Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 20, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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LTCG – Assessee contended that since all the MOU were cancelled and the sale consideration kept in the Escrow account had been appropriated by DRDL, therefore no transfer can be said to have taken place - There was an extinguishment of assessee's rights over the shares - additions confirmed - AT
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Validity of assessment u/s 147 - If the AO treats the return filed belatedly to be a non est return then certainly the Assessing Officer could not have proceeded for making assessment u/s 143(3) - AT
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AO cannot deny the sources simply by saying that there is a gap of more than one month in the withdrawal of cash from one bank and deposit in another is not sufficient to doubt the sources - AT
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Share premium - additions u/s 68 - non-est company or a zero balance company - Revenue cannot question the charging of such of huge premium without any bar from any legislated law of the land - AT
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Because some profit has been earned by an assessee trust registration u/s. 12AA cannot be denied so long as provisions of sections 11, 12 and 12AA are complied with - AT
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Stamp duty valuation - The provisions of section 50C are applicable only in respect of capital asset, being land or building or both and there is no reference that the said provisions is applicable to stock in trade - AT
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Exemption u/s 54 - determination of cost of acquisition of new house property - Legal fees toward purchase of the new asset - Civil work expenses - Transfer charges builder seller - Expenses on improvement – Partly allowed in favour of assessee - AT
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Retainership fess - no relationship of an employer & employee - The fees received by assessee did not fall under the category of “Salary” but required to be taxed as “Professional Fees” - AT
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Demand u/s 68 read with Section 41(1) - Trading liability - genuineness of the entities against whom trading liabilities have been shown - additions deleted - AT
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Commission expenses – The assessee is an authorized dealer of vehicles, buses and others equipments - Merely having friends and relatives, adverse inference cannot be drawn - AT
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Accelerated depreciation - installation of plant and machinery - mproved design of tractors - improvements made thereon based on their own in house R&D efforts - Accelerated depreciation allowed - AT
Service Tax
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Demand on the ground that the additional amount collected by the appellants (stock-broker) from their clients as “transaction charge” is part of service charges - stay granted - AT
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Banking and other financial services u/s 65(125) (zm) of Finance Act – Scope of the term Financial Lease - the expression “any other body corporate“ in the definition of “Banking and other financial service“ must be read in ejusdem generis with the expression occurring prior thereto in the definition - AT
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Demand of service tax - transportation of baggage is not an individual or a separate service, but it is a part of transportation of passengers' service by air - stay granted - AT
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Whether the applicant is eligible for abatement of 67% in providing finishing thermal and acoustic insulation in buildings, with the use of mineral woods/gypsum slab in the roof slab - stay granted - AT
Central Excise
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Cenvat credit - fire in the factory - original documents for taking Cenvat Credit were never available with them and cenvat credit cannot be taken on the strength of Xerox copies of bills of entry under Rule 9 (1) of the Cenvat Credit Rules - AT
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Excess goods not clandestine removal – non accountal of the goods, which are not meant for clandestine removal would not attract penal provisions, inasmuch as mens rea for imposition of penalty is required - AT
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Cenvat Credit - When common inputs are used in the manufacture of dutiable and exempted products, the liability to pay the amount of 8% as it was applicable at the relevant time would arise only for final products and not for 'waste' - AT
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Eligibility for cenvat credit - Sweet on paste used to reduce the abrasion of machinery – the SOP has to be treated as an input and hence would be eligible for Cenvat credit - AT
VAT
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Interest on refund u/s 38(2) of the Gujarat Value Added Tax Act, 2003 – on plain reading of subsection (2) of Section 38 “order” includes provisional assessment order/ provisional refund order - HC
Case Laws:
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Income Tax
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2013 (12) TMI 959
Payment excedding Rs.20,000 made through crossed cheque - Violation of Section 40A(3) - Held that:- As per the Circular issued by the CBDT refers to the instructions issued by the Reserve bank of India to the banks in which the difference between a crossed cheque and account payee cheque has been brought out - Payments made by a crossed cheque cannot be considered as payment by account payee cheque. Law requires payments to be made by an account payee cheque and not by a crossed cheque - Section 40A(3) is neither subject to any reasonable cause nor to any exception. Once payment exceeding Rs. 20,000/- is shown to have been made otherwise than by account payee cheque drawn on a bank or account payee bank draft, the expenditure in respect of which such payment has been made cannot be allowed as deduction - All the conditions for the applicability of section 40A(3) are fully satisfied - Decided against assessee.
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2013 (12) TMI 958
Long term capital gain on sale of shares – Assessee contended that in the case of the assessee since all the MOU were cancelled and the sale consideration kept in the Escrow account had been appropriated by DRDL, therefore no transfer can be said to have taken place. - Held that:- The transfer of shares is complete in all respects from the assessee to the DRDL as there is extinguishment of rights of the assessee over the concerned shares - The conduct of the parties in executing the transfer forms by the sellers in favour of the buyer recording of transfers in the share certificates and books of accounts of the respective companies and the annual return filed before ROC clearly demonstrate that the intention of the assessee was to transfer the shares to the buyer DRDL for a consideration and the transaction is complete on delivery of share certificates and executing the instrument of transfer - In pursuance to the transfer of shares, control and management of all 13 companies were handed over to the buyer DRDL - Not only there are entries in the books of accounts of the transferor companies and transferee company but all other formalities under the provisions of the companies Act, 1956 like execution of instrument of transfer, recording of transfer in share certificates handing over the share certificates, books of accounts, all other records and documents as well as control and management of the companies have been carried out which proves that there is transfer of shares to the buyer DRDL - There was an extinguishment of assessee's rights over the shares – Decided against assessee. Advance from several persons – Held that:- The assessee failed to explain the deposits by furnishing the names and addresses, amounts received etc., and even confirmation letters were also not produced by the assessee - Before the CIT (A), the assessee submitted that the sum was refund of advance previously made and has been duly disclosed in the books of accounts – The assessee failed to substantiate his claim – The issue was restored for fresh adjudication. Unsecured loan taken – Held that:- The assessee has failed to furnish any evidence to prove the source of creditor's past savings – The assessee has not submitted PAN and Bank statement of the creditor before the lower authorities - The assessee has submitted the PAN and bank statement of loan creditor before the CIT (A) - The CIT (A) has confirmed the addition without considering the evidences submitted by the assessee – The issue was remitted back to the file of the Assessing Officer for fresh adjudication after taking into account the evidences produced by the assessee.
