TMI Tax Updates - e-Newsletter
December 16, 2013

Case Laws in this Newsletter:

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

Articles

1. REOPENING OF ACCOUNTS & VOLUNTARY REVISION OF FINANCIAL STATEMENTS / BOARD’S REPORT

   By: dhanapal sreepathi

2. Information about transactions can be called by general notices – says the Supreme Court.

   By: DEVKUMAR KOTHARI

News

1. Auction for Sale (re-issue) of Government Stocks

2. Three Proposals of Different Ministries Approved in-Principle by the Ministry of Finance to Utilise the Resources in the Nirbhaya Fund to Enhance the Safety and Security of Women

3. RBI Reference Rate for US $ and Euro

4. Index Numbers of Wholesale Price in India (Base: 2004-05=100) Review for the month of November, 2013

Circulars / Instructions / Orders

Income Tax

1. 402/92/2006-MC - dated 13-12-2013

PRESS RELEASE

2. F. NO. 385/8/2013-IT(B) - dated 13-12-2013

EXTENSION OF LAST DATE OF PAYMENT OF DECEMBER QUARTER INSTALMENT OF ADVANCE TAX FOR FINANCIAL YEAR 2013-14 FROM 15-12-2013 TO 17-12-2013

3. F.NO.500/9/2003-SO/FT&TR-2(1) - dated 13-12-2013

CENTRAL BOARD OF DIRECT TAXES (CBDT) - REVISION OF WORK DISTRIBUTION AMONG DIRECTOR (FT&TR-II), DIRECTOR (FT&TR-IV) AND DIRECTOR (FT & TR-V)

FEMA

4. 80 - dated 16-12-2013

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

DGFT

5. 43 (RE: 2013)/2009-2014 - dated 16-12-2013

Notification of SIONs.

Companies Law

6. 19/2013 - dated 10-12-2013

Clarification with regard to applicability of section 182(3) of the Companies Act, 2013.

Highlights / Catch Notes

Income Tax

• Interest u/ss 234A, 234B, 234C Applies Only to Actual Income, Not Notional or Projected Earnings.

  Case-Laws - HC : Whether interest u/s 234A, 234B, and 234C be charged on notional income - No interest can be charged when there is no real income - The interest will have to be charged in the year when income was earned - HC
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• Directors Not Liable u/s 179 If Tax Recovery Failure Isn't Due to Gross Neglect or Misfeasance.

  Case-Laws - HC : Section 179 of the Act cannot be invoked if such a Director proves that non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part - HC
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• Assessee Entitled to Set-Off by Determining Peak Credit Despite Disbelief in Genuineness of Individuals' Funds.

  Case-Laws - HC : Even then, if the genuineness of all the person is disbelieved and all the credits appearing in the different account are held to be the assessee's own moneys, the assessee will be entitled to set off and a determination of the peak credit after arranging all the credits in the chronological order - HC
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• Employee Contributions to Approved Funds Exempt from Tax Under Income Tax Act Section 10(23AAA.

  Case-Laws - HC : Exemption u/s 10(23AAA) - Once the fund is approved by the Commissioner in accordance with the Rules made in this behalf, the contribution made by the employees to the said fund do not form part of the total income and consequently, it does not attract tax - HC
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• Land and Building Valuation u/s 50C: Consider Sub Registration Authority Figures or Departmental Valuation Officer Report for Tax Assessment.

  Case-Laws - HC : Valuation u/s 50C - Land and building has to be valued combining together and taking into consideration the valuation adopted by the Sub Registration Authority or by the report of the Departmental Valuation Officer - HC
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• Overseas Branch Expenses and Deductions: Section 44C and Section 36(1)(viia) Interplay in Income Tax Act.

  Case-Laws - AT : Expenses incurred by overseas branch – Deduction u/s. 44C has to be given after taking into account deduction u/s. 36(1)(viia) and deduction u/s.36(1)(viia) has to be given after taking into account deduction u/s. 44C - AT
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• Dissolved Company Assessment Invalid u/s 560 of Companies Act, 1956, Despite Participation in Proceedings.

  Case-Laws - AT : Assessment on a company which has been dissolved and struck off the register of companies u/s 560 of the Companies Act,1956, is invalid, even though the company participated in assessment proceedings - AT
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• Appellant's Business Expansion Expenses Approved as Deductible u/s 37 of the Income Tax Act.

  Case-Laws - AT : Project Development Expenditure - The expenditure under consideration incurred by the appellant for expansion of the existing line of business or for maintenance and operation of the already established stores is an allowable deduction u/s 37 - AT
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• Cutting and Polishing Diamonds Not Considered Manufacturing for Additional Depreciation Under Tax Laws.

  Case-Laws - AT : Additional depreciation - The cut and polished diamond could not be treated a new article or thing and that cutting and polishing of diamonds cannot be held manufacturing or production - AT
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• Court Rules Jewelry Sale for Charity Not Assessee's Income; Unexplained Cash Credit Cleared.

  Case-Laws - AT : Unexplained cash credit - sale of gold and jewellery belong to Mother - The assessee being only a facilitator for doing charity on behalf of her late mother, the deposits made in one bank account on account of sale of jewellery cannot be assessed as income of the assessee - AT
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• Finance Act 2006 amends Section 142(1) to remove time limits on issuing notices, effective retroactively from April 1990.

  Case-Laws - AT : As per the proviso inserted to section 142(1) of the Act by Finance Act 2006 with retrospective effect from 1-4-1990 has clearly done away with any limitation with regard to the issuance of notice u/s 142(1) - AT
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Customs

• Battery Imports for Cell Phones Classified as Accessories, Eligible for Customs Benefits Under Relevant Notification.

  Case-Laws - AT : Import of battery for cellular phone - the battery has to be considered as accessory, if not part/component, of cellular phone and consequently, the benefit of the Notification is admissible - AT
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Service Tax

• CENVAT credit denial overturned due to procedural lapse; Advice of Transfer Debit use not valid grounds for denial.

  Case-Laws - AT : Denying of CENVAT Credit - Availment of credit on the basis of Advice of Transfer Debit - procedural lapse cannot be considered as a reason to deny Cenvat credit involved - AT
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• CENVAT Credit Denial Challenged for Cafeteria Rental; Credit Allowed Pre-Registration Period as Input Service.

  Case-Laws - AT : Denial of CENVAT Credit - No reason to hold that renting of cafeteria area cannot form input service when service of cafeteria itself is considered as input service - credit for the period prior to registration also allowed - AT
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• Meal Vouchers Not Payment Systems, Service Tax Upheld for Promoting Goods and Services for Affiliates.

  Case-Laws - AT : Meal voucher cannot be compared with credit/debit cards and cannot be called a payment system which is true for the debit/credit card - meal vouchers of the assessee definitely helps in promoting sale of goods and services of assesses affiliates - levy of service tax upheld - AT
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• Two-Year Management Course Aids Employment but Not Classified as Vocational for Service Tax Purposes.

  Case-Laws - AT : Commercial Training & Coaching - No doubt the two years course will help candidates in understanding various facets of management and get employment. It is a professional management course. This cannot be considered as Vocational Course - AT
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• Appellant Not Liable for Service Tax: Job Work, Not Manpower Services, Confirms Tribunal Decision.

  Case-Laws - AT : Manufacturing activity or Job work - Whether appellant shall be liable to Service Tax as manpower provider - appellant had not provided service of manpower but had acted as job worker - AT
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• Court Grants Stay on Classifying NHAI Services as Business Auxiliary; Classification Deemed Inconceivable by Court.

  Case-Laws - AT : Stay application - Business auxiliary service - providing business auxiliary services by respondents to such NHAI is inconceivable - Stay granted. - AT
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Central Excise

• Eligibility for Notification No. 63/95-CE: Job Workers and Vendors Supplying to Defence Not Entitled to Exemption Benefits.

  Case-Laws - AT : Eligibility for Notification No.63/95-CE – extension of benefit of the Notification to a job worker and vendor supplying input to the manufacturer of final goods for ultimate supply to Ministry of Defence would apparently amount to extending the scope of exemption to such job worker and vendor which is not permissible - AT
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• Three-Wheeler Tax Assessment Excludes Tool Kits and Jack Assemblies from Assessable Value Under Central Excise Rules.

  Case-Laws - AT : Inclusion of the value of accessories in the value of three wheelers supplied –the value of tool kits and jack assembly are not includable in the assessable value of the motor vehicle - AT
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• Section 11AC Penalties: Presumptions Can't Replace Concrete Evidence in Central Excise Act Case.

