TMI Tax Updates - e-Newsletter
December 15, 2014

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. DISHONOR OF CHEQUE FOR ADVANCE PAYMENT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. FDI in Listed/Unlisted Companies

2. Anti-Dumping Duty

3. Allowing International System to Settle Bonds

4. Frauds Committed by E-Commerce

5. Fll Investment in Stock Exchanges

6. Kisan Vikas Patras Reintroduced to Boost Small Savings

7. Concept of Retrospective Taxation

8. Attachment of Properties Against Tax Arrears

9. Agreement on FDI

10. Revision of Interest Rate

11. Fishing Expedition of CBDT Officers

12. No Dues Certificates by Banks

13. Shadow Banking Implementation Group (SBIG) Constituted to undertake Micro Mapping of Shadow Banks and to Assess the Risks

14. Banking Reforms for Housing Sector

15. Know Your Customer (KYC) Norms

16. Measures for Fiscal Prudence

Highlights / Catch Notes

Income Tax

• Assessees eligible for Section 80IB benefits even without land title transfer; development permissions in original owners' names.

  Case-Laws - HC : Tribunal did not commit any error in holding that the assessees were entitled to the benefit u/s 80IB of the Act even where the title of the lands had not passed on the assessees and under some cases the development permissions also have been obtained in the name of the original owners - HC
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• Penalty Imposed for Non-Voluntary Revised Tax Return Filing After AO Confrontation on Asset Sale Loss Claim.

  Case-Laws - HC : Assessee had not filed revised return voluntarily, but had filed the revised return after the AO confronted the assessee and they were asked to explain how and why loss on account of sale of fixed assets was claimed in the profit and loss account – the levy of penalty upheld u/s 271(1)(c) - HC
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• Appellate Authorities Reject Book Results for Lack of Maintenance, Confirm Rs. 18.43 Crore Turnover for Greater Noida Project.

  Case-Laws - HC : As the books of accounts had not been produced and were not regularly maintained, the book results should be rejected - as far as total turnover is concerned, the appellate authorities are right in holding that the figure of ₹ 18.43 crores cannot be disputed as the assessee was only doing development work for the Greater Noida Authority - HC
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• High Court Rules Chartered Accountant's Error in Tax Law Interpretation as Bona Fide, Penalty Imposed u/s 271(1)(c.

  Case-Laws - HC : Penalty u/s 271(1)(c) – The mistake made by the Chartered Accountant was a result of a human error in correctly interpreting and applying the complex interconnect between two sections. The error was bona fide - HC
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• Assessment Invalidated Due to Improper Notice Service u/ss 143(3) & 147; Order Set Aside.

  Case-Laws - AT : Validity of assessment u/s 143(3) r.w. section 147 – Notice not served as provided u/s 143(2) - there was no valid service of notice u/s 143(2) by way of affixation - assessment order set aside - AT
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• Long-term capital gains must use fair market value at development agreement date for accurate tax assessment.

  Case-Laws - AT : Assessment of LTCG – determination of sales consideration – sale consideration cannot be taken on the basis of cost of construction to the developer - to be determined on the basis of FMV as on the date of development agreement - AT
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• CIT's Objection on 12AA Registration Rejected Due to Small Donation Amounts Below Rs. 5,000 per Donor.

  Case-Laws - AT : Names and addresses of the donors are brought on record by the assessee and the amount of donation from each donor being very small being less than ₹ 5,000/- each, there is no merit in the objection of CIT in rejecting the claim of the assessee for registration u/s 12AA of the Act - AT
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• Assessee Liable for Tax on Capital Gains from Sale of Mortgaged Shop, Says Commissioner of Income Tax (Appeals.

  Case-Laws - AT : Taxability of capital gains - CIT(A) rightly held that asseessee being the legal owner has to be taxed for the capital gains arising from the sale of mortgaged shop - AT
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• Taxpayer's Production Figures Upheld: Insufficient Evidence to Reclassify Agricultural Income as Other Sources by AO.

  Case-Laws - AT : Addition of agricultural income – AO did not have sufficient evidence to reject the production figures returned by assessee in respect of agricultural products, crops and flowers and treated the part of income from other sources - AT
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Customs

• Tribunal Urged to Avoid Resolving Appeals with Brief, Unclear Orders: Emphasizes Thorough Fact-Finding Role.

  Case-Laws - HC : If the Tribunal is last fact finding authority and was dealing with a statutory Appeal, we would expect it not to dispose of the same by a cryptic and short order - HC
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• Confiscation and fines under Customs Act Section 112 valid despite incorrect subsection mention in notice. Proceedings stand.

  Case-Laws - HC : Confiscation of goods - Redemption fine - Penalty u/s 112 - merely because the show cause notice does not mention Section 112(b) but mentioned Section 112(a) of the Customs Act, would not vitiate the entire proceedings - HC
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Service Tax

• Penalty Overturned: Contentious Issue and Limitation Period Lead to Decision Reversal in Appeal Case.

  Case-Laws - AT : Imposition of penalty - the issue being contentious and arguable and the demand having been raised by invoking the period of limitation, we deem it fit to set aside the penalties imposed upon the appellant - AT
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• Minimum Demand Charges Must Be Included in Gross Value for Service Tax on Gas Transport Services.

  Case-Laws - AT : Valuation - Transport of gas through Pipelines or conduit - Minimum Demand Charges (MDC) collected by the Applicant from their customers - prima facie amount of MDC is liable to included in the gross value of taxable services - AT
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• Services for Barge Transport from Vessel to Shore Not Classified as Cargo Handling for Tax Purposes.

  Case-Laws - AT : Classification of services - cargo handling service for import of goods - transportation by barges from the mother vessel to the jetty onshore - decided in favor of assessee - AT
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• Service Tax on Car Parking Rentals Qualifies as Input Service; Refund Entitled Under Cenvat Credit Rules, Rule 5.

  Case-Laws - AT : Service tax paid on car parking rentals is an eligible input service under Rule 2(l) of the Cenvat Credit Rules and consequently the appellant would be eligible for refund of the same under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 5/2006-S.T - AT
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• Rail Welding Service Under Business Auxiliary Service Classification Demand Set Aside.

  Case-Laws - AT : Business Auxiliary Service - appellant undertake the joining of sections of rails at site by thermite welding process. - demand set aside - AT
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Central Excise

• Importer Wins Favorable Ruling on Concessional Duty Rate for Battery Imports for Mobile Handsets Manufacturing.

  Case-Laws - AT : Import of batteries to be used for manufacture of mobile handsets and similar phones - Availment of concessional rate of duty - demand set aside - AT
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• Scented Supari Manufacturer Granted Stay; Machines Not Used for Gutkha Production, Duty Paid Under Central Excise Act, Section 4A.

  Case-Laws - AT : Manufacture of Scented Supari and cleared the same on payment of duty as per Sec. 4A of the Central Excise Act 1944 - machines were not used for manufacture Gutkha in the factory - stay granted - AT
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• CENVAT Credit Refund Allowed for DTA Units Supplying to 100% EOUs; Deemed Export Status Not a Barrier.

  Case-Laws - AT : Refund of CENVAT credit availed on inputs used in the manufacture of goods cleared by DTA units to 100% EOUs would be available and it can not be denied on the ground that it was a case of deemed export - AT
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• Central Excise: Insurance Costs Excluded from Assessable Value, Even with "To Pay" Freight Terms.

  Case-Laws - AT : Valuation of goods - Determination of assessable value - cost of insurance incurred by the assessee is not to be included despite the fact that the freight is “to pay basis” - AT
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Case Laws:

• Income Tax

• 2014 (12) TMI 1152
  Exclusion of stock in trade from average value of investment for the purpose of disallowance made u/ s 14A r.w. Rule 8D (2)(ii) - Held that:- When the assessee is in the business of share trading as well as future & option then the expenditure incurred by the assessee in the course of business activity of trading in shares would be considered exclusively for business activity and the same cannot be apportioned being an expenditure incurred for earning the dividend income. The expenditure attributable towards the earning of the exempt income directly related to the dividend income has to be disallowed as the same cannot be claimed against the taxable income of the assessee. Therefore, the disallowance computed under Rule 8D of the Income Tax Rules cannot be more than the actual expenditure incurred by the assessee for the dividend income excluding the activity of share trading which is the business activity of the assessee. Even the computation of disallowance arrived as per the Rule 8D should be restricted only to the extent of actual expenditure or to the extent of the expenditure which can be attributable to the activity of the dividend income excluding the business activity of share trading. Accordingly, we direct the Assessing Officer to re-compute the disallowance u/s 14A with the rider to the actual expenditure which can be attributable to the receipt or earning of the dividend income excluding the expenditure related to business activity of share trading. - Decided partly in favour of revenue.

