TMI Tax Updates - e-Newsletter
December 27, 2014

Case Laws in this Newsletter:

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

Articles

1. (National) Good Governance Day_25th December

   By: Deepak Aggarwal

2. GST Modality

   By: CA Akash Phophalia

3. INTERPRETATION OF TAX LAWS – CONCEPT OF PARI MATERIA

   By: Dr. Sanjiv Agarwal

4. Why GST

   By: CA Akash Phophalia

News

1. RBI Reference Rate for US $

Notifications

Income Tax

1. 87/2014 - dated 23-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies constituted Government of Karnataka to constitute “Karnataka Computerisation of Police Society”

2. 86/2014 - dated 23-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies constituted Government of Tamil Nadu to constitute “Tamil Nadu Pollution Control Board”

3. 85/2014 - dated 23-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies constituted Government of Kerala to constitute “Kerala State Electricity Regulatory Commission”.

4. 84/2014 - dated 23-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies for the constitution of "North East Centre for Technology Application and Reach”.

Circulars / Instructions / Orders

Central Excise

1. 992/16/2014-CX - dated 26-12-2014

Inclusion of cases filed in the Settlement Commission in the “Call-Book”-reg.

Highlights / Catch Notes

Income Tax

• Income Tax Act Section 40A(3) Amendment: Aggregate Daily Cash Payments to One Person, Effective April 1, 2009.

  Case-Laws - HC : Effect of amendment u/s 40A(3) w.e.f. 1.4.2009 – Total cash payments towards expenditure made to a particular person during a day to be aggregated or not - the amendment is applicable w.e.f. 1st April, 2009 not prior to that - HC
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• Income Tax Assessment Invalid if Section 143(2) Notice Not Served on Time; Proceedings Deemed Final.

  Case-Laws - HC : Validity of assessment framed u/s 143(3) - In the absence of the notice being served within the stipulated period under section 143 (2) of the Act, the assessment proceeding comes to an end and is deemed to have become final - HC
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• Income from Survey Classified as 'Other Sources' Affects Eligibility for Deduction u/s 80IB for Housing Projects.

  Case-Laws - AT : Deduction u/s 80IB – Income disclosed during survey treated as income from other sources – as per provisions of Section 80IB, deduction is allowable in respect of income derived from the eligible housing project - AT
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• Advances for capital assets purchase aren't deductible as bad debts or business losses under income tax rules.

  Case-Laws - AT : Claim of bad debts – advance given for purchase of capital assets are not allowable as bad debts/business loss - AT
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• Bus Hiring Classified u/s 194C, Not Section 194-I, for TDS Deductions in Indian Income Tax Act.

  Case-Laws - AT : Hiring of buses treated as hiring of machinery U/S 194-I or u/s 194C – owner was responsible for running cost, maintenance, driver cost and other incidental charges like accident etc. - it is not a case of renting of plan and machinery - TDS to be deducted u/s 194C - AT
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• Penalty Upheld for Violating Section 269SS: Cash Loan Obtained, No Distinction Between Genuine and Non-Genuine Transactions.

  Case-Laws - AT : Confirmation of penalty u/s 271D – Violation of section 269SS - Assessee obtained unsecured loan in cash - when the provision does not make any distinction whether a transaction is genuine or not, it cannot be read into the statutory provision. - AT
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• Company Failing Employee Cost Filter and Amalgamated Business Model Disqualified as Comparable in Transfer Pricing Analysis.

  Case-Laws - AT : Selection of comparable - TPA - a company cannot be selected as a comparable not only on the reason of failing employee cost filter, but also due to amalgamation during the year, which has changed the business model of the company - AT
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Customs

• Detention Order Issued u/s 3(1)(i) and 3(1)(iii) of COFEPOSA Act, 1974; Focus on Procedural Safeguards.

  Case-Laws - HC : Detention order passed under Section 3(1) (i) & 3(1) (iii) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 - The purpose of a detention order is preventive in nature and not punitive. Therefore, there must be strict compliance of the procedural safeguards in every case of preventive detention. - HC
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• Appellant Cleared of Penalty u/s 112; No Involvement in Contraband Importation Found. Penalty Waived.

  Case-Laws - AT : Personal penalty u/s 112 - there was no role of the appellant in aiding and abetting the importation of contraband goods. - penalty waived - AT
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Service Tax

• Commissioner (Appeals) to Re-evaluate Service Tax Applicability on Consulting Engineering for Security Force Facilities Construction.

  Case-Laws - AT : Consulting Engineer’s Services - Executing the work of construction of mess, quarters etc. for the staff of Assam Rifles - Commissioner (Appeals) to decide the matter afresh - AT
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• Court Rules Employee Secondment May Not Be Taxable as Recruitment or Auxiliary Service Under Tax Law.

  Case-Laws - AT : Secondment of employees - reimbursement of salary - Manpower Recruitment or Supply Agency Service - Business Auxiliary Service - prima facie case is in favor of assessee - AT
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Central Excise

• Appellant entitled to exemption benefit despite missing declaration due to honest belief; no suppression of fact involved.

  Case-Laws - AT : Denial of area based exemption - appellant has not acted mala fide. It is primarily entitled to the benefit of exemption notification aforesaid. It only failed to file necessary declaration under bonafide belief as stated above. Non filing declaration is not suppression of fact. - AT
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• CENVAT Credit Rules: Rule 11(3) and Rule 6(1) don't apply when exempt goods, on which credit was availed, are exported.

  Case-Laws - AT : CENVAT Credit - goods become exempt after availing credit - export of goods - Neither the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004, nor the provisions of Rule 6 (1) ibid are applicable to this case - AT
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• Rebate Claim Denied for Missing Bank Realization Certificates; Cancellation Request Doesn't Close Claim if BRCs Submitted Timely.

  Case-Laws - CGOVT : Denial of rebate claim - Failure to produce relevant Bank Realization Certificates - mere cancellation request of the respondent cannot be treated as closure of rebate claim, provided the BRCs are submitted within the extended time limit by the RBI. - CGOVT
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• Manufacturer Entitled to Rebate for Excess Duty Paid; Government Must Refund Voluntary Overpayments in Original Payment Method.

  Case-Laws - CGOVT : Rebate claim - amount of excess duty paid then prescribed rate of duty - Amount paid in excess of duty payable on one's own volition cannot be retained by Government and it has to be returned to manufacturer/applicant in the manner in which it was paid - CGOVT
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• Rebate Claim Discrepancy: Assessee Wins Case Over Gross and Net Weight Differences in ARE-1 Forms, Missing Shipping Bill.

  Case-Laws - CGOVT : Rebate claim - discrepancies in the declared gross weight and net weight in there ARE-1s - shipping Bill was not appended with the rebate claim - decided in favor of assessee - CGOVT
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• Job Worker, Not Principal Supplier, Holds Duty Liability as Manufacturer in This Case.

  Case-Laws - AT : Duty liability to be discharged by the Job worker or Principle supplier (the appellant) - it is the job worker who has to be treated as manufacturer and not the appellant and, therefore, there would not be any duty liability on the appellant. - AT
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• Court Dismisses Additional Duty Demand on Job-Worked Goods; Scrap Value Not Added to Duty Calculation.

  Case-Laws - AT : Valuation of goods - Job work - addition of value of scrap - duty liability has been discharged on the price at which the job-worked goods were sold by the principal manufacturer - demand set aside - AT
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Case Laws:

• Income Tax

• 2014 (12) TMI 937
  Transfer u/s 32A(5) - Investment allowance granted earlier u/s 155(4A) withdrawn by AO - Whether the scheme of arrangement/reconstruction can be regarded as amalgamation and protected under sub-section (6) to Section 32A - Held that:- The word “transfer” and its purport was examined in the Commissioner of Income Tax, Lucknow versus Narang Dairy Products, Lucknow, [1996 (2) TMI 6 - SUPREME Court] - the transaction may not be a “transfer” as defined u/s 2(47), the definition section is an inclusive one and does not exclude the contextual or the ordinary meaning of the word, “transfer” - the contention of assessee cannot be accepted that the scheme of arrangement or reconstruction did not result in transfer of the 9 units of the assessee to the three newly formed companies - The three companies were in fact separate juristic entities in law - The expression “otherwise transfer” cannot be given a narrow meaning to exclude all transfers as a result of merger, amalgamation, etc. Amalgamation as a term can include transfer of one or more undertakings to another company without really blending of one or more existing companies into the transferee/amalgamated company - all assets of the transferor/amalgamating company need not be transferred to the new or other company - The purpose and objective behind sub-section (6) to Section 32A is to facilitate reconstruction and amalgamation and not to obstruct genuine transactions of such nature - The emphasis in sub-section (6) to Section 32A is on sale or transfer of the ship, aircraft, machinery or plant, subject matter of investment allowance in connection with amalgamation or reconstruction - There is also reference to reserves - The emphasis in sub-section (6) is not upon the blending or merger of the existing company, which has availed of benefit under Section 32A into another or new company - At the same time, appropriate and required conditions have been incorporated in sub-section (6) to Section 32A to ensure that there is no abuse of the conditions applicable to the amalgamating company, both with regard to the reserve and the time stipulation on sale or “otherwise transfer” of assets is applied and adhered to - Violation would cause and result in negative and penal consequences. 9 out of 13 undertakings of the assessee were taken over by the three new companies, while the earlier company, i.e. continues to exist - Revenue contended that in case assessee had ceased to exist and had merged, conditions mentioned in Section 2(1B) of the Act would be satisfied - it is a matter of not selecting a correct taxable event, possibly due to inability and lack of foresight in comprehending the objection that could be raised - This would not be in consonance with the object, aim and purpose behind Sub-Section (6) to Section 32A - the principle of updating construction is premised on the doctrine that Acts are always speaking and are intended to apply over a period of time - There is, therefore, need to interpret and construct them with reference to contemporary understanding - The construction should be continuously updated to allow for changes, after the Act was written - This would be an intention of the Legislature, as it is not expected that the Legislature will intervene every now and then, when the Act is intended to apply over a long time - The Act is a living Act and not a relic - Therefore, it may not be true and correct that the language of statute must always be understood in the sense it was understood when it was passed. When purposive interpretation is applied for the benefit of the assessee, it is equally important to ensure that the assessee complies and does not negate the purpose of the Legislation, be it in the form of conditions stipulated in Section 2(1B) and specific stipulations of Section 32A sub-section (6) - the assessee should be able to show and establish that the liabilities associated with the plant, machinery, ship or aircraft were transferred to the amalgamated company by virtue of amalgamation (Clause (ii) of Section 2(1B) of the Act) as also the condition that the shareholders not holding less than nine-tenth in value of the shares (Clause (iii) of Section 2(1B) of the Act) was satisfied - the stipulations of sub-section (6) to Section 32A must be met and satisfied - As these aspects have not been examined, the matter is to be remitted back to the Tribunal for examination of the aspects - there was transfer within the meaning of Section 32A(5) of the Act – Decided partly in favour of revenue.

