TMI Tax Updates - e-Newsletter
December 17, 2013

Case Laws in this Newsletter:

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

Articles

1. INDEPENDENT AUDITORS' REPORT

   By: CAGOPALJI AGRAWAL

2. CLASS ACTION SUITS UNDER COMPANIES ACT, 2013

   By: dhanapal sreepathi

News

1. India and the Government of Republic of Macedonia Signed an Agreement for The Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income

2. RBI releases Discussion Paper on Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy

3. Per-Capita Income

4. Trade Policy Formulation Needs Coherence: S R Rao

5. Statement of Shri Anand Sharma, Minister of Commerce and Industry in Parliament on the 9th Ministerial Conference of WTO at Bali

6. RBI Reference Rate for US $ and Euro

7. Decisions Taken On Indirect Tax Issues by the Forum Chaired by Dr. Parthasarathi Shome, Adviser to the Finance Minister for Exchange of Views Between Industry Groups and Government on Tax Related Issues or Tax Related Disputes

Notifications

Customs

1. 50/2013 - dated 16-12-2013 - Cus

Seeks to amend notification No. 10/2008-Cystoms, dated 15th January, 2008 so as to further deepen the tariff concessions in respect of goods covered under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore.

DGFT

2. 57 (RE-2013)/2009-2014 - dated 16-12-2013 - FTP

Export Policy of Onions.

Circulars / Instructions / Orders

DGFT

1. 08/2013 - dated 17-12-2013

Inviting Suggestions on import of power generating equipment under EPCG scheme

Customs

2. F. No. 390/Misc./163/2010-JC - dated 12-12-2013

Reduction of Government litigation - providing monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme court – Regarding.

Central Excise

3. F. No. 390/Misc./163/2010-JC - dated 12-12-2013

Regarding reduction of Government litigation - providing monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme court

Highlights / Catch Notes

Income Tax

• Assessee Must Prove Commission Rates with Associated Enterprises Are at Arm's Length Price or Face Consequences.

  Case-Laws - AT : Determination of arm's length price (ALP) - rate of commission charged by the assessee from its AEs - It is the assessee who has to substantiate that the price charged is at ALP and not vice versa. The assessee has to face the music if it fails to prove so. - AT
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• Dealership networks classified as intangible assets u/s 32(1)(ii) of Income Tax Act; eligible for 25% depreciation.

  Case-Laws - AT : Depreciation on dealership network - he same was in the nature of intangible asset as contemplated u/s 32(1)(ii) of the Act - The assessee was entitled to depreciation thereon @25% - AT
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• Trust's Exemption Denied: Significant Violation of Objectives Invalidates Original Registration Basis u/ss 11 and 10(23C).

  Case-Laws - AT : Denying exemption u/s. 11 and 10(23C) - The objects of the trust have been violated in a wholesome manner and the basis on which registration is granted no longer survives or holds good, would call immediate interference by the registration granting authority - AT
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• Denial of Section 54F exemption during Section 154 rectification for TDS claim not feasible per Section 143(1).

  Case-Laws - AT : As per section 143(1) - denial of exemption u/s 54F while processing rectification application u/s 154 for claim of TDS - such an enquiry is not possible on the petition filed by the assessee under Section 154 - AT
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• Court Rules Section 142(1) Notice Not Equivalent to Section 143(2) for Reassessment u/s 147.

  Case-Laws - HC : Service of notice u/s 143(2) for the purpose of reassessment u/s 147 - revenue contended that notice u/s 142(1) should be regarded as a notice issued under Section 143(2) - decided against the revenue - HC
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• Warehouse Rental Income Taxed as Business Income, Not House Property, Due to Consistent Past Assessments.

  Case-Laws - AT : Treatment of rental income - warehouse/godown - receipts were taxable as business income and not income from house property, more so when receipts were assessed as business income in the past and there was no change in factual or legal position - AT
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Service Tax

• Manpower Supply vs. Recruitment: Service Tax Implications When Payments Include Commission.

  Case-Laws - AT : Difference between 'manpower recruitment service’ and ‘manpower supply service’ - The service receiver simply pays the amount to the appellant adding a commission due to the appellant. This is nothing but MSS and it is difficult to accept that this is MRS. - AT
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• Court Rules Material Costs Excluded from Service Tax Under Notification No. 12/2003-ST When Separately Invoiced.

  Case-Laws - AT : Inclusion of cost of materials for the purpose of levy of service tax - value of materials was shown separately in the invoices - appellant has fulfilled the conditions required to be fulfilled for availing the benefit of Notification No.12/2003-ST - AT
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• Refund Claim Denied: Excess Tax Payments Recorded Without Customer Debits, Indicating No Transfer of Tax Burden.

  Case-Laws - AT : Denial of refund claim - Refund of excess tax paid - excess payments were reflected as receipts in the general ledger account and there was no corresponding debit entries in the name of any of their customers. Therefore, the incidence of tax was not passed on to any other person. - AT
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• Equipment Supply and Construction Contracts Must Be Separate for Service Tax Calculations Under Tax Rules.

  Case-Laws - AT : Both the contracts for Supply of equipments and Construction of works has to be treated as distinct and separate contracts and value of supply contract cannot be added to the value of the construction contract for the purpose of service tax liability - AT
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• Appellant Not Part of Licensee's Business Process; No Business Support Services Provided in Mall Case; Stay Granted.

  Case-Laws - AT : Business Support Services - commercial complex (Mall) - Since the licensee of the appellant did not take any assistance or aid from the appellant, the appellant is not involved in any business process or part thereof of the licensee in any way - stay granted - AT
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• Service Tax Demand Confirmed: Registration Fees Included in Taxable Value, Non-Refundable if No Purchase Made.

  Case-Laws - AT : Demand of service tax - Inclusion of registration fees in taxable value - The registration fee will be adjusted to the first purchase made by the clients in case no purchase is made the registration fee is not to be refunded - demand confirmed - AT
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• Foreign Branch Services Consumed Abroad Deemed Non-Taxable; Case Remanded for Further Verification.

  Case-Laws - AT : Appellant has received the service from abroad from their branches, since the service have been consumed by the clients abroad - service appears to be non taxable - matter remanded back for verification - AT
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• IT Software Testing and Analysis Services Included u/s 65(106) Effective from May 16, 2008.

  Case-Laws - AT : If IT software was already included within the scope of technical testing and analysis service, there was no need for any amendment to be specifically made in Section 65(106) - testing and analysis of IT software would be effective only from 16/05/2008 - AT
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Central Excise

• Cenvat credit allowed for paint used on plant and machinery u/r 2(k); paint is defined as an 'input.'.

  Case-Laws - AT : Denial of Cenvat credit on paint as input or not as per rule 2(k) - Paint applied on plant and machinery – The paint is specifically covered by definition of ‘input’ under Rule 2 (k) and there is no condition that its use must be directly by the manufacturer, the cenvat credit on this ground cannot be denied. - AT
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• Company Liable for Penalties on Cenvat Credit, Not Its Director, Says Court Decision.

  Case-Laws - AT : Penalty - Cenvat credit has been availed by M/s. Asha Telecom Pvt. Ltd., not by Shri Ashok Verma, it is M/s. Asha Telecom Pvt. Ltd., who will be liable for penalty and not the Director of the appellant-company - AT
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VAT

• Forty-sixth Amendment: Court Questions Impact on Doctrine of Mutuality in VAT and Sales Tax Cases.

  Case-Laws - HC : Whether the Forty-sixth amendment to the Constitution of India has done away with the doctrine of Mutuality - the claim of the assessee itself does not appears to be a bonafide claim - HC
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• Court Rules Tax Demand Unjustified: No Evidence of Involvement in Central Sales, Best Judgment Assessment Not Needed.