  Case-Laws - AT : Penalty u/s 11AC - any presumption, howsoever strong, cannot take the place of an evidence - The ingredients as contained in Section 11AC of Central Excise Act, 1944 are not applicable to the facts and circumstances of the present case - AT
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• Company Denied Refund for Education Cess Under Notification 56/2002 Due to Payment via Personal Ledger Account.

  Case-Laws - AT : Exemption under Notification 56/2002 - Area based exemption - refund of education cess and higher education cess paid through PLA denied - AT
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VAT

• Trademark Use Transfer Subject to Sales Tax as Intangible Goods Under Legal Review.

  Case-Laws - HC : Liability to sales tax - Transfer of right - trade mark - Right given by the petitioner is undoubtedly a transfer of right to use incorporeal or intangible goods and therefore, exigible to sales-tax - HC
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Case Laws:

• Income Tax

• 2013 (12) TMI 729
  Unaccounted investment in property - Held that:- Following Sargam Cinema vs. CIT [2009 (10) TMI 569 - Supreme Court of India] - Where the books of accounts have not been rejected by the AO, reference to DVO is not justified - The Tribunal has observed in its impugned order that the AO has not pointed out any material defect/ discrepancy in the books of account maintained by the assessee - The books of account were not rejected before referring the matter to the DVO - Decided against Revenue.

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• 2013 (12) TMI 728
  Whether interest u/s 234A, 234B, and 234C be charged on notional income - Held that:- The assessee has received compensation and interest thereupon only after the judgment of the Hon'ble Supreme Court in the year 2001 - Only due to judicial pronouncement, the assessee has become entitled to receive the additional compensation and interest thereupon - The interest can be charged only on the income received and not from the date on which it was entitled to receive interest - No interest can be charged on notional interest - Following CIT Vs. ICD, Syndicate [2006 (3) TMI 90 - KARNATAKA High Court] - No interest can be charged when there is no real income - The interest will have to be charged in the year when income was earned - It cannot be charged retrospectively when there was no receipt in the hands of assessee - Decided in favour of assessee.

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• 2013 (12) TMI 727
  Disallowance of expenses on advertisement, publicity and sales promotion, vehicle upkeep expenses, payments made to hotels u/s 37 - Held that:- On analysis of provisions of sub - sections to section 37 - The issue raised by the assessee regarding aggregation of items specified in sub-section (3B) is a debatable issue - The AO could not have filed an application under Section 154 to rectify the mistake as it is not a mistake apparent from record - The CIT (A) and Tribunal have erred in interpreting the deduction under Section 37 (3A)/(3B) by reading the word 'or' after each of the clauses (i), (ii) and (iii) of sub-section (3B). The word 'or' has to be seen in the context of the deduction for expenses on any one or more of the items. Such expenses have to be aggregated for the purposes of allowing deduction - If the words of the Statute are in themselves precise and unambiguous, then no more can be necessary than to expound these words in their natural and ordinary sense. The words thesemselves alone do, in such case, best declare the intention of the law givers - Decided in favour of Revenue.

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• 2013 (12) TMI 726
  Whether tax dues of company be recovered from its directors - Held that:- Tax dues of a private company can be recovered from its Directors in the circumstances specified in Section 179 of the Act - Section 179 of the Act cannot be invoked if such a Director proves that non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on the part of the petitioner in relation to the affairs of the company - The petitioner has thus proved that non recovery of the tax due against the company cannot be attributed to any gross neglect, misfeasance or breach of duty on her part in relation to the affairs of the company - Neither the ACIT nor the CIT have referred to any material nor they have referred to any evidence to indicate any gross neglect, misfeasance or breach of duty on the part of the petitioner in relation to the affairs of the company - Decided in favour of petitioner.

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• 2013 (12) TMI 725
  Unaccounted investment and undisclosed income - Held that:- The Tribunal was justified in restoring the matter to the AO with direction to recompute the peak - The AO was wrong in his method of peak by pick and choose method - As per he peak theory defined in the Sampath Iyengar's Law of Income-tax - Where the credits appear not in the same account but in the accounts of different persons. Even then, if the genuineness of all the person is disbelieved and all the credits appearing in the different account are held to be the assessee's own moneys, the assessee will be entitled to set off and a determination of the peak credit after arranging all the credits in the chronological order - Decided against Revenue.

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• 2013 (12) TMI 724
  Change in accounting period for maintaining uniformity - Held that:- The period of three months from March to June, was shown by the assessee and proper tax has been paid - This is merely an adjustment of the accounting system for maintaining uniformity in the accounting system permissible as per the guidelines issued by the Institute of Chartered Accountant - After examining the entire material, the Tribunal observed that there is no escapement of tax - Decided in favour of assessee.

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• 2013 (12) TMI 723
  Undisclosed investment - purchase of shares on credit from different 207 persons - Held that:- The details and other evidences in the nature of cheques, their dates, amounts, particulars of banks and addresses of the persons who are stated to have sold the shares, which have also been transferred by the Company in the name of the assessee - The burden which initially lay upon the assessee stood effectively discharged - No addition ought to have been made - Decided against Revenue.

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• 2013 (12) TMI 722
  Exemption u/s 10(23AAA) - Held that:- Both the financial institutions namely Veerashiva Sahakara Sangha and Karnataka Veerashaiva Vidyabhivrudhi Samsthe do not fall within Section 11(5) of the Act as they are not approved - Once the fund is approved by the Commissioner in accordance with the Rules made in this behalf, the contribution made by the employees to the said fund do not form part of the total income and consequently, it does not attract tax - Decided in favour of assessee.

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• 2013 (12) TMI 721
  Whether land and building are to be treated as separate assets for the purpose of section 50C - Held that:- The interpretation of Section 50C of the Act is ascertained by the Court - On analysis of sub-section (1) it appear that there must be a transfer of a capital asset, which means, the land or building or both - The consideration received or accrued on the transfer is less than the value adopted or assessed or assessable by an authority of the State Government on which the stamp duty is paid - If the valuation adopted by the Stamp Valuation Authority is more than the consideration received, then such value has to be treated as the full value of the consideration received or accrued for the purpose of Section 48 - Land and building has to be valued combining together and taking into consideration the valuation adopted by the Sub Registration Authority or by the report of the Departmental Valuation Officer - Decided against assessee.

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• 2013 (12) TMI 720
  Non-allowance of the credit of Securities Transaction Tax (STT) u/s. 88E in view of the assessee's tax liability for the current year being determined u/s 115 JB - MAT - CIT(A) allowed the assessee's claim - Held that:- No infirmity in the impugned order; the same being rather the consistent view of the Mumbai Benches of the Tribunal. The order by the Tribunal in the case of Horizon Capital Ltd. (supra) has been since confirmed by the high court in CIT v. Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT]. We, may, however, clarify that the rebate u/s. 88E is only in respect of the tax chargeable under the head profit and gains of business or profession, and not any other. As such, only as much of tax under the MAT provisions which relates to the income, though based on book profit, attributable to the profits of the assessee's business arising from taxable securities transactions, would stand to be allowed, in view of the qualifying condition of section 88E. Disallowance u/s. 14A read with rule 8D - assessee contests the same on the basis that the investment under reference, i.e., on which the dividend income stands received by it, being shares in different companies, are held by it as stock-in-trade, and not as investment, so that rule 8D(2)(ii) is not applicable - Held that:- Rule 8D shall apply qua the shares held as stock-in-trade. See ITO vs Daga Capital Management Pvt. Ltd. (2008 (10) TMI 383 - ITAT MUMBAI). The language of rule 8D(2)(ii) itself provides the mandate inasmuch as it prescribes or authorizes a disallowance only qua investment income from which is not taxable, so that in limiting the amount worked out with reference to the total investment; the same also yielding taxable income, we have only sought to operationalize the said rule. It would also be appreciated that not doing so would also violate the principle of only net income (from any source) being subject to tax inasmuch as a disallowance for the total interest as per rule 8D(2)(ii) would in effect bring the share trading income to tax without deduction of the interest expenditure allocable or attributable thereto The assessee, in the instant case, has suo motu disallowed Rs. 1,22,295/-. Its argument for non-application of s.l4A(l) is thus even otherwise infirm. The disallowance by the Revenue, per rule 8D, works to Rs. 12,23,627/-, a part of which stands to be deleted and the balance confirmed, as indicated above. Under the circumstances, the assessee gets part relief. - Decided partly in favour of assessee.

