Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 26, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Petition for recalling of noting in the order sheet - adverse remarks made by the tribunal against the Chartered Accountant (CA) in the order - Adverse remark against the petitioner expunged - HC
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Payments made for acquiring television rights amount to royalty -The nature of transaction, being a perpetual transfer for a period of 99 years, would undoubtedly fall within the scope of sale - excluded from the definition of Royalty - HC
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Scope of term 'Direction' in the Assessment Order to initiate penalty proceedings - When it is left to the option and discretion of the ITO whether or not take action, it cannot be described as a direction. - HC
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Whether polishing of rough granites amount to manufacture u/s 10B - when the resultant article no longer retained its original character, but has a different name and character, exemption allowed - HC
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Whether loss of unit entitled to deduction under Section 10-B be set off against business profits earned by the assessee - Held Yes - HC
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Whether additional liability on actual cost of asset in respect of fluctuations in foreign exchange rate be deductible u/s 43A - Amendment to Section 43A by Finance Act, 2002 w.e.f 1.4.2003 was amendatory and not clarificatory - HC
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Taxability of interest income earned on FDR - unutilized interest was received, on the amount of grant received from the State Government, and kept in FDRs as per the direction of state government - not taxable - HC
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Valuation - Deduction of self supervision charges - Determination of cost of construction as the supervision charges as against 10% claimed by the assessee by its Directors - order of ITAT in favor of assessee sustained - HC
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Registration under section 12A – Public at large is neither eligible to become a member nor is provided any benefit of the trust activities, as all its activities are for the members enrolled - registration denied - AT
Central Excise
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Refund of un-utilised cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 – an assessee cannot be compelled to make exports under rebates and the exports under bond are entitled to refund of input or input service credit - AT
VAT
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Classification of sale - Inter state sale or Intra state sale and purchase - mere endorsement in the allocation order making the allocation from Madras to Kottayam at the price at which it was originally quoted for Madras, hence, will not improve the case of the assessee for treating the transaction as an inter-State sale - HC
Case Laws:
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Income Tax
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2013 (12) TMI 1216
Petition for recalling of noting in the order sheet - adverse remarks made by the tribunal against the Chartered Accountant (CA) in the order - Held that:- it appears that originally, the dispute was between Accountant and Judicial Members of the Tribunal and it was not functioning. So, adjournment was sought by the petitioner, but the same was refused. However, on 06.03.2013, the case of the petitioner was decided in favour of the assessee in his presence. - During the course of arguments, the petitioner has tendered his unconditional apology orally as well as in writing. When the petitioner has tendered his unconditional apology, no further adjudication is required - The order of the Tribunal modified to expunge the reference made by the Tribunal to the Institute of Chartered Accountant of India, and cancelled the cost of Rs.5,000/-, imposed by the Tribunal too. Adverse remark against the petitioner, if any, is also expunged.- Decided in favour of petitioner.
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2013 (12) TMI 1215
Payments made for acquiring television rights amount to royalty - Held that:- As per clause (v) to Explanation (2) to Section 9(1) of the Act - Royalty to mean consideration for the transfer of all or any rights (including the granting of a licence) in respect of any copy right, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films - The transfer deed clearly states that the transfer in favour of the assessee is for a perpetual period of 99 years - The assessee was also entitled to assign the said rights, which was transferred in their favour - Further the agreement was irrevocable and shall remain in force for a period of 99 years - The nature of transaction, being a perpetual transfer for a period of 99 years, would undoubtedly fall within the scope of sale - The findings of the First Appellate Authority was perfectly justified in holding that the transfer in favour of the assessee as sale and therefore, excluded from the definition of Royalty as defined under clause (v) to Explanation (2) of Section 9(1) of the Act - Decided in favour of assessee.
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2013 (12) TMI 1214
Scope of term 'Direction' in the Assessment Order to initiate penalty proceedings - Whether penalty proceedings can be initiated when there is no loss to revenue - Held that:- Following Commissioner Of Income Tax Vs. Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] - The assessment order should contain a direction for initiation of penalty proceedings - The meaning of the word direction is of importance - Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous - It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly - As the words used in the legal fiction or the deeming provisions of Section 271(1B) is Direction, it is imperative that the assessment order contains a direction - Use of the phrases like (a) penalty proceedings are being initiated separately and (b) penalty proceedings under Section 271(1)(c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law - The word 'direction' has been interpreted by the Apex Court - In any event whatever else it may amount to, on its very terms the observation that the ITO is free to take action, to assess the excess in the hand of the co-owners cannot be described as a direction - A direction by a statutory authority is in the nature of an order requiring positive compliance - When it is left to the option and discretion of the ITO whether or not take action, it cannot be described as a direction. In the case of assessee - Assessing Authority was not satisfied that there is any concealment of the intent - There was no direction for initiation of penalty proceedings - In the absence of such a direction, the deeming provision is not attracted - The conditions prescribed under Section 271(1)(c) of the Act, is not attracted – Decided in favour of assessee.