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2013 (12) TMI 957
Sale of ‘Prosopis Juliflora' - Agricultural income or not - AO observed that the assessee could not specify the actual mode of cultivation, as initially it claimed that it had used the plants supplied by the Forest Department free of cost, and subsequently, on being required to furnish evidence from the forest depart. - as per AO the assessee was itself in doubt about the very basis of the cultivation contentedly carried out in 140 acres.. Held that:- The facts brought on record show that the assessee has sold the crop to various persons after growing the said crop - The assessee filed details pertaining to the said crop viz., sales receipts etc. to the department - The department when recording his statement, the department not only to furnish the statement of the proprietor to the assessee but also an opportunity of cross-examination shall be given to the assessee and opportunity of such cross examination is one of the corner-stones of natural justice - The authorities cannot draw adverse inference on the basis of the statement of the Proprietor of M/s Raghavendra Seeds & Pesticides and the claim of the assessee has to be accepted on the basis of evidences on record brought by the assessee - Decided in favour of assessee.
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2013 (12) TMI 956
Validity of assessment u/s 263 - Held that:- As per section 263 - CIT must have some material(s) which would enable him to form a prima facie opinion that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue - The AO cannot revise an order on grounds regarding which the assessee was not show cause otherwise also the assessment order was made u/s 147/148 r.w.s. 143(3) of the Act and the AO has computed assessee's income after making reasonable and due inquiries - The assessee is not found to have been indulging in the purchase and sales of any immovable property - The twin condition of Section 263 are not fulfilled and, thus, the order cannot be revised - Decided in favour of assessee.
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2013 (12) TMI 955
Whether consultancy charges and travelling expenses are capital in nature - Held that:- The assessee has paid consulatncy fee for rendering services of fleet management service and providing security products and networking solution - The payment made under consultancy agreement has to be allowed as revenue expenditure when the genuineness of the payment has not been doubted - The assessee has started a new line of business in the service industries - Such an expenditure has to be allowed as revenue and cannot be held as capital expenditure or can be capitalized in the books of account - Following Empire Jute Co. Ltd. v. CIT [1980 (5) TMI 1 - SUPREME Court] - If there is continuity of business with common management and fund, then even if the assessee has started a new line of business in this year, the payment made for carrying out such running of new business, is nothing but a business expenditure which has to be allowed in the year in which it has been incurred - There is no augmentation of asset to the assessee but has helped the assessee to develop a proper guidance for running the new line of service industries - Decided in favour of assessee.
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2013 (12) TMI 954
Validity of assessment u/s 147 - Held that:- It is apparent from the materials on record as well as the remand report submitted by the Assessing Officer, no notice either u/s 143(2) of the Act or section 142(1) of the Act was issued to the assessee before completing assessment - If the Assessing Officer treats the return filed belatedly to be a non est return then certainly the Assessing Officer could not have proceeded for making assessment u/s 143(3) of the Act - Following Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] - The requirement of issuing notice u/s 143(2) of the Act is a mandatory requirement and not a curable procedural irregularity - When the statute requires an act to be done in a particular manner, then it has to be done in that manner only - The Assessing Officer has completed the assessment u/s 143(3) read with section 147 of the Act without issuing any notice u/s 143(2) as per the statutory mandate, the assessment order passed is legally unsustainable - Decided against Revenue.
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2013 (12) TMI 953
Depreciation on fixed assets - Held that:- The major portion of the depreciation has been disallowed because the assessee did not present adequate proof regarding the additions to the fixed assets - Enough time was not given to the assessee to produce sufficient evidence and the same has been mentioned in the written submissions also - The issue was restored for fresh adjudication. Depreciation on UPS - Held that:- UPS is an essential component of a computer system and ensures data integrity through uninterrupted supply of power - This is a dedicated system for computers only. Therefore, the depreciation rate to be allowed is 60% - Decided against assessee. Depreciation on library books - Held that:- The cost of the books is less than Rs. 5,000 - 100% depreciation claimed by the assessee is to be allowed - Decided in favour of assessee. Exemption u/s 10A - Held that:- Following Gemplus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - Even if the disallowance is sustained, it will only go to increase the business profits of the assessee which is exempt u/s 10A - Assessing Officer is directed to recompute the deduction after taking into account disallowances made - Decided in favour of assessee.
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2013 (12) TMI 952
Unexplained sources of deposits - Held that:- The sources of deposits in one account has been explained to be out of sale of sugarcane - Sufficient cash was available with the assessee for deposit in the joint account - The Assessing Officer has nowhere denied that assessee was owning 275 acres of land in which agricultural operations were conducted - Assessing Officer cannot deny the sources simply by saying that there is a gap of more than one month in the withdrawal of cash from one bank and deposit in another is not sufficient to doubt the sources - There can be various reasons for such a gap and the gap of 1 ˝ month is not a large gap so as to raise suspicion – Decided in favour of assessee.
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2013 (12) TMI 951
Tax not deducted at source on transponder fees paid to non-resident - Held that:- Ld. CIT(A) simply relying upon the decision of Hon'ble Delhi High Court in Asia Satellite Telecommunication Co. Ltd. [2011 (1) TMI 47 - DELHI HIGH COURT] has granted relief to the assessee without discussing the provisions of applicable treaty - In the decision of Mumbai ITAT in Channel Guide India Ltd. v. Asstt. ACIT [2012 (9) TMI 95 - ITAT MUMBAI] which has been relied upon by the assessee - There is a discussion in detail regarding applicable treaty which in the present case is stated to be DTAA of India with Malaysia - The issue was restored for fresh adjudication.