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• 2014 (12) TMI 936
  Validity of reopening of assessment u/s 147 and 148 - Failure on the part of assessee to disclose fully and truly all the material facts or not - Notice dated 29 March 2012 seeking to reopen assessment has been issued after the expiry of four years from the end of the relevant AY i.e. 1999-00 - Held that:- Neither the notice dated 29 March 2006 nor the reasons supplied in support specifically state that there was any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the relevant AY – as held in Hindustan Lever Ltd. vs. R. B. Wadkar, Assistant Commissioner of Income Tax & Ors. (No. 1) [2004 (2) TMI 41 - BOMBAY High Court] - it is necessary whilst supplying the reasons for the issuance of notices u/s 147 and 148 of the Act to communicate as to which fact or material was not disclosed by the Assessee fully and truly, that has resulted in the income escaping assessment - apart from there being no allegation that there was any failure on the part of the petitioner to fully and truly disclose all material facts necessary for assessment, even otherwise, the reasons as recorded give no clue whatsoever as to the alleged failure on the part of the petitioner in disclosing fully and truly, the material facts necessary for its assessment - the jurisdictional parameter, for invoking the provisions of Section 147 of the Act is absent, on both the grounds mentioned in the reasons in support of the notice. Not only was there no failure to disclose fully and truly all the material facts in relation to the determination of MAT liability u/s 115JA, but further such disclosed material facts were duly considered by the AO in making the Assessment Order dated 21 March 2002 u/s 143(3) - issuance of notice and the consequent assessment order is in excess of jurisdictional restraint imposed upon the AO by the proviso to Section 147. Availability of alternative remedy – Held that:- The petition was lodged on or about 25 January 2007 and admitted on 26 March 2007 - at the stage when the petition was filed, the reassessment order dated 26 December 2006 had already been passed - the issues raised, do not involve any disputed questions of fact – AO has not adhered to the jurisdictional restraints imposed by proviso to Section 147(1) of the Act and further there is violation of principles of natural justice - If all such circumstances are cumulatively considered, rejection of the present petition on the ground of availability of alternate remedy is not appropriate - Decided in favour of assessee.

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• 2014 (12) TMI 935
  Revision of an order u/s 263 - erroneous and prejudicial to revenue order - Interpretation of Sections 28(ii)(c) and 45 - Transfer of goodwill taxable as profits and gains of business under Section 28(ii)(c) of the Income Tax Act and not under the head capital gains - Held that:- By Sub-Agency Agreement dated 8.11.1992, Sea Land (I) Ltd. appointed CHAKIAT as their sub-agents in South India for all cargoes carried by Sea Land Service Inc., USA - Clause (1) of the agreement dated 1.6.2000 provided that the assessee will transfer to MAERSK the shipping sub-agency business related to Sea Land and covered by the Sub-Agency Agreement dated 8.11.1992 along with goodwill in relation thereto – assessee is a recipient of certain amount for holding an agency in India for the activities relating to the business of Sea Land (I) Ltd. and it is only in connection with the termination of the agency, the assessee received certain payment under Clause (1) of the agreement dated 1.6.2000 by transferring such rights covered by the sub-agency to MAERSK and that is referable to the initial Sub-Agency Agreement dated 8.11.1992 - Section 28(ii)(2) would come into play and the income received by the assessee has to be certainly treated as profits and gains of business - it can partake the character of transfer of capital asset, as what is transferred is the sub-agency and goodwill attached. The Tribunal was rightly of the view that the AO has not applied the correct provision of law and the CIT was justified in invoking Section 263 of the Act to revise the erroneous order - Insofar as prejudice to the interest of the revenue is concerned, it is apparent on the face of the record that but for the application of Section 28(ii)(c) of the Act, the assessee would be entitled to the benefit of claiming the receipt of the amount as capital gains under Section 45 of the Act and the consequent exemption that they have sought for. Therefore, the claim of the assessee would certainly be prejudicial to the interest of the revenue – the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (12) TMI 934
  Effect of amendment u/s 40A(3) w.e.f. 1.4.2009 – Total cash payments towards expenditure made to a particular person during a day to be aggregated or not - distributors were not ready to give him goods on credit for even one or two days - Held that:- The Tribunal rightly relied upon in COMMISSIONER OF INCOME-TAX Versus DALIP CHAND AND SONS [2008 (1) TMI 205 - HIMACHAL PRADESH HIGH COURT] - other dealers similarly situated were making payments by crossed cheque – in COMMISSIONER OF INCOME-TAX Versus DALIP CHAND AND SONS [2008 (1) TMI 205 - HIMACHAL PRADESH HIGH COURT] - transactions themselves were found to be extremely doubtful and appeared to be fraudulent - in terms of the amendment made to Section 40A(3) of the Act, aggregation of the total payments during the day has to be made - the amendment is applicable w.e.f. 1st April, 2009 - assessee had pointed out that he had expanded the ambit and area of business to include sale of mobile phones, mobile phone accessories and recharge coupons - He had made purchases of Rs. 1,38,43,525/- for which payments were made to two parties in cash - there are several mitigating factors to show and establish commercial expediency and reasons for making the purchases – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 933
  Incentives/subsidies amounted to capital receipt or not - Whether the Tribunal erred in not holding that incentives/subsidies in the form of exemption from sales tax received by the assessee constituted capital receipt not liable to tax – Held that:- The assessee is in receipt of a sales tax subsidy – Tribunal was of the view that sales tax subsidy received by the assessee is a revenue receipt - a perusal of the judgment in Commissioner of Income Tax, Madras Versus Ponni Sugars & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] reveals that it has been already held that whether a subsidy is a revenue or a capital receipt would depend upon the nature and purpose of a subsidy – thus, the order passed by the Tribunal is set aside and the matter is restored to the Tribunal for re-determining the question whether sales tax subsidy is a revenue or a capital receipt by reference to the nature and purpose of the subsidy – Decided in favour of assessee.

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• 2014 (12) TMI 932
  Deduction u/s 80IA - Whether the Tribunal was right in holding that the deduction u/s 801A, if not claimed in the initial year, can be claimed in the subsequent years when the conditions therein are fulfilled – Held that:- In Commissioner Of Income-Tax Versus Seeyan Plywoods [1991 (2) TMI 89 - KERALA High Court] it has been held that if the assessee does not satisfy the conditions in the initial year and if he satisfies the conditions in subsequent years, then the benefit must be given from the year in which it satisfies the conditions and as per section 80I the assessee is entitled for deduction only for 10 years and not more than that - the Tribunal was rightly of the view that the assessee has satisfied all the conditions in order to avail benefit of Section 80IA – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 930
  Validity of assessment framed u/s 143(3) - no notice was issued under Section 143 (2) – Held that:- Following the decision in Harsingar Gutkha P. Ltd. Versus Commissioner of Income-tax [2008 (5) TMI 443 - Allahabad High Court] - the service of the notice on the assessee within the period provided under the proviso is mandatory - In the absence of the notice being served within the stipulated period under section 143 (2) of the Act, the assessment proceeding comes to an end and is deemed to have become final – since the assessment order was void ab initio, further dealing with the question of law as framed by the appellant does not arise for consideration - the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 929
  Deduction u/s 80IB deleted – Held that:- as per sub-section 10 of section 80IB of the Act, the housing projects which were approved before 31st day of March, 2008, the benefit will be hundred per cent subject to fulfilment of certain conditions - this condition was substituted by Finance (No.2) Act of 2009 with effect from 1.4.2009 which has been further explained by sub-clause (ii) to Explanation regarding completion certificate - since the approval was granted to the assessee on 1.4.2005, therefore, the assessee is not expected to fulfill the conditions which were not on the statute when such approval was granted to the assessee - the law existing at the particular point of time will be applicable unless and until it is specifically made retrospective by the legislature - The substitution so made, is therefore, applicable prospectively and not retrospectively - approval was granted to the assessee on 16-3-2005, consequently the assessee was expected to complete the project on or before 31-3-2009. The assessee is expected to complete the project as per the approved plan at a particular point of time and the assessee is not expected to do or to fulfill the conditions which are not in existence at the relevant point of time or made compulsory after making some amendment in the Act from the future date - since the assessee was to complete the project on or before 31- 3-2009 and request was duly made with the Competent Authority on 5-11-2008 mentioning that the project has been completed and completion certificate may be issued and if the same is not issued by the Competent Authority the assessee should not be penalized for the same unless and until some contrary facts are brought on record evidencing that the assessee contravened the conditions contained in the approval granted by such Competent Authority - as per sub-section (10) of Sec. 80-IB, the housing project which were approved before 31st day of March, 2008, the benefit will be hundred per cent subject to fulfillment of certain conditions. However, this condition was substituted by the Finance (No.2) Act of 2009 with effect from 1-4-2009, which has been further explained by sub-clause (ii) to the Explanation regarding completion certificate. However, since the approval was granted to the assessee on 1-4-2005, therefore, the assessee is not expected to fulfill the conditions which were not on the statute when such approval was granted to the assessee – Decided against revenue. Claim of depreciation on computer peripherals @ 60% - Held that:- Following the decision in COMMISSIONER OF INCOME TAX Versus BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [2010 (8) TMI 58 - DELHI HIGH COURT] - computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system - the computer accessories and peripherals cannot be used without the computer - as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60% - CIT(A) was justified in deleting the additions – Decided against revenue.