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2013 (12) TMI 1213
Penalty u/s 271AAA on undisclosed income accepted during search operation - Held that:- Initially the amount of Rs.12.5 crores was declared and disclosed by the AOP but subsequently the AOP had filed a revised return declaring “nil” income - The Assessing Officer had decided that Rs.12.5 crores should be equally divided and taxed in the hands of Virendara Kumar Gupta, Sarad Jain and Sudhir Jain - The three respondent-assessees had filed appeal before the Commissioner (Appeals) questioning the said order/position - The AOP filed an application under Section 264 in pursuance of which the individual assessees withdrew the appeals - Taxes and applicable interest were paid on the undisclosed income - Details of nature of undisclosed income and manner of earning was recorded in the statement of Virendara Kumar Gupta - It was stated that such an income was undisclosed income - Decided against Revenue.
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2013 (12) TMI 1212
Disallowance out of preliminary expenses - Held that:- Following assessee's own casew for A.Y. 1994-95 - Total preliminary expenses incurred by the assessee had to be apportioned in the ten successive previous years, for preliminary expenses in accordance with Section 35D of the Income Tax Act, determining the previous year in which the business was commenced or in which the existence of the industrial undertaking was completed or in which the new industrial units commenced operation - Decided against Revenue. Disallowance of deferred revenue expenditure - Held that:- The AO had not disputed the genuineness of the expenditure. His only objection was that the claim of expenses was on deferred basis. The advances were not doubted and the expenses were incurred during the year - The assessee had claimed less than the allowable expenditure, there was no justification for the disallowance under consideration - Decided against Revenue. Disallowance of debenture transfer fee, upfront fee and processing fee - Held that:- There was no controversy as to whether the expenditure was capital expenditure or revenue expenditure - The borrowed funds were utilized for working capital, and since these funds were utilized for the business purpose, no disallowance was made out of the interest paid on such borrowed funds - The Tribunal further found that the AO has accepted that the interest bearing funds were entirely utilized by the assessee for its business purposes - Tribunal is final fact finding authority - Decided against Revenue.
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2013 (12) TMI 1211
Whether purchase and sale of shares are speculative transaction - Held that:- The assessee was engaged in the business of trading of crafts paper, installation, job work, consultancy and commission - The transaction whereby it purchased the shares and incurred loss on account of the fall in the value of the share was a solitary one - The Tribunal has recorded its finding that the transaction did not constitute the business carried on by the company, cannot be termed as perverse or unreasonable - No substantial question of law arises - Decided against Revenue.
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2013 (12) TMI 1210
Whether polishing of rough granites amount to manufacture u/s 10B - Held that:- The definition of 'manufacture' was omitted from Section 10B of the Income Tax Act with effect from 01.04.2001 - Following M/s.Gem Granites vs. CIT [2004 (11) TMI 13 - SUPREME Court] - The polished granite is different from rough granites and that rough granites under the process as amounting to manufacture. Thus, when the resultant article no longer retained its original character, but has a different name and character - The plea of the Revenue cannot be accepted solely by the reason of the absence of definition of 'manufacture' under Section 10B of the Income Tax Act, during the relevant assessment years - Decided against Revenue.
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2013 (12) TMI 1209
Condonation of delay - Held that:- Whenever an explanation is given to condone the delay in filing the appeal, the Tribunal must exercise its discretion with a conscious application of mind on such explanation - The discretion of the Tribunal in such case must be exercised on such explanation and its sufficiency keeping in mind that the rejection of the application denies to the appellant an opportunity of hearing in appeal on merits - Unless the explanation is not bonafide, the right of hearing on merits may not be denied to the assessee - The fact that the Tribunal did not consider the reason, and observed that it was not a case to condone the delay has deprived the appellant the remedy of Second Appeal, which is the final authority on recording findings of fact - The Tribunal did not apply its mind to the explanation offered for condonation of delay in filing the appeal - Decided in favour of assessee.
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2013 (12) TMI 1208
Perquisites to director - Held that:- Following Commissioner of Income Tax v. HICO Products Pvt. Ltd. [1992 (11) TMI 58 - BOMBAY High Court] - In the case of employee director and such other persons, who are covered by the proviso to Clause (a) the aggregate ceiling of Rs.72000/- was fixed not only in respect of expenditure referred to in sub-clause (i) and sub-clause (ii) but also those referred to in sub-clause (i) and (ii) of clause (c) of Section 40 (5) of the Act - The legislative intention was to treat the employee directors and other persons mentioned in the proviso differently from other employees in the matter of allowability of expenditure incurred on them - The expenditure incurred by the director were within the ceiling. Whether proposed dividend is an ascertained liability - Held that:- Following CIT v. Enfield India Ltd [1996 (10) TMI 14 - MADRAS High Court] - The dividend was only proposed and was not yet approved by the General Body of the shareholders at the annual general meeting - It could not be said to be liability on the first day of the computation period under sub-section (1) of Section 80J - Decided in favour of assessee.