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• 2014 (12) TMI 483
  Allowability of deduction u/s 80IB(10) - land development agreement - Decision in the case of DY. COMMISSIONER OF INCOME TAX Versus RADHE DEVELOPERS INDIA LTD [2009 (4) TMI 21 - GUJARAT HIGH COURT] rightly followed or not – Held that:- The Tribunal has rightly recorded that CIT(A) found that as per the Development Agreement and facts of the case, the assessee had taken full responsibility for execution of the development project - The assessee had been given full authority for execution of the development project, including development of the land and construction of residential units - The assessee had engaged professionals such as architect for designing architectural work and had also enrolled members and collected the consideration from the buyers of the residential units - The assessee had also paid the cost of the land to the Societies including stamp duty and had taken possession of the land for construction of the project – as per the decision in DY. COMMISSIONER OF INCOME TAX Versus RADHE DEVELOPERS INDIA LTD [2009 (4) TMI 21 - GUJARAT HIGH COURT] a legal title was not required for getting benefits u/s 80IB(10) of the Act and the assessee was the deemed owner of the land u/s 2(47) of the Act - the assessee had borne the entire cost of construction, including materials, and the receipt was not fixed for the contractor and the assessee was a developer and builder of the housing project. In K. Raheja Development Corporation v. State of Karnataka [2014 (10) TMI 110 - KARNATAKA HIGH COURT] while construing the meaning of the term "works contract", what the Supreme Court had in mind was Article 366(29-A)(b) of the Constitution. By Article 366(29-A)(b), a legal fiction had been introduced into a contract which was divisible into one for sale of goods and the other for supply of labour - the term "works contract" has to be understood in a manner that Parliament had in its view at the time of the Forty-sixth Amendment which was more than appropriate to Article 366(29-A)(b) and which was not restricted to "works contract" as commonly understood i.e. a contract to do some work on behalf of somebody else. The ordinary meaning of the term "works contract" means a contract to do some work on behalf of somebody else whereas in the above decisions, the Supreme Court having regard to the provisions of Article 366(29-A)(b) has adopted a wider meaning of the expression "works contract". In the opinion of this court, while construing the provisions of the Income Tax Act, the ordinary meaning of the expression "works contract" is required to be taken into and resort cannot be had to the meaning of the said expression as envisaged under the relevant Sales Tax Act which are in the context of the provisions of Article 366(29-A)(b) of the Constitution - the interpretation rendered was based not on the normal meaning of the term "works contract" but on the special meaning assigned to it under the Act itself, which provided for a definition of inclusive nature - the Tribunal did not commit any error in holding that the assessees were entitled to the benefit u/s 80IB of the Act even where the title of the lands had not passed on the assessees and under some cases the development permissions also have been obtained in the name of the original owners – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 482
  Disallowance of expenses on exempt income u/s 14A r.w Rule 8D – investments in shares and mutual funds - Held that:- In Maxopp Investment Ltd. vs. Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] it has been held that it is only when the AO is not satisfied with the claim of the assessee, that the Legislature directs him to follow the method that may be prescribed - the findings recorded by the CIT(A) and the Tribunal are appropriate and relevant - the assessee had sufficient funds for making investments in shares and mutual funds - The self or voluntary deductions made by the assessee were not rejected and held to be unsatisfactory, on examination of accounts - the Rule in sub Rule (2) specifically prescribes the mode and method for computing the disallowance under Section 14A of the Act - under clause (ii) to Rule 8D(2) of the Rules, the AO is required to examine whether the assessee has incurred expenditure by way of interest in the previous year and secondly whether the interest paid was directly attributable to particular income or receipt - the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii) - Clause (i) relates to direct expenditure relating to income forming part of the total income and under clause (iii) an amount equal to 0.5% of the average amount of value of investment, appearing in the balance sheet on the first day and the last day of the assessee has to be disallowed – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 481
  Levy of penalty as per Explanation-I Section 271(1)(c) - Company has gone into liquidation and the Official Liquidator has been appointed - Whether the Tribunal was correct in law in allowing the appeal of the assessee in holding that the assessee had discharged the onus cast upon it under Explanation-I Section 271(1)(c) – Held that:- The word "concealment" would refer to somewhat malicious and mala fide conduct on the part of the assessee - The expression "inaccurate particulars" is copiously wider and broader and would include cases where particulars furnished are not accurate and which results in avoidance or evasion of tax - the assessee in Schedule-16 "General Expenses" of the profit and loss account had shown a debit on account of loss on sale of the fixed assets - the assessee had incurred losses was indicated in Schedule-16 of the profit and loss account - it is plausible for the assessee to urge that material facts were submitted and stated in the original return. Whether the assessee has been able to show that his conduct was bona fide – Held that:- All claims or deductions wrongly made cannot be treated as bona fide and protected by Explanation 1 to section 271(1)(c) of the Act - In cases where interpretive skills and divergent views are plausible, penalty for concealment should not be imposed - the assessee had claimed loss on account of sale of plant and machinery i.e. the fixed assets, in the profit and loss account - an assessee would normally rely upon legal opinion of a Chartered Accountant, who is required to audit accounts of the company and also submit an audit report, but penalty cannot be deleted on guise or pretence of legal opinion as a smokescreen and façade - the contention of the assessee cannot be accepted that all claims howsoever untenable, once certified by a Chartered Accountant or the Directors of the company, cannot be made a subject matter of penalty proceedings - most of the income tax returns are accepted without scrutiny or regular assessment and self-compliance of tax provisions is a rule required to be followed, the same is decided in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - the assessee had not filed revised return voluntarily, but had filed the revised return after the AO confronted the assessee and they were asked to explain how and why loss on account of sale of fixed assets was claimed in the profit and loss account – the levy of penalty is upheld u/s 271(1)(c) – Decided against assessee.

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• 2014 (12) TMI 480
  Deletion of profits on unaccounted sales - Whether the Tribunal was correct in deleting the addition made on account of profits earned on unaccounted sales - Additions on account of unexplained cash and unexplained investments in stocks had been restored to the file of the AO for further investigations – Held that:- The Tribunal held that the assessee had surrendered about 5 lacs on account of cash found at the time of search and also 6 lacs on account of excessive stock and therefore no addition should be made on account of profits outside the books of accounts - the factum that the assessee had earned undeclared profits outside the books was accepted - the entries recorded in the diary etc. were treated as incriminating and reliable material - In case the assessee was transacting business outside the books of accounts, necessarily he would have earned profit from the transactions - Some profit would have been used for personal expenses and entertainment etc. - The entire undisclosed profits would not have been redeployed in trade or for purchase of undeclared stocks - The factor and factum has not been taken into account - the assessee was unable to explain and match the entries given in the diary and the loose papers with the entries found in the books of accounts - The transactions were for a substantial amount – the assessee had also accepted addition of 50,000/- and 1,58,910/- on account of unexplained cash and unexplained excessive stock - assessee had earlier accepted undisclosed income of 2,78,450/- in the block assessment return - thus, the matter is to be remitted back to the Tribunal for fresh determination – Decided in favour of revenue.