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• 2014 (12) TMI 928
  Deduction u/s 80IB – Income disclosed during survey treated as income from other sources – Held that:- A survey operation u/s 133A of the Act was conducted on 27.08.2009 - during the course of survey, loose documents marked as “BF-44” was found - assessee explained that in the file there are expense vouchers along with receipts of amounts received which is already recorded in the books of accounts - the only business of the assessee was of developing and building of housing project styled “Nilkanth Heights Project” - no material has been brought to show that the assessee was engaged in any other activity - during the course of survey, the assessee has categorically stated that the amounts mentioned in loose documents marked as “BF- 44” represents additional income of the said business - only on the basis of this declaration of the assessee, the income of the assessee of Rs. 1,25,00,000/- was accepted by the survey officials in the hands of the assessee and was assessed in the hands of the assessee - as per provisions of Section 80IB, deduction is allowable in respect of income derived from the eligible housing project - the business of the assessee of developing and building residential project in the name and style of “Nilkanth Heights Project” was eligible housing project u/s 80IB, statutorily allowable deduction to the assessee cannot be denied – Decided in favour of assessee.

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• 2014 (12) TMI 927
  Transfer pricing adjustment – Determination of ALP – Payments made to AE at Nil – Assessee derived any benefit from services rendered by AE or not - Held that:- Following the decision in Commissioner of Income Tax-I Versus M/s. Cushman And Wakefield (India) Pvt. Ltd. [2014 (5) TMI 897 - DELHI HIGH COURT] - TPO cannot determine arm’s length price of the payments made by the assessee to its ‘AE’ at ‘nil’ for the reason that assessee did not derive any benefit from services rendered by AE – the TPO is to conduct a Transfer Pricing analysis to determine the arm’s length price (ALP) and not to determine whether there is a service from which assessee has derived benefit or not - the exercise to determine whether assessee had derived any benefit or not from payment of such management fee is to be examined by the AO and appropriate disallowance u/s 37 is called for the TPO had determined the ALP of payment of management fees at ‘NIL’ by holding that the assessee did not derive any benefit from services rendered by the AE - AO has to determine whether the assessee has derived any benefit from payment of professional fees and if any benefit had derived, whether such payment is commensurate to comparable transaction has to be examined by the TPO – thus, the matter is remitted back to the AO/TPO for fresh consideration – Decided in favour of assessee. Expenses on interior of a lease hold premises disallowed – Held that:- Assessee has incurred a sum of Rs. 40,017,141/- on interiors of lease hold premises - majority of these expenditures are expended for major renovation and these expenses are clearly capital in nature – as decided in assessee’s own case, it has been held that prima facie the expenses were of capital in nature - Even if the premises were on lease, because of the provision to Explanation (i) to section 32 of the Act the expenditure of capital nature on the construction of any structure or doing of any work in or in relation to and by way of renovation or expansion or improvement to the building, it is to be assumed as if the said structure or work is a building owned by the assessee – the authority is justified in disallowing a sum of Rs. 4,00,17,141/- as capital expenditure and allowing depreciation on the same – Decided against assessee.

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• 2014 (12) TMI 926
  Expenses incurred in connection with extension of existing business at Greater Noida – Capital or revenue expenses allowable u/s 37(1)/36(1)(iii) - Held that:- As decided in assessee’s own case, it has been held that if it is expansion of the same line of business, the expense incurred on obtaining the borrowed funds should be allowed as revenue expenditure - there was no finding regarding the nature of the project being undertaken at Noida - the detail shows only expenditure on acquisition of land and building construction - assessee had itself capitalized the borrowing cost in the preceding as well as current year and only after 12.12.2001 when the project was deferred/suspended, that the assessee has claimed the borrowing cost to be allowable as revenue expenses as per the AS-16 of the Institute of Chartered Accountants of India. The reliance upon A.S. 16 by the assessee is on the premise that the case comes under ‘Suspension of Capitalization” - the matter is remitted back for the issue of allowability of interest expenditure to the file of AO - since there is no finding of the authorities below regarding nature of the project being undertaken by the assessee at Greater Noida, therefore, the issue of suspension of capitalisation also needs examination of facts at the end of AO – Decided in favour of assessee. Advances given during the course of business in earlier years, written off during the year disallowed – Held that:- A proposal of Reconfiguration of IT Set up for the assessee company has been put up by Shri Abir Basak to Mr. Dinesh Chandna with a bottom line that the commercial term for the same has been negotiated to Rs. 5 lacs with M/s IBM Global Services - the assessee has claimed bad debts of Rs. 5 lakh paid to M/s Trivoli Management, Rs. 1,25,000 to M/s IBM Global Services and Rs. 2,10,000 to M/s IBM Global Services & Excel Computer totalling to Rs. 8,35,000/- as per scope of work, certain devices, systems were proposed to be installed for the purpose of reconfiguration of IT set up of the assessee - the amounts were advanced for purchase of capital assets and as decided in Tulip Star Hotels Limited. Versus Additional Commissioner Of Income-tax, Special Range - 1, New Delhi [2007 (6) TMI 238 - ITAT DELHI-D] - advance given for purchase of capital assets are not allowable as bad debts/business loss – thus, the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (12) TMI 925
  Transfer pricing adjustment on AMP expenses – Held that:- Both the parties admit that the DRP has in a very cursory manner passed its order – similar issue has been decided in L.G. Electronics India Private Ltd. Vs. ACIT [2013 (6) TMI 217 - ITAT DELHI] - mere fact that no consideration moved between the associated enterprises for a transaction is not a decisive factor to have influence over its nature - Payment of consideration has not been made as a condition precedent for inclusion of any transaction within the ambit of section 92B - the simple fact that the foreign AE did not pay any consideration to the Indian AE will not take the transaction out of the purview of the transfer pricing provisions, if it is otherwise an international transaction - thus it is palpable that all the three necessary ingredients as culled out from a bare reading of section 92B are fully satisfied - the transfer pricing adjustment in relation to advertisement, marketing and sales promotion expenses incurred by the assessee for creating or improving the marketing intangible for and on behalf of the foreign AE is permissible and earning a mark-up from the Associated Enterprise in respect of AMP expenses incurred for and on behalf of the AE is also allowable - in any event as the claims of the assessee have to be examined based on the facts of the case, the matter is remitted back to the TPO for fresh adjudication – Decided in favour of assessee.

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• 2014 (12) TMI 924
  Hiring of buses treated as hiring of machinery U/S 194-I or u/s 194C – Assessee in default u/s 201 - Hired buses were governed under the contracts and "carrying out a work" as explained in section 194 C - no fix rental was paid but the payment made to the contractors was on the mileage basis – Held that:- Following the decision in ITO vs Regional Manager, UPSRTC, Saharanpur [2011 (5) TMI 892 - ITAT DELHI] it has been held that the payments made by the assessee would fall under the category of carriage of goods and passengers by any mode of transport other than railways and not under rent - provisions of section 194C of the Act will be applicable - the assessee had taken the buses on hire on payment made on kilometer running basis - The owner was responsible for running cost, maintenance, driver cost and other incidental charges like accident etc. - Therefore, the assessee has not taken the plant or machinery on rent. The definition of word “work” is clear in Explanation – III (c) attached to sub-section (2) of section 194-C of the Act which makes it clear that it includes carriage of goods or passengers by any mode of transport other than by railways - Therefore, payment made by the assessee would certainly fall under the category of carriage of goods and passengers by any mode of transport other than railways and the same does not fall under the definition of rent related to section 194I of the Act - assessee has not taken the plant or machinery on rent but assessee is making payment towards hiring charges paid to the transporter for carriage of goods and passengers by any mode of road transport – Decided in favour of assessee. Deletion of penalty u/s 271(1)(c) – Held that:- Since in the quantum appeal of the assessee for the same assessment years has been decided in favour of assessee, the payment made by the assessee to the transporters for carrying of passengers by road transport falls within the ambit of section 194C of the Act and the assessee was right in deducting the TDS u/s 194C of the Act, therefore, the penalty imposed by the AO on account of lower rate deduction of TDS is certainly not sustainable – Decided against revenue.

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• 2014 (12) TMI 923
  Confirmation of penalty u/s 271D – Violation of section 269SS - Assessee obtained unsecured loan in cash - Since the entire loan was received in cash, AO was of the view that provisions of section 269SS have been violated thereby attracting penal provisions of section 271D - Held that:- Assessee has obtained cash loan and there cannot be any doubt with regard to the fact that assessee has violated the provisions of section 269SS of the Act, thereby attracting penal provisions contained u/s 271D – assessee contended that obtaining of cash loans is for a reasonable cause because on the dates when cash loans were availed, assessee was not having sufficient cash balance to discharge its liability on account of labour payment, which is urgent and immediate in nature – section 269SS clearly states that when any person obtains a loan above Rs. 20,000 from another person not by way of crossed-cheque or demand draft, then, there will be a violation of the provisions of section 269SS - when the provision does not make any distinction whether a transaction is genuine or not, it cannot be read into the statutory provision. Assessee’s claim that in absence of sufficient funds, assessee had availed cash loan of Rs. 5 lakh, is not acceptable - so far as the other loan of Rs. 5 lakh, it is to be noted that the closing cash balance as on 04/03/10 was Rs. 1,66,597, therefore, assessee’s explanation that availing of cash loan of Rs. 5 lakh for the purpose of meeting business exigency on account of payments to be made to labourers etc., is acceptable - there was sufficient cash balance on 03/12/09 to meet the business exigency, and there was no need to avail cash loan on 03/12/09 – assessee has failed to reasonably explain availing of cash loan to the extent of Rs. 5 lakh on 03/12/09 - penalty to the extent of Rs. 5 lakh for availing cash loan of Rs. 5 lakh on 03/12/09 has to be sustained – Decided partly in favour of assessee.