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2013 (12) TMI 1207
Whether loss of unit entitled to deduction under Section 10-B be set off against business profits earned by the assessee - Held that:- Following Goetze (India) Ltd. v. CIT [2006 (3) TMI 75 - SUPREME Court] - The Tribunal has held that on the date relevant to the present controversy, the Act did not prescribe any impediment prohibiting the assessee from setting off the loss in the manner allowed by the Tribunal - The revenue is unable to refer to any statutory provision or precedent, relevant to the assessment year, that would enable us to hold to the contrary - The order passed by the Income Tax Appellate Tribunal granting relief to the assessee is in accordance with law - Decided against Revenue.
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2013 (12) TMI 1205
Petition for payment of demand in instalments - Held that:- The petitioner's claim to grant credit for TDS of the Assessment Years 2012-13 and 2013-14 cannot be accepted - The petitioner is facing serious financial hardship - It would be appropriate to permit the petitioner to clear the entire outstanding amounts in three monthly instalments - Decided in favour of petitioner.
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2013 (12) TMI 1204
Whether additional liability on actual cost of asset in respect of fluctuations in foreign exchange rate be deductible u/s 43A - Held that:- Following Commissioner of Income Tax. vs. Woodward Governor India (P) Limited [2009 (4) TMI 4 - SUPREME COURT] - Amendment to Section 43A by Finance Act, 2002 w.e.f 1.4.2003 was amendatory and not clarificatory - It shall be prospectively effective from 1.4.2003 and the cases relating to earlier assessment years would be governed by unamended Section 43A of the Act - The present appeal which relates to the assessment year 1993-94, the same would be governed by the unamended provisions of Section 43A of the Act - The assessee was entitled to exchange rate fluctuation in respect of foreign currency in the assessment year in question as it was following mercantile system of accountancy - Decided against Revenue.
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2013 (12) TMI 1203
Unexplained cash credit - Held that:- Following Dhakeswari Cotton Mills Ltd. vs. C.I.T. [1954 (10) TMI 12 - SUPREME Court] - The assessment was set aside on the ground that it is based on bare suspicion, conjectures and surmises and further held in the first case that finding of fact would be vitiated if it is based partly on conjectures or on material which is partly inadmissible or irrelevant even though there may be some other relevant admissible material to support the finding. But the order must be read as a whole to see whether the findings are vitiated - The reasons assigned to disbelieve the transaction of loan are not proper. Sri Ram Kumar was maintaining a bank account and payment was made through cheque to the assessee. In the absence of any relation with the partners of the assessee firm, it was not possible for the firm to deposit money in the account of partner in the firm and then get it from him as loan - Decided in favour of assessee.
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2013 (12) TMI 1202
Whether interest income earned on FDR is not taxable - unutilized interest was received, on the amount of grant received from the State Government, and kept in FDRs by the assessee - Held that - On the directions of the State Government, the assessee kept the unutilized grant in the bank. The interest accrued on such deposit did not form part of the profit and loss account of the Corporation, but will be treated as part of the grant-in-aid given by the State Government. The letter of the State Government dated 3.4.1980, was relied upon by the CIT (Appeals) in granting the relief - Decided against Revenue.
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2013 (12) TMI 1201
Unexplained cash credits - Held that:- Following CIT v. P.K. Noorjahan [1997 (1) TMI 6 - SUPREME Court] - The assessee did not have any source of income, and that money was not utilised by her - The protective assessment made against her and the substantive assessment against one Shri Deepak Gupta does not call for any interference by the High Court - The provisions contained in section 69 could not be invoked in respect of the investment - Decided against Revenue.
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2013 (12) TMI 1200
Genuineness of unsecured loans - Held that - The Tribunal found that both the creditors had appeared and confirmed the advances - The assessee had discharged the initial onus that lay upon it by bringing on record necessary confirmation, source of deposits and had produced the creditors, who had admitted making of advances - The nature and source of the credit was proved, and thus the assessee had discharged the burden - Decided against Revenue. Valuation - Deduction of self supervision charges - Determination of cost of construction as the supervision charges as against 10% claimed by the assessee by its Directors - Held that:- The Tribunal found the allowance for self supervision at 10% to be justified on the basis of several decisions of the Tribunal. On the architect's fees as added by DVO at 1% of the cost, the Tribunal did not find any error in the order of CIT (A) in directing the AO to substitute the estimated cost on account of architect fee with the actual cost incurred at about 2% - The Tribunal found that the findings of CIT (A) on the expenses or constructions such as supervision charges, bank commission, plans approval, expenditure, expenses for Form 32 for purchase of material, municipal taxes and fertiliser were justified - The CIT (A) had worked out the difference between the estimated cost in terms of DVO's report and modified the cost after allowing the supervision charges and adjusting architect fees - These, according to the Tribunal, were findings of fact - Decided against Revenue.