  Case-Laws - HC : Demand of tax - Rejection of books of accounts - In the absence of any material to show that the assesee revisionist was indulging any central sales, the authorities were not justified in making best judgment assessment in respect of central sales - HC
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Case Laws:

• Income Tax

• 2013 (12) TMI 785
  Nature of amount received representing as 'Capital Replenishment Reserve' by way of surplus free sale of sugar quota under the Scheme known as 'Sugar Incentive Scheme', which is inseparable part of trading receipts - Capital Receipt or revenue receipt - Held that:- the amount was utilized for expansion of the unit. So the assessee is entitled to get the benefit of this amount, which has already been granted by the Tribunal - following Ponni Sugars & Chemicals LTD. & ORS. [2008 (9) TMI 14 - SUPREME COURT], decided in favor of assessee. Disallowance of amount transferred to molasses reserve fund - Held that:- This issue is squarely covered as per the ratio laid down by this Hon'ble Court in the case of the Simbhaoli Sugar Mills Limited vs. The Commissioner of Income Tax, Meerut, ITR No.4 of 1985 dated 20.9.2005 [2005 (9) TMI 590 - ALLAHABAD HIGH COURT] where the expenditure is incurred while the business is being carried on and not for its extension or for the substantial replacement of its equipment, is a revenue expenditure and should have been allowed as an admissible deduction and accordingly answered the question in favour of the assessee. Valuation of closing stock on account of interest - in the valuation of closing stock the assessee has added to the cost the amount of bank interest i.e. after deduction of the interest receipt from the gross amount of the interest payable. But the A.O. opined that the gross interest payable should be included in the cost of valuation of closing stock so he has disallowed the claim made by the assessee but the appellate authorities have allowed the claim of the assessee. - Held that:- it is not evident whether the closing stock was pledged in the bank, what interest was paid on receipt viz a viz Fixed Deposits Receipts. Hence the facts are not clear. - matter remanded back to AO for fresh decision - Decided partly in favor of revenue.

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• 2013 (12) TMI 784
  Unexplained investment in property - reference to valuation officer - Held that:- the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. - Following the decision in Sargam Cinema vs. CIT; [2009 (10) TMI 569 - Supreme Court of India], decided in favor of assessee.

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• 2013 (12) TMI 783
  Non issuance of notice u/s 143(2) for reassessment proceedings u/s 147/148 - Held that:- the decision of Hon ble Jurisdictional High Court in the case of Alpine Electronics Asia Pte. Ltd. (2012 (1) TMI 100 - DELHI HIGH COURT) would be applicable. Respectfully following the same, we hold that the assessment completed without issue of notice under Section 143(2) of the Act was invalid. - Decided in favor of assessee.

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• 2013 (12) TMI 782
  Nature of rental income - business income or income from house property or other sources - a warehouse/godown was let out by the assessee for preservation of goods belonging to M/s. Hindustan Lever Ltd., for commercial purposes and the letting out of the building for warehouse is business of the assessee. - Held that:- the income derived is to be treated as income from business only. - Decided against the revenue. TDS on rent paid - assessee contended that when the assessee itself did not claim the payments by debiting to profit and loss account, the question of disallowance of those amounts by invoking the provisions of section 40a(ia) does not arise. - Held that:- In the case of M/s. Narne Constructions (P) Ltd [2013 (3) TMI 412 - ITAT HYDERABAD], it was observed that; unless the assessee claims this item as expenditure / payment, the A.O. cannot allow or disallow the same - Decided in favor of assessee.

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• 2013 (12) TMI 781
  Non Filing of Form NO. 10 for claiming exemption u/s. 10(21) - Reassessment - Application of income - trust wholly for charitable or religious purposes - Held that:- even if expenses for charitable and religious purposes have been incurred for the earlier year and the said expenses are adjusted against the income of a subsequent year, the income of that year can be said to have been applied for charitable and religious purposes in the year in which the expenses incurred for charitable and religious purpose had been adjusted. - Decision in CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1993 (11) TMI 17 - GUJARAT High Court) followed. Order of CIT(A) confirmed - AO directed to verify the records and if the claim of the deficit of Rs.46,42,125/- is found to be correct, the surplus should be arrived at after setting of the same from the surplus of Rs.55,73,560/- during the current year. The total income shall be computed by the A.O. accordingly. - Decided against the revenue.

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• 2013 (12) TMI 780
  Determination of arm's length price (ALP) - rate of commission charged by the assessee from its AEs - Held that:- As the law provides for considering the price charged or paid in a comparable uncontrolled transaction, there can be no scope for considering a quotation price in isolation which is not preceded with or succeeded by any actual transaction. - the bare quotation price cannot be accepted under the CUP method for the purposes of benchmarking. - Decided against the assessee. It is the assessee who has to substantiate that the price charged is at ALP and not vice versa. The assessee has to face the music if it fails to prove so. Such a burden can be discharged by positively demonstrating and proving with the help of some comparable cases that the price charged or paid in an international transaction is at ALP. If the assessee does not bring on record any comparable case to indicate that the price charged in another comparable uncontrolled transaction should be differed, then the price so charged or paid in the given comparable uncontrolled transaction has to be accepted as ALP. Assessee charged commission from SIMCO as well as some third party at $ 0.50 per DMT. Such rate, unless shown with the help of some other comparable case to be not applicable in respect of the other two international transactions because of different volume, cannot be ignored. - Decided against the assessee.

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• 2013 (12) TMI 779
  Depreciation on dealership network - Held that:- Following assessee’s own case for A.Y. 2007-08 - The claim of the assessee for depreciation on dealership network is allowed by the Tribunal - The consideration paid by the assessee for the purpose of enhancing its network in the field of money transaction business by acquiring rights or infrastructure or other advantages attached to the marketing network - The same was in the nature of intangible asset as contemplated u/s 32(1)(ii) of the Act - The assessee was entitled to depreciation thereon @25% - Decided against Revenue. Depreciation on computer peripherals - Held that:- Following CIT vs. BSES Yamuna Power Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - Computer accessories and peripherals such as printers, scanners, server etc. very much form an integral part of the computer system and consequently they are eligible for depreciation at higher rate of 60% - Decided against Revenue. Expenses on exempt income - Interest and other expense - Held that:- Following assessee’s own case for A.Y. 2006-07 - Own funds were available with the assessee company in the form of share capital and reserves at the relevant time which was sufficient to made the investment in the equity shares. Other expenses - Held that:- As per Rule 8D - The disallowance in respect of other expenses is sustained - Partly allowed in favour of assessee. Rectification of mistake - Held that:- Following CIT vs. Sakseria Cotton Mills Ltd. [1979 (2) TMI 17 - BOMBAY High Court] - The issue relating to allowability of deduction on account of provision for diminution in the value of investment while computing the book profit u/s 115JB of the Act was not the subject matter of appeal before the Tribunal - No direction were given by the Tribunal on this issue while restoring the matter to the file of the A.O. - There was no mistake in the order of the A.O. passed u/s 143(3) r.w.s. 254 of the Act on 30-12-2008 in allowing the deduction on account of provision for diminution in the value of investment calling for any rectification u/s 154 of the Act - Such mistake, was in the order originally passed by the A.O. u/s 143(3) - The rectification made by the A.O. on this issue to the order passed u/s 143(3) r.w.s. 254 of the Act by an order dated 19-8-2010 passed u/s 154 of the Act thus was not permissible - Decided in favour of assessee.

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• 2013 (12) TMI 778
  Hiring Charges - Tax not deducted at source - Held that:- The risk and responsibility of fulfilling of various terms and conditions of the contract remained with the Assessee, where the Assessee had taken on hire the vehicles - It cannot be attributed as contract of service and thereby a sub-contract and therefore the provisions of section 194C(2) are not applicable - The Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record - Decided against Revenue. Interest expense - Held that:- The amount paid as interest to banks and finance companies was not submitted by the Assessee before A.O. nor the details are available before the Tribunal - CIT(A) has granted relief to the Assessee by following the decision of Special Bench in the case of Merlyn Shipping [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] - The Hon. Gujarat High Court in the case of Sikandar Khan N. Tunvur [2013 (5) TMI 457 - GUJARAT HIGH COURT] held that the decision of Special Bench in the case of Merilyn shipping (supra) does not lay down correct law - The issue was set aside for fresh adjudication. Disallowance of expenses - Held that:- In the Remand Report, the Assessee had produced the bills and vouchers and A.O. had failed to identify any single discrepancy - Assessee has shown increased gross profit and net profit as compared to the immediate preceding year - The A.O. has also not pointed out any deficiency in the books of accounts - The Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record - Decided against Revenue.