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• 2014 (12) TMI 922
  Rejection of books by the AO u/s 145(3) – Held that:- Book rejection u/s. 145(3) can be resorted to if true income of the assessee cannot be deduced from the assessee's books if it follows incorrect method of accounting - AO has merely pointed out certain defects in the bills or vouchers and also incorrect claims - The AO has not observed any defect in the method of accounting per se - The incorrect claims and defects in the bill, may lead to disallowance on the specific grounds pertaining to them - these are not grounds for rejection of assessee's books of accounts without any specific reasons attributed for doing so - assessee's contention is accepted on this ground. Labour and manufacturing expenses disallowed – Held that:- Assessee's contention cannot be accepted that the matter has been squarely covered by the Tribunal’s order - AO has not pointed out any specific defects in the labour and wages payment claims either from the submissions made by the assessee or through any independent investigation - AO has merely arrived at the purported inflation of such claim from comparison made with the corresponding expenses during the previous year - In the absence of any specific defect in the accounting or any evidence which may warrant any re computation of such claim, the AO's estimated addition cannot be upheld. Addition made on account of GP deleted by AO – Fall in GP by 1% substantiated or not – Held that:- CIT(A) rightly was of the view that the AO has not observed any defect in the method of accounting and further incorrect claim and defect in the bills of expenses may lead to disallowance on specific grounds but cannot be the reason for rejection of assessee’s books of accounts - with respect to the labour and wages payments, he has noted that AO has not pointed out any specific defects either from the submissions made by the Assessee or through any independent investigation - Revenue has not brought any material on record to controvert the findings of CIT(A) – Decided against revenue.

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• 2014 (12) TMI 921
  Selection of comparable - Nucleus Netsoft and GIS (India) Limited - functionally non-comparable or not - Failing employee cost filter and amalgamation of company - assessee is captive contract service provider engaged in providing IT enabled back office services to Ameriprise US - Held that:- Assessee relied upon judicial precedent for exclusion of the specific comparable on the ground that the factum of amalgamation makes the comparable an incomparable – in Willis Processing Services (I) (P.) Ltd. Versus Deputy Commissioner of Income-tax [2013 (3) TMI 415 - ITAT MUMBAI] the issue has been restored to the TPO to verify whether the functionality of the comparable has also changed as that would be the relevant criteria to consider the prayer for excluding the comparable – in M/s HSBC Electronic Data Processing (I) (P.) Ltd. Versus Assistant Commissioner of Income-tax [2013 (6) TMI 708 - ITAT HYDERABAD] - for this specific year i.e 2006-07 assessment year has given a categorical finding that it has changed the business model of the company – there is no merit in the arguments of the Revenue to still restore the issue for verification when a Co-ordinate bench on facts pertaining to the very same AY has held that the business model for Neclues Netsoft & GIS (India) Ltd. has changed as a result of the amalgamation – thus, this company cannot be selected as a comparable not only on the reason of failing employee cost filter, but also due to amalgamation during the year, which has changed the business model of the company – Decided in favour of assessee.

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• Customs

• 2014 (12) TMI 942
  Detention order passed under Section 3(1) (i) rather he even attended the hearing in the prosecution case on 04.08.2014, when he could have been served with the detention order. The respondents have not disclosed that any attempt was made to serve the detention order soon after it had been made. It is not the respondents case that the detenue was avoiding service of the detention order. In fact, the same was served upon him at his residence. - The purpose of a detention order is preventive in nature and not punitive. Therefore, there must be strict compliance of the procedural safeguards in every case of preventive detention. Detenue appeared in the Court of CMM, Jaipur on 04.08.2014. There is absolutely no explanation offered as to why the detention order was not served upon him on the next date. The respondents have themselves tendered in Court a time chart showing the chronological sequence of events in respect of the detenue. In this chronological chart at sl. No.108, it is disclosed that on 01.08.2014, a letter was written by SA to DGP Rajasthan with a copy to the Ministry, informing that if the detention order has not been executed till then, the same could be executed against the detenue on 04.08.2014 when he had to appear before the CMM, Jaipur. In this background, the failure of the respondents to serve the detenue with the detention order on 04.08.2014 is, in our view, fatal. The service of GoD and the RuD is a constitutional right and communication of the same has to be made within the prescribed period to enable the detenue to make a representation. Only in cases where there are exceptional circumstances does the law permit extension from the prescribed period of 5 days upto 15 days. In the present case, the so called exceptional circumstances furnished by the respondent have been set out herein above. In our view, the same cannot, under any circumstance, be classified as "exceptional circumstances". Admittedly, the detaining authority was informed of the execution of the detention order on 14.08.2014. Merely because the ADJ (COFEPOSA) was then on Kolkata for attending a hearing before the Advisory Board in another matter cannot be an excuse for the detaining authority in not taking steps for service of the GoD and the RuD upon the detenue at the earliest and positively within the period of 5 days. It is not the respondents case that apart from the ADJ (COFEPOSA), there are no other officers working in the office of the detaining authority. The failure of the executing authority to intimate the sponsoring authority of the detention of the detenue on 13.08.2014 cannot be cited as an excuse to defeat the fundamental rights of the detenue. With regard to delay in furnishing of the Hindi translation of the RuD is concerned, we may observe that the respondents have pointed out that on earlier occasions, the detenue had addressed letters in English and even stated that he can read, write and understand English language. Thus, it appears that there is a real controversy as to, whether or not the detenue bonafidely required translations of the GoD and the RuD to be able to make an effective representation. We do not propose to get into this aspect in the light of the aforesaid discussion, since the detention cannot be sustained on account of serious infirmities - firstly, on account of passing of the detention order; secondly, on account of delay in execution of the detention order, and; thirdly, on account of delay in service of the GoD and the RuD upon the detenue post the detention. - Decided in favour of assesse.

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• 2014 (12) TMI 941
  Waiver of pre-deposit - Penalty u/s 112 - Discharge of duty liability on quantity of fuel remained in the air craft as unused - Held that:- Fuel that was procured in India and present in the aircraft at the time of its departure from Kolkata Airport for foreign trip, ought to be deducted from the total quantity of fuel found at the time of its return, from the foreign trip. In principle, there is no dispute, as the Commissioner has recorded it in the impugned order. The grievance of the appellant is that even though all the records were produced before the Ld. Commissioner alongwith the C.A. certificate, no finding has been recorded on the same, before confirming the demand. The Commissioner has confirmed the demand only on the ground that they could not produce invoices of fuel procured in India and also the fact that they could not show that they have not claimed rebate/ draw back against the exports. The work sheets and C.A. Certificate produced by the Appellant need to be considered/examined and from the finding of the Commissioner, we do not see any such discussion. Accordingly, in our opinion, the appeal need to be remitted to the adjudicating authority for deciding the issue afresh. Also, we find that the Revenue has also filed Appeal against the same order of the Ld. Commissioner. This Tribunal has consistently, in similar situation, remanded the case, where both the Revenue and the assesse are in appeal against the same order. In the result, the impugned order is set aside and the Appeals are remitted, with the consent of both sides, to the adjudicating authority, for deciding the issue afresh, after taking into consideration all evidences that have been produced by the appellant company before us as well as placed earlier during the course of adjudication proceedings; and also the grounds raised by the Revenue in their Appeal. - Decided in favour of assessee.

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• 2014 (12) TMI 940
  Denial of refund claim - Unjust enrichment - Availment of the benefit of customs duty under Notification No. 64/88-Cus., dated 1-3-1988 - Confiscation of goods - redemption fine - Held that:- there is no finding recorded by the Revenue that the assessee has passed on the burden of duty to anybody else. In view of the facts admitted in the impugned order, I find that the appellant has used the machinery for their own use. Secondly, on the ground of non-filing of the requisite original document, these are only meant for verification of the refund claim. From the order of the learned Commissioner of July, 2009, it is admitted fact by the Revenue that the appellant had deposited Rs. 5,23,039/- in pursuance to rejection of his claim for exemption under Notification No. 64/88-Cus., which was finally allowed by the said order in July, 2009 and adjustment of duty, etc. was done from the amount of the said deposit. It is also observed in the order in favour of the appellant that “balance amount to be refunded to importer on the basis of application to be made by the importer to the proper officer”. In the facts and circumstances, there is nothing else to verify in law except the doctrine of unjust enrichment, which I hold is not applicable under law and facts and circumstances of the case. - Decided in favour of assessee.

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• 2014 (12) TMI 939
  Personal penalty u/s 112 - allegation of abetting the importation of contraband goods - contravention of the provisions of Section 111(a), (f) and (j) of the Customs Act, 1962 - Held that:- The role of Shri Kashyap J. Badekha is limited by introducing importer to Shri Arif Patel for clearance of the goods and to help the importer to get IEC. He has nothing to do with the import of contraband goods. We further find that the role of Shri Arif Patel was only for the clearance of the goods and for the clearance of the earlier consignment, nothing has been proved against the appellant, that he was having no knowledge of the modus operandi of the importation of the contraband goods by replacing aluminium scrap. Further, in this case the container was intercepted at Bombay port itself and it was opened and the appellant came to know about the container with contraband goods only after examination. In these circumstances, the appellant was not having any knowledge of importation of contraband goods by the importer. As per Section 112A of the Customs Act, 1962, the penalty can be imposed on the person who act of aiding and abetting the importation of contraband goods. As discussed above, there was no role of the appellant in aiding and abetting the importation of contraband goods. Therefore, penalties under Section 112(a) of the Act are not imposable on the appellants. - Decided in favour of appellant.