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• 2014 (12) TMI 479
  Applicability of section 44AD - Assessee’s turnover in excess of 40 lacs and justification of addition made u/s 40A(3) - Whether the addition to declared income is adequate or a higher addition would be justified – Held that:- The AO did not conduct any inquiry and ascertain the net profit rate of other comparable contractors and disallowed expenditure resulting in abnormal gross profit rate of 59.60%, which should not be accepted - The effect thereof was that 70% of the expenditure on account of purchases worth 10.61 crores out of total purchases of 14 crores was disallowed - as the books of accounts had not been produced and were not regularly maintained, the book results should be rejected - as far as total turnover is concerned, the appellate authorities are right in holding that the figure of 18.43 crores cannot be disputed as the assessee was only doing development work for the Greater Noida Authority - The total turnover is also supported by the tax at source certificate - The quantum of turnover was not adversely commented upon by the AO - counsel for the assessee had earlier produced a copy of the assessment order relating to AY 2010-11, wherein the AO himself had applied net profit rate of 8% on contractual receipt of 6.66 crores and net profit rate of 3% on supply receipts of 7.21 crores - revenue has not been able to point out or state that the other contractors have a higher profit rate, than the net profit rate of 8% as held by the appellate authorities – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 478
  Validity of deduction u/s 80IB(9) – assessee engaged on exploration activities carried by assessee - Whether the assessee was engaged in commercial production and refining of mineral oil or not – Extraction of oil amounts to result in any new product or commodity or not – Held that:- The Tribunal rightly held that there was a consortium of such Corporations, of which the present Assessee was a part - the activity of extraction could very well fall within the term "production" – in Commissioner of Income-tax v/s. Sesa Goa Ltd. [2004 (11) TMI 14 - SUPREME Court] it has been held that from the definition of the word 'production', it has to follow that mining activity for the purpose of mineral oil would come into within the ambit of the word 'production', since ore is "a thing", which is the result of human activity or effort - extraction and processing of iron ore amounts to "production" within the meaning of the word in section 32-A(2)(b)(iii) and consequently the Assessee was entitled to benefit of section 32-A(I) - If the consortium partner was undertaking an identical activity, and was allowed the deduction, the Tribunal’s order is upheld. Site restoration expenses or abandonment cost treated as an ascertained liability – Held that:- The site restoration expenses or abandonment cost was treated as an ascertained liability –it was deleted from the computation of book profit u/s 115JB - as per the terms and conditions of a Production sharing contract, it is under obligation that on expiry or termination of the contract to remove all its equipments and installations from the contract area as well as perform the necessary site restoration, operation or process -This is in accordance with the International Petroleum Practices - Such explanation of the Assessee was supported by independent finding and carried out by Institute of Oil and Gas Production Technology – thus, no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (12) TMI 477
  Deletion of penalty u/s 271(1)(c) – Onus discharged by assessee or not – Misinterpretation of section 115JB by assessee - Held that:- The Tribunal was rightly of the view that the assessee had discharged the onus and established their bona fides for the purpose of Explanation 1 to Section 271(1)(c) – assessee through Affidavit accepting his fault that he had misunderstood and misinterpreted the provisions of Section 115JB of the Act - computation made by the Chartered Accountant in this case in Form No. 29B was erroneous and he had owned his fault and mistake - This was the first year when Section 115JB was made applicable to companies covered by Section 10A of the Act - the explanation and conduct of assessee did not reflect any attempt to propound an excuse which was sham or a ruse - The reason given was not a device to cover an ulterior purpose - The mistake made by the Chartered Accountant was a result of a human error in correctly interpreting and applying the complex interconnect between two sections. The error was bona fide – relying upon Price Waterhouse Coopers Private Limited versus CIT [2012 (9) TMI 775 - SUPREME COURT], the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 476
  Computation of tax liability u/s 115JB – Tribunal relied upon the Explanation as it stood at the time of the relevant AY - Held that:- The Tribunal was rightly of the view that the assessee made a computation and for the purposes of section 115JB relying on the explanation 1 as it stood then - The facts being undisputed, the Tribunal held that the Commissioner did not commit any error apparent on the face of the record nor his order can be termed as perverse - The only ground on which the AO refused to accept the claim or deduction was that the Assessee had not lodged it in its normal computation - So long as the definition of the term book profit and found in explanation 1 permitted the Assessee to lodge that claim, it is not necessary for him to have shown it in the normal computation - In the original return of income and the normal computation, this was not shown but in the revised return this was the claim lodged and referred by relying upon the explanation - It was also claimed on the basis that amount is credited to the Profit and Loss Account - relying on the explanation 1 as it stood then that the Tribunal upheld the order of the Commissioner – the order of the Tribunal is upheld as the view taken in the facts and circumstances peculiar to the Assessee cannot be termed as perverse or proceeding on a complete misreading or misinterpretation of the relevant statutory provision – as such no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (12) TMI 475
  Interest charged u/s 215 - Whether the Tribunal is right in deleting the charging of interest u/s 215 on the ground that the assessee could not have anticipated the additions and disallowances made in the income – Held that:- Following the decision in Patel Engineering Co. Limited Versus CB. Rathi And Another [1983 (2) TMI 10 - GUJARAT High Court] it could not have anticipated or foreseen that its estimate of the current income would not be accepted and that the advance tax paid would be less than the assessed tax by the percentage prescribed in subs. (1) of s. 215 - it was impossible for the authorities to reach the conclusion that the circumstances of the case did not justify the waiver of interest - to remit the matter to the Commissioner under such circumstances would be only protracting the proceedings by asking the Commissioner to grant the relief which we can ourselves grant to the petitioner in the course of these proceedings - In the context of the wider superintendence jurisdiction of the court, in exercise of its power under art. 227, merely quashing the revisional decision of the Commissioner is not justice – decided against revenue.

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• 2014 (12) TMI 474
  Computation of deduction u/s 10A - Exclusion of telecommunication charges from the computation of total turnover – Held that:- Following the decision in Commissioner of Income Tax and another Vs Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein it has been clearly held that while computing the consideration received from such export turnover, the expenses incurred towards freight, telecommunication charges, or insurance attributable to the delivery of the articles or things or computer software outside India, or expenses if any incurred in foreign exchange, in providing the technical services outside India should not be included – Decided against revenue. Allowability of deduction u/s 10A – STPI permission not obtained - Whether the Tribunal was correct in holding that commencement of production on 23.10.1997 i.e., before obtaining STPI permission which was done subsequently on 23.12.1997 and after commencement of production - Held that:- The three conditions to be fulfilled for getting the benefit u/s 10A are the assessee should begin to manufacture or produce articles or things or computer software on or before the 1st day of April 1994 in software technology park, and it is not formed by the splitting up or the reconstruction of a business already in existence and it is not formed by the transfer to a new business of machinery or plant previously used for any purpose - all the three conditions are fulfilled - the material on record discloses application for registration was filed on 23.10.1997 whereas, the permission was granted on 23.12.1997 after incorporation of the assessee on 03.09.1997 - The assessee taken steps for registration by filing application and thereafter he has commenced production on 23.10.1997 and therefore, as it has fulfilled the requirement as mentioned in Sub Section (2)(i) of Section 10A, the assessee cannot be denied the benefit – Decided against revenue.

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• 2014 (12) TMI 473
  Validity of assessment u/s 143(3) r.w. section 147 – Notice not served as provided u/s 143(2) - Whether the reopening of assessment was made in absence of reason to believe and material on records and whether there was service of notice u/s.143(2) much less a proper service as per Rule 17 of Order V of CPC – Held that:- The limitation prescribed is mandatory, the format of provision being in negative terms - if the requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language, that is to say, if the statute enacts that it shall be done in such a manner and in no other manner, such requirements are, in all cases absolute and neglect to attend to such requirement will invalidate the whole proceeding – in Assistant Commissioner of Income-tax vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] - the AO has to necessarily follow the provisions of section 142 and sub-sections (2) and (3) of section 143 - assessee has filed his objection before the AO and such objection has also been noted by the AO in his assessment order to the effect that assessee has objected non service of notice u/s.143(2) during the course of assessment proceedings itself - Thus, participation of assessee in the assessment proceedings will not disentitle the assessee his right to object to the service of notice u/s.143(2) of the I.T. Act, 1961. Notice issued u/s 143(2) dated 17-7-2012 returned unserved by postal authorities - notice was affixed by the Inspector on 28-7-2012 - Serving Officer had not set out reason for passing subsequent entry nor for adopting the mode for service by affixture and without stating the reasons for doing so, the adoption of the mode of substituted service could not be legally justified - Notice was served by affixture - the adoption of mode of substituted service was not legally justified - there is no mention of name and address of the person who had identified the house of the assessee and in whose presence the notice u/s 143(2) was affixed - there was no valid service of notice u/s 143(2) by way of affixation - the department has not been able to demonstrate that notice u/s.143(2) was served within the statutory time limit, the assessment made on the basis of such invalid notice could not be treated to be valid assessment and, such assessment order deserves to be treated as null and void and liable to be quashed and annulled – Decided in favour of assessee.