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• 2013 (12) TMI 777
  Denying exemption u/s. 11 and 10(23C) - Rescinding of the approval granted u/s. 10(23C)(vi) - unaccounted income as also unaccounted investment in land and cash - incriminating documents found during search and seizure - Held that:- The objects of the trust have been violated in a wholesome manner and the basis on which registration is granted no longer survives or holds good, would call immediate interference by the registration granting authority. In these circumstances, the registration authority cancels the registration. The argument placed before us by learned AR is superficial which cannot be considered. - Decided against the assessee. Estimation of unaccounted receipt collected from students towards management quota fees - Held that:- the receipts as per seized documents accepted to have been collected by Sri R. Kondal Rao during the course of search action as well as before us and offered for taxation by Sri R. Kondal Rao, the same cannot be considered in the hands of the assessee once again in the event he complied with the payment of tax. - AO to pass fresh orders - Decided in partly in favor of assessee. Addition towards capital fund - funds contributed by members of the trust for specific purpose - Held that:- voluntary contributions in the nature of tied up grant received by the assessee cannot be brought to tax even the trust is not registered u/s. 12AA of the Act. The tied up donations received by the assessee should not be taxable as income of the assessee, if it is used for specific purpose for which it has been given and it cannot be considered as revenue receipts so as to tax the same. - On the other hand, the donations used for the benefit of the trustees it should be brought to tax as income of the assessee. The AO is directed to segregate these donations which are diverted for personal benefit of the Members of the trust and tax the same accordingly. - Decided partly in favor of assessee. Addition on account of amount collected over and above the prescribed fees and that amounts were not brought in the books of account - Held that:- it is seen that while the seized documents indeed showed receipt of such unaccounted income by the assessee society, M/s. J.B.· Educational Society s books do not show anything payable on this account to the assessee. Therefore, it cannot be said that the amount received by JB Educational Society was not over and above the total amount recorded in the. seized documents pertaining to the assessee society. Accordingly, he was of the view that the claim of double addition is not tenable in the facts and circumstances of the case. - Decided against the assessee.

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• 2013 (12) TMI 776
  Validity of assessment u/s 143(3) - Held that:- The assessee received the refund along with interest of the amount paid by him under the agreement - Following DDA v. ITO [1995 (1) TMI 126 - ITAT DELHI] - Compensation paid by the Developer to the allottees under a self-financing scheme, for delay in the construction was considered by the Revenue as income in the nature of interest u/s. 2(28A). The assessee's right is limited to recover the amount paid (for the purchase of flats) at the contracted rate of interest, on being so demanded by the buyer on the construction having not been completed by the specified date - The proposition that the interest received is chargeable to tax as income will also apply where the interest is payable under the terms of the agreement, express or implied, and the court or arbitrator gives effect to the terms of the agreement and awards interest which has been agreed to be paid - The part of amount is chargeable u/s 56 as interest income - Partly allowed in favour of assessee.

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• 2013 (12) TMI 775
  Head of income under which to be taxed - Held that:- The assessee had not offered the income, on sale of conversion of assets in to stock-in- trade, as per the provisions of section 45(2) of the Act - AO also did not consider the said provisions while finalising the assessment - The issue was restored for fresh adjudication. Denial of deduction u/s 80HHC - Held that:- The assessee has exported the moulds - The assessee cannot be denied the benefit of section 80HHC of the Act on export proceeds of moulds - The issue was restored for fresh adjudication. Depreciation on mould purchased - Held that:- Moulds were ready for use and depreciation is allowable even if assets were not using during the year under consideration - This aspect has not been looked into by the AO/FAA - If moulds were available to be used, AO should allow the depreciation as per the provisions of the Act - The issue was restored for fresh adjudication.

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• 2013 (12) TMI 774
  Determination of profits in the business of wine - Held that:- Income of the assessees in the line of liquor business has to be estimated at 5% cost of sales made by them - Decided against Revenue. Unexplained credit - Held that:- Following Kale Khan Mohammed Hanif Vs. CIT [1963 (2) TMI 33 - SUPREME Court] - The onus of proving the source of a sum of money found to have been received by the assessee is on assessee himself - If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the IT Act - The amounts of the cash credits could be assessed to tax as income from undisclosed sources in addition to the business income computed by estimate - The taxing authorities were not precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appeared in the books of a business whose income they had previously computed on a percentage basis - The issue was restored for fresh adjudication.

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• 2013 (12) TMI 773
  Levy of penalty u/s 271(1)(c) - Income from property - Held that:- Change of head or confirmation of an addition in quantum proceedings does not result in automatic levy of concealment of income. In the case before us, all the facts location of the properties, income received from the properties during the AY under consideration -were available on file - For levy of penalty u/s 271(1)(c) the two conditions must exist - In this case both the conditions were not fulfilled - Penalty u/s. 271(1)(c) was not leviable as it is a case of change of head of income only and assessee as well as AO were treating a particular head of income as correct head of income in earlier years - Decided in favour of assessee.

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• 2013 (12) TMI 772
  Suppression of commission income - Held that:- The assessee had declared gross commission income for RTO liaison work - No details related to such commission incomewere furnished before the Assessing Officer - The Assessing Officer was justified in estimating the income but such estimation appears to be on the higher side - The assessee had filed the return for the first time in response to notice u/s.153A(a) declaring income of Rs.66,520/- which includes Rs.20,850/- commission for RTO liaison work - The estimation has been restricted to Rs. 24000/- - Partly allowed in favour of assessee. Opening cash balance - Held that:- The opening balance of Rs.5,51,321/- also consisted of cash of Rs.1,25,726 - The appellant has not given any evidence to the effect that this cash actually has been brought forward from the earlier year - This cash has surfaced in the period relevant for A.Y. 2002- 03 for the first time - Cash represents unexplained income of the appellant for A.Y. 2002-03 - The addition of Rs.1,80,750/- on account of opening balance is restricted to Rs.1,25,726 - Partly allowed in favour of assessee. Unexplained investment - Held that:- The assessee has deposit of Rs. 10,000 in Mahesh Sahakari Bank - In view of the addition of commission income and cash available the addition should not be made - Decided in favour of assessee.

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• 2013 (12) TMI 771
  Unexplained investment - Held that - The purchase and sale of shares were done through Off Market Transactions, meaning thereby that the shares were not routed through Demat account nor through BOLT - After year 2000, when the SEBI has made it mandatory to transact through Demat Account, thereby completely banning the physical transactions of the shares through BOLT , the assessee is still transacting in physical shares Offline - The genuineness of the transaction needs further verification at the assessment stage - The issue was restored for fresh adjudication.

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• 2013 (12) TMI 770
  Disallowance u/s 14A - Held that:- The application of Rule 8D is w.e.f. assessment year 2008-09 - The disallowance in this case is to be computed on some reasonable basis - The issue was restored for fresh adjudication. Depreciation on goodwill - Held that:- Following CIT Vs. Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT - Goodwill has been held to be an asset eligible for depreciation - Decided in favour of assessee. Repair and maintenance expenses - Held that:- The details of expenses incurred, filed by the assessee were not considered by the AO - The issue was restored for fresh adjudication. Website Development Expenses - Held that:- The AO is not entitled to grant deduction on the basis of a letter requesting an amendment to the return filed - The assessee should have filed valid revised return for claiming the expenses - Following Pruthvi Brokers & Shareholders (P) Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] - The issue was restored for fresh adjudication.