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• 2014 (12) TMI 938
  Rectification of mistake - Revocation of CHA license - Fraudulent export under Buy Back System were affected - Availment of excess ineligible Drawback - Held that:- appellant has not disputed that the clearance of the impugned goods has been conducted by Shri Sumit V. Ghatkamble. It is also an admitted fact that Shri Sumit V. Ghatkamble was not having a customs pass. When a person is not having a customs pass and is a trainee employee as contended by the appellant, in that situation, the clearance were conducted by Shri Sumit V. Ghatkamble was within the knowledge of the appellant. These facts are also admitted by Shri Sumit V. Ghatkamble. It is also an admitted fact that the work has been brought by one Shri Mahesh Pande to Shri Sumit V. Ghatkamble to whom the appellant has allowed to use their CHA licence for some consideration. Therefore, the observation made by the adjudicating authority in the impugned order that “I find that no such permission has been obtained and that Shri Sumit V. Ghatkamble was not holding customs pass in the name of charged CHA while undertaking customs clearance of the subject export goods under the ten shipping bills of M/s. Leevon Overseas. Therefore, the charge under Article 12 has been proved against the appellant is beyond doubt” is not correct. The appellant has authorization from the exporter for undertaking the transactions. He has also obtained all the documents required for filing of the shipping bills and other export documents. The check-list has been prepared by the appellant’s own employee and preliminary verification of the existence of the exporter has also been undertaken, it does not mean that the CHA licence has been sub-let. The examination of the goods is a function to be undertaken by the Customs Officer. Merely because thee CHA or its employee was absent during the examination, it does not mean that the CHA licence has been sub-let. Following the precedent decision we set aside the impugned order revoking the CHA licence No. 11/499 - Decided in favour of appellant.

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• Service Tax

• 2014 (12) TMI 965
  Cargo Handling Services - Whether the Appellant were eligible to claim the benefit of exemption from the levy of ‘Cargo Handling Services’ in relation to the cargo meant for export - Held that:- Assessee could not adduce sufficient evidences to establish that the cargo which they handled, were meant for export. Consequently, the demand was confirmed by the ld. Commissioner. Now, the Appellant claim that they could procure necessary documents, to establish that the cargo in question for the relevant period, were meant for export, and also they would place necessary documents/certificates in support of their claim. However, we find that the said certificate and documents relate to 56% of the demand. The ld. Advocate for the Appellant submits that they are now in the process of procuring the documents for the remaining quantity of goods. Therefore, in the interest of justice, we are of the view that the matter may be remanded to the ld. Adjudicating Authority for considering the evidences afresh, that would be placed by the Appellant - Matter remanded back - Appeal disposed of.

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• 2014 (12) TMI 964
  Consulting Engineer’s Services - Executing the work of construction of mess, quarters etc. for the staff of Assam Rifles - Held that:- Dispute centers round the services rendered by the Appellant to the Director General of Assam Rifles in executing the works of construction of quarters and mess for the staff of Assam Rifles. We find from the submission of the ld. Advocate for the Appellant that the issue is highly debatable and accordingly, the same ought to be examined in detail, before arriving at a conclusion as to whether the services rendered by the Appellant to the Director General of Assam Rifles would fall under the category of ‘Consulting Engineer’s Services’ or otherwise. Considering the fact that the Appellant is a public sector undertaking of Government of India, it is appropriate to remit the case to the ld. Commissioner (Appeals) for deciding the issue on merits, without insisting any predeposit. In the result, the impugned Order is set aside, and the matter is remitted to the ld. Commissioner (Appeals) for deciding the issue afresh. - Decided in favour of assessee.

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• 2014 (12) TMI 963
  Waiver of pre-deposit - Mining Services - transportation of lignite from the mines to the power plant under the GTA services and also for transportation of fly ash - Held that:- agreement between two parties for the mining and transportation as individual expenses can not be considered to be falling under one heading i.e. ‘Mining Services’. This is our prima-facie view. This our prima-facie view is fortified by the decision of the Tribunal in the case of R.K. Transport Company (2012 (3) TMI 271 - CESTAT, NEW DELHI). On perusal of the circular which has been relied upon by the adjudicating authority, we also find that the said circular specifically talks about vivisection of the contract for the purposes of charging under the of Cargo Handling Services and Transportation Services - appellant has made out a prima-facie case for the waiver of pre-deposit of the amounts involved. Accordingly, application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of the appeal. - Stay granted.

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• 2014 (12) TMI 962
  Whether the appeal filed before the Commissioner (Appeals) was barred by limitation or otherwise - Held that:- It is the claim of the Appellant that even though they were communicated with the Order-in-Original on 19.01.2011 by hand-delivery; but the certified copy was received by them on 04.04.2011. Therefore, the date of receipt of the certified copy of the impugned Order-in-Original be considered as the date of communication of the Order and the limitation should start from that date. I do not find force in the argument of the ld. FCA for the Appellant. Since the Order was communicated to them on 19.01.2011, the appeal could have been filed on the basis of such Order, and it cannot be construed that the date of communication of the certified copy thereof, be considered as the date of communication for the purpose of computation of the time-limit of three months, as prescribed under Section 85(3) of the Finance Act, 1994. - appeal dismissed.

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• 2014 (12) TMI 961
  Waiver of pre deposit - secondment of employees - Manpower Recruitment or Supply Agency Service - Business Auxiliary Service - Held that:- Manpower Recruitment or Supply Agency service allegedly received by the appellant, that issue also stands concluded by the judgment of the Gujarat High Court in C.S.T. vs. Arvind Mills Ltd. reported in [2014 (4) TMI 132 - GUJARAT HIGH COURT] whereby the High Court confirmed the decision of the Ahmedabad Bench of this Tribunal in Arvind Mills Ltd. vs. C.S.T., Ahmedabad reported in [2013 (10) TMI 821 - CESTAT AHMEDABAD]. There are other decisions of this Tribunal in Paramount mount Communication Ltd. vs. C.C.E., Jaipur - [2013 (3) TMI 134 - CESTAT NEW DELHI]; Volkswagen India Pvt. Ltd. vs. C.C.E., Pune I reported in [2013 (11) TMI 298 - CESTAT MUMBAI] and of the Principal Bench in BMW India Pvt. Ltd. vs. C.S.T. ,Delhi reported in [2013 (10) TMI 585 - CESTAT NEW DELHI] which enunciates the same principle of no liability to tax on reimbursement of the expenses and salaries of employees seconded by the principal employer to a subsidiary employer in India, for effective execution of the principal employers business. In so far as Business Auxiliary Service is concerned, the appellant claims that it amounts to export of taxable service and is entitled to immunity to service tax under provisions of the Export of Service Rules, 2005.This plea stands concluded by the Larger Bench decision of this Tribunal in Paul Merchants Ltd. vs. C.C.E., Chandigarh reported in [2012 (12) TMI 424 - CESTAT, DELHI (LB)] as well as the decision in Simpra Agencies and Simpra Agencies Pvt. Ltd. reported in [2014 (6) TMI 354 - CESTAT NEW DELHI]. We grant waiver of pre-deposit in full and stay all further proceedings for realization of the adjudicated liability, pending disposal of the appeal - Stay granted.

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• 2014 (12) TMI 960
  Waiver of pre-deposit of service tax - Commercial, training and coaching services - Held that:- Prima facie, we find that the applicant has made out a strong case in respect of demand of Rs. 3 lakhs which is in respect of applicant providing computer education to the students in government schools as per the syllabus. Keeping in view the facts and circumstances, applicants are directed to deposit Rs. 1,25,000 within a period of 8 weeks in addition to the amount already deposited and report compliance. The pre-deposit of the remaining dues are waived and recovery stayed during the pendency of the appeal. - Partial Stay granted.

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• 2014 (12) TMI 959
  Waiver of pre- deposit of service tax - Job work - Business Auxiliary Service - Materials and chemicals which are used during the processing are sold to the principal - Held that:- Admitted case of the appellants are that they are receiving the articles of aluminium from the principal and after undertaking certain processes which does not amount to manufacture, clear the same to the principal. As the applicants are receiving the aluminium articles from the principal, therefore, prima facie we find no merits in the contention of the appellant that the activity comes under ‘works contract’. during the argument the applicant admitted that the value of articles is approximately 60%. In view of the above as we find that the applicant failed to make a case for total waiver of pre-deposit of service tax - Partial stay granted.

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• 2014 (12) TMI 958
  Waiver of pre-deposit of service tax - Real estate agents service - Held that:- The applicants agreed to purchase land for certain consideration from land owner. Subsequently entered into another agreement for sale of the same land, without getting it registered in their own name and without giving full consideration to the land owner, with the builder. There is no registered sale deed transferring land in the name of the present applicant. As per the definition of ‘real estate agent’ as provided under Finance Act, real estate agent means a person who is engaged rendering any service in relation to leasing or renting of real estate agent. In the present case, the activity undertaken by the applicant is real estate agency as the applicant had not transferred the land in his name before entering into an agreement for sale with the builder. Therefore, we find no merit in the contention of the applicant that it is a case of sale and purchase of land. Under these circumstances as we find that applicant failed to make out a case for total waiver of service tax. - Partial stay granted.