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2013 (12) TMI 950
Rectification of mistake - Order resulted in additional burden on the assessee - Held that:- When an appeal is preferred before the Tribunal by any of the parties, the Tribunal is supposed to pass appropriate order as it may deem fit in the appeal preferred by any of the parties - It is immaterial whether such order will benefit one or the other of the parties in the process it might be in favour of a party, who had not preferred the appeal, particularly, when the principle of law is laid down and on such legal principle the appellant may not entitled to any relief - There is nothing to prevent the Tribunal from passing appropriate order in such an appeal preferred by one of the parties even though it might amount to granting of relief to a party, who did not prefer any appeal - The Tribunal is not supposed to pass an anomalous order - Neither can it create a confusing state and permit confusion to continue, nor can it pass an incongruous order. It has to decide the case irrespective of the fact as to whether it would amount to granting relief to the other party who did not prefer the appeal - Following CIT v. Assam Travels Shipping Service [1992 (9) TMI 2 - SUPREME Court] - Tribunal is having no such power to make a review. There was no mistake in the order of the Tribunal much less any mistake apparent on record - Decided against assessee.
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2013 (12) TMI 949
Treatment of share premium - additions u/s 68 - Issue of shares sham transaction – Held that – No doubt a non-est company or a zero balance company asking for a share premium of ₹ 490/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. The subscribers to the share capital are all companies - The confirmations of the transactions have been received by the AO by issuing notice u/s. 133(6) - Identity of shareholders has been established beyond all reasonable doubts - The Revenue authorities have not questioned the identity of the share holders - The genuineness of the transaction can also be safely concluded since the entire transaction has been done through the banking channels duly recorded in the books of accounts of the assessee duly reflected in the financial statement of the assessee - Not even a single evidence could be found which could lead to the entire transaction as sham - The share holding pattern also cannot be said to generate any transaction which could be said to be sham - The share holders in all the related transaction under issue are directly or indirectly related to the Government of India - The Revenue authorities have erred in treating the share premium as income of the assessee u/s. 56(1) – The application of funds would be in the subsidiary companies – Decided in favour of assessee. Commencement of business – Held that:- The assessee company received certificate of commencement of business on 29.04.2008 – The main objects of the company shows that one of the main object of the company is that of financing, investing, sourcing, operating, green or clean technology products and services that optimize the use of natural resource or reduce the negative environmental impact - the assessee company has in fact set up three subsidiary private limited companies - One of this subsidiary private limited company has stated generating electricity as per the certificates given by the Tamilnadu State Electricity Board - All the legitimate expenses including depreciation are allowable – Decided in favour of assessee. Interest on fixed deposit – Held that:- The frequency and holding period of purchase of fixed deposits by the assessee shows that the intention of assessee is to earn interest income – Following CIT v. Indo Swiss Jewels Ltd. [2005 (9) TMI 47 - BOMBAY High Court] - The interest income is to be taxed under the head business income - Decided in favour of assessee.
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2013 (12) TMI 948
Recalling of Tribunal's order - Held that:- As per section 254 - If there is a mistake, then an amendment should be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision - The power to rectify a mistake under s. 254(2) cannot be used for recalling the entire order - Following CIT v. Hindustan Coca Cola Beverages [2006 (10) TMI 125 - DELHI High Court] - The power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified. Following CIT v. Karam Chand Thapar & Bros. (P.) Ltd. [1989 (2) TMI 5 - SUPREME Court] - The decision of the Tribunal has not to be scrutinised sentence by sentence merely to find out whether all facts have been set out in detail by the Tribunal or whether some incidental fact which appears on the record has not been noticed by the Tribunal in its judgment - If the court finds that it has taken into account all relevant material and has not taken into account any irrelevant material in basing its conclusions, the decision of the Tribunal is not liable to be interfered with, unless, the conclusions arrived at by the Tribunal are perverse - Decided against assessee.
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2013 (12) TMI 947
Registration u/s 12AA - Held that:- The activities conducted by the assessee are basically aimed at improving the knowledge and competence of its members - Income from programme revenue derived by the society during each year, is not as per the objects of the society - The DIT(E) didnot carried out any enquiry into the objects of the society - Where no activity is commenced, the question of making any enquiry regarding any activity by the DIT(E) would not arise. The nature of enquiry would depend on the facts of each case. As per the amendment by Finance Act, 1983 w.e.f. 1st April, 1983 - The clause "not involving carrying any activities of profit" were omitted from this definition by the Legislature - Therefore, after such omission, the element of profit cannot be excluded from the definition "charitable purposes" u/s 2(15) of the Act - As per section 10(22) - Income of any activities cannot be exempted unconditionally if such institution also exists for deriving of profit - Such institution can claim exemption u/ss. 11 and 12 as element of profit is not excluded by the Legislature - As per Section 11 in order to claim exemption such institution must apply 75% of its income for charitable purposes. The surplus if any has to be invested in specified bonds - Because some profit has been earned by an assessee trust registration u/s. 12AA cannot be denied so long as provisions of sections 11, 12 and 12AA are complied with. - Decided in favour of assessee.
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2013 (12) TMI 946
Stamp duty valuation - stock in trade - Held that:- The assessee has disclosed the property in trial balance for all the years from 2000-01 to 2005-06 as part of stock in trade - The assessee was in the business of construction and development rights purchased by the assessee is part of stock in trade - The assessee could not get possession of the said property till the date the assessee transferred his rights in the said property to M/s Jajodia and Patel Properties - The assessee has treated the said property as stock in trade - The provisions of section 50C are applicable only in respect of capital asset, being land or building or both and there is no reference that the said provisions is applicable to stock in trade - The sale value as per agreement for sale of development rights under the facts and circumstances of the case is genuine - Decided against revenue.