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• 2013 (12) TMI 769
  Tax not deducted at source on prefessional fees paid - Held that:- The assessee himself is a painter and selling his own paintings and art works - The assessee can be considered to be in a "vocation" - This aspect has neither been considered by the AO nor by the CIT(A) - Whether the provisions of Section 194J apply in the case of the assessee would depend upon the finding of the fact whether the assessee is in profession or in business - The issue was restored for fresh adjudication.

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• 2013 (12) TMI 768
  As per section 143(1) - denial of exemption u/s 54F while processing rectification application u/s 154 for claim of TDS - adjustments for any arithmetical error in the return or incorrect claim u/s 141(1) - Held that: - It is clear that what is possible to adjust is only any arithmetical mistake or any incorrect claim patent on the face of the return - In the present case, there was no question of any arithmetical error - Assessing Officer held that the capital gain was not exempt from levy of tax - The debatable issues like exmption u/s 54F are not to be considered - The Assessing Officer has overstepped his authority to deny the exemption claim of the assessee made under Section 54F in the present case, beyond the jurisdiction of Section 143(1)(a) We cannot just ignore the anxiety of the Assessing Officer in the matter of exemption under Section 54F. But, the only thing is that such an enquiry is not possible on the petition filed by the assessee under Section 154. - Decided in favour of assessee.

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• 2013 (12) TMI 767
  Penalty u/s 271B - assessee has failed to audit its books of account as required u/s.44AB - Held that:- The assessee was exempt from tax upto A.Y. 2002-03 and the law was amended w.e.f. 01-04-2003 - As per the amended provision the definition of local authority was restricted by the Finance Act, 2002 w.e.f. 01-04-2003 and APMC was excluded from the local authority - There was bona fide belief on the part of assessee for not getting its accounts audited u/s.44AB and obtain such audit report before the specified date although the assessee maintains books of accounts and such books of accounts are duly audited by the auditors appointed by the cooperative department - Following Hindustan Steel Ltd. Vs. State of Orissa [1969 (8) TMI 31 - SUPREME Court] - There is a rule that ignorance of law is no excuse but there is no presumption that every one knows the law - Decided in favour of assessee.

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• 2013 (12) TMI 745
  Service of notice u/s 143(2) for the purpose of reassessment u/s 147 - The stand taken by the revenue is that the notice issued under Section 142(1) dated 14th August, 2008 should be treated as omnibus or a general notice. It is accordingly submitted that this notice under Section 142(1) dated 14th August, 2008, should be regarded as a notice issued under Section 143(2) of the Act. – Bar of limitation - Held that:- The notice under Section 142 (1) dated 14th August, 2008 was issued and served beyond the period of one year from the date of filing of return i.e. 15th June, 2007 - It was barred by limitation. The contention of the appellant that notice under Section 142 (1) can be regarded as a notice issued under Section 143(2) of the Act cannot be accepted - Following Commissioner of Income Tax versus Lunar Diamonds Ltd. [2005 (3) TMI 33 - DELHI High Court] - service of notice under Section 143(2) of the Act is mandatory - for proceedings under Section 147 of the Act, notice under Section 143(2) is required and is mandated except in cases covered by the first and second proviso to Section 148 of the Act – the facts of the case are not covered by the exceptions carved out in the two provisos as the return filed on or after 1st October, 2005 - Section 292BB does not help the Revenue, as the respondent-assessee had objected to the reassessment proceedings on the ground of non-issue and service of notice under Section 143(2) before the Assessing Officer – Decided against the revenue.

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• 2013 (12) TMI 744
  Treatment of rental income - Property leased out as 'income from business' instead of treating the same as 'income from house property' – Held that:- The assessee constructed a warehouse/godown for specific purpose and let out to the M/s. Hindustan Lever Ltd., and the income derived is to be treated as income from business only - Following ITO vs. Rasiklal & Co. (P) Ltd. [2008 (8) TMI 802 - ITAT MUMBAI] – Assessee not merely letting out its premises for warehousing but being also under obligation to provide adequate security to the material stored apart from receiving and delivering stock, taking physical inventory at regular intervals, to do loading and unloading and stock taking in addition to ensuring proper spray of pesticides in the godown, it was doing a complex commercial activity, hence receipts were taxable as business income and not income from house property, more so when receipts were assessed as business income in the past and there was no change in factual or legal position – Decided against Revenue. Income from Business OR from other Sources - Income received on let out of furniture and fixtures and generator assessed as 'Income from other sources', to be assessed as business income – Held that:- The assessee is carrying on the business of letting out warehouse/godown for commercial purposes - The furniture & fixtures and generator are attached to that business of the assessee - This leasing of assets cannot be isolated from the assessee's business so as to treat the income derived from furniture & fixtures and generator as income from other source - the CIT(A) is justified in treated the income from letting out of furniture & fixtures and generator as income from business and allowing depreciation claim of the assessee – Decided against Revenue.

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• Customs

• 2013 (12) TMI 766
  Penalty under Section 112(a) - Violation of the conditions of Notification No.52/2003-Cus. ibid read with the provisions of Sections 61 and 72 of the Customs Act - Commissioner ordered confiscation of imported goods but refrained from imposing penalties - Held that:- For a penalty to be imposed under Section 112(a) of the Act, the person sought to be penalized should be shown to have committed any one or more of the violations specified under Section 111 of the Act, which has not been done in the present cases. The appellant has not shown that the respondents rendered the goods liable to confiscation under Section 111 of the Act. Therefore the prayer in the appeals cannot be acceded to - Decided against Revenue.

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• 2013 (12) TMI 765
  Demand of differential duty - Import of Meril Beauty Soap - Classification under 3401.19 or 3401.11 - Held that:- CVD is leviable on goods falling under sub-heading 3401.19 - Heading 3401.11 covers soaps other than toilets - lower authority has clearly distinguished the fact that the item is properly classifiable under heading 3401.19 and for the purpose of calculating additional duty of customs on the imported goods, the assessment is required to be done on the basis of maximum retail price after granting abatement of 35% on the MRP. Section 3(1) of the CTA’ 75 is very clear and support obtained from this section in the said assessment is correct - appellant could not produce anything contrary - Decided against assessee.

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• 2013 (12) TMI 764
  Denial of refund claim - Bar of limitation - Held that:- As regards the denial of refund by the Original authority on the ground that the credit was not taken by the respondent “within a period of reasonable time”, the same has been rightly allowed by the Commissioner (Appeals) as there was no specific time limit for credit to be taken under the Cenvat Credit Rules - No valid reason to interfere with the decision on merits given by the Commissioner (Appeals) holding that refund could not be rejected on the ground that the credit has been taken belatedly. Commissioner (Appeals) has merely given another opportunity to the respondents to produce the documents before the Original authority for fresh consideration. This has been given in the light of the submissions made before the Commissioner (Appeals). As the matter required factual verification by the Original authority, the course of action prescribed by him appears appropriate. Though the Commissioner (Appeals) has no power to remand matter with effect from 11-5-2001 after amendment to Section 35A, the grounds on which the matter was remitted to the Original authority appears genuine. Therefore, I direct the Original authority to verify the claim of the assesses with reference to the documents and consider the refund claim afresh - Decided partly in favour of Revenue.

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• 2013 (12) TMI 763
  Levy of anti dumping duty - Inclusion of higher sizes of TCP, reliability of IBIS data, calculation on a weighted average basis, and injury analysis done by the D.A - Held that:- D.A. has conducted a detailed investigation and has considered all aspects of the case based on data and evidence made available to him. He has also considered the submissions made by all the interested parties including the appellants. He has determined a dumping margin of 31.85% in respect of exporters from Chinese PR. He has also concluded that import of the subject goods from the subject countries have increased substantially. The D.A. has examined the relevant economic indicators, as well as the volume and price effects of the dumped imports The D.A. has done a meticulous analysis and has taken an overall view of the relevant economic factors and has finally arrived at his findings on dumping, injury and the causal link between the two. He has also considered that imposition of anti-dumping duty would not restrict imports nor would it affect the availability of the products to the consumers. Accordingly, he has recommended anti-dumping duty of 10% adv. on TCPs upto the size 130” imported from Chinese PR leading to the impugned customs notification - No reason to interfere with the impugned final findings and the impugned customs notification issued pursuant to the same - Decided against assessee.