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• 2014 (12) TMI 957
  Waiver of pre deposit - Reimbursement of transportation charges by CHA - whether the appellant was liable to pay Service Tax on the transportation charges reimbursed by the appellant to the CHA who actually paid transportation charges to transporter without paying service tax - Held that:- As per Rule 2(i)(d)(i)(B) of the Service Tax Rules, 1994, service tax on GTA services is required to be paid by the person who actually pays or is liable to pay the freight either himself or through his agent. In the present case, CHA is rendering several services to the appellant as per the invoices raised by CHA and produced at the time of arguments and one of the charges indicated in the invoices is payment of transport charges. There is no evidence on record that CHA is acting only as an agent of the appellant and that which paying freight charges to the transporter CHA was only acting as an agent. - Appellant has made out a prima facie case for complete waiver of the confirmed dues and penalties. Accordingly, it is ordered that there shall be stay on recoveries of the confirmed dues and penalties, till the disposal of the appeal - Stay granted.

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• 2014 (12) TMI 956
  Restoration of appeal - Appeal dismissed for non compliance of pre deposit order - whether an interlocutory order passed would revive after restoration of the appeal earlier dismissed for default or otherwise - Held that:- The relevant principle is reiterated in the decision of the Delhi High Court in Radhey Bai v. Savithri Sharma - [1975 (2) TMI 112 - DELHI HIGH COURT]. There is unvarying judicial authority for this principle, spelt out in the judgment of the Delhi High Court. Accordingly, in the circumstances and in the right of the settled legal position we declare that the interim order dated 23-2-2012 directing waiver of pre-deposit of the balance adjudicated liability on condition of the deposit of Rs. 40 lakhs (the amount having already been deposited as noticed by the judgment of Punjab & Haryana High Court) has revived and shall be operative during pendency of the appeal. In this view of the matter this application is infructous and dismissed.

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• Central Excise

• 2014 (12) TMI 953
  Denial of area based exemption - manpower recruitment agency or manufacturer of goods - benefit of notification No.214/86-CE was deniable to it not being a job worker - Since appellant failed to file the required declaration to claim area based exemption, department was deprived of examining whether the appellant was entitled to the exemption before its first clearance was made. That resulted in denial of benefits of notification No.50/2003-CE dated 10/06/2003 to it - whether the appellant was a mere service provider to HUL or a "manufacturer" under section 2(f) (ii) of the Act read with in terms of chapter Note 6 of Chapter 34 of Central Excise Tariff Act 1985 Held that:- Primary object of the Notification No. 50/2003-CE, dated 10.06.2003 is to grant duty exemption to manufacturing units situated in the area specified therein subject to fulfillment of conditions prescribed therein read with the Board Circular No.908-CX, dated 23.12.2009 as well as Circular No.757/73/2003-CX, dated 22.10.2003 [F.No.201/54/2003-CX-6]. It is not in dispute that the appellant was situated in the specified area of Himachal Pradesh and entitled to the exemption benefit granted by the notification read with the Board circulars. However relying on the copy of agreement dated 01.09.1977 and Board Circulars, the appellant bona fide believed that it was a mere service provider and not a manufacturer for the reasons mentioned hereinbefore as urged by it and failed to file necessary declaration for consideration of its exemption status by the Authority. Registration of the appellant under Finance Act, 1994 and its existence in the specified area of Himachal Pradesh, as well as its activity carried out as job worker of HUL was well known to Record. Appellant bona fide believed that it was not manufacturer and not liable to excise duty and if held to be manufacturer, it is entitled to the exemption by Notification No. 50/2003 read with the Board circulars aforesaid. There is nothing on record to show that either appellant or HUL suppressed any fact to the authority. Record also reveals that appellant has not acted mala fide. It is primarily entitled to the benefit of exemption notification aforesaid. It only failed to file necessary declaration under bonafide belief as stated above. Non filing declaration is not suppression of fact. So also there is nothing on record to appreciate that appellant had any intention to evade duty. Therefore, appellant acting bona fide is not debarred it to file the same before the authority to re-examine its eligibility to the exemption, otherwise that would defeat object of the area based exemption - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 952
  CENVAT Credit - goods become exempt after availing credit - export of goods - Applicability of Rule 6 and 11 of the Cenvat Credit Rules, 2004 - Exemption to Menthol Crystals BP/USP and Menthol BP/USP - Held that:- In terms of Rule 6 (1) of the Cenvat Credit Rules, 2004, Cenvat credit shall not be allowed on such quantity of input or input services, which is used in the manufacture of exempted goods except in these circumstances mentioned in sub-Rule (2). In terms of sub-Rule (2) of Rule 6 ibid, when a manufacturer avails of Cenvat credit in respect of any input or input services and manufactures such final products which are chargeable to duty as well as the exempted goods, then the manufacturer shall either maintain separate account and inventory for the receipt, consumption of the inputs/input services meant for use in the manufacture of dutiable final product and exempted final product and take Cenvat credit only in respect of inputs/input services used in or in relation to manufacture of dutiable final product, or if does not maintain such account and inventory, in accordance with the provisions of sub-Rule (3) of Rule 6, he shall pay an amount either equal to 10%/5% of the sale price of the exempted final product or equal to the Cenvat credit involved on the inputs/input services used in or in relation to manufacture of exempted final products, to be calculated as per the provisions of this sub-Rule. From a plain reading of the above sub-Rule (3) of Rule 11, it is clear that this rule applies, if - (a) one or more duty paid inputs in respect of which Cenvat credit has been taken, have been used in or in relation to manufacture of a final product which up to a certain date was dutiable and (b) that final product has become fully exempt from duty whether on option basis or absolutely from a particular date. - if any stock of Cenvat credit availed inputs is lying in stock or is in process or is contained in the final products lying in the stock as on the date of exemption, the Cenvat credit involved in respect of such inputs lying in stock or in process or contained in final product lying in the stock would be required to be paid by the manufacturer, which he can do by deducting that amount from the Cenvat credit balance, if any, lying in his credit and the credit balance, if still left, shall lapse and the same cannot be utilized for payment of duty on any final product whether cleared for home consumption or for export or for payment of service tax on any output service whether provided in India or exported. Thus, in accordance with the provisions of this sub-rule, the balance credit shall lapse and cannot be utilized for any purpose whether for payment of duty on the domestic clearances or for payment of duty on the goods cleared for export. Provisions of sub-rule (1) of Rule 6 of the Cenvat credit Rule, 2004 are subject to the provision of sub-rule (6) of this rule and in the circumstances enumerated in various clauses of Rule 6(6), the provisions of sub-rule (1), (2) and (3) of Rule 6 are not applicable. The thrust of the Revenue s case is that the word ‘excisable goods’ in sub-Rule (6) of Rule 6 of the Cenvat Credit Rules, 2002 should be read as ‘dutiable goods’ and accordingly, the provisions of this sub-rule would not be applicable to the fully exempted finished products which have been exported out of India, and the Cenvat credit in respect of the same would not be admissible in accordance with the provisions of sub-Rule (1) of Rule 6. In other words, the contention of the Revenue is that when some finished products which are fully exempt from duty are exported out of India under bond/LUT, under Rule 19 of the Central Excise Rule, 2002, the provisions of sub-Rule (6) of Rule 6 would not be applicable and accordingly, the provision of sub-Rule (1), (2), (3) of Rule 6 would become applicable and, therefore, the Cenvat credit in respect of inputs used in or in relation to manufacture of such final product would not be admissible in accordance with the provisions of sub-Rule (1). Neither the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004, nor the provisions of Rule 6 (1) ibid are applicable to this case. As regards the Department s plea that the respondent cannot take cash refund of accumulated Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 as well as rebate of duty paid out of the same credit, since in this case, under Rule 5 of Cenvat credit Rules, 2004, prohibition is on claiming input duty drawback under Customs and Central Excise duties Drawback Rules, 1995 or the equivalent benefit of input duty rebate under Rule 18 of the Central Excise Rules and in this case, neither the input duty drawback under the Drawback Rules nor the input duty rebate under Rule 18 of the Central Excise Rules, 2002 has been claimed, this plea is not valid. None of the present show cause notices, which are the subject matter of present appeals, either this allegation has been made or any evidence in this regard has been discussed. In the three show cause notices which culminated in the order-in-original No. 20-22/D-I/2009 dated 31/03/09 passed by the Commissioner, there is not even a whisper of this allegation. Even in the written submissions wherein this plea has been made, no evidence in support of this allegation has been disclosed. In any case, such an evidence is yet to be evaluated, as the show cause notices issued to M/s Ambika International, M/s Fine Aromatics, M/s Jay Ambey Aromatics and M/s Shiva Mint Industries and also to the respondent have not been adjudicated. - present matter cannot be decided on the basis of allegations made in the subsequent show cause notice dated 07/03/13 issued to the respondent and the show cause notices dated 29/10/12 and 04/10/12 issued to the respondent suppliers M/s Ambika International, M/s Fine Aromatics, M/s Jay Ambey Aromatics and M/s Shiva Mint Industries. Those Show Cause Notices have to be adjudicated by the Commissioner independently and can’t be referred to or introduced in the present proceedings. Accordingly, we have laid down the law, based upon the allegations made in the present Show Cause Notice, as the subsequent notices are not the subject matter of the present appeals. - Decided against Revenue.