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• 2014 (12) TMI 472
  Incriminating documents seized during search – Validity of notice u/s 153C – Held that:- The basis for initiation of proceedings u/s. 153C is the information/valuables/documents seized belonging to persons other than covered u/s. 153A - there is no indication as to the information on the valuables/ documents seized during from the search proceedings conducted in the case of M/s. Midwest Granites (P) Ltd(MGPL), and it's directors, and no such valuables or documents relatable/belong to the assessee - no addition was made based on the incriminating material found during the course of search proceedings conducted in case of MGPL, which is an associate concern of the assessee company - additions made in course of assessment proceedings u/s. 153A should be derived from the incriminating material found during the course of search - The assessment proceedings u/s. 153C are also considered as proceedings u/s. 153A, since 153C is read with Sec. 153A. The assessments for the AYs 2003-04, 2004-05, 2005-06, 2006-07, 07-08 and 2008-09 were unabated and treated to have been concluded – AO has not specifically pointed to any availability of seized/ incriminating material related to the assessee found during the search proceedings conducted in case of MGPL or the directors of the group companies - There is no specific reference to any material or valuables that are relatable to the assessee and have become the basis for making the additions or disallowances, and prompt the assessing officer to re-agitate the issues which were otherwise settled in the unabated assessments - the various additions made by the AO in the assessment orders for the AY 2003- 04 is not justified and are directed to be deleted - there is no incriminating material found in the course of search - as there is already finding that no incriminating material had been found pertaining to assessee, very issuance of notice u/s 153C itself is bad - there is no merit in Revenue contention – Decided against revenue.

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• 2014 (12) TMI 471
  Assessment of LTCG – Claim of exemption u/s 54F – Held that:- Assessee along with E. Govinda Reddy has entered into the development agreement with M/s BPR Infrastructure Ltd. on 04/05/06 - developer in terms with the development agreement has started the development work by not only obtaining permission from concerned authorities and has also started construction activities and the construction is almost complete - assessee’s contention that possession was not handed over to developer cannot be accepted - without being handled over possession over land, the developer would have started the development activity - facts available on record indicate that developer was handed over possession of land for starting development activity on execution of development agreement on 04/05/06, transfer in terms of section 2(47)(v) read with section 53A of TP Act for all intent and purpose has taken place in the AY – relying upon Potla Nageswara Rao Vs. CIT [2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT] - So far as adoption of sale consideration at 3,72,74,900, assessee rightly contended that sale consideration cannot be taken on the basis of cost of construction to the developer - the sale consideration deemed to have been received by assessee has to be arrived at on the basis of FMV as on the date of development agreement i.e. on 04/05/06. Assessee’s share in the deemed sale consideration has to be worked out - during the assessment proceeding as well as before the first appellate authority, assessee has brought it on record that by virtue of a registered partition deed dated 23/06/1995, assessee is not absolute owner of the property, but, he owns 1/4th share along with his three sons - though, in the development agreement assessee along with E. Govinda Reddy have executed with developer by projecting them as absolute owners of land, but, on the basis of registered partition deed a ratification deed was executed on 23/04/07, wherein the other co-owners have also been made party to the development agreement - assessee’s claim for apportioning the taxable capital gain amongst all the co-owners has to be considered keeping in view the registered partition deed dated 23/06/95 and ratification deed dated 23/04/07 - as neither AO nor CIT(A) has properly appreciated assessee’s contention by keeping in view the aforesaid documentary evidences brought on record, we are of the view that the entire issue of computation of capital gain needs to be examined afresh by taking into account all the facts and materials brought on record – thus, the matter is remitted back to the AO for fresh consideration - AO is also directed to consider assessee’s claim of exemption u/s 54F in terms with the statutory provision – Decided in favour of assessee.

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• 2014 (12) TMI 470
  Rejection of books of account and estimation of profit – Held that:- FAA rightly held that the assessee, under the provisions of Income Tax Law, can maintain its books of accounts either on Cash Basis or Mercantile basis - the AO has not properly analyzed the veracity of books of account nor has he properly appreciated various facts - the various other reasons given by the AO in support of his decision to reject the books of account are trivial in nature, which does not warrant such a decision - CIT(A) has come to the conclusion that the rejection of books of account of the assessee and consequently estimation of net profit is not justified - CIT(A) has properly analyzed the facts prevailing in the instance case and has taken conscious decision on this matter - AO has not found any defect in the books of account –revenue could not file any material to controvert the findings of the CIT(A) – the order of the CIT(A) is upheld – Decided against revenue. Assessment of security deposit – Held that:- CIT(A) was rightly of the view that the assessee has received the security deposit from the prospective patients under the promotional scheme floated by the assessee - the assessee has given copies of all deposits, details of patients, amount received, copies of dental record to the AO - the AO has proceeded to assess the amount under the impression that the assessee is not liable to repay the security deposit received by it - assessee has refunded the security deposit to the patients - CIT(A) was justified in holding that there is no cessation of liability in respect of the security deposits - Since the assessee is liable to repay the security deposit, the question of assessing the same u/s 28(iv) also does not arise – the order of the CIT(A) is upheld – Decided against revenue. Unexplained investment u/s 69 – Held that:- CIT(A) rightly held that the assessee has accounted for the deposit of 3.70 crores paid to M/s Royal Dental Clinic Pvt. Ltd. in its books of account but the same was netted of against the security deposit while preparing the balance sheet - CIT(A) has given clear finding that the assessee has accounted for the investment made in M/s Royal Dental clinic Pvt Ltd in books of account, and since the assessee has followed a particular method for grouping the accounts and presented only the net balance in the balance sheet, it cannot be held that the assessee has not accounted for the investment of 3.70 crores made with M/s Royal Dental Clinic Pvt. Ltd. – the order of the CIT(A) is upheld – Decided against revenue. Unexplained credits u/s 68 – Held that:- Dr. Arun Chamaria is also assessed by the same officer and upon examination of his assessment record only, the AO has come to know of the fact that the assessee has received the share application money 20 lakhs from Dr.Arun Chamaria - The reasons for not disclosing the same in the balance sheet has been duly explained by the assessee before CIT(A) and the same has been found to be correct by the FAA also – thus, the genuineness of receipt of 20 lakhs cannot be suspected – Decided against revenue.

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• 2014 (12) TMI 469
  Rejection of claim of the assessees for registration u/s 12AA and 80G(5) - details of donation received in Cash - Genuineness of the objectives of the assessee – Held that:- Assessee contended that he has claimed receipt of cash donation of 44.73 lacs and he is not satisfied about the details provided in respect of these donations - there is no objection of CIT regarding the objects of these assessee trusts – the basis of CIT in doubting the genuineness of cash donation is that the identity of Shri Pawan, who has issued the receipts is not known and no salary was debited in the books of account on account of payment to Shri Pawan - this is not valid for deciding the claim of the assessee regarding registration - regarding the receipt of donation from various persons below 5,000/- each, although some doubt are raised by CIT but names and addresses of the donors are brought on record by the assessee and the amount of donation from each donor being very small being less than 5,000/- each, there is no merit in the objection of CIT in rejecting the claim of the assessee for registration u/s 12AA of the Act. Regarding the second donation of receipt of donation, Bhalchandra Educational Trust, the finding of CIT is not correct because the amount of 40 lacs was given by Bhalchandra Educational Trust to both the assesses trusts as a loan and not as donation and moreover, the third trust has already been granted registration on 08/12/2009 u/s 12AA and no adverse inference can be drawn on this account - trustees and objects of the trust is identical with these two trusts – under identical facts, registration is already granted by learned CIT himself to Bhalchandra Educational Trust, there is no reason to deny registration to these two trusts - assessee has invested an amount on acquiring the land and on account of building – the two trusts have already undertaken activities to fulfill their charitable objects in a big way – thus, CIT was not justified in rejecting the claim of the assessees for registration u/s 12AA and 80G(5) of the Act – Decided in favour of assessee.