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2013 (12) TMI 945
Exemption u/s 54 - determination of cost of acquisition of new house property - Legal fees toward purchase of the new asset – Held that:- The purpose for which the fees stands paid cannot be a matter of presumption - The seller-builder keep at hand all the approvals, clearances, title deeds, NOC, etc., toward execution of the sale agreement - In the absence of any evidence with regard to the actual work undertaken, this amount cannot be considered as forming part of the cost of purchase of the new asset - Decided against assessee. Civil work expenses – Held that:- Civil work comprising re-plastering, re-tiling, waterproofing, re-wiring and installation of full length grills for safety, was done which was for the interior work and renovation – The assessee has much before the renovation work occupied the house property - The modifications being made did not impact inhabitable state of the residential property - The work done, as a perusal of the bill would show, is toward upgrading interiors, interior designing, extending to curtains. – Decided against assessee. Transfer charges builder seller – Held that:- No material evidence was provided by the assessee to support the claim, so that the purpose for which the money is given is not known – However the AFS contained a clause that legal charges and security to be deposited by the buyer with the owner-builder which would cover the cost for formation of the (housing) society and it registration, and for the preparation of the AFS and conveyance – The details of the expenses were not given - Decided against assessee. Expenses on improvement – Held that:- Any house property would necessarily warrant being kept in a state of good repairs - Merely because repairs are not carried out for a number of years together, leading to incurring expenditure in lumpsum or in a huge sum, would not by itself make it capital expenditure - The same is only by way of substantial repairs, i.e., that had accumulated over the past decades - Some cost incurred toward improvement cannot be denied, the same is estimatedat Rs. 1.50 lacs, i.e., at around 20% of the expenditure claimed to have been incurred – Partly allowed in favour of assessee.
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2013 (12) TMI 944
Retainership fess - Income from salary or income from profession - Held that:- Following CIT Vs. Apollo Hospital International Ltd [2012 (8) TMI 459 - GUJARAT HIGH COURT] - In a situation when the terms of the employment/contract are such that no relationship of an employer & employee could be established then it is not justifiable on the part of the Revenue to treat an assessee as an employee of the said Institute - The fees received by assessee did not fall under the category of “Salary” but required to be taxed as “Professional Fees” - the AO is directed to examine the nature of expenditure whether incurred to earn the professional service – Decided in favour of the assessee. Disallowance of expenses - Held that:- In above ground it is held that the income is professional fee - This issue is remitted for fresh adjudication to decide whether the expenses are allowable u/s 37 or not.
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2013 (12) TMI 943
Trading liability - genuineness of the entities against whom trading liabilities have been shown - assessee contended that if wants to make the addition on account of bogus credit u/s 68. Then, it has to be made in the year in which the credits were recorded first time. It is a carry forward from the earlier year, the AO has not disputed this aspect. If AO wants to make addition on account of cessation of liability u/s 41(1) of the IT Act then, the liability has not ceased, assessee has partly made the payment during this year and remaining in the next year. - Held that:- The reasoning of the ld. CIT (A) is that assessee failed to produce bank details of Raj Industrial Corporation indicating the credits of the amounts debited from its account. To our mind, it is a little too higher technical approach the assessee can produce its accounts, a certificate from its banker. It is to be seen that, why it will pay an amount to some unknown entity. - Decided in favour of assessee. Demand of CENVAT - Held that:- It is an additional liability of the taxes. It is not related to any penalty - The AO has observed that it is panel in nature but how it is penal in nature AO has not observed this fact - Decided against Revenue.
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2013 (12) TMI 942
Transfer price adjustments - arm's length price (ALP) - Held that:- there is no cogent basis for sustaining the addition made with regard to the payment of technical fee, training fee, testing expenses, payment of modification of tools and payment of design and development expenses. - DRP has not given any cogent reasons. - No additions - Decided in favor of assessee. Whether the matter should be remanded back - Held that:- TPO has made the elaborate order whereby he has only dealt with royalty aspect and not dealt with the other allied payments. The royalty payment has been allowed by the DRP. In these circumstances, assessee will be put to great hardship, if the TPO is given a second inning to make out a fresh case. - Decided against the revenue. Excessive and unreasonable expenses u/s 40A(2) - Secondment of employees - AO in the assessment order amongst other things, has alleged that the expenses are bogus in nature and the same have been booked by way of some tax avoidance measures. However, the Assessing Officer towards the end, has allowed 50% of such expenses as excessive and unreasonable - Held that:- DRP has also affirmed Assessing Officer's action by stating that claim of assessee that 17% of the time of employees of MIL has been spent for the assessee is also without any supporting evidence. Thus, we find that there is conflict between submissions of the assessee and finding by the authorities below. - Issue remitted back.
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2013 (12) TMI 941
Travelling expenses – Held that:- The assessee has incurred the expenditure wholly and exclusively for the purpose of the business of the assessee, the ad- hoc disallowance cannot be made - The expenditure incurred for the purpose of business is allowable under Section 37 – Decided in favour of assessee. Commission expenses – Held that:- The assessee is an authorized dealer of vehicles, buses and others equipments - Considering the nature of business wide convincing and liaison work is required for selling these vehicles particularly which are to be supplied to schools colleges and charitable institution etc. The concerned parties have clearly established and identified the vehicles sold through bill number date and parties to whom the vehicles were sold - The nature of assessee's business are that such liaison work is necessary for selling and such liaison work is in the form of service rendered for selling the vehicles - Merely having friends and relatives, adverse inference cannot be drawn particular by under the circumstances of the case and it is established that these persons have rendered service against the commission paid – Decided in favour of assessee.