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• 2014 (12) TMI 951
  Denial of rebate claim - Failure to produce relevant Bank Realization Certificates - respondent themselves requested for cancellation of the rebate claims - Rebate claims were rejected by the original authority holding that their original claims being no more live for consideration, as the claims filed on 22.10.2012 were barred by limitation of time as stipulated under Section 11B - Commissioner (Appeals allowed the appeals with consequential benefits - Held that:- Commissioner (Appeals) has observed that mere cancellation request by the applicant party cannot be treated as closure of rebate claim. Government notes that mere cancellation request for the reasons of non-realization of export proceeds cannot be the reason for rejection, if such export proceeds are realized subsequently within prescribed statutory time limit or extended time granted by the RBI. On perusal of documents submitted by the respondent it is observed that he has submitted the impugned BRCs after stipulated time limit. Further, they could not produce any extension of time limit granted by RBI. Under such circumstances, Government holds that the appellate authority is correct that mere cancellation request of the respondent cannot be treated as closure of rebate claim, provided the BRCs are submitted within the extended time limit by the RBI. Otherwise, if no such extension is granted, then rebate claims would be treated as time barred as contested by the revenue. Under such circumstances, in the interest of justice, Government is of the opinion that cases may be remanded back to decide the same afresh. The respondents are required to submit formal extension of time limit by the RBI within 90 days of receipt of this order. - Matter remanded back - Decided partly in favour of Revenue.

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• 2014 (12) TMI 950
  Rebate claim - amount of excess duty paid then prescribed rate of duty - Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-CE(NT) dated 06 09.2004 - manufacturers had paid duty on said exported goods @ 10% under Notification No. 2/08-CE dated 01-03-2008 - original authority after following due process of law, held that duty was required to be paid on exported goods at the effective rate of duty @ 4% in terms of Notification No. 4/2006-CE dated 01.03.2006 as amended and sanctioned the rebate claims to the extent of duty payable @ 4% - rejection of rebate claim on free samples - Held that:- Notification No. 4/2006-CE dated 1.03.06 when issued, originally did not prescribed any concessional rate of duty to medicaments of chapter Heading 3004 and a concessional rate of duty @8% was prescribed by amending the said notification vide notification no. 4/2008-CE dated 01.03.2008 and the same was further reduced to 4% vide amending the said notification vide notification no. 58/2008-CE dated 7.12.08. Further Notification No. 4/06-CE-was amended vide Notification No. 4/11-CE dated 01.03.2011 and the effective rate of duty was enhanced to 5%. On the other hand, the tariff rate of duty for the Chapter heading 3004 was 16% adv. There is no merit in the contentions of applicants that they are eligible to claim rebate of duty paid @10% i.e. General Tariff Rate of Duty ignoring the effective rate of duty @4% or 5% in terms of exemption notification No.4/06-CE dated 1.03.06 as amended. As such Government is of considered view that rebate is admissible only to the extent of duty paid at the effective rate of duty i.e. 4% or 5% in terms of Notification No.4/06-CE dated 1.03.06 as amended, as applicable on the relevant on the transaction value of exported goods determined under section 4 of Central Excise Act, 1944. - no foreign remittances was to be received by the applicant, they were not eligible for rebate of duty on (free trade samples). As per foreign trade policy, the exporter is allowed to send the free trade samples, but the admissibility of the rebate claim is to be decided as per relevant provisions of Central Excise Act. No commercial value is mentioned on the export documents and the market value as per records become nil. Since the market price of export goods at the time of exportation is nil, the rebate claim becomes inadmissible in terms of condition No.2(e) of Notification No. 19/2004-CE(NT) dated 6.9.2004. Amount paid in excess of duty payable on one's own volition cannot be retained by Government and it has to be returned to manufacturer/applicant in the manner in which it was paid. Accordingly, such excess paid amount/duty which is required to be returned to the applicants. Government modifies the order of Commissioner, (Appeals) to the extent discussed above. As such the excess paid amount may be recredited in manufacturer's cenvat credit account - Decided partly in favour of assessee.

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• 2014 (12) TMI 949
  Rebate claims - Notification No. 19/2004-CE(NT) dated 6.9.2004 does not specify automobile cess as duty for the purpose of granting rebate - non-fulfillment, of condition 2(b) of Notification No. 19/2004-CE(NT) dated 6.9.2004 - Held that:- Under sub-section (3) it was further envisaged that the pro visions of the Central Excise Act, 1944 and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Rules. Surcharge is collected as part of levy under three different enactments goes to show that scheme of levy of Education cess was by way or collecting special funds for the purpose of Government project towards providing and financing universalised quality of basic education by enhancing the burden of Central Excise Duty, Customs Duty, and Service Tax by way of charging surcharge to be collected for the purpose of Union. But, it was made clear that in respect of all the three taxes, the surcharge collected along with the tax will bear the same character of respective taxes to which surcharge was appended and was to be governed by the respective enactments under which Education Cess in the form of surcharge is levied that at the time of clearance from Mysore factory, they are not acquainted as to which goods would be exported or sold to the local market by the Hosur Unit; that at the time of clearance from Mysore unit, there is no ARE-1 prepared but the goods are merely transferred to the Hosur unit and that ARE-Is are prepared when the goods are exported from Hosur unit. The applicant has further relied upon provisions contained in part-I of Chapter 8 of Supplementary Instruction, 2005 which relate to Notification No.19/2004-CE (NT) dated 6.9.2004. Since the goods are exported from Hosur unit on ARE-1/Invoice, the said goods are cleared for export on the date of preparation of ARE-1 at Hosur unit. Since the goods are exported within six months of their clearance from Hosur unit (date of ARE-1/invoices), the allegation of violation of condition 2(b) of the Notification No.19/2004-CE(NT) does not survive and hence, rebate claims cannot be disallowed on this count. - Decided in favour of assessee.

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• 2014 (12) TMI 948
  Rebate claim - discrepancies in the declared gross weight and net weight in there ARE-1s - shipping Bill was not appended with the rebate claim - appellant did not file Bank realization certificate along with rebate claim - Arrival of FOB value after deduction of freight/insurance/commission - held that:- Government finds that rule 5 only provides for exclusion of cost of transportation in case of goods sold for delivery at a place other than the place of removal. Government notes that there is no mention whatsoever regarding exclusion of commission from FOB value to arrive at transaction value. As such; this- contentiorG of theapplicant_departraeatis C rary to legal position and hence not tenable. There are specific provision in Section 4(3)(d) of the Central Excise Act 1944 and there is logical inference from DGFT's Policy Circular No.51(RE-2008)2004-09 dated 6.1.2009 regarding inclusion of commission in transaction value. As such Government finds no infirmity in finding of Commissioner (Appeals) that rebate is admissible on FOB value (which is arrived at by including commission and excluding freight) in absence of any substantive counter argument of applicant department. Accordingly, the rebate is admissible on such transaction value. On perusal of sample AREs-1 No.614 dated 11.7.12 and ARE-1 N6.757 dated 29.7.12 and relevant shipping bill No.1157499 dated 1.8.12 and 1142621 dated 2.8.12, Government observes that goods covered vide said two sample- AREs-1 have been cleared under physical supervision of central excise authorities and ultimately exported along with goods covered vide 18 other AREs-1, vide above mentioned two shipping bills, as evident from endorsement of custom authorities on part B of said ARE-1. There is no finding of original authority regarding correlation between excise documents and export documents except ambiguity in weight, which has been explained by the respondent as mentioned in para (11) above. Under such circumstances, keeping in mind whole fact of the case, Government finds force in argument of the respondent regarding ambiguity in net weight/gross weight. As such export of duty paid goods stands established. Under such circumstances, Government finds that rebate is admissible for the reasons of substantial compliance of export of duty paid goods. Rebate/drawback etc. are export-oriented schemes. A merely technical interpretation of procedures etc. is to be best avoided, if the substantive fact of export having been made is not in doubt,' a liberal interpretation is to be given in case of any technical lapse. Once a view is taken that the party would have been entitled to the benefit of the notification had they met with the requirement of the concerned rule, the proper course was to permit them to do so rather than denying to them the benefit on the technical grounds that the time when they could have done so, had elapsed. In fact, as regards rebate specifically, it is now a title law that the procedural infraction of Notifications, circulars, etc. are to be condoned if exports have really taken place, and the law is settled now that substantive benefit cannot be denied for procedural lapses. Procedure has been prescribed to facilitate verification of substantive requirement. The core aspect or fundamental requirement for rebate is its manufacture and subsequent export. As long as this requirement is met other procedural deviations can be condoned. This view of condoning procedural infractions in favour of actual export having been established has been taken by tribunal / Govt. of India in a catena of orders, including Birla VXL Ltd. [1997 (7) TMI 383 - CEGAT, NEW DELHI], Alfa Garments [1995 (3) TMI 281 - CEGAT, NEW DELHI], T.I. Cycles [1983 (5) TMI 138 - CEGAT, BOMBAY], Atma Tube Products [1998 (5) TMI 98 - CEGAT, NEW DELHI], Creative Mobus [2003 (7) TMI 682 - GOVERNMENT OF INDIA], Ikea Trading India Ltd. [2003 (7) TMI 99 - GOVERNMENT OF INDIA] and a host of other decisions on this issue. - No infirmity in impugned order - Decided against Revenue.

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• 2014 (12) TMI 947
  Duty liability to be discharged by the Job worker or Principle supplier (the appellant) - manufacture of steel racks and trolleys - Imposition of penalty under Rule 173Q - Held that:- Work order dated 8-10-1993 placed by the appellant to M/s. Bonafide Industrial Works besides quoting rate of the job work on per kg. basis, also mentions the conditions, one of which is that all the workers employed by the job worker for this contract would be covered under ESI and PF Scheme as per Labour Laws in force. Thus, in respect of the workers, employed by the job worker, it is the job worker who is responsible for providing the benefits under ESI and PF Scheme to the workers employed by him. It is also not disputed that M/s. Bonafide Industrial Works were doing similar job work for other clients. There is no evidence on record to indicate that M/s. Bonafide Industrial Works is a dummy unit floated by the appellant or is an agent of the appellant. When the transactions between the appellant and the job worker M/s. Bonafide Industrial Works are on principal to principal basis in the sense that both are independent entities and the job worker cannot be said to be a hired labour, working under the control of the Appellant, it is the job worker who has to be treated as manufacturer and not the appellant and, therefore, there would not be any duty liability on the appellant. Just because the raw materials and drawings and designs of the racks and trolleys to be fabricated were supplied by them, the appellant would not become the manufacturer. - Decided in favour of assessee.