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• 2014 (12) TMI 468
  Taxability of capital gains on the asset mortgage in discharge of dues, where assessee being a guarantor - Computation of LTCG on sale of shop – Transfer u/s 2(47)(i) – Held that:- A firm and a company in which the Assessee was a partner and director respectively had obtained financial assistance from banks and as a security for lending to the firm and company, Assessee had mortgaged the shop - on failure of the borrowers to repay the loans, the bank sold of the mortgaged shop and appropriated the dues - when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset – following the decision in Commissioner of Income Tax Versus Attili N. Rao [2001 (10) TMI 5 - SUPREME Court] in a case where the property is mortgaged for securing the debt and subsequently, if the mortgagee sells the property and recovers the amount due to him and pays the balance of the sale price, if any, to the owner of the property, then, the 'gross amount' should be taken as the 'consideration' for computing capital gain in the hands of the owner of the property - thus, CIT(A) rightly held that asseessee being the legal owner has to be taxed for the capital gains arising from the sale of mortgaged shop – the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (12) TMI 467
  Transfer pricing adjustment - Determination of ALP of international transactions - Sale of stitched bond fabric - Evaluation of a taxpayer’s separate and combined transactions – Held that:- Assessee rightly contended that under CUP approach, same period transactions ought to be compared so that correct benchmarking takes place - export sales rates in the month of March-2007 have increased drastically - for a correct benchmarking, transactions of March-2007 ought to have been ignored - sales to non-Associated Enterprises after 2-2-2007 should have been ignored - there are no. of instances wherein, the prices charged to the Associated Enterprises party are higher than prices charged to the non-Associate Enterprise party - Though yearly average is a good and reasonable indicator for benchmarking under the CUP approach, a transaction based benchmarking approach should not be rejected, and especially in such cases where, rejection of a transaction-based benchmarking may lead to some distortion - like has to be compared with like - In fact, natural process of benchmarking itself calls for ignoring that period when, supplies are not made either to Associated Enterprises party or non-Associated Enterprises party - Further, if March-07 supplies are removed from the yearly benchmarking average, even yearly average rates become comparable and within the permissible 5% variation scope as follows – thus, the additions made by the TPO is set aside – Decided in favour of assessee.

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• 2014 (12) TMI 466
  Validity of notice u/s 143(2) – Assessee contended that return was filed on 31.07.2007 and notice u/s 143(2) was issued on 16.09.2008, therefore, it was not within the period prescribed under the Act – Held that:- Following the decision in Amarjit Singh Tut. Versus Union of India [2013 (2) TMI 173 - Punjab and Haryana High Court] - the return was furnished on 31st July, 2007, therefore, the financial year had ended on 31st March, 2008 - The sixth month from the end of the financial year was expiring on 31st September, 2008 - However, the notice was served u/s. 143(2) on 16.09.2008, therefore the notice was very much within the time prescribed - The old provisions were not applicable wherein it was prescribed that no notice u/s.143(2) shall be served on the assessee after the expiry of 12 months from the end of the month in which the return was furnished - since a procedure has been laid down which was effective from 1st April, 2008, therefore it is expected from the Revenue Department to follow the procedure, especially the issuance of notice u/s 143(2) of IT Act - Since, the AO has rightly followed the procedure by issuing a notice u/s.143(2) within the time prescribed under the proviso to Section 143(2), there is no substance in this additional ground of the assesse – Decided against the assesse. Computation of LTCG on sale on land – Transfer u/s 2(47) – Held that:- Revenue rightly contended that because as per Section 2(47) the definition of the word "transfer” in relation to a capital asset includes sale, exchange, and relinquishment of the asset. This is a case of a transfer of an immovable property - since the possession was handed over and the sale deed was registered in the Financial Year 2006-07, therefore, the correct assessment year ought to be A.Y.2007-08. The AO’s action, in this regard is hereby affirmed. - Decided against the assessee. Application of section 50C - valuation on the basis of the rates of stamp duty fixed by the sub-registrar. - Held that:- on one hand, the assessee has claimed that only 50% of the land was transacted but the stamp duty was paid on the entire area of the land, but on the other hand, the AO’s opinion was that the sale consideration in respect of entire land was to be assessed in the hands of the assessee by applying the stamp duty rates which were paid by the assessee at the time of execution of the sale deed. – matter is remitted back to the AO for fresh adjudication – Decided partly in favour of assesse.

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• 2014 (12) TMI 465
  Validity of reopening of assessment u/s 148 –Capital asset u/s 2(14) - Adoption of wrong rate of valuation as on 01.04.1981 – Expenses on sale of land disallowed – Held that:- Following the decision in Rameshwar S/o Dayaram alias Kallu Versus Income-tax Officer 6(2), Jhansi [2014 (10) TMI 332 - ITAT AGRA] and as held in Badam Singh Rajpali, Versus Income-tax Officer [2012 (7) TMI 160 - ITAT, AGRA] - The AO has not verified the information issued notice u/s. 133(6) to the assessee and required to confirm the transaction as to how the capital gains arise out of the transaction - There was no material with the AO to prima facie prove that the assessee earned capital gain because he wanted the assessee to intimate as to how capital gain arises out of the transaction - The AO had acted only on the basis of suspicion and it could not be said that it was based on belief that income chargeable to tax had escaped assessment - AO had to act on the basis of “reason to believe” and not on “reason to suspect” - the AO has not satisfied the ingredients of section 147 of the Act in the reasons recorded for reopening of assessment - the AO has not correctly assumed jurisdiction u/s. 147 /148 of the IT Act – the order is to be set aside – Decided in favour of assesse.

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• 2014 (12) TMI 464
  Addition of agricultural income – AO was of the view that the assessee had declared excess agricultural income and treated the income as undisclosed income – Held that:- CIT(A) was rightly of the view that the AO did not utilize the opportunity provided to him by the office to examine the parties to whom sales were made - The purpose of a remand is to ensure that adequate opportunity is provided to both parties to examine the case and put forth both views in the shortest period of time – as decided in assessee’s own case for the earlier assessment year, it has been held that the AO had wrongly inferred from the material produced before him that the method of accounting for sale of flowers was incorrect or that the alleged discrepancies were addressed to the assessee asking for an explanation for the same. CIT(A) rightly held that allegation that the sale patties are doubtful, does not have any merit – the AO did not have sufficient evidence to reject the production figures returned by assessee in respect of agricultural products, crops and flowers and treated the part of income from other sources - revenue authorities have not disputed the land holding i.e. 40.03 hectors of assessee and agricultural activity - a similar addition made in AY 2004-05 was deleted by CIT(A) and revenue have not preferred appeal against the same - in AY 2006-07, agricultural income on the same holding has been accepted by the AO – thus, the CIT(A) rightly deleted the addition – the order of the CIT(A) is upheld – Decided against revenue.

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• Customs

• 2014 (12) TMI 488
  Import of Processed Natural Limestone under EPCG scheme - Benefit under Notification No.103/2009-Cus - revenue alleged that the goods were restricted for import in terms of the Foreign Trade Policy in force. - Confiscation of goods u/s 111(d) - Penalty u/s 112(a) - Wrong classification of goods - Held that:- There is no application of mind on the part of the Tribunal. - A very vital and material contention is raised on behalf of the Respondent and which is tried to be supported by producing number of documents including the relevant Notification. If the Tribunal is last fact finding authority and was dealing with a statutory Appeal, we would expect it not to dispose of the same by a cryptic and short order, more particularly, when such vital contentions have been raised as would have a material bearing on the outcome of the Appeal. It would also have some bearing on the pending cases. Customs Tariff Heading No.68022900 under which the goods are classifiable, then, whether there is any restriction in terms of the applicable policies or not ought to have been examined. Whether, the Commissioner was right in making a reference to the Customs Tariff Heading 68022200 should have been then considered. If that was permissible, the Tribunal was obliged to not only make a reference to the relevant findings of the Commissioner to uphold them in their entirety or otherwise. If these findings were not tenable as urged on behalf of the Respondent/original Appellant, then, the Tribunal should have held accordingly. We do not find any discussion much less a conclusive finding on this aspect of the matter. Resultantly, we are constrained to quash and set aside the impugned order on this short ground alone. - Decided in favour of Revenue.

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• 2014 (12) TMI 487
  Reward for providing information - Information providing for cases where raid conducted and proceedings initiated - Held that:- out of five cases, in two cases the matters are remanded to the adjudicating authority by CESTAT and in one case the adjudication proceedings is still pending. It also appears that so far as two other cases are concerned the Units are closed and non-working since long and in one case the Department has already attached the property on 21-2-2008. However, GIIC in the case of M/s. Shivani Sizers Pvt. Ltd. has claimed that the Unit is under possession of GIIC. In view of this, as such, it will not be possible at this stage to ascertain the amount of reward, if any, due and payable to the petitioner - Appropriate authority directed to adjudicate the respective cases i.e. in the case of M/s. Mudra Texturising Pvt. Ltd., Surat; M/s. Chandralon Texurising Pvt. Ltd., Surat and M/s. Goyani Textiles, Surat and conclude the adjudication proceedings and pass an appropriate order/final order of adjudication in accordance with law and on its own merits at the earliest. - Application disposed of.