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• 2013 (12) TMI 762
  Payment of differential duty - Import of Superior Kerosene Oil - Held that:- Notification No. 23/98-Cus. gives exemption only to the Superior Kerosene Oil (SKO) if it is for sale through Public Distribution System. On perusal of all the records we find that there is sale of Superior Kerosene Oil (SKO) to Railways and Air Force/Defence. In our considered view this Notification cannot be pressed into service by the learned Sr. Counsel for the prima facie view that has to be taken for waiver of pre-deposit of the amount involved. At the same time we are of the considered view that the demand of duty on sale through Public Distribution System beyond the quota may be prima facie covered under the said Notification. Applicant has not made out a prima facie case for complete waiver of the amounts adjudged - Stay granted partially.

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• Corporate Laws

• 2013 (12) TMI 761
  Penalty u/s 15A(a) of SEBI Act,1992 - Violation of sections 11C(2) and 11C(3) of the SEBI Act – Failure to furnish records while investigation – Held that:- After affording an opportunity of personal hearing and perusal of the material on record and giving regard to the facts and circumstances of the case, the Adjudicating came to the conclusion that the appellant violated the provisions of sections 11C(2) and 11C(3) of the SEBI Act, 1992 - The manner in which the replies have been submitted before the Investigating Officer is not appreciable by the Tribunal - Instead of passing the burden on others, the appellant should have fully co-operated with the Investigating Officer appointed by the SEBI – Penalty is reduced to Rupees Two Lakhs – Decided Partly in favour of Appellant.

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• Service Tax

• 2013 (12) TMI 800
  Demand for service tax - Manpower supply services - Penalty u/s 77 and 78 - Difference between 'manpower recruitment service’ and ‘manpower supply service’ - Held that:- There is an essential difference between ‘manpower recruitment service’ and ‘manpower supply service’. In the case of MRS, a specific number of persons are sent by the recruiting agency to the service receiver who selects a person or persons depending upon the requirement and pays the service charges to the recruitment agency and the service ends there. The persons recruited by the service receiver become the employees of the service receiver and thereafter the service provider need not and will not have any relationship with the persons whom he has sent. On the other hand, in the case of MSS, the service receiver requests for a number of men or women as the case may be with requisite qualification and once they are sent, the service receiver may choose and select or may simply accept the persons sent by the service provider but the responsibility for the performance of these persons and payment of salaries to them and other obligations which are required to be met by the employer will be with the service provider only. There is no obligation to show reasons as to why the persons were sent back. Further there is no connection between the persons sent by the appellant and the organizations because the salaries are being paid by the appellant and not by the service receiver. The service receiver simply pays the amount to the appellant adding a commission due to the appellant. This is nothing but MSS and it is difficult to accept that this is MRS. Only when the service recipient has an obligation legal or contractual to pay certain amount to any third party and the said amount is paid by the service provider on behalf of the service recipient, the question of reimbursing the expenses incurred on behalf of the recipient shall arise - cost of input services and inputs used in rendering service cannot be treated as reimbursable cost. In the case of MSS, manpower is the input and just because it is separately charged, it cannot be treated as reimbursable expenditure - appellant failed to make out a prima facie case on merits - Decided against assessee.

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• 2013 (12) TMI 799
  Demand of service tax - Maintenance and repair service - Inclusion of cost of materials for the purpose of levy of service tax - Held that:- invoices the cost of materials and ATF have been shown separately. Further on verification of 2 - 3 invoices, we also find that the cost of materials and ATF have not been arrived at on a notional basis. No doubt the details of materials have not been given. Further we also take note of the fact that the show-cause notice issued by the department recognized the fact that the value of materials was shown separately in the invoices. There is no finding either in the show-cause notice or in the adjudication order that the value of materials and ATF shown in the invoice does not reflect the actual position but has been indicated on a notional basis. Thus, we find on our own verification of a few invoices as well as the show-cause notice and the order-in-original, clearly show that in this case the materials and the ATF value were shown separately and repair/service cost was shown separately. Further the learned counsel also submits that the appellants have not availed CENVAT credit. Therefore, we see that the appellant has fulfilled the conditions required to be fulfilled for availing the benefit of Notification No.12/2003-ST dated 20.6.2003 - Decided in favour of assessee.

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• 2013 (12) TMI 798
  Denial of refund claim - Refund of excess tax paid - Held that:- ledgers which are the subject matters and which are the cause for excess payment had not been produced before the Commissioner and he has seen these ledgers and he has satisfied himself after going through the ledgers that excess payment has been made and that as submitted the entire amount of commission received was received as cum-tax receipt and tax was paid by the Bank and therefore the question of excess recovery may not arise. According to Deputy Commissioner, the appellant has been able to show effectively that the excess service tax has been paid and the same has not been collected and after going through the general ledger account and other relevant documents, ST-3 returns and TR6 challans, he has recorded a finding that there was no unjust enrichment. He has also recorded that excess payments were reflected as receipts in the general ledger account and there was no corresponding debit entries in the name of any of their customers. Therefore, the incidence of tax was not passed on to any other person. Procedure adopted by the original adjudicating authority while adjudicating the second show-cause notice cannot be found fault with, even though it may not be appropriate to take it as a basis for coming to the conclusion in favour of the appellant but it can definitely be taken note of. Since the departmental officer has verified records and has come to the conclusion and I am also satisfied that this kind of a situation cannot lead to unjust enrichment, I consider that the appeal can be allowed - Decided in favour of assessee.

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• 2013 (12) TMI 797
  Demand of service tax - Reimbursement of charges/expenses - Whether assessee liable to pay reimbursement charges for the period prior to 18/04/2006 - Held that:- subordinate rule cannot extend the valuation scope of a service to be determined under Sec. 67 of the Finance Act, 1944. Argument of the AR that appellants have not fulfilled the condition of Rule- 5(2) of the Service Tax (Determination of Value) Rules 2006 is not relevant in view of the fact that Rule-5 (1) itself has been struck down by Delhi High Court in its judgment dt. 30/11/2012 and no contrary judgment of any other High Court or Supreme Court has been brought to our notice - Following decision of Intercontinental Consultants & Technocrats Pvt. Ltd Vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT] - Decided in favour of assessee.

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• 2013 (12) TMI 796
  Demand of service tax - Two contracts was for supply of indigenous equipment and materials and the other one for the Construction/ Erection/ Installation of plant - Revenue contends that there was artificial bifurcation of contracts and contracts should be treated as one - Revenue also contends that explanation to Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, substituted under Notification No. 23/2009-ST dated 07.7.2009, is not applicable to the applicant's case - Whether two contracts dated 24.08.2007, executed by the appellant with service recipients can be considered as separate contracts or as one contract - Held that:- explanation added to Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is applicable only for those contracts which are entered after 07.7.2009 - It is clear from the Circular issued by CBEC that where execution of works contract has commenced prior to 07.7.2009, in those cases gross amount, for the purpose of payment of service tax, will not include the free of cost supply by the service recipient. In view of the clause of the supply contract, the findings of the adjudicating authority that ownership of the Balance of Plant and items stands transferred only at the time of completion of work, is not correct. In the case of imported equipments as well as the Balance of Plant equipment, the ownership/ title lies with the service recipient when the same are received at site. Accordingly, it has to be held that after receipt of balance equipment, the title/ ownership of the same is transferred to the service recipient. Accordingly, adjudicating authority cannot go beyond the CBEC Circular No. 150/1/2012-ST dated 08.2.2012 wherein it has been clarified that for the works contract executed before 07.7.2009, free of cost supplies are not required to be added to the gross amount, for the purpose of payment of service tax. There is no evidence on record to convey that both, the supply contract and the construction contract were artificially bifurcated after introduction of explanation to Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Therefore, both the contracts dated 24.08.2007 for Supply of equipments and Construction of works has to be treated as distinct and separate contracts and value of supply contract cannot be added to the value of the construction contract for the purpose of service tax liability - Decided in favour of assessee.