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2013 (12) TMI 940
Accelerated depreciation - Held that:- Following assessee's own case for the A.Y. 2006-07 - As per Rule 5(2) of I.T Rules and the certificate (P.B-II) issued by the Ministry of Science and Technology, Department of Scientific & Industrial Research, New Delhi dated 15.6.2007 - Plant and machinery installed during the Financial Year 2005-06, are for improved design of tractors in the plant set up for the manufacture of agricultural tractors, Harvester combines and Industrial forklifts based on technology originally acquired from Central Mechanical Engineering Research Institute, Durgapur (CMERI) and improvements made thereon based on their own in house R&D efforts - Assessee satisfied the requisite conditions for accelerated depreciation and the revenue failed to bring evidence on record to rebut such evidences - Decided against Revenue. Repair and maintenance - Held that:- Following assessee's own case for the A.Y. 2006-07 - The expenditure was incurred by the assessee on renovation of floors, ceiling, painting etc. The expenditure is duly allowable in the hands of assessee being current repairs - The expenditure incurred on purchase of carpets being replacement of existing asst is an allowable expenditure - Such expenditure incurred by the assessee cannot be regarded as capital expenditure, where the claim is in the nature of repair and replacement - Decided against Revenue.
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Customs
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2013 (12) TMI 939
Denial of benefit of exemption Notification No. 103/2009 - Demand of duty along with redemption fine and penalty - Clearance under EPCG scheme - Classification under Customs Tariff Heading 6802 92 00 or Customs Tariff Heading 6802 22 00 - Held that:- adjudicating authority has classified the impugned goods under Customs Tariff Heading 6802 29 00, which is not in dispute. Therefore, the appellants are entitled for classifying the same under Customs Tariff Heading 6802 29 00 as per ITC (HS) Policy and entitled for benefit of Notification No. 103/2009 under EPCG scheme - Decide in favour of assessee.
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2013 (12) TMI 938
Anti Dumping duty - Denial of benefit of Notification No. 49/2009-Cus., dated 15-5-2009 - Goods imported from China - Held that:- there is no sample has been drawn and it has not been verified by the Revenue before issuing the less charge notice for demanding the Anti Dumping duty that these tapes are made up of Iron-Steel/Fiber glasses even though they could have been verified by inspecting the appellant’s stock/appellant’s buyers, the demand of duty by invoking Notification No. 49/2009 is not sustainable in the absence of any evidence on record - Decided in favour of assessee.
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2013 (12) TMI 937
Violation of principles of natural justice - Notice of hearing not served - Held that:- on 19-3-2008 hearing took place and it was recorded that the persons whose statements have been recorded and who has been asked to appear on 18-19-3-2008 and had not appeared for the same. Thereafter, it is further recorded that “since the noticees to appear for personal hearing to those persons have been sent by post and the said persons were not present. It is requested that the Presenting Officer to ensure that the notices for hearing to be held on 26-27-3-2008 be served to the persons at their residential addresses, the undersigned would be getting the letter served at their office premises - AR failed to produce the records whether notices of hearing for 26-27-3-2008 was served on the persons or not, as the same is not available in the records, therefore, presumption goes against the Revenue. It is held that notices for the hearing to be held on 26-27-3-2008 were not served on the appellant as directed by the Inquiry Officer - principles of natural justice has been violated, therefore, the inquiry proceedings were held in the back of the appellants and the same are liable to be set aside - Decided in favour of assessee.
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2013 (12) TMI 936
Extension of stay application - Penalty u/s 12(b) - Held that:- Tribunal has directed continuation of the stay order, in case of pendency of reference application before the Hon’ble High Court. As such, while taking into account the fact that the applicant has already deposited an amount of Rs. 5 lakh and reference application filed before the Hon’ble High Court stands admitted, we extended the Stay Order No. S/401/2001-NB (D), dated 22-8-2001 [2001 (8) TMI 766 - CEGAT, NEW DELHI] and hold that the same will continue to be in force till the final disposal of the reference application by the Hon’ble High Court - Stay extended.
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2013 (12) TMI 935
Interest on the Refund sanctioned belatedly - Revenue contends that Assessee has never made a claim for interest - Commissioner (Appeals ordered for payment of interest - Held that:- In case of any refund claim made, Section 11B of the Act specifically provides that any person claiming refund has to make an application. By reading these two Sections together, it becomes quite clear that the interest is required to be granted when the claim is sanctioned beyond a period of three months from the date of application. In this case, the Commissioner (Appeals) on an appeal filed by the Respondent Assessee, has allowed the interest which is admissible to them as per law - When the issue involved is settlement of refund claim, the date of filing the application is not relevant, whereas for the purpose of interest, the date of filing the application has to be taken into account. Under these circumstances, we find that the impugned order passed by the Commissioner (Appeals) is proper and correct and needs no interference - Decided against Revenue.
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Service Tax
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2013 (12) TMI 974
Sta application - Construction of residential complex - Held that:- appellant had engaged a contractor and the contractor had paid tax to the tune of Rs.1.80 crores. This submission, which required detailed verification, appears to have influenced the Bench to call for a lower level of deposit. For the period under dispute in the present appeal, no such evidence has been produced and therefore a higher amount of pre-deposit should be called for since the matter is already decided against a similarly placed assesses in the case of LCS City Makers Ltd. Vs CST Chennai - [2012 (6) TMI 363 - CESTAT, CHENNAI] - Prima facie case against assessee - Stay denied.
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2013 (12) TMI 973
CENVAT Credit - GTA Service - Abatement under Notification No.32/2004 - Held that:- CBEC has issued instructions that consolidated declaration from the concerned transport operators would be sufficient for granting abatement under Notification No. 32/2004-ST. This declaration can be produced even at a later stage. Most of the transport operators are individuals who are registered for payment of any service tax or excise duty. Since this condition is with reference to the transporter and not with reference to applicant, the applicant should be given more time to produce necessary evidence. Therefore, at the present stage, we consider it proper to waive the requirement of predeposit of dues arising from the impugned order for admission of the appeal and stay its collection during the pendency of the appeal - Prima facie case in favour of assessee - Stay granted.