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• 2013 (12) TMI 719
  Addition u/s 68 - Held that:- The amounts represented by such FDRs standing in different names in the account books of the Pat Sanstha - The FDRs being question did not belong to the AOP - The amounts treated as unexplained investments of the AOP for assessment years 1999-2000 and 2000-01 have been assessed in the hands of Agresan Sahakari Pat Sanstha Ltd. for the very same assessment years as unexplained cash credits u/s 68 - The impugned additions are unsustainable as it would amount to taxing of the same income twice i.e. in separate hands for the same assessment years - Decided against Revenue.

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• 2013 (12) TMI 718
  Expenses incurred by overseas branch – Held that:- Following assessee's own case for A.Y 1991-92 - If the expenses are shared/ allocated/ apportioned/ non-exclusive head office expenses then they will fall within the limits under section 44C of the Income Tax Act, 1961 (the Act) - If expenses are exclusively incurred by the head office for the Indian Branch then they shall be considered under general provisions of the Income Tax Act,1961- Expenses incurred by the bank overseas branches directly pertained to the operations and business of the Indian branches - Decided in favour of assessee. Interest paid to set off against interest received – Held that:- Following Aruna Mills Ltd. vs. CIT [1956 (8) TMI 45 - BOMBAY HIGH COURT] - There was no nexus between the receipt of interest by the assessee company and the payment of interest under the provisions relating to payment of advance tax - The first case the assessee was being paid interest for making the advance payment and in the second case he is made to pay interest for failure to pay the advance payment - The provision for payment of interest in the Act is not as compensation for use of the money belonging to the creditor which a debtor has, but the payment is for an entirely different consideration - There was a default in complying with the statutory obligation to make advance payment of tax - The interest cannot be strictly called a penalty, it was in the nature of penalty because it was for a default - On this basis also the rule of netting was not accepted – Decided against assessee. Expenses incurred – Held that:- Indian law limits certain deductions of a permanent establishment with respect to head office expenditures. The deduction of amounts characterized as executive and general administration expenditures (not interest) is capped at five percent of the adjusted total income of the permanent establishment - The restrictions for allowing expenses incurred by the PE being head office expenses which are covered by Sec.44C of the Act (domestic law) as well as other expenses incurred in India are within the fold of Article 7(3) of the DTAA - As far as expenses incurred in India attributable to the business carried on in India are concerned, they have to be allowed subject to the limitations provided in the Act – Decided in favour of assessee. Expense on entertainment of staff members – Held that:- The Tribunal estimated 10% of the entertainment expenses to be attributed to the staff members entertaining the clients and accordingly allowable to that extent – Partly allowed in favour of assessee. Expenses on rent, repairs and depreciation – Held that:- Following Britannia Industries Ltd. [2005 (10) TMI 30 - SUPREME Court] - The claim of expenditure on rent, repair/depreciation on Guest House is not allowable - Decided against assessee. Amount paid to RBI – Shortfall in CRR and SLR – Held that:- Following Assessee's own case for the assessment year 1992-93 and DCIT V/s. Dhanalakshmi Bank Ltd [2000 (8) TMI 246 - ITAT COCHIN] - The interest paid to the RBI was not penalty and accordingly the interest expenditure is allowable - Decided in favour of assessee. Club membership fee – Held that:- Following assessee's own case in A.Y 1990-91 and Otis Elevator Co. (India) Ltd. vs. CIT [1991 (4) TMI 53 - BOMBAY High Court] - The assessee is entitled to deduction on account of annual subscription paid to the clubs, in respect of its employees - Decided in favour of assessee. Interest paid to overseas branch – Held that:- Following Sumitomo Mitsui Banking Corpn. vs. DDIT(IT) [2013 (1) TMI 509 - ITAT MUMBAI] - When the transaction between the overseas head office of the assessee and its unit in India was a transaction as between principal and principal - Any income cannot arose in favour of the assessee either directly or indirectly since the gain in overseas office was offset by the loss incurred in the Indian branch - There cannot be a valid transaction of sale between the branch office of the assessee in India and its head office - It is a elementary proposition that no person can enter into a contract with oneself and debiting or crediting one's account cannot alter this legal position. The interest paid to the overseas branch head office is an allowable deduction by virtue of provisions of DTAA and at the same time the said interest paid by the India PE is not chargeable to tax under the provisions of IT Act being income to self - Decided in favour of assessee. Expenses incurred for earning the income exempt u/s 10(15)(iv)(h) – Held that:- The expenditure incurred for earning the non-taxable income has to be disallowed - There may be direct expenditure incurred for earning exempt income but expenditure incurred for the composite/indivisible activities in which taxable and non-taxable income is received, then the principle of apportionment will apply - The AO has not brought out any direct expenditure incurred for earning the exempt income in question and disallowed the proportionate expenses by considering total expenditure incurred by the assessee and booked to the P&L Account - When there is no direct expenditure incurred for earning the exempt income then the apportionment of the expenditure is only for such expenditure which has been incurred for composite/indivisible activities resulting in taxable and non taxable income - The expenditure which is common for the activities for taxable and non-taxable income, the disallowance has to be considered - Section 14A was not in existence when the assessment in the said case was completed by the AO – As per the provision inserted by the Finance Act, 2001 retrospectively w.e.f 01/04/1962 - The disallowance of the proportionate expenditure incurred for composite or indivisible activity in which taxable and non-taxable income is received has to be examined in the light of the provisions of Section 14A - AO has not examined the issue by considering the expenditure which is incurred for the composite/indivisible activities in which taxable/non-taxable income is received – The issue was set aside for fresh consideration. Deduction u/s.36(1)(viia) and section 44C – Held that:- The adjusted total income for the purpose of Section 44C means total income computed in accordance with the provisions of the Act and interalia after giving effect to the deduction u/s. 36(1)(viia) - The conjoined reading of section 36(1)(viia) as well as section 44C makes shows that for computation of deduction u/s. 36(1)(viia) the deduction u/s. 44C has to be given effect and similarly for deduction u/s. 44C, deduction u/s. 36(1)(viia) has to be given effect - The deductions have to be given after calculating the income as per the provisions of the Act - Deduction u/s. 44C has to be given after taking into account deduction u/s. 36(1)(viia) and deduction u/s.36(1)(viia) has to be given after taking into account deduction u/s. 44C – The view of AO is accepted – Decided in favour of Revenue. Head office expenditure – Held that:- The assessee has claimed 5% of the adjusted total income as head office expenditure under section 44C - The assessee has filed a certificate from the head office auditors confirming head office administrative expenses - The assessee has debited the head office administrative expenses in the P&L Account at Rs.15,10,18,863/-, the AO restricted the deduction only to the extent of the amount which was debited to the P&L Account - The AO has not examined the certificate from the head office auditors regarding the actual expenditure incurred in respect of head office administrative expenses - The CIT(A) has also not examined this issue by taking into account the certificate from the head office showing actual expenses incurred – The issue was restored for fresh adjudication.

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• 2013 (12) TMI 717
  Assessment on amalgamated company - Validity - Held that:- Following IMPSAT (Pvt.) Ltd. vs ITO ITAT, Delhi 'A' Bench [2004 (7) TMI 299 - ITAT DELHI-A] - Assessment on a company which has been dissolved and struck off the register of companies u/s 560 of the Companies Act,1956, is invalid, even though the company participated in assessment proceedings- There is no provision in the IT Act to make assessment on a dissolved company-it is not a case of discontinuance of business so as to attract section 176 nor does Section 159 cure the lacuna - Once a company is dissolved it become a non existent party and therefore no action can be brought in its name - There is no provision in Income Tax Act, 1961 to make an assessment thereon - Decided against Revenue.

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• 2013 (12) TMI 716
  Project Development Expenditure - Capital or Revenue - Held that:- The assessee-company is expanding its already started line of business by expanding its scale of operation - Following M/s Reliance Footprint Ltd V/s ACIT [2013 (12) TMI 161 - ITAT MUMBAI] - The question that whether the Assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the Assessee might take of his own rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter - The said expenditure were incurred towards salary to the employees, travelling and conveyance, telephone expenses, professional fees paid, audit fee and other miscellaneous expenses towards registration as stamp duty charges, license application fees, repair and maintenance etc - Such expenses cannot be said to have generated any capital advantage to the assessee and the same is in the nature of revenue expenditure irrespective of the fact that the assessee has given dual status of such expenditure in its books of account and computation of income claiming it as revenue expenditure - Following Asahi India Safety Glass Limited [2011 (11) TMI 2 - DELHI HIGH COURT] - The expenditure which is incurred, which enables the profit making structure to work more efficiently leaving the source of the profit making structure untouched is an expense in the nature of revenue expenditure - The expenditure under consideration incurred by the appellant for expansion of the existing line of business or for maintenance and operation of the already established stores is an allowable deduction under section 37 - Decided against Revenue.

