and later on processing shrunk, has no bearing with the specific rate of duty applied at the time of clearance of processed fabrics - Decided against Revenue.

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• 2014 (12) TMI 407
  Waiver of pre-deposit of CENVAT credit, interest thereof and penalty - credit on the tyres for dumpers used for transportation of lime stone from the mines to the factory of the appellant - Held that:- Following decision of M/s HINDUSTAN ZINC LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2013 (1) TMI 29 - CESTAT NEW DELHI] - Prima facie case in favour of assessee - Stay granted.

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• 2014 (12) TMI 406
  Determination of transaction value - CENVAT credit entitlement on the inputs used for preparation of agarbathi masala - permission for production of additional evidence in terms of Rule 23 of the CEGAT (Procedure) Rules, 1982 - Held that:- Appellants had not taken these grounds since the appellants were very confident that Agarbathi masala was not excisable and not marketable - Therefore, there was failure to submit alternative grounds and only when they failed, they realized that they should have made such alternative grounds. We find this explanation to be reasonable – If submission of additional evidences is not allowed and the matter is not remanded, it would result in a peculiar situation where the same issue would be receiving different treatments for different periods – in the interest of justice and to ensure uniform treatment of the same issues for all the different periods, matter is remanded to original authority for adjudication afresh.

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• 2014 (12) TMI 405
  Waiver of pre deposit - Manufacture of fully built vehicles on the chasis - Benefit of Notification No.6/2006 dt.01/03/2006 - whether the appellant is eligible for the benefit of the notification or not - Held that:- Value of the purpose of payment of central excise duty has to be the price at which the goods are sold by the principal manufacturer, that question would arise only when it is decided that the benefit of the notification claimed by the appellants is not admissible. The benefit is admissible, automatically the value of the chasie will have to be deducted and in such a case, the value has to be naturally work out separately since what is being sold is only chasis and not a fully built vehicle by the principal manufacturer to the customers. - appellant is eligible for the benefit of Sl.No.41 of the notification, the question of adoption of value on which the goods are sold by ALL to the ultimate customer would not be relevant for determination of assessable value of fully built vehicles manufactured by the appellants. Therefore the requirements of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

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• 2014 (12) TMI 404
  Denial of SSI Exemption - Benefit of Notification No.175/1986 dated 1.3.1986 - Use of other company's brand name - Held that:- onus of proof to show that the brand name belongs to another person is on the Department and we have already observed that the claim of the appellant that appellants are joint owners has not been contested and further there is no evidence produced to show that the brand name was owned by M/s. Millipore Corporation as alleged in the show-cause notice - no case has been made out against the appellants - Decided in favour of assessee.

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