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• 2013 (12) TMI 795
  Demand of service tax - Value of such taxable service - electricity is supplied free of cost by the service receiver – Held that:- electricity is required for rendering the service of operation and maintenance of the plant, then the cost of supply of electricity is a consideration for the service rendered and such cost will have to be included in the value of the taxable services rendered - issue is prima facie covered in favour of the assessee, we find no justification in directing to deposit them any part of the demand and penalty - Stay granted.

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• 2013 (12) TMI 794
  Demand of service tax - Business Support Services - commercial complex (Mall) - given premises on licence and leave basis to various licencees - Management, Maintenance & Repair Services - Penalty u/s 76 & 78 - Service of providing furniture, fixtures, amenities, infrastructure in the unit for which amenities fee is charged - Held that:- all the aforementioned charges are collected on per square feet basis on the area occupied or made available on lease-license basis to the licensee and the same are entitled to use of specified premises or unit in the mall and are recovered on monthly or periodical basis. Further, non-payment of any of the aforesaid charges would dis-entitle to use and occupy the premises - there is no question of any outsource service. Since the licensee of the appellant did not take any assistance or aid from the appellant, the appellant is not involved in any business process or part thereof of the licensee in any way - prima facie the charges collected by the appellant from its licensee are in the nature of rent as held by the Apex Court in the case of Karnnai (1956 (11) TMI 29 - SUPREME COURT). Thus, the appellant has made out a prima facie case for waiver of pre-deposit - Stay granted.

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• 2013 (12) TMI 793
  Demand of service tax - Disclosure of registratio fees in ST-3 Return - Inclusion of registration fees in taxable value - Held that:- respondents were paying service tax as provider of online information and data base access or retrieval or both. The respondents are not disputing the taxability of their service - The registration fee is not refundable as such. The registration fee will be adjusted to the first purchase made by the clients in case no purchase is made the registration fee is not to be refunded. In view of this, the registration fee is not to be refunded as such, hence is required to be added to the gross value of taxable service on which the respondents are liable to pay service tax - respondent has not disclosed this fact regarding collection of registration fee in the ST3 returns. It is only during the scrutiny of records it was found that the registration fee is not added to the gross value of the taxable service. Hence the allegation of suppression with intent to evade tax is also sustainable - Decided in favour of Revenue.

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• 2013 (12) TMI 792
  Demand of service tax - Service rendered abroad - Application of Section 66A - Held that:- appellant has provided services through their branches abroad to customers located abroad. Therefore, it is not a case of the appellant receiving the services but it is a question of rendering services abroad. Further, the appellant has not made any payments for the receipt of any services whereas on the other hand, the appellant has received proceeds of the service rendered abroad by their branches, after deduction of expenditure incurred for rendering of services abroad - service has been rendered to the clients abroad and, therefore, the consumption of the service is not in India but abroad. Therefore, the question of subjecting the said activity to service tax in India does not appear to be sustainable in law. Appellant has received the service from abroad from their branches, since the service have been consumed by the clients abroad, it would amount to export of service under Rule 3 of the Export Service Rules, 2005 in which case also there would not be any service tax liability. In the case of permanent establishment of the appellant situated abroad, the service has been provided by foreign service providers abroad and the service has also been consumed abroad - matter has to go back to the original adjudicating authority for consideration afresh - Decided in favour of assessee.

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• 2013 (12) TMI 791
  Demand of service tax - Testing and analysis of computer software - Held that:- Information technology service was brought under the service tax net with effect from 16/07/2008. Consequently, the activity of testing and analysis of IT software was also brought into the tax net by amending the definition. If IT software was already included within the scope of technical testing and analysis service, there was no need for any amendment to be specifically made in Section 65(106) - testing and analysis of IT software would be effective only from 16/05/2008 when the said activity was specifically included under technical testing and analysis service - Following decision of RELQ SOFTWARE PVT. LTD. Versus CST, BANGALORE [2008 (12) TMI 145 - CESTAT BANGLORE] - testing and analysis of IT software would be leviable to service tax only with effect from 16/05/2008 and therefore, there is no infirmity in the impugned order passed by the adjudicating authority - Decided against Revenue.

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• 2013 (12) TMI 790
  Demand of service tax - Clearing and forwarding service - Bar of limitation - In the earlier period service not called as Clearing and forwarding service - Held that:- service rendered in respect of the impugned goods namely, wheat is in the nature of cargo handling service and there is an exemption available for such service rendered for agricultural produce under Notification No. 10/2002-S.T., dated 1-8-2002 - appellants have made out a prima facie case for waiver of the pre-deposit - Stay granted.

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• 2013 (12) TMI 789
  Demand of service tax - Penalty under Sections 76 & 78 - GTA Services - Suppression of duty - Held that:- both the lower authorities have taken the view that mere non payment of service tax amounts to suppression and the circumstances under which omission/shortly be occurred have not been discussed and considered. Further, I also find that according to provisions of Section 73(3) of Finance Act, 1994, even if the amount was ascertained by audit party, if the assessee pays the amount before issue of show cause notice, unless suppression/fraud/collusion to evade duty has been found no show cause notice could have been issued. After going through the records, I find that both the lower authorities have not given enough justification for invoking suppression in this case. There was no need for issue of show cause notice and initiating proceedings against the appellant - Decided in favour of assessee.

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• 2013 (12) TMI 788
  Waiver of pre-deposit and stay of recovery - Service Tax and Education Cess - GTA services - Held that:- appellant has made out a prima facie case against the demand of Service Tax on the facts and circumstances of this case and in view of the stay order cited by the learned counsel, wherein waiver and stay were granted against a similar demand of service tax on transportation of goods by individual transporters. In the result, there will be waiver of pre-deposit and stay of recovery in respect of the adjudged dues - Decided in favour of assessee.

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• 2013 (12) TMI 787
  Denial of CENVAT Credit - Service tax on insurance premium paid - Held that:- When the appellant has undisputedly paid insurance premium for protection of its plant and machinery from various risks and hazards that cannot be isolated from consideration of Cenvat credit of Service Tax paid against premium. Although it does not contribute to manufacture directly but manufacture is made with such facility which had indirect nexus. On such premise the reasoning of the first appellate authority does not stand to reason nor sound well in law - Decided in favour of assessee.

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• 2013 (12) TMI 786
  Waiver of pre-deposit of Service Tax, interest and penalty - Interior decorator service - Service provided on the basis of clients’ design and drawing provided - Held that:- applicants are undertaking only manufacture and sales of furniture and fixtures as per the design and drawing provided by its customers, therefore, prima facie the applicant has a case in their favour. Pre-deposit of the amount of service tax, interest and penalty is therefore waived and recovery thereof stayed during the pendency of the appeal - Stay granted.

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• Central Excise

• 2013 (12) TMI 760
  Disallowance of MODVAT availed on Input and Capital goods - Depreciation u/s 32 of the Income Tax, 1962 claimed – Held that:- There is a difference of the amounts in the ledger entry - It was clarified by the appellant in the Memorandum of Appeal that they have capitalized all such expenses which are directly attributable to bring the assets of its working condition by means of debit entries in the ledger accounts - it is not clear as to how the MODVAT amounts should have been deducted during the accounting year 1994-95 could be claimed as not taken into the account for the purpose of depreciation in the Assessment Year 1996-97 - Rule 57T provides that the assessee shall not claim deprecation under Section 32 of the Income Tax, 1961 - the Income Tax authority had certified that the appellant had not claimed depreciation which would prevail against any other document, unless its genuinity is doubted. Following Honda Siel Cars (I) Ltd. Vs. CCE [2003 (9) TMI 596 - CESTAT, NEW DELHI] - Rule 57R(8) was amended retrospectively by the Finance Act, 2003 and the provisions of the rule, on the basis of which credit was denied, were deleted - in view of the amendment made in Rule 57R(8) of Rules - demand of duty along with penalty is not sustainable – Decided in favour of Assessee.