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• 2013 (12) TMI 715
  Cutting and polishing of rough diamonds - Manufature or not - Additional depreciation - Held that:- Raw diamonds and cut and polished diamonds were different and distinct marketable commodities having different uses - Therefore, a company engaged in cutting and polishing raw diamonds for the purpose of export was engaged in the processing of goods to convert them into marketable form - The raw and uncut diamond is subjected to a process of cutting and polishing which yields the polished diamond, but the polished diamond is a new article or thing which is the result of manufacture or production - The cut and polished diamond could not be treated a new article or thing and that cutting and polishing of diamonds cannot be held manufacturing or production - Cutting and polishing of rough diamond in to polished diamond is not manufacturing or producing of a new article or thing - Decided against assessee.

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• 2013 (12) TMI 714
  Unexplained cash credit - Held that:- The assessee has only source of income i.e. income from other sources, interest on loans and interest on bank - The assessee has only bank account maintained with Allahabad Bank - She has opened one bank account with Standard Chartered Bank, Gariahat Branch, Kolkata just to deposit the sale proceeds of jewellery, which was handed over by her mother for the purpose of charity - The assessee produced the letter of Smt. Rampiyari Devi which clearly states that she is having gold and diamond jewellery, which was received at the time of her marriage, and expressing her will for charity out of the sale proceeds of the above jewellery through her daughter - Even the sale proceeds were deposited in the Standard Chartered Bank Account only for the purpose of depositing sale proceeds of jewellery, for which the assessee was only custodian and this account was opened just as a facilitator - Immediately after sale of jewellery the amount was deposited in this bank and was issued cheque in the name of Ramkrishna Mission for the purpose of charity - By producing the evidence before the lower authorities the assessee has discharged the initial burden which lies upon him. Now the burden shifts on the department as to why the assessee's case cannot be accepted and why it must be held the entry, thought purporting to be in the name of a third party, still represent the income of the assessee from an undisclosed income - The AO or the CIT(A) has neither examined these evidences nor put to cross examination like that of sale bill, the valuation report or the ownership letter written by assessee's mother - The assessee has produced all the evidences and which have arbitrarily been rejected by the lower authorities - Assessee was never the owner of gold and diamond jewellery instead her mother has handed over the possession of jewellery for doing charity out of the sale proceeds of the same and assessee acted accordingly - Decided in favour of assessee.

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• 2013 (12) TMI 713
  Penalty u/s 271(1)(c) - Under valuation of WIP and deduction u/s 80HHC - Held that:- Following assessee's own case for earlier years - The principle in both years remains same - The penalty for concealment of income cannot be made where there is difference in calculation of an exemption as claimed by assessee and as allowed by Assessing Officer due to difference in opinion in respect of various heads of expenses and income relating to export or non-export income - Decided against Revenue. Penalty for depreciation on film city - Held that:- The assessee relying upon the decision in A. V. Mevyyappa Chettiar claimed depreciation @ 25% on studio building - Up to the date of filing of return that is on 31.12.1999 the decision of the case remained in favour of assessee - Later on the Hon’ble Supreme Court reversed the decision - The depreciation claimed under bonafide belief does not amounts to furnishing of inaccurate particulars of income - Decided against Revenue. Carry forward of loss of amalgamating company - Held that:- At the time of filing of return, the assessee was under a bonafide belief that it will continue to carry on the business of amalgamating company - The addition was debatable as is apparent from the order of Ld. CIT (A) in respect of quantum additions wherein he had reduced the disallowance from Rs. 3 lacs to Rs. 2.50 lacs - Decided against Revenue.

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• 2013 (12) TMI 712
  Disallowance u/s 40A(3) – Held that:- The cash payment as per the seized documents were made by the Assessee outside the books of accounts - The onus is on the Assessee to prove the source of these expenses - The provisions of Sec. 40A(3) will not be applicable – The sources of these expenses were not explained by the assessee - The AO verified and came to the conclusion that the actual cash payment made by the Assessee is lower than the amount disallowed by the CIT(A) - Partly allowed in favour of assessee. Withdrawal from bank account – Held that:- The Assessee has assisted the transporters to open these bank accounts as the transporters are located at faraway places so that the payment can be made to these transporters through cheque and the transporters or his truck driver may withdraw the amount as and when it is needed - The AO has nowhere held that the transport charges paid by the Assessee are bogus - The AO presumed that these bank accounts belonged to the Assessee - The amount withdrawn by a person from his bank account cannot be regarded to be his income - Under Sec. 4 of the Income Tax Act the income tax is chargeable only on the real income - The amount withdrawn from the bank account represents only the current asset of the Assessee – Decided in favour of assessee. Undisclosed cash payment – Held that:- The Assessee has disclosed only a sum of Rs.6,31,00,000/- during the year as undisclosed income of the Assessee - The Assessee had made cash payment during the year amounting to Rs. 8,50,39,441 - Until and unless the income is earned by the Assessee, the Assessee cannot make the payment - Income is earned by the Assessee prior to making of the cash payment - The Assessee has not utilized the income for making the cash payments - The income declared by the Assessee in the subsequent year cannot cover the cash payments made by the Assessee during the year - Therefore, out of the cash payments of Rs. 8,50,39,441/-, we allow telescoping only to the extent of Rs. 6,31,00,000/- - Partly allowed in favour of assessee. Unaccounted sales – Held that:- The Assessee was a conduit for carrying on the business of Shri Anil H. Lad in respect of iron ore illegally extracted - Once the revenue has found the statement of the Assessee to be correct that the Assessee was engaged in unaccounted sales to accommodate the illegal mining carried out by one (Shri Anil H. Lad), there cannot be any falsity in the statement of the Assessee that the Assessee was earning Commission on this unaccounted sales from 2-4% - The estimation of the profit cannot be at the whims of the A.O that he may apply any rate of profit. The estimation of the profit must be based on the material evidence found during the course of search or as may be gathered by the A.O to support that the estimate made by the A.O is not arbitrary and is bonafide - Part of the statement cannot be accepted as true and the other part of the statement as false - No cogent material or evidence was brought to our knowledge that the assessee has earned the profit @ more than 4% - Partly allowed in favour of assessee. Suppressed profit – Held that:- From the print out of the Balance sheet found and seized, it is apparent that this Balance sheet is subject to Audit and was not signed by any of the responsible persons - The Balance Sheet does not have any conclusive evidence on the basis of which the income can be determined - The Assessee is maintaining the regular books of accounts. The accounts are duly audited by the Auditor and the Auditor has duly certified the Profit & Loss A/c and Balance sheet which were furnished along with the returns. The Audited Profit & Loss and Balance Sheet depicts the correct and fair Profit & Loss Account. The unaudited rough print out of the Balance sheet cannot substitute the audited Profit & Loss and Balance sheet – The issue was set aside for fresh adjudication. Unaccounted investment – Held that:- The CIT(A) has rightly confirmed the addition because the investment in the plot of land made on 16.12.2006 was not accounted for during the impugned assessment year – Decided against assessee. Bogus purchases – Held that:- The assessee was engaged in the trading of the iron ore - During the course of carrying out the trading in iron ore the assessee has accommodated Shri Anil H. Lad and M/s VSL and Sons for selling iron ore procured by them through illegal mining carried out in their mining - The purchases made by the assessee from these firms which were without bills were shown by the assessee in his books of accounts as if the assessee has made purchases from various parties - The sales made by the assessee were duly accepted by the revenue - At the most, where the Assessee had saved any tax in procuring the bogus bills, the Assessee could have made more profit but the purchases made by the Assessee cannot be disallowed - The gross profits as per the books of assessee were 16.35% and 6.06% for the assessment year 2007-08 and 2008-09 respectively - Once the purchases are disallowed the gross profit will increase to 50.9% and 90.7% for the assessment year 2007-08 and 2008-09 respectively - No material or evidence whatsoever showing the comparative instance was produced before us to justify such a high gross profit - No addition on account of bogus iron ore purchases can be made as without procuring the iron ore by incurring the cost in our opinion the assessee cannot sell the iron ore - The revenue could have added the profit on such purchases @ 4% as the assessee categorically stated that he was carrying out the sales on behalf of Shri Anil H. Lad on commission basis and the evidences found during the course of search and survey also prove that the assessee is being used as conduit to siphon off iron ore which was illegally mined by M/s VSL & Sons firm of Shri Anil Lad - The assessing officer had disallowed the expenses incurred by the assessee for the purchases u/s 37(1)of the Income Tax Act - The purchase cost in the case of a trader in our opinion is allowed as deduction u/s 28 itself as u/s 28 is only the profit and gains of any business or profession which are chargeable to Inc. The consideration received by the assessee on the sales cannot be regarded to be the profit and gains of the profession. Section 28(1) does not make total revenue receipt to be chargeable to Income Tax Act – Decided in favour of assessee. Undisclosed stock – Held that:- The assessee only declared the stock of Rs. 41,00,000/- during the impugned assessment year and as claimed by the assessee and accepted by the A.O Rs. 6,00,00,000/- in the assessment year 2006-07 - Undisclosed stock of Rs.10.75 crores was found and accepted by the assessee lying at Krishnapatnam, Nellore district – The telescoping is not allowed under any accounting principles for sum of Rs. 6 crores against the income of Rs. 6,41,00,000 - The order of the CIT(A) sustaining the addition to Rs. 4,75,00,000/- is confirmed – Decided against assessee.