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2013 (12) TMI 1199
Fall in G.P. Rate – Held that:- AO simply mentioned that all the manufacturing expenses are not verifiable. Keeping in view this fact, we are of the view that it will meet the ends of justice if the addition of Rs.5,00,000/- is sustained instead of addition of Rs.12,61,810/- made by the AO – Partly allowed in favour of assessee. Penal interest on late payment of interest to the bank – Held that:- As per the provisions of Explanation to Section 37(1) of the Act, any expenditure incurred by the assessee for any purpose which is an offence is not allowable - The late payment of interest to the bank is occurred during the normal course of business of the assessee - The expenditure in question is not incurred for any purpose which is an offence within the meaning of Explanation to Section 37(1) – Decided in favour of assessee.
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2013 (12) TMI 1198
Registration under section 12A – Held that:- The trust was created to provide opportunities for the students of the Department of Economics, Delhi School of Economics to seek employment - Assessee is charging money for registration and subscription from the enrolled students as well as it is also getting subscription from the companies who coming to the campus for providing employment to the enrolled students - The activities of trust are focused on the students of Delhi School of Economics getting education in the institute - Public at large is neither eligible to become a member nor is provided any benefit of the trust activities, as all its activities are for the members enrolled - The activities cannot be in any manner classified as being charitable in nature - Apart from administrative heads of expenditure, no other expenses were shown to have been incurred on any charitable activity – Decided against assessee.
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2013 (12) TMI 1197
Addition on adhoc basis u/s 145(3) – Held that:- The assessee has maintained proper books of accounts and there is no case for invoking section 145(3) – There was huge increase in expenses because cost has come down in respect of various expenses and increase is only in respect of claim and other services - The increase in rent and other services were on account of opening new stores - The entire claim of expenditure is supported from the audited accounts and the Assessing Officer has not found any mistakes or irregularity in respect of any part of the claim of the expenses - Proper stock record is maintained on ERP system - There was no case of any cash deficit and reconciliation statement was duly furnished to the Assessing Officer and Assessing Officer has not disputed the correctness of the same – Decided in favour of assessee.
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Customs
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2013 (12) TMI 1196
Confiscation of goods - Freezing of accounts - Held that:- Respondents in the counter affidavit have stated the chain as to how the misdeclared goods were imported by M/s. VVK Traders, M/s. Mehta Overseas, M/s. Chopra Overseas and M/s. Umesh Impex and other firms and were shown to be sold to individuals against the fake cash bills and imported chemicals with correct description were shown to be supplied by another set of fake front firms to several firms located mainly at Sambha, Jammu & Kashmir and the Petitioner’s firm was found to be one of such firms - since the freezing of the bank account, was not seizure of the ‘goods’ as envisaged under Section 110 of the Act, the Petitioner is not entitled to de-freezing of the bank account unconditionally - It is therefore, directed that the amount deposited in Bank Account after the date of freezing the account shall be released, subject to furnishing of a Bank guarantee to Respondent No.2 in respect of the amount credited in the account from the date of freezing of the account - Conditionally decided in favour of assessee.
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2013 (12) TMI 1195
Classification of goods - Classification under CTH 8517 12 10 or CTH 8517 70 90 - benefit of Central Excise Notification 6/2006 Sr. No. 28 and Cess Notification No. 69/2004 (Sr.No. 1) - Held that:- What should be the correct classification, is the duty of the assessing officer while assessing the goods - The assessee has tried to classify the goods under 8517 12 10/8525 20 17 and 8525 20 19, it is the duty of the assessing officer to examine the goods and classify it correctly. On examination of the description of the goods given by the assessee, we find that they have clearly declared the goods as FWT LST-280-R in complete set (cellular phone). Therefore, we do not find from the records that the act of the assessee is a deliberate act to avoid payment of CVD. As the act of the assessee is not deliberate and they have paid duty along with interest, therefore we do not find any reasons to impose penalty on them - Following decision of Northern Plastic [1998 (7) TMI 91 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2013 (12) TMI 1194
Classification of goods - Mis declaration of goods - Import of oil - Classification under heading 3402.9020 or heading 3403.9900 - Discrepancy in reports - Held that:- reference by Commissioner (Appeals) to the earlier test report by Kanpur Research Centre which was in favour of the assessee, was not called for. The earlier order of Commissioner (Appeals) has accepted the discrepancies in the two reports, had remanded the matter to the original adjudicating authority, calling for a fresh retest report. The earlier order has not been challenged by the Revenue. As such, it was not permissible for Commissioner (Appeals) to refer the said fact - appellant is entitled to unconditional dispensation of duty and penalty and to stay recovery of the same till disposal of the appeal, inasmuch as retest report supports their claim - Stay granted.