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• 2014 (12) TMI 485
  Confiscation of goods - Redemption fine - Penalty u/s 112 - Held that:- Court on a perusal of the facts of the said case found that the essential ingredients of Section 112 of the Customs Act have not been specifically spelt out either under clause (a) or (b) of Section 112 of the Customs Act - show cause notice elaborately discussed the role played by the appellant. Therefore, merely because the show cause notice does not mention Section 112(b) but mentioned Section 112(a) of the Customs Act, would not vitiate the entire proceedings; more so when the ingredient found place in the show cause notice and non-mentioning of the specific clause of the Customs Act will not vitiate the details mentioned in the show cause notice in clear terms. Hence, considering the above factual position, we find no ground to entertain the Civil Miscellaneous Appeal. Accordingly, the appeal fails and same stands dismissed - Decided against assessee.

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• 2014 (12) TMI 484
  Revocation of CHA licence under Regulation 22(7) of CHALR, 2004. - On a complaint made by a person it comes to notice that appellant, appearing for Regulation 8, Examination of CHALR, 2004 is failed in SSC examination and the graduation certificate submitted by him is bogus/fake and matter was referred to CIU, it is stated that the CHA, deliberately made false statements under Section 108 of the Customs Act, 1962 the CHA squarely failed to discharge their obligation under Regulation 13(n) read with Regulation 19(8) of CHALR, 2004 and merits immediate suspension and even revocation of CHA licence - Tribunal set aside revocation order - Held that:- Tribunal has relied upon a view taken by this Court earlier [2010 (1) TMI 955 - BOMBAY HIGH COURT] and which has now been expressly overruled. Therefore, it was open for the Commissioner to have disagreed with the Enquiry Officer. All that he has to comply with are the principles of natural justice and before taking any view, he should have heard the Customs House Agent. He should have given him an opportunity to substantiate and prove his defence. It is not therefore the correct proposition of law that the Commissioner was not empowered to disagree with the Enquiry Officer. Ordinarily therefore the Tribunal’s order would be required to be set aside and the matter relegated to the Commissioner from the stage at which he received the enquiry report. The Commissioner, having disagreed with the findings and conclusions in the enquiry report, should have been permitted to issue show cause notice calling upon the respondent to show cause as to why Enquiry Officer’s report should not be rejected and the charges held not to be proved. The Commissioner could have then also called upon the respondent to furnish his explanation on the proposed punishment. Tribunal’s order is not in accordance with law laid down in the Larger Bench decision of this Court but finding that the incident is very old, no useful purpose will be served by permitting the Commissioner to reopen the enquiry and proceed from the stage noted above. Having found that the only lapse was forwarding a certificate in relation to graduation of the son of the partner of the respondent, we are of the opinion that the chapter be closed, particularly when the licence was suspended for about 20 months. The father of Mehul Boda had not assisted the son in proving and submitting an alleged bogus Certificate. The allegations are against the son, who was an employee of the respondent. The son having been disassociated completely now from the business of the respondent firm, so also the partner of the respondent giving an undertaking to this Court which is accepted in the facts and circumstances peculiar to this case, while allowing the appeal, quashing and setting aside the order of the Tribunal instead of restoring the matter back to the Commissioner, we direct as above. We therefore direct that there shall be no penalty save and except suspending of the licence which was already so suspended for 20 months, but now stands restored in the light of the order of the Tribunal. In addition, we direct that the security deposit which was furnished earlier will stand forfeited. The respondent shall furnish fresh security deposit in terms of the applicable Regulations. - Decided partly in favour of Revenue.

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• Corporate Laws

• 2014 (12) TMI 486
  Physical possession of petitioner's property "Kingfisher House" under SARFAESI Act - Property mortgaged by appellant - Jurisdiction of Court in terms of Sections 34 and 35 of the SARFAESI Act - Held that:- A plain reading of Section 34 of the SARFAESI Act, would indicate that the jurisdiction of all civil courts to entertain any suit or proceeding, in respect of any matter, which a DRT or an Appellate Tribunal is empowered to determine under the Act, is barred. And no injunction can be granted by any Court or other authority in respect of any action taken or to be taken pursuant to the aforesaid Act. The bar would apparently apply to this court as well. Section 35 of the SARFAESI Act would declare that the provisions of the Act would prevail over other laws notwithstanding anything inconsistent contained therein. Having regard to the objects of the SARFAESI Act, as indicated in the Statement of Objects and Reasons to the Act, it was found that unlike international banks, the banks and financial institutions in India did not have the power to take possession of securities and sell them, resulting in delayed recovery of loans. It was in that direction that the Central Government had constituted certain Committees to examine the reforms necessary in the banking sector and it is on the basis of reports of those Committees, inter alia, suggesting the legislation for Securitization and empowerment of banks and financial institutions to take possession of the securities and sell them without the intervention of the court, that the SARFAESI Act had come into being. Hence, any intervention by any court or authority in respect of proceedings under the said Act would defeat the object of that Act. Hence it is clear that this court would not have jurisdiction to interfere in the present circumstances of the case with the impugned action. The secured creditor who seeks to prove the whole of his debt in the course of the proceedings of winding up must before he can prove his debt relinquish his security for the benefit of the general body of the creditors. If he surrenders his security for the benefit of the general body of creditors, he may prove the whole of his debt. If the secured creditor has realized his security, he may prove for the balance due to him after deducting the net amount that has been realized. The stage for relinquishing security arises when a secured creditor seeks to prove the whole of his debt in the course of winding up. If, he elects to prove in the course of winding up the whole of the debt due and owing to him, he has to necessarily surrender his security for the benefit of the general body creditors. Therefore, in my view, it would be wholly inappropriate and inapposite to require the secured creditor at the stage when he files Company Petition for winding up to exercise the option of relinquishing his security since that stage does not arise until the debt is to be proved. Consequently, the application filed by the respondent is held to be not maintainable. The interim order granted earlier stands vacated and the application is dismissed. - Decided against applicant.

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• Service Tax

• 2014 (12) TMI 506
  Imposition of penalty - Scope of Cargo handling services - cleaning of the mining area - transportation of the gypsum from one place to railway station - activity of loading of gypsum into railway wagons/rakes through mechanical loaders - Held that:- First two services fall under different categories which were introduced subsequently and for which the appellant had started paying service tax from those dates, we find no reasons to hold that the said two services are part & parcel of the ‘cargo handling services’, which according to the Revenue falls under clause (c). - loading of the goods into racks or wagons through mechanical loaders does not fall under the category of ‘Cargo Handling Services’. For the said purpose, a reference may be made to the Rajasthan High Court in the case of S.B. Construction Co. Vs. Union of India - [2006 (8) TMI 28 - HIGH COURT OF JUDICATURE FOR RAJASTHAN (JODHPUR)]. However, as the appellant is not contesting the confirmation of demand under the said category on the ground that they have already deposited the same along with interest, we are not going into the details relatable to the said category. In any case, the issue being contentious and arguable and the demand having been raised by invoking the period of limitation, we deem it fit to set aside the penalties imposed upon the appellant. - Decided in favour of assessee.

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• 2014 (12) TMI 505
  Waiver of pre-deposit - Valuation - Transport of gas through Pipelines or conduit - Minimum Demand Charges (MDC) collected by the Applicant from their customers. - Held that:- The Revenue's contention is that this amount has been mentioned in the agreement as transmission charges, therefore, the value should be included in the gross taxable value realized towards transportation/transmission of gas. We find force in the contention of the ld.A.R. for the Revenue and on this count, the Applicant could not able to make out a prima-facie case for total waiver of predeosit. However, in relation to the applicability of service tax on marketing margin under the category of Business Auxiliary Service, we find substance in the contention of the ld.C.S. for the Applicant. We find that the applicants were purchasing and selling the gas in retail, however, while fixing the retail price, the Ministry has considered the marketing margin. Prima-facie, the transaction is that of sale and not service. Thus, on this count, the Applicant could able to make out a prima-facie case for total waiver of predeposit of dues adjudged. - Partial stay granted.