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• 2013 (12) TMI 711
  Reassessment u/s 147 - Held that:- The auditor has mentioned in the Audit Report that the assessee made recoveries against recoverable written off to the tune of Rs.5.56 crore, which was credited to the Profit and loss account - When the auditor is reporting that the amount of recoveries has been credited to the P&L account, it shows that the said amount had found its way into the taxability net - There was appropriate, full and true disclosure of all the relevant aspects on this point - The assessment has been reopened on the basis of audit report already available on record making such observations, aptly demonstrates that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment - The material condition for reopening the case is lacking. The solitary basis for the initiation of reassessment is the audit report furnished by the assessee along with the return of income indicating that the amount representing recoveries was credited to the P&L Account - Such audit report was available with the AO at the time of framing assessment - The AO did ask about the details of the such amount debited to the P&L account, which amount is `net’ of the recoveries - When such details were furnished and no addition was made, it has to be presumed that the AO got convinced with such details - There is no fresh material coming into the possession of the AO which prompted him to issue notice u/s 148 - Consideration of the same material already on the record of the AO, which led to the initiation of reassessment is a case of change of opinion - Decided in favour of assessee.

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• 2013 (12) TMI 710
  Whether notice u/s 142(1) issued after end of one year from the relevant assessment year is barred by limitation or not - Held that:- Following DIT vs. KLM Royal Dutch Airlines [2007 (7) TMI 577 - DELHI HIGH COURT] - The notice issued u/s 142(1) of the Act is valid and consequently the assessment order passed cannot be held to be invalid in law - As per the proviso inserted to section 142(1) of the Act by Finance Act 2006 with retrospective effect from 1-4-1990 has clearly done away with any limitation with regard to the issuance of notice u/s 142(1) of the Act - The issue was restored for fresh adjudication.

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• Customs

• 2013 (12) TMI 709
  Denial of benefit of Notification - Import of battery for cellular phone - Whether the benefit of Notification No. 21/2005-Cus dated 1/3/2005 (Sl. No. 320) was admissible to the respondent in respect of battery for cellular phone, imported by them vide Bill of Entry No. 3514 dated 1/4/2005 - Held that:- parts, components and accessories of mobile handsets including cellular phones were chargeable to nil rate in respect of basic customs duty and additional customs duty (CVD) under Sl. No. 320 of Customs Notification No. 21/05 at the time of importation of the subject goods. It is not the case of the appellant that the importer did not satisfy the relevant condition. It is common knowledge that a cellular phone cannot function without a battery. If that be so, the battery has to be considered as accessory, if not part/component, of cellular phone and consequently, the benefit of the Notification is admissible to the item imported by the respondent - Decided against Revenue.

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• 2013 (12) TMI 708
  Waiver of pre deposit - Confiscation of goods - Imposition of redemption fine and penalty - Held that:- where the goods are neither exported under bond nor are physically available for confiscation, redemption fine is not imposable. Therefore, redemption fine is not imposable in this case - prima facie, the applicant-exporter has made out a case for complete waiver of pre-deposit - where the factual matrix is that the containers were loaded on the vessel which sailed on 30-1-2007 and the same being Moharam holiday for Customs, CHA or the exporter were not authorised to go to Customs area, the ‘Let Export Order’ was taken only on 31-1-2007; in that case the Hon’ble High Court held that in these circumstances, the exporter and CHA could hardly be said to have committed breach of Section 50(1) of the Customs Act, 1962, since it was beyond their control - Following decision of Commissioner of Customs (Export) v. Kusters Calico Machinery Ltd. [2010 (3) TMI 474 - BOMBAY HIGH COURT] - Stay granted.

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• 2013 (12) TMI 707
  Classification of goods – Benefit of Notification No. 141/2005 – Held that:-The CRCL report answers to the description of the goods as per heading 5407 6190 - Therefore the goods are rightly classifiable under 5407 61 90 - assessee have also claimed benefit of Notification No. 14/2005 which provides effective rate of duty as 15% subject to condition that ‘they are’ other than upholstary’ – The Commissioner has granted the benefit of Notification No. 141/2005 at Sl. No. 53 carrying the similar condition i.e. other than upholstery - Thus the appellant are eligible for the benefit of the notification – Commissioner is directed to re-quantify the duty liability - neither side has challenged the enhancement of value – Therefore the Commissioner is also directed to re-determine the penalty – Decided in favour of Assessee.

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• 2013 (12) TMI 706
  Denial of benefit of Notifications No. 46/2002 and 40/2006 - Clearance of 100% Cotton yarn dyed woven fabrics - Held that:- when exports were made shipping bill was filed with Customs Authorities and in the shipping bill a declaration to the effect that it is under DFIA scheme would have been made. In such a situation, customs officers also should have verified the specifications. Having allowed export of motors with input specifications as bearings upto 50 mm bore, it may not be appropriate for the customs authorities to insist on technical specifications at the time of import of bearings. Further, we also find that the specifications provided in the DFIA authorization have to be considered as sufficient for the customs purposes since the specifications are based on goods exported under a shipping bill. Therefore the responsibility to ensure that exporter gives a proper declaration while making exports in the shipping bill lies on both customs as well as DGFT authorities and having missed the bus at the time of export, it may not be correct to insist on specifications from a transferee of DFIA. Further, we also take note of the fact that DGFT is supposed to ensure that all the requirements have been fulfilled before allowing transferability - appellants are eligible for the benefit of Notification No. 40/2006-NT - Following decision of GLOBAL EXIM Versus COMMISSIONER OF CUSTOMS (EXPORT), MUMBAI [2010 (4) TMI 366 - CESTAT, MUMBAI] - Decided against Revenue.

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• 2013 (12) TMI 705
  Suspension of license - Non complaince of norms laid down in the regulation and the circular issued by C.B.E. & C. - Held that:- The facts unearthed by Revenue so far does not indicate any active involvement by the Appellant in doing smuggling or facilitating smuggling. The only case brought out so far is that the Appellant had handled three consignments in May 2010 of an importer who later on filed Bills of Entry in his own name and in such Bills of Entries some discrepancies (not clearly specified by Revenue) has been detected. We also note that the license of the Appellant has remained suspended for almost one year and the Revenue had ample opportunity to conduct necessary investigation against any involvement by the Appellant. We are of the view that continuing suspension of the licence will be unduly harsh based on the evidence that has been so far brought to the notice of the Tribunal. Therefore, we are of the view that the suspension of their license should be revoked and we order accordingly. It is made clear the Revenue is at liberty to issue notice under Regulation 22 for revocation of license of the Appellant, if their involvement in any smuggling activity can be proved by acceptable evidence - Decided in favour of Appellant.