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2013 (12) TMI 1193
Rejection of request of the exporters for conversion of Free Shipping Bills into DEPB Shipping Bills - Held that:- jurisdictional Commissioner has rejected the request of the appellants for conversion of free shipping bills to DEPB shipping bills stating that DGFT Public Notice dated 21-8-1998 was not in existence at the time of export of goods. It is rather obvious that the public notice dated 21-8-1998 was not in existence earlier and hence the public notice specifically states that it retrospectively covers shipments earlier made from 1-4-1997 to 14-4-1998. This public notice has been issued by the DGFT in the public interest consciously allowing DEPB benefit to the exporters retrospectively. If conversion is not allowed on the hyper-technical ground that public notice was not in existence at the time of shipment, the very purpose of the public notice issued conveying Government’s decision for grant of a retrospective benefit would be defeated as in no case of any exporter, conditions sought to be satisfied by the jurisdictional Commissioner could be fulfilled. That would be detrimental to the public interest which has been specifically invoked while issuing the relevant public notice dated 21-8-1998 - Decided in favour of assessee.
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2013 (12) TMI 1192
Condonation of delay - Held that:- applicant has filed a Writ Petition before the Hon’ble High Court of Bombay on 10-9-2009, which was disposed off on 19-4-2010 and the order was received on 5-5-2010, the said period is to be deducted from the period for filing the appeal and for rest of the period, the applicant had fallen ill, we find that the reason for delay is not convincing to this Bench when the remedy was available to the appellant to file appeal before this Tribunal but under what circumstances, they filed Writ Petition in the Hon’ble High Court. The applicant has failed to explain the reason as to why they have filed Writ Petition before the Hon’ble High Court - Condonation of delay denied.
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Service Tax
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2013 (12) TMI 1228
Demand of service tax on outstanding balance (Debtors) - Ledger balance due for realization - Held that:- tax is chargeable on the amount shown outstanding by BSNL. As per BSNL outstanding balance is carry forwarded to next months and it cannot be a case of revenue demanding service tax every month on the same amount. Respondent (BSNL) contends that tax was leviable on amount realized and not on outstanding amount and they rely on Letter of Ministry of Finance, Department of Revenue F. No. 137/12/97-CX-4 dated 03.12.97 in this regard. We find that commissioner (Appeal) has considered these submissions of BSNL and allowed their appeal - Decided against Revenue.
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2013 (12) TMI 1227
Waiver of pre deposit - Demand of service tax - Renting of Immovable Property Service - Held that:- a crucial fact was not pleaded before that authority by the party, nor did they plead it before the appellate authority. Before this Tribunal, however, they have pleaded the fact categorically. It has been stated that some of the buildings were rented out to the State Government/Departments for non-commercial use - It is incumbent on the appellant, however, to establish that the premises were actually allowed, under lease, to be used by Government offices. Prima facie, subject to proof of such use of the buildings, the appellant can claim exemption from the levy, given the definition of ‘Renting of Immovable Property’ under Section 65(90a) of the Act and the definition of the ‘taxable service’ under Section 65(105)(zzzz) of the Act. In this scenario, we are inclined to remand the case to the original authority, for the ends of justice, to enable the appellant to prove their case before that authority and to enable that authority to take a correct decision on the facts of the case - Decided in favour of assessee.
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2013 (12) TMI 1226
Demand of service tax - Banking and other financial services - Held that:- in the show-cause notice the amount of Rs.8,04,83,022/- has been taken into consideration as lease rent earned by the appellant whereas in the impugned order the adjudicating authority has taken into consideration the lease agreement with M/s JBF Industries Ltd., for considering the amount as Rs. 3.50 Crore. The adjudicating authority confirmed the demand after taken into consideration the amount mentioned in the show-cause notice and there is no discussion in the impugned order in respect of remaining demand. In view of this we find that the matter requires reconsideration by the adjudicating authority. Therefore the impugned order is set aside and the matter is remanded to the adjudicating authority for denovo consideration - Decided in favour of assessee.