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• 2014 (12) TMI 504
  Whether the commission/discount earned by the acquiring bank from the Merchant Establishment is liable to service tax under the category of banking and financial services for the period prior to 01.05.2006 - Held that:- as the correctness of the earlier decision in ABN Amro [2011 (7) TMI 312 - CESTAT, NEW DELHI] was doubted in the case of Commissioner of Service Tax vs. HDFC Bank Ltd. (2013 (9) TMI 630 - CESTAT MUMBAI) and the matter was referred to Larger Bench on the following points of law for consideration:- Whether the introduction of the new, comprehensive definition of "credit card, debit card, charge card or other payment card service" vide section 65 (33a) read with section 65 (105)(zzzw) by the Finance Act, 2006, is substantive and seeks to levy all the transactions covered by use of Credit/Debit/Charge Card or is in continuation of the levy under Section 65 (10) or (12), as the case may be, as held in the case of ABN Amro decision in so far as credit card services are concerned? Whether the sub-clause (iii) in the definition of taxable service viz. "credit card, debit card, charge card or other payment card service" in section 65 (33a) can be said to be applicable retrospectively, i.e. from 16 July 2001 when section 65 (72) (zm) became effective? Can ‘merchants / merchant establishments' be considered as ‘customer' as envisaged in Section 65 (72)(zm) of the Finance Act, 1994 as it stood prior to 1-5-2006? Whether Merchant Establishment Discount can be said to be received "in relation to" credit card services when in fact in a particular transaction, the Acquiring bank receiving ME Discount may not have issued that particular credit card at all? (72)(zm) of the Finance Act, 1994 as it stood prior to 1-5-2006? Matter to be placed before the Hon'ble President, CESTAT for constitution of the Larger Bench.

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• 2014 (12) TMI 503
  Waiver of pre-deposit - Rule 5(1) of Service Tax Valuation Rules - Re-imbursement of expenses in the value of taxable services for the purposes of levy of service tax - Whether the appellant is required to discharge Service Tax liability on an amount collected by them from the customers as to they being actual reimbursable expenses - Held that:- valuation of the service provided by the appellant needs to be ascertained based upon the provisions of Section 66 & 67 of Finance Act, 1994 and if such taxable amount is not ascertainable, then the recourse has to be taken as per the provisions of Rule 5(1) of Service Tax Valuation Rules. In the case in hand, this is the precise issue. Hon'ble High Court of Delhi in the case of M/s Intercontinental Consultants & Technocrafts Pvt.Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] has struck down the said provision of Rule 5(1) of the Service Tax Valuation Rules which would indicate that there is no provision available with the Department as of now to re-work out or re-determine the value of the taxable service. Appellant has made out a prima facie case for waiver of the pre-deposit of the amounts involved. Accordingly, application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal. - Stay grantd.

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• 2014 (12) TMI 502
  Classification of services - cargo handling service for import of goods - transportation by barges from the mother vessel to the jetty onshore - Held that:- when the goods are being transported by the barges from the mother vessel to the jetty onshore, that activity is part of the import transaction of bringing the goods into India from a place outside India. The question of rendering any service in respect of such goods by way of cargo handling or otherwise can take place only after the customs transaction is completed. Therefore, the question of levying to service tax the transportation by barges from the mother vessel to the jetty onshore, would not arise at all since the said activity is part of the import transaction leviable to import duty and we hold accordingly. This is also evident from the fact that section 14 of the Customs Act, 1962 relating to determination of value of import goods for the purposes of levy of customs duty and the Customs Valuation Rules, 2007 (CVR in short) were amended to specifically include barge charges and handling charges in the transaction value of the imported goods vide Finance Act, 2007 to overcome the adverse decision in the case of Ispat Industries (2006 (9) TMI 181 - SUPREME COURT OF INDIA). Section 14 was substituted "to specifically provide that transaction value of imported goods shall include, in addition to the price, any amount paid or payable for costs and services, including commissions, cost of transportation to the place of importation, insurance, unloading and handling charges to the extent and in the manner specified in the rules made in this regard". If the bills raised for the services rendered indicates the amount charged for cargo handling and transportation separately on actual basis, then the tax would be leviable only on the cargo handling charges. The contracts entered into with the customers show separately the charges towards shipping charges of cargo from Mother Vessel to Dharamtar jetty. Therefore, there is no merit in the contention that transportation charges should be included in the value of taxable services in respect of cargo handling service. Transport of coastal goods and goods transported through inland water came under the purview of service tax levy vide Finance Act, 2009, with effect from 06/07/2009. Vide notification No. 30/2009-ST dated 31/08/2009 transport of coastal goods in respect of items specified in the Table annexed thereto were exempt from service tax. The appellant herein undertook coastal transportation of fertilizers, which is one of the items specified in the notification as eligible for exemption. Revenue is seeking to confirm service tax demand under the category of cargo handling service. It is a settled position in law that when a new entry is brought under service tax levy, the same activity cannot be subjected to levy under an existing entry unless the new entry is carved out of the existing entry - Therefore, there cannot be any demand for service tax on coastal transportation of goods prior to July, 2009. Further the goods transported by the appellant is also covered by Notification 30/2009-ST. In this factual and legal scenario, the demand of service tax under the category of cargo handling service has to be set aside especially when the activity is squarely covered under the entry of coastal transportation of goods and we hold accordingly. Department initially sought to recover the tax under the entry for 'Port Services' vide letter dated 22.02.2008 but changed its stance to 'Cargo Handling Service' upon being informed by the Appellant vide letter date 27.02.2008 that it did not possess the requisite port authorisation for the barging to be classified under 'Port Services'. The decision of the apex court in Uniworth Textiles Ltd. vs. CCE, Raipur [2013 (1) TMI 616 - SUPREME COURT], wherein it was held that the extended period of limitation is not invokable for mere non-payment and requires a deliberate default on the part of the assessee, is also applicable. The facts available on record clearly show that the department itself was not clear as to the classification of service rendered by the appellant and has been changing their stand. In such a scenario, the allegation of suppression with an intent to evade service tax cannot be sustained. Thus the appeal succeeds on account of time bar also apart from merits. Impugned orders classifying the services rendered by the appellant under "cargo handling service" and confirming the service tax demands accordingly are clearly unsustainable in law. Accordingly we set aside the same - Decided in favour of assessee.

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• 2014 (12) TMI 501
  Waiver of pre deposit - construction and repair activity - construction of foundation walls for sub-station or control rooms, foundation for electricity tower etc - Exempted under Notification No. 45/2010-S.T., dated 20-7-2010 - Held that:- Applicants also relied on the Notification No. 11/2010-S.T. which provides exemption to services provided for transmission of electricity only. During the arguments, the applicants disclosed that the demand for the period after 26-2-2010 comes to approximately 11 lakhs. The applicants already deposited more than 18 Lakhs. In respect of the demand on the construction of hostel for women and Synthetic Track in the University, we find that there is no dispute regarding this activity and, prima facie, the activity is not commercial. In the above facts and circumstances of the case, the amount already deposited is sufficient for hearing of the appeal. Pre-deposit of the dues is waived and recovery thereof is stayed during the pendency of the appeal. - Stay granted.

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• 2014 (12) TMI 500
  Consulting Engineer service - Whether the companies, i.e. body corporate, are covered under the definition of ‘consulting engineer’ prior to 1-5-2006 - Held that:- Trade Notice No. 53-C.E. Service Tax/97, dated 4-7-1997 clarified that in respect of consulting engineer service where the services are rendered to the prime consultant by the sub-consultant, the sub-consultant is not liable to pay service tax. In the present case, the Revenue is not disputing that the appellant provided services to M/s. NEC Engineers Pvt. Ltd. as a sub-contractor. Following decision of Turbotech Precision Engineering Pvt. Ltd. [2010 (4) TMI 344 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2014 (12) TMI 499
  Management Consultancy Services - Deputation of executives - fees received for that work were not declared in the ST-3 returns - Held that:- From the nature and description of the service rendered, it is obvious that the charges have been collected on account of deputation of staff. It is also clear that the staff so deputed has to look after various assignments given to them by the group companies and they are not doing any activity assigned by the appellant to them. Service of deputation of staff does not come under the category of ‘Management Consultancy Service’ but falls under ‘Manpower Recruitment or Supply Agency Service’ - services rendered by the appellant in the case before us does not fall under the category of ‘Management Consultancy Service’ but comes under the category of ‘Manpower Supply Agency Service’ which came under tax net effective from 16-6-2005. Since the period involved in the present case is from October, 1998 to January, 2002, much prior to the introduction of levy on ‘Manpower Supply or Recruitment Agency Service’ the demand raised in the impugned order does not sustain - Following decision of Sterlite Optical Technologies Ltd. v. Commissioner of Central Excise, Vapi [2008 (12) TMI 72 - CESTAT, AHMEDABAD] and Carborandum Universal Ltd. v. Commissioner of Central Excise, Chennai [2009 (12) TMI 184 - CESTAT, CHENNAI] - Decided in favour of assessee.