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• Corporate Laws

• 2013 (12) TMI 704
  Consolidation of holding as per Regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - Appellants applied to SEBI for post-facto exemption from making a public offer under Takeover Code with respect to warrants converted into shares - SEBI denied exemption and directed appellants to disinvest shares converted from warrants – Held that:- The order to divest would not be in anyone's interest and that no benefit would accrue to other investors in the scrip of the Company, its employees or its promoters by such divestment - On the contrary, this proposed action of divestment might sent the Company back into sickness after all the attempts made by the Appellants to bring it out of dire straits gradually over a significantly long period of time - Sale of huge number of shares, as required under orders of the Respondent, will bring down the share price, leading to under evaluation of security, in the form of shares, with banks/financial institutions for loan - this in turn shall lead to demand for higher security by financial institutions/ loanee and thereby triggering a chain reaction, leading to financial difficulties, making/continuing operation difficult/ impossible - company may fall back into sickness again - Case remanded back to SEBI for reconsideration given the fact that post-facto exemption is not an unprecedented action on part of the Respondent – Decided in favour of Appellant.

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• Service Tax

• 2013 (12) TMI 742
  Denying of CENVAT Credit - Availment of credit on the basis of Advice of Transfer Debit - Penalty under rule 15(1) and 15(2) of CCR 2004 - Held that:- assessee has not complied with provisions of CCR 2004 read with Central Excise Rules, 2002 strictly. However, existence of original invoice and its genuineness is not disputed by Revenue. In fact, such documents were produced before lower authorities. Therefore, the duty involved has been paid and there is no dispute that the equipment in question has been used at the sites where credits were taken. In such circumstances, considering the commercial practice which was necessary for efficient procuring the equipment in question, this procedural lapse cannot be considered as a reason to deny Cenvat credit involved - Decided in favour of assessee.

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• 2013 (12) TMI 741
  Demand of service tax - Denial of CENVAT Credit - Renting of cafeteria area - Refund of Cenvat Credit - Assessee 100% Export Oriented Unit - Service Tax Registration Certificate not submitted - Held That:- there is nothing in CCR, 2004 to restrict taking of credit only for services received after the date of registration especially in a situation where provider of service is exporting the services and is not required to pay service tax - Rule 4 of Service Tax Rules is applicable to a person who is liable to pay service tax. If there is an offence of not complying with Rule 4 of Service Tax Rules, that matter has to be adjudicated as per the provisions of the Act and the Rules. Denial of Cenvat credit may not be the proper course in such situation. The delay in taking registration is only of 11 days. The claim for refund has been submitted after registration. Further the provision of CCR, 2004 which is not complied with is not precisely pointed out. The requirement of registration prior to having eligibility for credit is sought to be achieved by a laborious interpretation of Service Tax Rules, 1994 and Cenvat Credit Rules, 2004 by interpreting that a service provider has to get registered (as per Service Tax Rules, 1994) and only a service provider can take credit (as per Cenvat Credit Rules, 2004) and deducing that an unregistered service provider does not get eligibility for credit. By not getting registered a person does not cease to become a provider of taxable service if he is actually providing such service. Even if a service provider is not registered there will be tax liability on him if he is providing taxable service. The concomitant benefit of Cenvat credit also has to be seen accordingly, of course subject to provisions in Cenvat Credit Rules 2004, in the absence of clear provisions to the contrary - Following decision of Portal India Wireless Solutions (P) Ltd. Vs CST [2011 (9) TMI 450 - KARNATAKA HIGH COURT]. No reason to hold that renting of cafeteria area cannot form input service when service of cafeteria itself is considered as input service as decided by Mumbai High Court in CCE Nagpur Vs Ultratech Cement Ltd. - [2010 (10) TMI 13 - BOMBAY HIGH COURT] and in the case of CCE Bangalore Vs Stanzen Toyotetsu India (P) Ltd.- [2011 (4) TMI 201 - KARNATAKA HIGH COURT] - Decided against Revenue.

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• 2013 (12) TMI 740
  Demand of service tax - Business Auxiliary Service - Benefit of Notification No. 8/2005 and Notification No. 6/2005 - Held that:- service tax demand has been confirmed against the appellants under category of Business Auxiliary Service under clause V of the definition which covers the production of goods or processing of goods for or on behalf the clients. The activities undertaken by the appellants prima facie are covered under this clause of the definition of Business Auxiliary Service - Commissioner (Appeal) has granted the benefit of Notification No. 8/2005 dated 01.03.2005 but has not granted the benefit under Notification No. 6/2005 as amended on the ground that appellants have not produced any details of the value of taxable service provided by them. After going through Orders-in-Original and Orders-in-Appeal we find that in respect of first five appellants the value of taxable service provided by the appellants prima facie is much below the exemption limit. We are therefore of the view that the first five appellants have strong case for complete waiver of pre-deposit and stay of recovery against the dues till disposal of the appeal - Conditional stay granted.

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• 2013 (12) TMI 739
  Waiver of pre-deposit - Service tax demand - Interest under Section 75 - Penalties under Sections 76, 77 and 78 - Support Service of Business or Commerce - Held that:- any service provided in relation to business or commerce including those falling within the inclusionary part of the definition constitutes the taxable service enumerated. On this prima facie view, the amounts collected by the petitioner as user charges or fees for facilitating the business of transportation of passengers, of entities which had utilised the terminal facility brought up by the petitioner would amount to providing Support Service of Business or Commerce - Conditional sty granted.

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• 2013 (12) TMI 738
  Demand of service tax - Cargo Handling service - Segregation of service into Cargo Handling Services and Transportation Services - Benefit of abatement on the GTA services - Held that:- there is an evidence which indicate that appellant had charged separately for the loading of timber logs within the port area on to the Trailor or specially designed vehicles and discharged the service tax liability and also discharged the service tax liability on transportation by road on the amount received from the importers. We also note from the invoices issued by the appellant that for transportation of logs from port area to importer s premises, appellant is indicating the amount separately as transportation charges, on which after receiving payment, appellant discharged the service tax liability under reverse charge mechanism. Appellant has also made out a case for waiver of pre-deposit on the ground of limitation, as the show cause notice dated 02.11.2010 was issued by the department indicating the same services for the same period under GTA services hence, invoking extended period again the show cause notice dated 15.11.2012 - Following decision of R.K. Transport Company vs. CCE, Raipur [2012 (3) TMI 271 - CESTAT, NEW DELHI] - Stay granted.

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• 2013 (12) TMI 737
  Waiver of pre-deposit - Demand of service tax - Advance received for execution of service contracts - Held that:- The two contracts are for service and the applicant had paid service tax and they had received 10% advance in respect of the contracts of service and the applicant had already paid an amount of Rs.33.89 lakhs. In these circumstances, prima facie the applicant has a strong case in their favour - Stay granted.

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• 2013 (12) TMI 736
  Demand of service tax - Penalty u/s 78 - Business of issuing meal/gift coupon vouchers - Business Auxiliary Services - Whether meal vouchers issued by the assessee promotes sale of goods and services produced or provided by or belonging to the affiliates - Held that:- When a user/employee gets such meal vouchers from his employer (assessee's customer), the user has to look the list of affiliates and thereafter approach one of the affiliates of the assessee to buy goods and services. The user cannot approach any other entity or business establishment but to limit himself to the affiliates of the assessee. - such a scheme/restrictions viz. purchase of vouchers by employer and purchaser of goods and services by employee from affiliates itself promotes the sale of goods and services of the affiliates and therefore meal vouchers of the assessee definitely helps in promoting sale of goods and services of assesses affiliates. Meal voucher cannot be compared with credit/debit cards and cannot be called a payment system which is true for the debit/credit card. Vouchers are definitely not substitute for carrying cash as is the case with credit/debit card. In fact, in real life value of such meal vouchers is limited to two thousand per month per employee - Assessee have not been able to provide any evidence to come to the conclusion that the assessee were having a bonafide belief that they were not required to pay service tax during the period under Business Auxiliary Services. No attempt was made by the assessee to ascertain their tax liability from the department before the investigation started - Decided against the assessee. Classification of service - BSS or BAS - section 65A - Held that:- The introduction of new service did not bear any specific pattern or coverage to particularly sector. In Central Excise Tariff as also Customs Tariff, the classification is based upon scientific principle and pattern. Keeping in view the evaluation of various entries in the service tax, it is not unusual to find that a particular activity service may get covered by more than one entry/classification. - since the activities are more specifically covered under Business Auxiliary services as per Sec.65A(2), the same would be covered under Business Auxiliary Services. - the service can not be classified as Business Support service - Decided against the assessee.