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2013 (12) TMI 1225
Rejection of refund claim - Bar of limitation - Held that:- when a law pertains to a particular matter lays down time limits for demand of duty or refund of tax, the said time limit would prevail over the time limit prescribed under the general law of limitation. In the present case, the time limit is one year from the date of payment of service tax. Inasmuch as the appellant has filed the refund claim after a lapse of one year, the claim is time-barred - Following decision of Hindustan Coco Products ltd. Vs. CCE, Bombay [1987 (9) TMI 133 - CEGAT, NEW DELHI] and CC, Ahmedabad Vs. Vishal Exports overseas Ltd. [2007 (1) TMI 490 - CESTAT AHMEDABAD] - Decided against assessee.
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2013 (12) TMI 1224
Demand of service tax - Business Auxiliary Service - Held that:- to arrange for finance and granting of loans to provides certain services relating to the granting of loans, for an on behalf of the bank and for these activities the assessee is receiving commission, hence is liable to service tax under the “Business Auxiliary Service” - Following decision of South City Motors Ltd. V. Commissioner of Service Tax, Delhi reported in [2011 (11) TMI 408 - CESTAT, NEW DELHI] - Decided against assessee.
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2013 (12) TMI 1223
Cenvat credit taken on input service - Separate accounts not maintained - Common input services used in manufacture – Waiver of Pre-deposit – Held that:- The provisions prescribed a time limited for CENVAT credit taken on the common input services and reverse it so as to avert a demand under Rule 6(3) of the CENVAT Credit Rules 2004 but the assessee did not heed it - Now they claim to have reversed the inadmissible credit for the period from 1.4.2008 at a belated stage –Assessee is clearing both dutiable and exempted final products - They could have refrained from taking CENVAT credit on the common input services if it was their case that the quantum of credit attributable to the exempted final products was not segregable - The appellant however chose to take CENVAT credit of the entire amount of service tax paid on common input services – Appellant failed to make out a prima facie case for waiver – the appellant 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 1222
Denial of cenvat credit on various services – Waiver of Pre-deposit – Held that:- The main disputed services are, services like Man-power and Recruitment Agency, Management Consultants, Royalty Services etc. - Relying upon M/s BATA INDIA LTD Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI-III [2013 (12) TMI 923 - CESTAT CHENNAI] - for services of Man-power Recruitment Agency, Management Consultants, Royalty Services, transportation of goods from Regional Distribution Centers (RDC) to Retail outlets etc., stay was granted on all the items of services except in respect of tax relating to ‘transportation of goods' from RDCs to retail outlets - The total amount involved in such transportation in these two cases will be around Rs.80,000/- only in the present appeals - the applicant directed to make a deposit of Rupees Eighty Thousand as pre-deposit – stay not granted.
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2013 (12) TMI 1221
Waiver of predeposit of tax - Demand of differential amount - Erection, commission and installation - Suppression of facts - Held that:- audit report relates to the year 2006 and the show-cause notice is issued after two years in 2008. It is also clear from the audit report that the audit report was provided on the basis of Board's circular dated 7.10.1998. In view of that, the allegation of suppression of facts, prima facie, is not sustainable - Stay granted.
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2013 (12) TMI 1220
Demand of service tax - Erection and commissioning of machines - Whether the two payments made on 5.1.2008 and 8.4.2008 were towards discharge of the demand confirmed in the impugned order - Held that:- benefit under Notification No.1/06-ST cannot be extended for the reason that assessee has not proved that they were eligible for any CENVAT credit - The adjudicating authority has not adopted such logic which would imply that there such logic would not have been adverse to the appellant - Conditional stay granted.
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2013 (12) TMI 1219
Waiver of pre deposit - Demand of service tax - Job work - Held that:- activity undertaken by the applicants is of job-work following the procedure under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. Therefore, the provisions of Service Tax are not applicable to the facts of this case. The applicants are having a good case on limitation also - Stay granted.
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2013 (12) TMI 1218
Waiver of pre deposit - Demand of service tax - Business exhibition - Held that:- for the services of Business Exhibition covered by Section 65(105)(zzo), in accordance with Rule 3(ii) of Taxation of Services (Provided From Outside India and Received in India) Rules, 2006, to have been received in India, the services must be performed in India. But since this service has been performed abroad and not in India, we are of the prima facie view that the same cannot be considered as having been received in India - Following decision of Marino Industries Ltd. reported in [2011 (7) TMI 820 - CESTAT, NEW DELHI] - Stay granted.