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2013 (12) TMI 972
Stay application - Demand of service tax - Receipt of amount from the Foreign Exchange Department, Kolkata in the nature of FOREX trading / dealing or otherwise as FOREX - Held that:- There is no dispute that the amount was transferred from the Kolkata Branch to the applicant’s Branch. It is also seen from the adjudication order that this amount is in relation to the profit arising out of the FOREX transaction credited to exchange and commission account of the branch. We find that the Tribunal in the applicant’s own case allowed the appeal with the observation that tax is not leviable on the profit earned out of dealing in foreign exchange. In view of that the applicant has made out a prima facie case for waiver of predeposit of the entire dues - Prima facie case in favour of assessee - Stay granted.
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2013 (12) TMI 971
Stay Application - Demand confirmed on the ground that the additional amount collected by the appellants (stock-broker) from their clients as “transaction charge” is part of service charges and this amount cannot be excluded from the gross value - Held that:- Tribunal in the case of First Securities Pvt. Ltd. Vs Commissioner - [2007 (6) TMI 33 - CESTAT, BANGALORE] held that amounts collected towards transaction charges by the assessee cannot be equated with the brokerage or commission. In the case of LSE Securities Ltd. Vs CCE Ludhiana - [2012 (6) TMI 364 - CESTAT, New Delhi], the Tribunal held that the amount received by the assesssee under the head of turnover charges, stamp duty, BSE charges, SEBI fees and DEMAT charges could not be taxed. Ld.AR relied upon the decision of the Tribunal in the case of Sriram Insight Share Brokers Ltd. Vs CST Kolkata - [2008 (6) TMI 185 - CESTAT, KOLKATA] wherein part deposit was directed. We find prima facie Tribunal in the final order held that this transaction charges should not be included in the taxable value - Prima facie case in favour of assessee - Stay granted.
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2013 (12) TMI 970
Stay application - Demand of service tax - Exemption Notification No. 1/2006-ST - Whether providing of finishing services, in continuation or as part of the construction of complex service would amount to providing a distinct service falling within the re-strive clause of the exemption notification which provides that exemption would not apply where the taxable service provided is only completion and finishing services - Held that:- Prima facie case in favour of assessee - Stay granted partly.
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2013 (12) TMI 969
Demand of service tax - Supply of gas in reusable and returnable containers - Held that:- The transaction does not involve in supply of tangible goods for use at all. The appellant imported helium gas and the helium gas has to be filled in reusable and returnable containers. The supply of cylinders is part of sale of gas and it is not a separate activity in itself and therefore, the rental charges for the cylinders form part of the value of the goods sold. In view of the above, the clarification given by Joint Secretary (TRU) does not apply. Accordingly, we prima facie view that the appellants has made out a strong case in their favour for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of dues adjudged against the appellant and recovery thereof is stayed during the pendency of the appeal - Decided in favour of assessee.
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2013 (12) TMI 968
Banking and other financial services u/s 65(125) (zm) of Finance Act – Scope of the term Financial Lease - Service provided to customer by a banking company or a financial Institution in relation to banking and other financial services attracted service tax – Held that:- The lease agreements are not financial lease agreements, the same would not be exigible to service tax under section 65(105) (zm) r.w. section 65(12) company can be said to be rendering "banking and other financial services" only if its transactions with the customers are of financial nature - even during the period price to 01.06.07 when there was no definition of the term "Financial Leasing" in Section 65(12), this term did not cover the operating lease agreements in which there is no clause giving the lessee, at the end of the lease period, entitlement to purchase the asset an option to purchase the asset. In absence of its definition in it, is to be interpreted in the sense in which it is understood in common parlance or trade parlance – no infirmity in the impugned order - as decided in National Oxygen Ltd. Vs. CCE Pondichery (2007 (4) TMI 41 - CESTAT, CHENNAI) reported in has held that the expression "any other body corporate" in the definition of "Banking and other financial service" must be read in ejusdem generis with the expression occurring prior thereto in the definition - there is no evidence to show that the lessee agreements cover 75% or more of the estimated economic life of the leased assets – Decided against the revenue.
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2013 (12) TMI 967
Demand of service tax - Imposition of penalties under Section 76, 77 and 78 - Transportation of Goods by Air - Held that:- principal service involved in the present case is transportation of passengers by air. While rendering the services to passenger, his baggage is also transported free of cost within specified limits and the cost of transportation of baggage is included in the fare of transportation of the passenger by air. When the weight of the baggage exceeds the free allowance limits, they collect excess baggage charges from the passengers, and this does not mean that they are transporting goods by air. Transportation of baggage is not an individual or separate service, but it is a component of the principal service, and the principal service is transportation of the passenger by air - transportation of baggage is not an individual or a separate service, but it is a part of transportation of passengers' service by air - appellant had made out a strong prima facie case for complete waiver of pre-deposit. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeals - Stay granted.
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2013 (12) TMI 966
Waiver of pre deposit - Insurance premium paid by the lender - Reverse charge mechanism - Held that:- While waiving the penalty on the applicants the learned Commissioner have invoked Section 80 of the Finance Act which provides waiver of penalty in case the assessee proves that there was reasonable cause for the said failure. There are several decisions of this tribunal e.g. in the case of Solitz corporation vs commissioner of Service Tax, New Delhi – (2008 (10) TMI 35 - CESTAT NEW DELHI), M.P. Water & Power Management Institute vs CCE Bhopal – [2009 (1) TMI 17 - CESTAT NEW DELHI) and Indian Petrochemicals Corpn. Ltd. vs. CCE Vadodara – (2008 (4) TMI 651 - CESTAT, AHMEDABAD) wherein this Tribunal has held that when a penalty by invoking Section 80 of the Finance Act, 1994 has been dropped the extended period of limitation is not invokable - Prima facie the applicant has made out a case for waiver of entire demand of dues adjudged in the impugned order. - stay granted.