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• 2013 (12) TMI 735
  Denial of refund claim - Exemption under Notification NO. 24/04-ST dated 10.9.2004 - Vocational Training or Commercial Training & Coaching - Post Graduate Diploma in Management (PGDM) at Sadhana Centre for Management & Leadership Development (SCMLD) - Held that:- appellant is accepting that they are providing Commercial Coaching and Training Centre - the course is for a duration two years. The first year is common to all candidates. Thereafter they undergo summer training with some organization. In the second year, they undergo courses in one of the five disciplines/area of specialization - From the course content, it is clear that courses are academic in nature and covers broad spectrum of subjects - No doubt the two years course will help candidates in understanding various facets of management and get employment. It is a professional management course. This cannot be considered as Vocational Course that imparts skill to enable the trainee to seek employment or self employment after the said course. Notification No. 24/2004-ST dated 10.9.2004 has been amended vide notification No. 3/2010-ST dated 27.2.2010, wherein the Explanation relating to Vocational Training Institute is replaced by new definition. As per new definition, Vocational Training Institute means as Industrial Training Institute or Industrial Training Centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the apprentices Act, 1961 (52 of 1961). Though the said explanation was inserted in 2010, but indicates the scope of term vocational training in specific terms - Decided against assessee.

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• 2013 (12) TMI 734
  Waiver of pre-deposit of Service Tax demand - Penalty u/s 77 and 78 - Maintenance or Repair Service - Evasion and suppression of tax - Held that:- applicants are providing the services in the nature of construction, repair, recondition or replace a portion of the highway system. It is admitted fact that the applicants are entered into a contract of ‘maintenance and management of immovable property’. Maintenance means to maintain the road in proper condition, therefore, the argument that the repairs does not covered under maintenance services is prima facie not tenable. As the applicants are entered into an agreement of ‘maintenance or management of road/immovable property, therefore, the applicants have failed to make a prima facie case for complete waiver of pre-deposit - Conditional stay granted.

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• 2013 (12) TMI 733
  Demand of service tax - Manufacturing activity or Job work - Whether appellant shall be liable to Service Tax as manpower provider - Held that:- On totality of the construction of the agreement without being read in piece-meal does not throw light to hold that the objective of the parties was to provide manpower only without carrying out manufacture. Had that been the objective, the appellant would have ceased to operate after supply of manpower. But that was not so. While object is clear from Clause 3 of agreement, that appears to be determining factor to decide incidence of tax under law - appellant had not provided service of manpower but had acted as job worker in absence of finding that no manufacture activity was carried out - Decided in favour of assessee.

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• 2013 (12) TMI 732
  Penalty u/s 76, 77 and 78 - Service provided by foreign parties - Suppression of tax - Held that:- The appellant says that it is registered soon after the amendment of law. There is no intention of evasion patent from orders but there was delay in payment of Service Tax. It appears that under bona fide mistake and due to confusion of law there was delay. We are unable to find the manner how suppression has occurred. For no finding in that regard in the revisional order, the revisional order appears to have preconceived imposition of penalty without assigning the reason for justification of levy - Following decision of Continental Foundation Jt. Venture [2007 (8) TMI 11 - SUPREME COURT OF INDIA ] - Decided in favour of assessee.

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• 2013 (12) TMI 731
  Stay application - Business auxiliary service - Held that:- National Highway Authority of India has availed services of the respondents. Fundamentally, the said National Highway Authority of India (NHAI) is not established by Revenue to be business concern nor a commercial concern not being engaged in any business activity. Therefore providing business auxiliary services by respondents to such NHAI is inconceivable - Stay granted.

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• 2013 (12) TMI 730
  Availment of Cenvat credit - Benefit of Notification No. 1/2006-S.T., dated 1-3-2006 - GTA service - Notification No. 12/2003-S.T., dated 20-6-2003 - Held that:- appellants have produced on record sample certificate by the transporter declaring that they have neither availed Cenvat credit of duty paid on any inputs or capital goods used for providing transport services nor benefit of Notification No. 12/2003-S.T., dated 20-6-2003. The Tribunal in its various decisions has held that such type of declaration is sufficient and there is no need to give declaration on each and every consignment note inasmuch as there is no such requirement in the notification. Otherwise also, we find that when the transporters are not paying service tax, the question of availment of credit and the benefit of Notification does not arise - Following decision of Indian Oil Corporation Ltd. v. CCE, Mumbai-II [2010 (12) TMI 786 - CESTAT, MUMBAI], U.P. State Sugar Corporation v. CCE, Meerut [2008 (9) TMI 244 - CESTAT NEW DELHI] and CCE, Rajkot v. Sunhil Ceramics Pvt. Ltd. [2007 (12) TMI 24 - CESTAT, AHMEDABAD] - Decided in favour of assessee.

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• Central Excise

• 2013 (12) TMI 703
  Cenvat credit availed on bogus invoices – Held that:- Owners of the vehicle in respect of the invoices have given categorical statements that no goods were transported in these vehicles from MMTC to Kiran Metals Industries - In view of the statement of transporter recorded under Section 14 of the Central Excise Act, conclusion drawn by both lower authorities that no goods were sent to M/s Kiran Metals are sustainable and accordingly penalty imposed in respect of these invoices is upheld. As regards the invoice No. 27 and 29 - Shri Umang Batra duly authorised by owners of vehicle HR 38 BG 4071 and HR 38A 2562 in his statement refers to invoices issued by M/s International Metal Corporation and denies any movement of goods from M/s International Metal Corporation and does not speak anything about MMTC - the invoices No. 27 and 29 MMTC have shown the origin of goods as ‘self importer’ - Revenue is not able to prove any case against MMTC in respect of these two invoices - Penalty in respect of the two invoices quashed. VSA has submitted registration papers in respect of vehicle No. HR 46A 6737 and since vehicle No. HR 46A 6737 is registered vehicle and department has not recorded any statement of the owner of the vehicle HR 46A 6737 the benefit of doubt goes in favour of the appellant VSA - in the invoice No. 173 vehicle No. HR 46A 6737 is typed and not handwritten - Contention of the appellant is that letters ‘A’and ‘S’ are next to each other on key board and by mistake ‘S’ has been typed instead of ‘A’ has considerable force - Penalty imposed on VSA set aside – Decided partly in favour of Assessee.

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• 2013 (12) TMI 702
  Clandestine manufacturing and removal of final product – Unaccounted billets received – GRs issued to various transporters – Held that:- There is no investigation about receipt of the billets at the appellants end or no evidence stand produced by the Revenue as regards manufacture and clandestine clearance of the appellants final product - The buyers, to whom the cleared final product stand received have also not been identified by the Revenue - Relying upon Modern Steel Industries vs. CCE, Meerut [1999 (6) TMI 304 - CEGAT, NEW DELHI] - the appellants have strongly contended that there is no even an aolta of evidence against the appellants and merely because the dealers of M/s Nova Steel Udyog Ltd. have used the appellants name in the GRs of the transporters, by itself cannot be held to be conclusive evidence of receipt of the billets – Decided in favour of assessee.

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• 2013 (12) TMI 701
  Eligibility for Notification No.63/95-CE – Goods supplied for defence purposes or other projects – Held that:- Supply made to vendors would not be covered by the Notification No.63/95-CE dt. 16/03/1995 - The clarification above although are not issued under any of the provisions of the statute and lacks legal sanction, that was binding on the tax administration for uniformity approach to the subject to remove anomaly - Relying upon National Engg. Industries Ltd. Vs. CCE, Jaipur-I [2010 (7) TMI 406 - CESTAT, NEW DELHI ] - extension of benefit of the Notification to a job worker and vendor supplying input to the manufacturer of final goods for ultimate supply to Ministry of Defence would apparently amount to extending the scope of exemption to such job worker and vendor which is not permissible - it is not merely supply to Ministry of Defence but such supplies should be for official purpose when the exemption is available in relation to finished goods but not in relation to inputs supplied to manufacture of finished goods – Decided against Assessee.

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• 2013 (12) TMI 700
  Right to cross examine - Clandestine removal of Goods - Waiver of Pre-deposit – Held that:- The documents were seized from the premises - Inspite of searches carried out in the factory and other premises of the applicant and their employees, the Department could not retrieve any incriminating documents - even though the statements of the proprietor of the Transporter were against the applicants and also the documents relied in the show cause notice were seized from other premises, the applicants were not allowed cross-examination of the person concerned as requested by them repeatedly during the course of adjudication proceeding, on the ground that Applicant should not be allowed to build their defence by such examination - Prima facie, there is violation of principles of natural justice - the applicants are able to make out a prima facie case for total waiver of amount – Pre-deposits waived till the disposal – Stay granted.