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2013 (12) TMI 1217
Demand of service tax - Penalty u/s 76, 77 & 78 - Franchise services - Held that:- distributors are appointed by the Company for buying the goods from them and selling the same to the home consumers or to sell the same to the dealers who may be further appointed by them. As such, in the process, they act as independent contractors and does not have any relationship with the appellants brand name. They simply procure the goods from the appellants and further sell the same on commission basis. There is no representational right to their distributors to sell the goods in the market. And as such, at this prima facie stage, it can be safely concluded that the appellants cannot be held providing promotional services to the said distributors. Distribution agreement was examined by DGCEI in the year 2005. It is not the Revenue’s case that the agreement examined by Audit and by DGCEI were different. The DGCEI authorities having examined the distribution agreement and on being satisfied did not proceed ahead in the year 2005. As such, the issuance of show cause notice in 2009 invoking the longer period of limitation cannot be said to be a valid show cause notice. As such, we are of the view that the appellants have a good case on limitation also. Apart from the above, the appellants have deposited a part amount - By treating the same as sufficient for the purpose of Section 35, we dispense with the condition of pre-deposit of balance amount of duties and penalties imposed upon the applicant-appellant - Stay granted.
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Central Excise
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2013 (12) TMI 1191
Cenvat credit on scrap of inputs and capital goods – Applicability of Rule 5(A) w.e.f. 16.05.2005 under Notification No.27/05 - Waiver of Pre-deposit – Assessee contended that there was no necessity for reversal of the CENVAT Credit availed on scrap as no such provision was in existence at that time - Held that:-Prima facie there was force in the contention that payment of duty or reversal on scrap of capital goods became liable to duty w.e.f. 16.05.2005 and no such provision was there between January, 2004 to 15.6.2005 - CENVAT Credit involved after 16.05.2005 on scrap of capital goods is around Rs.38 Lakhs – Assessee directed to deposit 25% of the amount of CENVAT Credit as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2013 (12) TMI 1190
Cenvat credit availed on depreciated value of the capital goods installed in factory - Waiver of pre-deposit – Held that:- Prima facie an assessee is entitled to avail CENVAT Credit on capital goods if no depreciation has been claimed under Section 32 of the Income Tax Act, 1961 - the applicant has availed depreciation for the financial years 2004-05, 2005-06 and claimed CENVAT Credit on the reduced value of capital goods from 01.06.2007 after mining services became taxable service - Assessee contended that they themselves had calculated the amount of duty involved in the respective invoices of the capital goods and deducted the amount of duty representing the value on which depreciation has been claimed during 2004-05, 2005-06 and availed CENVAT Credit on the balance amount - There was no such a mechanism is available under the CENVAT Credit Rules - the applicant directed to deposit Rupees Two Crores Twenty Five 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 1189
Restoration of Appeal - Waiver of Pre-deposit – Official Liquidator contended that there is not enough assets of the company to meet the full liabilities of the company, thus payment of amount due to one party even before disposal of appeal will be prejudicial to the interests of other creditors – Held that:- Considering the winding up process which is under way and the fact that the amount involved is interest on duty which is already paid - lenient view to be taken in the matter and waive pre-deposit of the dues – Pre-deposits waived till the disposal – Application for Restoration of Appeal allowed and Stay granted.
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2013 (12) TMI 1188
Entitlement to refund under Notification No. 6/2002 - Duty paid at the time of clearance – Held that:- Following Tata Motors Ltd. vs. CCE, Lucknow [2011 (5) TMI 233 - CESTAT, NEW DELHI] - if registration of the vehicle is made as taxi within the extended period of three months, the refund granted by the notification is to be disallowed – order set aside – Decided in favour of Assessee.
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2013 (12) TMI 1187
Refund of un-utilised cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 – Held that:- Following Commissioner of Central Excise, Bangalore-III Vs. Motherson Sumi Electric Wires [2009 (5) TMI 498 - CESTAT, BANGALORE] - inputs used in goods which were exported under bond/letter of undertaking and the refund of credit having been accumulated from time to time, which the assessee was not able to utilize, is required to be refunded in terms of the Rule 5 of Cenvat Credit Rules. In Commissioner of Central Excise, Ahmedabad Vs. Surya International [2010 (6) TMI 702 - CESTAT AHMEDABAD] - an assessee cannot be compelled to make exports under rebates and the exports under bond are entitled to refund of input or input service credit - Rule 5 of the Cenvat Credit Rules, 2002 is a beneficiary piece of legislation and central excise officers has no jurisdiction to curtail it and find reason for non-adjustment or non-utilisation and the refund of un-utilised credit being a substantive right, has to be allowed – Decided in faovur of Assessee.
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2013 (12) TMI 1186
Valuation of goods - Payment of duty for the clearances made to their depot in terms of Rule 7 of the Central Excise (Valuation) Rules 2000 r.w. Rule 7 read with Section 4 (1) (b) of the Central Excise Act – Held that:- The assessee seems to believe that the goods which were cleared from the factory gate to the depot on a certain date at a certain price should necessarily be sold from the depot at the same price as far as possible on the same date and the amount of duty paid at factory gate should be recovered from the ultimate buyer so as to justify the determination of assessable value of the goods cleared from factory in terms of Rule 7 - The compilation of invoices (both factory gate and depot) produced is part of the assessee’s endeavour to make out this sort of a case – matter remanded to the original authority to take fresh view on the valuation issue after giving the assessee a reasonable opportunity of adducing evidence – Decided in favour of Assessee.