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• 2014 (12) TMI 498
  Refund of the Service Tax - Cenvat credit - Input services - Held that:- As regards the rejection of refund pertaining to Service Tax paid on group insurance policy, which also includes members of the family of the employee, the issue has already been settled in favour of the appellant in the cases of Micro Labs Ltd. [2011 (6) TMI 115 - KARNATAKA HIGH COURT] and Stanzen Toyotetsu India (P) Ltd., cited [2008 (12) TMI 118 - CESTAT BANGLORE] decided by the Hon’ble High Court of Karnataka. Therefore, the appellant is rightly entitled to take credit of Service Tax paid on insurance premium on group insurance policy as the said service is an eligible input service and we hold accordingly. As regards the Service Tax paid on car parking rentals, the car parking is part of the business premises of the appellant and is a business expenditure. Therefore, it is an eligible input service as defined in Rule 2(l) of the Cenvat Credit Rules, 2004. The Hon’ble High Court of Bombay in the case of Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] held that any input service which has a nexus with the business of manufacture or relating to business would get covered under the term ‘input service’ under Rule 2(l) of the Cenvat Credit Rules and accordingly Cenvat credit on such services would be available. In view of the above we are of the considered view that service tax paid on car parking rentals is an eligible input service under Rule 2(l) of the Cenvat Credit Rules and consequently the appellant would be eligible for refund of the same under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 5/2006-S.T., dated 14-3-2006. As regards the credit relating to services for which the input invoices were not produced, the appellant is directed to submit the same before the adjudicating authority to consider their eligibility to the credit and the consequential refund in accordance with law - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 495
  Waiver of pre deposit - Commercial use or exploitation of any event service - Conduct of cricket matches - Held that:- In any case it is not the appellant who is exploiting the IPL for commercial use. This is done by BCCI only. Appellant has a prima facie case in respect of this demand. appellants have either paid the entire amount due in respect of various services or have a prima facie case on merit in respect of others, In view of the above, we consider that the appellants have made out a case for waiver of pre-deposit and stay against recovery during the pendency of appeal - Stay granted.

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• 2014 (12) TMI 494
  Business Auxiliary Service - Penalty u/s 78 - Held that:- The appellant undertake the joining of sections of rails at site by thermite welding process. The welding of section of rails which are of length of 100 Mtrs is done at site as result of which there are lesser number of gaps at every 2Km instead of at every 100 Mtrs resulting in smooth movement of train on railway tracks. In fact, the process undertaken by the Appellant is part of the process of laying down of tracks and make them fit for traffic movement as before undertaking the thermite welding process, the rails have to be precisely aligned. In our view, therefore, the activity of the appellant does not result in any deliverable goods to the railway and it cannot be said to be the production or processing of goods not amounting to manufacture. The impugned order, therefore, is not sustainable - Decided in favour of assessee.

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• Central Excise

• 2014 (12) TMI 497
  Import of batteries to be used for manufacture of mobile handsets and similar phones - Availment of concessional rate of duty under Notification No. 21/2005-Cus dated 01.3.2005 superseded by Notification No. 23/2010-Cus dated 27.2.2010 - Held that:- There is no allegation that batteries are not used in the mobile handsets and phones manufactured and sold by them; there is no allegation that batteries are diverted; there is no allegation that batteries were not accounted for properly. The only allegation is that the batteries cannot be considered as part of mobile handsets and phones. In this regard, we find ourselves in agreement with the first submission that whether batteries can be considered as part or not is a question that would be decided by the Customs assessing authority and jurisdictional Central Excise officers do not have jurisdiction on it, prima facie, is correct. Further, we also find ourselves in agreement that it cannot be said that the appellants have not used the batteries for the purpose on which they were imported. batteries were received in an address different from the one indicated in the Bill of Entry - there is no case against the assessee at all - Decided in favour of assessee.

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• 2014 (12) TMI 496
  Waiver of pre-deposit of duty - Cenvat credit - allegation of transfer of credit to sister unit through overvaluation of goods - Held that:- Unit-II has paid the excess duty of 13,42,840/- over and above the CAS-4, and credit was availed by Unit-I. In our considered view, prima facie, the Cenvat credit cannot be denied to the Unit-I recipient of input. But, we are not impressed with the submission of the learned Counsel that it is a case of revenue neutrality and, therefore, demand is not sustainable. It is a question of fact required to be examined at length at the time of appeal hearing. The submission of the learned Counsel, the entire demand is barred by limitation, would be examined at the time of appeal hearing - Partial stay granted.

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• 2014 (12) TMI 493
  Waiver of pre deposit - Manufacture of Scented Supari and cleared the same on payment of duty as per Sec. 4A of the Central Excise Act 1944 - Held that:- As per the facts available on record with effect from 1/7/2012 only Scented Supari was being manufactured by the appellant and machines were not used for manufacture Gutkha in the factory. The required sealing of the remaining machines was done under the supervision of the Departmental Officers. Therefore, prima-facie, appellant has made out a case for complete waiver for the demands for the period from 1/7/2012. However, for the month of June 2012 the FFS pouch making machines were being operated in the factory for packing both Gutkha and Scented Supari. Rule 6(3) of the PMPM Rules only talks of determination of annual capacity of production of the operating packing machines and the word used in this Rule does not read as ‘operating packing machines packing notified goods.’ Prima-facie, appellant has not made out a case of complete waiver of demand for the period June 2012 - Partial stay granted.

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• 2014 (12) TMI 492
  Denial of refund claim - Clearance to 100% EOU - Deemed export or Physical - Held that:- refund of CENVAT credit availed on inputs used in the manufacture of goods cleared by DTA units to 100% EOUs would be available and it can not be denied on the ground that it was a case of deemed export - Following decision of CCE & C Vs NBM Industries [2011 (9) TMI 360 - GUJARAT HIGH COURT] and CCE Vs Shilpa Copperwire Industries [2010 (2) TMI 711 - GUJARAT HIGH COURT] - Stay of operation of refund order denied.

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• 2014 (12) TMI 491
  Valuation of goods - Determination of assessable value - cost of insurance incurred by the assessee - Held that:- There is nothing on record adduced by the Revenue to show that the place of removal was not the factory. On the other hand the lorry receipts under which the goods were consigned indicate that the consignee is the buyer and the freight is “to pay basis”. Therefore, we are of the view that the conclusion draw by the lower appellate authority cannot be faulted. - Decided against Revenue.

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• 2014 (12) TMI 490
  Condonation of delay - Absence of dealing officer - Held that:- Delay attributable to the absence of dealing officer of the appellant's company due to his ill health, which is evident from the leave application available in the records; and that immediately on resuming to his duties, necessary steps were taken to file the appeal before the first appellate authority. The marginal delay in filing the appeal should not be held against the substantive right of the appellant to file the appeal and redress his grievance in the appellate forum. Since the present appeal has been filed within the time limit of further 30 days, the Commissioner (Appeals) should have condoned the delay in filing the appeal and should have disposed the appeal on merits, which he is empowered under the statute to do so - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 489
  Availment of ineligible CENVAT Credit - Withdrawal of permission to make fortnightly payment of duty - Duty paid through CENVAT Credit account - After duty paid through PLA account suo moto credit taken - Held that:- Default made by the respondent has been rectified by making the payment through PLA along with interest. In these circumstances, the respondents are entitled for Cenvat Credit of duty paid through Cenvat credit account. Therefore, the ld. Commissioner (Appeals) has rightly dropped the demand of duty for taking suomotu credit. Further, as for the act of default, the respondent has already been penalized under Section 173Q of Central Excise Rules, 1944, therefore no further penalty is warranted. In these circumstances, I do not find any infirmity with the impugned order, the same is upheld. - Decided against Revenue.

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