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• 2013 (12) TMI 699
  Inclusion of the value of accessories in the value of three wheelers supplied – Held that:- Central Motor Vehicle (Amendment) Rules, 1989 and the Maharashtra Motor Vehicle Rules, 1989 specify that while plying the vehicle the driver should ensure that he has the tool kits and jack assembly necessary for change of tyres and rim - this is condition which needs to be met at the time of using the vehicle on the road - The Motor Vehicle Rule does not deal with supply of tool kits by the manufacturer. -The tool kits may be supplied by either the manufacturer or by the dealer - from the Motor Vehicle Rules, it does not emerge that the manufacturers are mandatorily required to supply the tool kits or jack assembly along with the vehicle - Following COLLECTOR OF CENTRAL EXCISE, PUNE Versus BAJAJ AUTO LTD. [1996 (10) TMI 401 - CEGAT, NEW DELHI] - the value of tool kits and jack assembly are not includable in the assessable value of the motor vehicle – order set aside – Decided in favour of Assessee.

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• 2013 (12) TMI 698
  Effect of Amendment in Notification No.48/2000 – Cenvat credit availed on inputs – Payment of duty on finished products as per Rule 57AB of cenvat credit rules 1944 - Held that:- On the date of payment of duty i.e. on 19.8.2000 the position in law was that the appellant could have utilized credit earned upto 15.8.2000 for the payment of duty for the first fortnight of August, 2000 - the adjudicating authority is correct in concluding that the appellant was not eligible for the credit earned on16th & 17 th August, 2000 for payment of duty for the first fortnight of the month - this amounts to advance utilization of credit – thus, the appellant shall be liable to pay only interest on the credit utilized the credit earned on 16 th & 17 August, 2000 for payment of duty w.e.f. from 1.9.2000 onwards. The appellant has utilized the credit on 19.8.2000, the appellant is liable to pay interest on the wrong utilization for the period from 19.8.2000 to 31.8.2000 - the rule provides for payment of interest @ 24% - the confirmation of interest for the period 19.8.2000 to 31.8.2000 is sustainable in law – it is related to interpretation of law, no penalty can be imposed – Decided partly in favour of Assessee.

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• 2013 (12) TMI 697
  Bar of limitation - Addition of the value of moulds and dies - Assessable value as per the amortization basis of final product- Held that:- Amortization cost of tools and dies supplied free of cost by their customers and is required to be added in the assessable value of their final products – relying upon Star Glass Works vs. CCE [2002 (10) TMI 728 - CEGAT, MUMBAI] - there was no malafide on the part of the appellant to evade payment of duty - the benefit of limitation to the appellant extended – Order set aside – Decided in favour of assessee.

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• 2013 (12) TMI 696
  Applicability of Section 11AC of the Central Excise Act, 1944 in the light of the judgement of UoI Vs. Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT ] – Held that:- Section 11AC of the Act was introduced which made the position clear that there is no scope for discretion and accordingly it cannot be sustained that Rules 96 ZQ and 96 ZO have a concept of discretion in built to impose lesser penalty - Investigation has not established that shortages found in fact were cleared clandestinely by the appellant. There is no confessional statement of the appellant that shortages were cleared clandestinely without payment of duty - Shortages found in the stocks could be a good ground for raising suspicion but it should be corroborated by the confessional statement of the assessee and/or other evidences that such shortages were clandestinely removed also - There is also no evidence of seizure of any goods clandestinely cleared by the appellant - the shortage of finished goods by itself could not, unless it is related to clandestine removal of finished goods for which there was no material evidence, infer evasion of Excise duty - It is also an established law that any presumption, howsoever strong, cannot take the place of an evidence - The ingredients as contained in Section 11AC of Central Excise Act, 1944 are not applicable to the facts and circumstances of the present case – thus, penalty imposed upon the appellant under Section 11AC of Central Excise Act, 1944 is not imposable and set aside – Decided inf avour of Assessee.

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• 2013 (12) TMI 695
  Exemption under Notification 56/2002 - Area based exemption - refund of education cess and higher education cess paid through PLA - Exemption from certain types of excise duties on goods manufactured by factories situated in specified areas of Jammu – Whether the matter to be referred to the Larger Bench - Held that:- the exemption is not for the whole of the three duties levied. It is only for part of it. Secondly it is not for all duties collected as excise duty but only for three specified duties. The fact that Education Cess is calculated as percentage of the aggregate of all excise duties cannot give Education Cess the same character as the other levies. The three levies dealt in the notification have distinct character and purposes. A new levy like Education Cess cannot at once take the nature of many levies. So the argument that Education Cess has the same nature as other excise duties exempt has no meaning. It is relevant that the notification was issued in the year 2002. At that time excise duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 was leviable. This levy was 15% of basic excise duty. But that levy was specifically exempted in the notification and not by implication. The power to grant exemption is to be exercised by the government and not through judicial interpretation or by implication or by reading words into the notification which words are not there. - Refund of education cess and higher education cess denied - Decided against the assessee.

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• 2013 (12) TMI 694
  Adjustment of amount due towards the refund - Excise duty raised – Penalty imposed under Rule 17 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and interest under Section 11AA of Central Excise Act, 1944 – Held that:- The mandate of law given u/s 11A of Central Excise Act, 1944 nowhere debars Revenue from adjusting refund against dues recoverable by Central Government under any of the provisions of Central Excise Act, 1944 or the rules made thereunder - if demand recoverable from an assessee is not adjusted against refund if any due to an assessee, public interest shall be jeopardized - Thus, there was no arbitrary process of law followed by Adjudicating Authority – Decided in favour of Revenue.

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• 2013 (12) TMI 693
  Packing material supplied free of cost form part of assessable value or not – Held that:- When goods are traded in containers/packaged material and not separable from contents to make such goods marketable, assessable value of the same shall be determined as cleared without separating contents from containers – Following Hindustan Polymers v. CCE [1989 (8) TMI 77 - SUPREME COURT OF INDIA] relates to the period prior to 30th June, 2000 - Thereafter the value of packaging material is required to be included in the assessable value - This calls for re-computation of demand arising after 30th June, 2000 including packaging material – Thus, the matter remanded back to the adjudicatory authority to recomputed the demand – Decided partly in favour of Revenue.

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• 2013 (12) TMI 692
  Cenvat credit taken on inputs used for the manufacture of high precision tools - Waiver of Pre-deposit – Held that:- The screws, inserts and cartridges, whether imported or procured indigenously, were cleared in assembled condition with the finished products and Central Excise duty was paid on such assembled goods on its transaction value - the Central Excise duty so paid was always higher than the CENVAT credit on inputs utilized - Central Excise duty on transaction value was paid on the imported inputs cleared ‘as such’ from the factory and that such duty was also higher than the CENVAT credit taken of CVD. The amount of duty paid by the appellant on finished goods or on inputs cleared ‘as such’ is higher than the CENVAT credit taken on inputs, a situation better than revenue-neutral exists and no intent to avail undue benefit of CENVAT credit can be attributed to the appellant – Pre-deposits waived till the disposal – Stay granted.

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• CST, VAT & Sales Tax

• 2013 (12) TMI 743
  Liability to sales tax - Transfer of right - Petitioner contends that it only gave franchisee right and there was no sale hence no sales tax is leviable - Revenue contends that transfer of trade mark and a trade mark is a property right, intangible or incorporeal goods and would fall within the definition of 'goods' hence liable to tax - Whether receipts pursuant franchisee agreement are liable to sales-tax - Held that:- petitioner has transferred their right to use their trade mark, good will, reputation exclusively to the franchisee in respect of a particular outlet and any misuse of such exclusively licensed right rendered, the franchisee open to action which meant to include the termination of agreement in terms of XIV of the said agreement. Therefore, it is a case where goods which are in the nature of intangible or incorporeal goods were available for delivery there were consensus adidem to the identity of such goods as the transferee has a legal right to use the goods and during the period when the agreement was in force, namely for a period of 10 years it was an exclusive right given to the transferee by the petitioner in respect of a particular store and consequently a transfer of right to use and not merely a licence to use the goods and during the period when the agreement was in force, the petitioner as the transferor could not transfer such goods with particular reference to the exclusive right given in respect of a particular store to any other party. Thus, all the attributes to constitute transfer of right to use the goods have been fulfilled - Right given by the petitioner is undoubtedly a transfer of right to use incorporeal or intangible goods and therefore, exigible to sales-tax - Following decision of BSNL vs. Union of India [2006 (3) TMI 1 - Supreme court] and Sunrise Associates vs. Government of NCT of Delhi & Ors. [2006 (4) TMI 118 - SUPREME COURT of INDIA] - Decided in favour of assessee.

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