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• 2013 (12) TMI 759
  Denial of Cenvat credit on paint as input or not as per rule 2 (k) - Paint applied on plant and machinery – Eligible for cenvat credit – Assessee contended that plant and machinery being fixed towards the earth, are not excisable, the paint would not be eligible for cenvat credit – Held that:- The paint is specifically covered by definition of ‘input’ under Rule 2 (k) and there is no condition that its use must be directly by the manufacturer, the cenvat credit on this ground cannot be denied. New grounds raised in the appeal by the revenue – Held that:- The grounds of appeal in the Revenue’s appeal do not mention the point at all that the paint had been cleared as such – Revenue’s appeal is on a totally on different ground that paint after its application on capital goods i.e. the power plant machinery installed in the factory which is fixed to the earth, would not be eligible for cenvat credit - The plea has to be rejected not only on the ground that the department cannot file appeal on a new ground which was not there at all in the show cause notice, but the same has also to be rejected as an obsurd plea – There is no merit in the revenue’s Plea and the same is rejected – Decided against Revenue.

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• 2013 (12) TMI 758
  Rebate claim found defective but not informed to the appellant in time – Document filed by appellant not looked into – Held that:- The appellant vouches authenticity of the date chart - interest of justice cannot be paralysed keeping the matter pending in the Tribunal - Prima facie, the date chart aforesaid clearly indicates that there was delay – Decided in favour of Assessee.

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• 2013 (12) TMI 757
  Duty demand on bulk drugs - Extended Period of limitation – Held that:- Suppression of relevant facts with intent to evade payment of duty was clearly alleged in the show-cause notice and the proviso to Section 11A (1) of the Act was specifically invoked - assessee had violated Rule 8 of the CER 2002 by not paying duty on or before 6th June 2004 on the goods cleared from their factory to Dr. Reddys Laboratories on 18.05.2004 and 21.05.2004 - even after 06.06.2004, the default continued - The plea of revenue-nuetrality emanates from the fact that Dr. Reddy’s Laboratories chose to pay the appropriate duty while returning the goods to the appellant on 10.06.2004 - An assessee who defaulted payment of duty by violating Rule 8 has to be held to have not paid duty on the goods - when the duty-paid goods were received from Dr. Reddy’s Laboratories, it was open to the appellant to take CENVAT credit thereof, a course allowed by the law - If the appellant did not opt to enjoy that benefit, the Revenue cannot be prejudiced - Decided against Revenue. Denial of Cenvat credit under Rule 6 (1) of the CENVAT Credit Rules 2004 – Inputs procured used in job-work which is exempted final product - Benefit of Notification No. 214/86-CE - Held that:- Any job-worked goods cleared without payment of duty under Notification No. 214/86-CE cannot be said to be ‘exempted goods’ for purposes of the Rule - There is no other ground to deny the credit to the appellant – thus the denial of the credit to the appellant by the lower authorities is unsustainable in law – further there can be no penalty on the appellant - Decided in favour of Assessee. Courier Service is Input service or not - Denial of Cenvat credit on certain services – Services claimed as input service or not under Rule2 (1) of Cenvat credit rules 2004 - Held that:- Following COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others [2011 (3) TMI 248 - KARNATAKA HIGH COURT ] - Where the final products are exported, the port of export is the ‘place of removal’ - the ‘courier service’ would qualify to be ‘input service’ in terms of Rule 2(l) of the CCR 2004 as it was used for transportation of the goods from the factory to the port of export - the credit is admissible and the demand and the penalty set aside - Decided in favour of Assessee.

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• 2013 (12) TMI 756
  Motor Vehicle Parts being not exempted bearing the brand name of others found and seized – No registration taken - SSI exemption availed as the clearances were within the Exemption limit – Held that:- The appellant in addition to manufacture the goods of their own brand, were also manufacturing the goods bearing the brand name of other persons and as such in respect of the goods bearing the brand name of other persons, the SSI exemption was not available - The moment, to Appellant started manufacture of goods bearing the brand name of other person, which were liable to duty, they should have obtained Central Excise registration and started observing not Central Excise formalities - But the Appellant had neither obtained registration nor were observing any Central Excise formalities - the order upholding the confiscation of the seized goods and imposition of penalty is correct - the quantum of the redemption fine and the penalty which is equal to the assessable value of the goods, is on much higher side - the redemption fine is reduced and the penalty under Rule 25 is reduced - Decided partly in favour of Assessee.

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• 2013 (12) TMI 755
  Denial of credit on Service tax paid on fumigation of containers utilized for export of goods - Waiver of Pre-deposit – Assessee contended that the definition of input service is wide enough to cover not only input service but also activities relating to business - Held that:- Input service has been utilized by the applicants before the shipment of goods from the port – Following CCE & C vs. Hindustan Coca Cola Beverages P. Ltd.[2010 (1) TMI 288 - CESTAT, BANGALORE] - the tribunal allowed cenvat credit availed on pest control services - the applicants are able to make out a prima facie case for total waiver – Pre-deposits waived till the disposal – Stay granted.

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• 2013 (12) TMI 754
  Denial of credit on input service – Construction activity - Pre-deposit of Waiver – Held that:- Following CCE, Nagpur Versus Ultratech Cement Ltd., [2010 (10) TMI 13 - BOMBAY HIGH COURT] - the scope of definition of input service is wide enough to cover the activity of construction and maintenance of township under the definition of input service - the applicants have made out a prima facie case for total waiver – Pre-deposits waived till the disposal – Stay granted.

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• 2013 (12) TMI 753
  Imposition of Section 11A(2B) of Central Excise Act, 1944 – Liability to pay Interest and penalty - Credit taken without receipt of the goods into the factory – Manipulation of the private records – Held that:- A plain reading of Section 11A(2B) clearly shows that where duty has not been levied or paid short-levied or short-paid by reason of fraud or collusion or any willful misstatement or suppression of facts, then the provisions of Section 11A(2B) will not apply - , the respondent has reversed the credit that of without paying any interest – Following COMMISSIONER OF CENTRAL EXCISE, DELHI-III Versus MACHINO MONTELL (I) LTD. [2006 (7) TMI 23 - HIGH COURT OF PUNIAB & HARYANA (CHANDIGARH)] - If any of the element such as fraud, collusion, suppression or willful mis-statement are present, the provisions of Section 11A(2B) would not apply and interest and penalty would be imposable - the respondent has resorted to fraud and forgery, therefore, the order of the lower appellate authority setting aside the interest and penal liability is clearly bad in law – Order set aside and the matter restore tot the adjudicatory authority – Decided in favour of Revenue.