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2013 (12) TMI 1185
Availment of Cenvat Credit - Credit in respect of truck - Held that:- There is no justification placed to show that manufacturer was dependent on truck and use of truck was integral to the manufacture and also relevant - Decided against assessee.
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2013 (12) TMI 1184
Demand of duty - Duty not paid on the entire quantity of scrap - Demand raised on basis of calculation of what quantity of scrap would have been produced adopting some notional standards - Held that:- lower appellate authority has considered all aspects of the case and has passed a detailed speaking order under which he has dropped the duty demand but has imposed penalties on the job workers while cautioning them to be more careful in future and directing them to maintain proper accounts showing details of scrap generated and cleared on payment of duty - the lower appellate authority has passed a proper and legal order as warranted by the circumstances of the case and the same calls for no interference - Decided against Revenue.
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2013 (12) TMI 1183
Waiver of pre-deposit of duty - Clearance of goods to SEZ developers - Held that:- assessee has made out a strong prima facie case that supplies made to SEZ developer should also be considered as export in view of the definition of export in Section 2(m)(ii) of Special Economic Zone Act, 2005. Further, Section 51 of the Act provides that the provisions of SEZ Act will have overriding effect if it conflicts with provisions in any other law. Once goods are considered to be exported, there is exemption from provisions of 6(6) of Cenvat Credit Rules, 2004. We also take note of the subsequent amendment made in Rule 6(6)(i) of Cenvat Credit Rules with effect from 31-12-2008. We, therefore, grant the prayer for wavier of pre-deposit and stay recovery of the amount in dispute during pendency of the appeal - Stay granted.
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2013 (12) TMI 1182
Waiver of pre-deposit - Stay of recovery - Denial of Cenvat credit - Held that:- Debit notes disclose all the essential particulars required of a statutory invoice. Prima facie, one should not look at the title of the document but should rather see the contents thereof to determine its status - Following decision of CCE, Salem v. Pallipalayam Spinners (P) Ltd. [2010 (9) TMI 951 - CESTAT CHENNAI] - Stay granted.
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CST, VAT & Sales Tax
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2013 (12) TMI 1229
Classification of sale - Inter state sale or Intra state sale and purchase - Purchase of rubber effected from State Trading Corporation of India Ltd. - Sales disclosed as inter-State sales - Whether the transaction in question was an inter-State sale or a local sale, taxable at 5% at the hands of the assessee herein as a last purchaser - Held that:- Being part of the very same establishment, the mere payment by the Units for any administrative convenience, per se, would determine the character of the transaction. On the other hand, a reading of the allotment order in the context of the application made by the assessee shows that it was a consolidated order in respect of all its Units. Contrary to the assertion of the assessee that the said order contemplated the movement from one State to another, one can only say that the assessee had made use of the particular delivery for the purpose of satisfying the requirement of its Units outside the State. The fact that STC issued a bill in the name of MRF Limited, Kottayam, or for that matter, a certificate had been issued by STC that MRF Limited, Kottayam and Goa had purchased natural rubber from STC, however, would not, in any manner, make the transaction an inter-State sales; that the authorities rightly came to the conclusion that the movement had nothing to do with the transaction of sale. The application of the delivered raw rubber to any particular Unit outside the State is a matter of choice and the discretion of the assessee and the seller, at no point of time, was involved in this. As is evident from the original allocation order, the price charged by STC for Chennai and Kottayam, Kerala are totally different. However, on the revised order, the price charged for RSS-3, now allotted to Kottayam, however, remained the same as for Chennai. As rightly contended by the learned Special Government Pleader, we can only construe the allocation order dated 16.08.1991 as carrying out the request of the assessee for delivery at Kottayam, which cannot be treated as the same as the assessee having originally entered it as RMA-5 - Kottayam. Thus the delivery instruction given cannot be construed as forming part of the sale transaction as indicated in the allocation order and as already noted in the preceding paragraph, on the request made, instead of making an endorsement in the letter itself, STC made necessary endorsement in the allocation order - Thus, the mere endorsement in the allocation order dated 16.08.1991 making the allocation of RSS-3 from Madras to Kottayam at the price at which it was originally quoted for Madras, hence, will not improve the case of the assessee for treating the transaction as an inter-State sale - Following decision of Commissioner of Sales Tax Vs. B.L.Kailash Chand Arhti [1992 (8) TMI 241 - SUPREME COURT OF INDIA] - Decided against assessee.
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