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2013 (12) TMI 965
Abatement of service tax - Notification No.1/2006-ST, dated 01.03.2006 - Completion and Finishing Service - Whether the applicant is eligible for abatement of 67% in providing finishing thermal and acoustic insulation in buildings, with the use of mineral woods/gypsum slab in the roof slab - Held that:- assessees have made out a strong prima facie case for waiver as the contracts entered into with their customers involved use of materials in addition to service, as seen from the various work orders received from the customers and, therefore, even if the services rendered by the assessees were in the nature of "finishing and completion services", prima facie, service tax cannot be levied on materials (goods) - Following decision of Lloyd Insulation (India) Ltd. Vs Commissioner of Service Tax Chennai [2010 (9) TMI 633 - CESTAT, CHENNAI] - Stay granted.
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2013 (12) TMI 964
Waiver of pre deposit - Penalty u/s 84 - Revisionary power of Commissioner - Held that:- Commissioner as a revisionary authority has given the reasoning that the service tax liability evaded was for the period 2005-06 and hence, penalty is imposable under Section 76 of Finance Act, 1994. In my considered view, prima facie, the appellant has made out a case for waiver of pre-deposit as, if the provisions of Section 78 and sub section 5 [Section 78(5)] clearly hold, that penalty imposed is equal to the amount of service tax liability escaped, penalty under Section 76 cannot be imposed during the relevant period - Stay granted.
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2013 (12) TMI 963
Stay application - Business Support Services - Penalties under Sections 77 & 78 - Held that:- adjudicating authority, has recorded that the amount has been written off in the books of account of the appellant in respect of their associated enterprises. Since the amount has been written off, it would not amount to receipt of any payment to the appellant, on which, the Service Tax liability, prima facie, would arise - Following decision of Sify Technologies Ltd. v. CCE Chennai [2010 (11) TMI 232 - CESTAT, CHENNAI] - Stay granted.
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2013 (12) TMI 962
Demand of service tax - Outdoor Catering Service - Vat paid on services - Assessee claimed that since VAT has been paid therefore they are not liable to pay service tax - Held that:- other part of “Outdoor Catering” was the service rendered by the assessee in bringing the food articles to a place designated by the client and that the service so rendered by the assessee which included the cost of transporting the food articles constituted taxable service - appellant has prima facie case against the demand of service tax under the head in respect of the cost of food items - Following decision of Commissioner of Service Tax v. LSG Sky Chefs (India) Pvt. Ltd. [2011 (4) TMI 911 - KARNATAKA HIGH COURT] - stay granted.
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2013 (12) TMI 961
Demand of service tax - Manpower Recruitment or Supply Agency Services - Held that:- appellants are engaged in the activity of crushing of stones and supply the same to their customers as per agreement entered between them on rate contract basis. In the earlier period a similar issue came before the Tribunal in the case of Divya Enterprises v. CCE, Bangalore as reported in [2009 (12) TMI 155 - CESTAT, BANGALORE ] wherein the appellant was executing the work of loading, unloading, bagging, stacking etc. on contract basis. In that case also the department was of the view that the appellant was liable to pay service tax under the category of Manpower Supply Services wherein the Tribunal has held that lump-sum work are given to the appellant for execution and this lump-sum work would not fall under the category of providing of service of supply of manpower. Therefore, following the precedent decision in the case of Divya Enterprises, we hold that the activity undertaken by the appellants does not cover by the manpower supply services - Decided in favour of assessee.
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2013 (12) TMI 960
Demand of service tax - Business Support Service - Held that:- present demand of service tax is under Section 66A of the Finance Act, 1994 (reverse charge mechanism). If that be so, there is a revenue-neutral situation - In this scenario, there will be waiver of pre-deposit and stay of recovery in respect of the adjudged dues - Stay granted.
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Central Excise
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2013 (12) TMI 934
Order of pre-deposit of 25 % of the duty challenged - Percentage of burning loss claimed by the appellant rejected – Held that:- in another matter Commissioner (Appeals), Customs and Central Excise observed that, burning loss of 4.92% is within the norms of 2 to 6-7% prescribed by the National Institute of Secondary Technology - thus, the Tribunal may be directed to reconsider the appellant's prayer for waiver of the condition of pre-deposit - the wastage and burning loss claimed by the appellant is in the permissible limit and demand of duty raised in the impugned order is not sustainable – thus, imposition of interest and penalty is irrelevant – order set aside and the matter remitted back to the CESTAT to consider the application for pre-deposit – Decided in favour of Appellant.
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2013 (12) TMI 933
Inclusion of value of deemed export - Whether value of deemed export is required to be excluded while determining FOB value of export for the purpose of computation of value of the Exim Policy – Following M/s. Amitex Silk Mills P. Ltd. vs. CCE, Surat-II-I [2007 (7) TMI 279 - CESTAT, AHMEDABAD] - the value of deemed export should be included while determining the FOB value of export – Decided against Revenue.
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2013 (12) TMI 932
Cenvat credit availed on the basis of Xerox copies of the bills of entry - Original duty paying documents not made available by the appellants – Held that:- No efforts were made by the appellants to approach Jurisdictional Officer for necessary certification regarding duty paid nature of inputs - original bills and entry were never available with the appellants and that is why straightway after receipt of show cause notice they started justifying their claim on the lines of receipt and utilization of inputs in the manufacturer of finished goods - immediately on receipt of show cause notice the appellant should have come forward with the original copies of bills and entry to justify that cenvat credit was properly taken. Copy of FIR only talks about the fire in the factory and not about the loss of the concern bills of entries - Because no such discussion is coming out from the order in original that appellant has claimed the originals to have been lost in a fire - The fire, if any must have broken out only after adjudication proceedings got completed - the contention of the appellants that the original bills and entry were destroyed in the fire and were not available, is not acceptable - original documents for taking Cenvat Credit were never available with them and cenvat credit cannot be taken on the strength of Xerox copies of bills of entry under Rule 9 (1) of the Cenvat Credit Rules - the cenvat credit has been correctly denied to the appellant and penalty has been correctly imposed by Commissioner (A) – Decided against Assessee.