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• 2013 (12) TMI 752
  Affixation of labels/MRP before clearance – Payment of CVD on MRP basis – Held that:- The appellant undertook the process of affixing labels/MRP before the goods were cleared by the Customs and the goods were cleared on payment of CVD on MRP basis - MRP on which CVD was discharged is the same as that adopted for excise duty liability - the appellant has discharged the CVD liability on MRP basis, even it is assumed that the appellant is liable to pay duty, the appellant would be eligible for the benefit of Cenvat Credit of CVD paid and the CVD paid would be more or less the same as the excise duty demand – thus, insistence of pre-deposit to secure the interests of Revenue does not arise. As regards the duty demand of Rs.3.3 crore in respect of goods where CVD liability was discharged on transaction value basis, there may be some merit in the contention of the revenue that the activity of affixing labels and MRP enhancing the marketability of the products - the appellant would be eligible for Cenvat Credit of CVD paid on the imported goods which is approximately of Rs.1 crore - thus, additional duty liability on account of re-labelling, MRP affixation would be approximately Rs.2.3 crores - the appellant directed to make a pre-deposit of duty of Rs.2.3 crore – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2013 (12) TMI 751
  Retrospectivity of Provisions - the demand prior to 20.9.1991 covered under the provisions of Section 11D of the Central Excise Act or not – Held that:- Partial exemption was granted to the manufacturer of sugar who were covered under the notifications – The notifications never authorized sugar manufacturer to collect more excise duty and pay less and retain the difference – Following Kisan Sahkari Chini Mills Ltd. vs. CCE, Allahabad2005 (3) TMI 124 - SUPREME COURT OF INDIA] – the incentive granted to the sugar manufacturer does not permit them to collect more duty than what is payable to the Revenue department - the appellants are collective more duty from customers and are paying less with the Central Government. Suppression with intent to evade payment of duty – Held that:- The appellant filed classification list whereby the appellant claimed concessional rate of duty as per the Incentive Scheme - the corresponding sale bills show collection of higher duty form the customers - it cannot be said that the allegation of suppression with intent to evade payment of duty is not sustainable - the incentive granted to the sugar manufacturers did not permit them to collect more than what they had themselves paid from their customers - If they collected by way of excise duty more than what is dues, then by virtue of Section11D of the Central Excise Act, the assessee is bound to deposit excess amount with the Government - the incentives granted to be Appellants did not permit them to collect, more than what they had themselves paid, from their customers - If they collected by way of excise, more than what they had paid, then by virtue of Section 11D they were bound to deposit that amount with the Government – Decided against Assessee.

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• 2013 (12) TMI 750
  Condonation of delay – Held that:- The Revenue filed this appeal on 6.2.2004 - by letter dated 15.4.2004 the assessee filed the cross-objection on 19.4.2004 - the assessee filed the cross-objection in a letter within the stipulated period - they filed the cross-objection in proper form - As the cross-objection was originally filed within the stipulated period, the COD application filed by the assessee is dismissed as infructuous. Recovery of Duty and Interest – Held that:- The respondent/assessee was one of the units of National Textile Corporation (TN & P) Ltd. a Government of India undertaking - the assessee paid duty in the month of August 2001 from CENVAT account instead of PLA/cash during the period of forfeiture under Rule 8 of Central Excise Rules, 2001 – Following Noble Drugs Vs. CCE [2007 (7) TMI 327 - CESTAT, MUMBAI] - the period of forfeiture facility for payment of duty on fortnightly basis, is required to pay duty out of the PLA - The provisions of Rule 8(4) are pari material with Rule 173G(1)(e) and the non-obstantive clause was introduced by insertion of sub-rule 3A in Rule 8 of the Central Excise Rules, 2002, only w.e.f. 31.3.2005 - the recovery of duty and interest which shall be paid in PLA/cash are set aside – Decided against Revenue.

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• 2013 (12) TMI 749
  Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 – Personal penalty under Rule 26(1) Bogus invoices issued without supplying any materials – Held that:-There is no allegation against the appellant that he had dealt with any excisable goods which he knew or had reason to believe were liable to confiscation - Under Rule 26 of the Central Excise Rules, as the same stood during the period of dispute, penalty was imposable on any person who acquires possession or is in any way concerned in transporting, removing, depositing, keeping concealing, selling or purchasing, or in any other manner dealing with any excisable goods which he knew or had reason to believe, are liable to confiscation. The only provision for imposing penalty for taking Cenvat credit wrongly is Rule 15 of Cenvat Credit Rules, 2004 under which the penalty can be imposed on the person who takes the Cenvat credit wrongly - Cenvat credit has been availed by M/s. Asha Telecom Pvt. Ltd., not by Shri Ashok Verma, it is M/s. Asha Telecom Pvt. Ltd., who will be liable for penalty and not the Director of the appellant-company – Thus, Penalty under Rule 26 of Central Excise Rules is not sustainable – Decided in favour of Assessee.

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• 2013 (12) TMI 748
  Benefit of Notification No. 3/2006 – Waiver of Pre-deposit - Revenue was of the view that the product is 'white chocolate' which does not attract Sl. No. 16 of the notification – Held that:- The absence of cocoa butter in the product was found on verification of records of the assessee - presence or absence of cocoa butter was immaterial - As per HSN Notes, white chocolate should be necessarily composed of cocoa butter among other ingredients - This requirement is clearly discernible from the Explanatory Notes under HSN Headings 1704 and 1806 - Prima facie, the finding recorded by the adjudicating authority that the presence or absence of cocoa butter is irrelevant to classification of the goods as ‘white chocolate' is not legally or factually tenable – Pre-deposits waived till the disposal – Stay granted.

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• 2013 (12) TMI 747
  Denial of benefit of Notification No. 3/2006 – Concessional rate of duty - Revenue was of the view that the goods are “White Chocolate” and did not answer the description given at Sl. No. 16 – Waiver of Pre-deposit - Held that:- Prima facie the appellant has made case in their favour both on merits and on limitation - there is no categorical report of CFTRI that the sample was composed of cocoa butter - No other test report was available so as to find the presence of cocoa butter in the subject goods - The relevant HSN Note indicates that white chocolate is composed of sugar, cocoa butter, milk powder and flavouring agents - Even the dictionary meaning of ‘chocolate’ indicates cocoa butter as an essential ingredient of chocolate - In the absence of documentary evidence of presence of cocoa butter in the goods – Thus, the appellant made a good case against a major part of the demand of duty on the ground of time-bar – Pre-deposits waived till the disposal – stay granted.

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• 2013 (12) TMI 746
  Benefit of SSI Notification No. 89/95 – Fatty Acid, Soap Stock and Spent Earth used for processing of refining of crude oil Waiver of Pre-deposit - Revenue was of the view that these products are dutiable from 1.3.2006 when notification 115/75-CE was rescinded – Held that:- Following CCE Vizag Vs Jocil Ltd. [2010 (12) TMI 24 - Supreme Court of India] - there is no specific finding in respect of "Palm Fatty Acid" which is main disputed item giving rise to most part of the amount confirmed - The demand confirmed in respect of spent earth which prima facie appears to be a waste product is a few thousands only - the contention of the appellant that palm fatty acid is a waste product cannot be accepted – the appellant is directed to deposit Rupees One Crore as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• CST, VAT & Sales Tax

• 2013 (12) TMI 802
  Liability under the provisions of the Central Sales Tax Act, 1956 – Held that:- The State had not enforced the law in relation to the transactions relating the State Corporation, would not entitle the petitioner to claim that the State must refrain from enforcing the law as against the petitioner; by recording the submission made by the State that it was initiating action against the State owned Corporation for the recovery of tax on transactions which were similar to those like that of assessees – Relying upon South India Tanners and Dealers Association Vs. Deputy Commissioner of Commercial Taxes and others [2008 (9) TMI 545 - SUPREME COURT OF INDIA]. Levy of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 - Scope of 46th amendment to the Constitution of India - Whether the Forty-sixth amendment to the Constitution of India has done away with the doctrine of Mutuality – Held that:- The order of the Sales Tax Appellate Tribunal is unexceptional on the aspect of assessment on unincorporated body - the claim of the assessee itself does not appears to be a bonafide claim - the order of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act levied on the assessee upheld – Decided against Assessee.

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• 2013 (12) TMI 801
  Demand of tax - Rejection of books of accounts - Disparity in electricity consumption - Held that:- account books of the assessee revisionist stood rejected on a different ground and disparity in electric consumption was not the sole basis of the said rejection, the authorities were fully justified in taking aid of the electricity consumption of the assessee revisionist in making the assessment of the taxable turnover of the assessee revisionist - A perusal of assessment orders reveal that the assessing authority simply on the ground that the books of account have been rejected had made the best judgment assessment of the turnover in respect of the central sales also even though a finding was returned that the assessee revisionist has not shown any central sales. No other reason or any material in support so as to assess the assessee revisionist under the Central Sales Tax has been pointed out -In the absence of any material to show that the assesee revisionist was indulging any central sales, the authorities were not justified in making best judgment assessment in respect of central sales - Accordingly, the assessment of the taxable turnover under the central sales and consequential tax liability thereon is held to be illegal - Decided Partly in favour of assessee.

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