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2013 (12) TMI 931
Excess goods not clandestine removal – Clerical mistake - Held that:- There is clear finding by the Commissioner (Appeals) that excess found goods were not meant for clandestine removal and it was only a case of clerical mistake on the part of the appellants – Following CCE, Chandigarh vs. Sadashiv Ispat Ltd.[2010 (1) TMI 500 - PUNJAB & HARYANA HIGH COURT] - non accountal of the goods, which are not meant for clandestine removal would not attract penal provisions, inasmuch as mens rea for imposition of penalty is required – the confiscation of the goods or imposition of penalty is not justified –Decided in favour of Assessee.
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2013 (12) TMI 930
Time-barred appeal - Branded Chewing Tobacco cleared in the guise of unbranded Chewing Tobacco without payment of duty – Held that:- The Adjudicating authority also observed that the adjudication proceeding was initiated only on the basis of documents available with the department and copies of which have been supplied to the department - the appellant wilfully protracted the proceeding on one pretext or the other - after the de novo adjudication order was passed, the appellants did not approach to the Commissioner (Appeals) as provided under Section 35(1) of the Act - The de novo Adjudication indicates that any person remain himself aggrieved by the order may appeal against the same to the Commissioner (Appeals) - the Tribunal has not given any observation on condonation of delay of filing of appeals before the Commissioner (Appeals). Following Singh Enterprises Vs Commissioner of Central Excise, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - Commissioner (Appeals) has no power to condone the appeal beyond the stipulated period - The language used makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning delay only upto 30 days after the expiry of 60 days which is the normal period for preferring appeal - there is complete exclusion of Section 5 of the Limitation Act - the appeals were filed beyond the stipulated period under proviso to Section 35(1) of the Act, 1944 – Decided against Assessee.
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2013 (12) TMI 929
Denial of cenvat credit - Goods can be considered as capital goods or not under Rule 2(a) of the CENVAT Credit Rules, 2004 – Waiver of Pre-deposit – Held that:- The matter is highly controversial and actual use of the goods and its nexus with manufacturing activity are very relevant for deciding the issue - On this aspect of the matter, the findings are vague because the lower authorities have concentrated on the type of articles used not its actual use – Following Saraswati Sugar Mills Vs Commissioner of Central Excise, Delhi-III [2011 (8) TMI 4 - SUPREME COURT OF INDIA ] - the applicants are directed to make a pre-deposit of Rupees Fifteen Lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2013 (12) TMI 928
Sludge emerged during the process of manufacture - Whether in terms of Rule 6(3)(i), an amount equal to 10%/5% would be payable – Held that:- The goods are definitely in the nature of ‘by-product' and ‘waste' – Following Rallies India Ltd. Vs Union of India [2008 (12) TMI 46 - HIGH COURT BOMBAY] - when common inputs are used in the manufacture of dutiable and exempted products, the liability to pay the amount of 8% as it was applicable at the relevant time would arise only for final products and not for 'waste'. The Board's Circular No.345/61-97-CX, to the effect that there should be no denial of credit even if a part of an inputs is contained in scrap, waste, residue etc., notwithstanding the fact that the erstwhile Rule 57D is no longer in force – further in the CBEC's Central Excise Manual, states that CENVAT credit is also admissible respect of amounts of inputs contained in any of the waste, residue or by-product - the basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products – thus, the 'sludge' is in the nature of by-product or waste and demand of amount of 10% on the value of the 'sludge' under Rule 6(1)(i) of the said Rules 2004 is not sustainable – Decided in favour of Assessee.
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2013 (12) TMI 927
Adoption of cost construction method - Waiver of Pre-deposit – Held that:- The Tribunal already settled the issue for the clearances made to their sister units are liable to be assessed by following comparable goods - The applicants have failed to make out a prima facie case for total waiver – the applicant has already deposited a sum of Rs.10 lakhs - the applicants directed to deposit a further sum of Rupees twenty lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2013 (12) TMI 926
Denial of Credit – Capital goods not installed on registered factory premises - Whether the jetty and the pipelines that connect the factory on shore would be treated as an integral part of the factory or not – Held that:- The 'pipelines' are owned by the applicant and further, the applicant obtained the licence from the Port authorities for use of the jetty to transport their raw material through pipelines to their factory on shore - the applicant is directed to deposit Rupees Ten lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2013 (12) TMI 925
Eligibility for cenvat credit - Sweet on paste used to reduce the abrasion of machinery – Held that:- The use of SOP has to be treated as in or in relation manufacture of final product Singh Alloys & Steel Ltd. v. Assistant Collector of Central Excise [1993 (1) TMI 97 - HIGH COURT AT CALCUTTA] - Dolopatch mix, magnesite peas and ramming mass used in the course of manufacture of steel ingots to prevent damage to the refractory lining of the furnace are eligible for input and that the definition of input is not depended upon what ought to be used but what is in fact used or what is commercially expedient to use - though in theory the manufacture of cement is possible without the use of SOP, but it is not disputed that the use of SOP reduces the obsession and thereby enhances the productivity – thus, the SOP has to be treated as an input and hence would be eligible for Cenvat credit – Decided in favour of Assessee.
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2013 (12) TMI 924
Maintainability of Petition – Held that:- Section 35F is applicable only in respect of appeals against the decisions relating to duty demanded and penalty levied – the present case is the appeal filed against the Commissioner (Appeals)’s order are in respect of Merchant Overtime, not duty, the provisions of 35F are not applicable - Both the stay application dismissed as infructuous – Decided against Assessee.
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CST, VAT & Sales Tax
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2013 (12) TMI 975
Interest on refund u/s 38(2) of the Gujarat Value Added Tax Act, 2003 – Refund granted on provisional assessment – Held that:- A registered dealer shall be entitled to received simple interest at the rate of 6% p.a. on the amount of such refund in pursuance of any order other than the audit assessment order or in pursuance of any order by any Court - on plain reading of subsection (2) of Section 38 “order” includes provisional assessment order/ provisional refund order – the Tribunal has not committed any error and / or illegality in holding that the dealer shall be entitled to interest at the rate of 6% p.a on the provisional refund – Decided against Appellant.
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