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• 2014 (12) TMI 946
  Waiver of pre deposit - CENVAT Credit - benefit of Notification No. 6/2006-C.E., dated 1-3-2006 - Held that:- Appellant has not availed any Cenvat Credit on any of the inputs which have been used in the manufacture of either the bulkers or the duty paid on the chassis and therefore, the appellant would be entitled for the benefit of exemption under the said Notification vide Serial No. 39. We further observe that under Serial No. 87 of the notification, goods manufactured in the factory and used in the same factory for building a body or fabrication or mounting or fitting of structure or equipment on a chassis falling under Heading 8706 is exempt from duty, subject to the condition that no credit on the chassis has been taken. This condition is also satisfied by the appellant. Therefore, there would not be any duty liability on the appellant on the bulkers manufactured and captively consumed in the manufacture of motor vehicle falling under Chapter 8704. Therefore, prima facie we are of the considered view that the appellant is eligible for the exemption. Consequently, the duty demand confirmed against the appellant is not sustainable in law. Thus appellants have made out a strong case for grant of stay. Therefore, we grant unconditional waiver from pre-deposit of dues adjudged against the appellants and stay recovery thereof during the pendency of the appeals. - Stay granted.

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• 2014 (12) TMI 945
  Valuation of goods - Job work - addition of value of scrap - duty liability has been discharged on the price at which the job-worked goods were sold by the principal manufacturer - Held that:- Appellant has discharged the duty on the sale price of M/s SAIL, which was the principal manufacturer. Therefore, the provision of sub-rule (i) of Rule 10A is clearly attracted. Only in a case where the sub-rule (i) & (ii) are not attracted, the transaction can be covered to sub-rule (iii) of Rule 10(A) - As regards the transaction pertaining to M/s KEC International and M/s RPG Transmission Ltd., the demand pertained to the period April, 2007 to December, 2010, whereas the show-cause notice has been issued only on 27.7.2011. Therefore, the demand for the period April, 2007 to June, 2010 would be clearly time barred and the demand cannot be sustained in law. We further see that the appellant has discharged the duty liability on the scrap, which has been generated and the transaction could have been undertaken under Rule 4(5)(a) of the Cenvat Credit Rules. If the appellant had followed the said procedure instead of paying duty, the question of inclusion or exclusion of value of the scrap would not have arisen at all. In these circumstances, the question of addition to value of scrap, is not sustainable. - Decided in favour of assessee.

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• 2014 (12) TMI 944
  Denial of refund claim - Unjust enrichment - Held that:- In the order dated 31-8-2010 while sanctioning the refund, the jurisdictional Assistant Commissioner has clearly recorded that the documents governing the transactions for the period January to March, 2009 had been verified by the jurisdictional Range Officer, who had returned the refund claim with the remarks that the appellant had paid excess duty to the extent of Rs. 30,90,857/-. Further, vide letter dated 13-8-2010, the jurisdictional Range Officer has also reported that unjust enrichment clause is not involved, inasmuch as the appellant has borne the incidence of duty and the said duty incidence had not been passed on to any other person. In view of the verification done by the jurisdictional Range Officer, it is not understandable how the Revenue can take a plea that the appellant has not crossed the bar of unjust enrichment. There is no evidence adduced or forthcoming from the Revenue showing that the appellant has passed on the incidence of duty to their buyers. In fact all the invoices for the transaction issued from factory as also from the depot were verified by the Range Officer, who after verification has reported that the appellant has borne the incidence of duty and has not passed on the incidence to any other person. In view of this clear finding recorded by the jurisdictional Ranger Officer, the appellant was rightly entitled for the benefit of refund. - Decided in favour of assesse.

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• 2014 (12) TMI 943
  Time limit for availing Cenvat Credit after the receipt of Inputs - credit availed after one year - Demand of interest on credit wrongly taken - Held that:- As per the Cenvat Credit Rules credit of the duty paid on inputs/input services has to be taken immediately on receipt of the input/input services. Though the rule does not lay down any time limit, it is a settled position in law that a reasonable time limit has to be read into the law. In Central Excise matters, the normal period of limitation, both for demand of duty and also for claiming of refund is one year. Therefore, it is reasonable to read into the law a time limit of one year from the date of receipt of inputs for taking of the credit. Inasmuch as the appellant has not done this, the denial of Cenvat credit cannot be faulted. Secondly, it is noted that the appellant was availing the benefit of Notification No. 6/2002 wherein the final products manufactured by the appellant was cleared without payment of duty up to a quantity of 3500 MT. To be eligible for the credit, the final products should be dutiable. The denial of credit to the extent of Rs. 9,63,922/- has been made on the ground that the credit pertains to inputs which have gone into the manufacture of exempted final products. Therefore, the denial of credit, in these circumstances, by the lower authorities cannot be faulted. Consequently, the appellant would be liable to pay interest on the Cenvat credit wrongly taken. Appellant took credit on 30-5-2006 and intimated the department accordingly. Therefore, it cannot be said that the appellant suppressed the fact of taking of any credit so as to attract mandatory penal provisions under Section 11AC. Therefore, the imposition of equivalent amount of penalty under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 is not warranted and accordingly I set aside the same. - I uphold the denial of Cenvat credit to the extent of Rs. 9,63,922/- along with interest thereon under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944. However, I set aside the penalty of equivalent amount under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Decided partly in favour of assesse.

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• CST, VAT & Sales Tax

• 2014 (12) TMI 955
  Maintainability of condonation application - Condonation of delay in filing the Sales Tax Application – Whether if the Application filed under the proviso to section 61(1) is filed beyond 90 days, can this Court take recourse to section 5 of the Limitation Act, 1963 - Held that:- In The Commissioner of Sales Tax, Maharashtra State, Mumbai vs. N.H. Polymers [2007 (11) TMI 563 - BOMBAY HIGH COURT] wherein it has been already held that the Court has no power to condone the delay in filing of these Applications - it is not possible to agree that the period of 90 days provided in the proviso for approaching the Court against the refusal of the Tribunal to refer any question of law is not a rule or provision of limitation - 90 days is a period provided for both sub section (1) substantively and the proviso - this period or stipulation of time or provision of limitation binds the parties – the contention cannot be accepted because it is not the word "only" referred by the Division Bench but a conjoint and combined reading of the legal provisions referred enables to hold that application of section 5 of the Limitation Ac, 1963 is excluded. The legislative intent to exclude the applicability of section 5 of the Limitation Act, 1963 has to be found out with reference to the nature of the power which is invoked and which is requested to be exercised, whether a party or person has absolute right to invoke it and equally whether the Court can exercise it and all this has to be examined with reference to the provisions of the special law - It is not that an express exclusion must be found in the section which is being construed or interpreted namely, section 61 of the Bombay Sales Tax Act, 1959 - It is possible to arrive at the conclusion and which has been arrived by the Division Bench by a combined or conjoint reading of the legal provisions as ultimately the statute must be read as a whole - Its provisions have to be read together and harmoniously so as to discern the legislative intent – thus, the Court have no power to condone the delay in filing of the Sales Tax Applications - The Notices of Motion are therefore dismissed – Decided against petitioner.

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• 2014 (12) TMI 954
  Validity of assessment order under Tamil Nadu Value Added Tax Act, 2006 – Company named Nokia India Private Ltd. engaged in the manufacturer of Mobile Phones, parts and accessories - Maintainability of the Writ Petition – Held that:- The assessee need not be relegated to avail the alternate remedy as it has been held that necessity to avail the alternative remedy may not arise and it is not a bar to exercise the jurisdiction under Article 226 of the Constitution of India - in Union of India vs. Tantia Construction Private Limited [2011 (4) TMI 1276 - SUPREME COURT] it has been held that the presence of an alternative remedy is not an absolute bar in entertaining a writ petition - the rule of exclusion of writ jurisdiction by availability of an alternative remedy, is a rule of discretion and not one of compulsion and there could be contingencies in which the jurisdiction under article 226 of the Constitution of India could be exercised in spite of availability of an alternative remedy - the question to be decided is relating to the jurisdiction, manner of exercise of power by the AO and the correctness and propriety of the decision making process and whether principles of natural justice was adhered - Therefore, the Writ Petitions are maintainable and cannot be rejected solely on the ground that as against the assessment orders, the statute provides for alternate remedy – Decided in favour of assessee. Best judgment u/s 27(1)(c) –Whether the assessment orders are best judgement assessments while made u/s 27(1)(a) - Held that:- The AO has invoked his power u/s 27(1)(a) - the assessment is not a best judgement assessment as the AO has not rejected the accounts - the power u/s 27(1)(a) has been invoked for reopening the assessments as certain defects were pointed out during the course of audit - Therefore, it cannot be stated that merely because Section 27(1)(a) of the TNVAT Act has been referred to in the impugned assessments, they are best judgment assessments – in Commissioner Of Sales-Tax, Madhya Pradesh Versus HM Esufali HM Abdulali [1973 (4) TMI 49 - SUPREME Court] it has been held that what is true of the assessment must also be true of re-assessment because re-assessment is nothing but a fresh assessment - the contention of the assessee cannot be accepted that going by the language of section 27(1)(a), the assessment are best judgment assessments, but revision of assessments in contra distinction with best judgment assessments u/s 22(4) – Decided against assessee. Correctness of the assessment orders and the decision making process – Held that:- The AO stated that at the time of audit, the omission was disclosed - however, the AO has failed to advert to the specific stand of the assessee that the discrepancy was noticed prior to the audit by the Dept and they suo motu disclosed the same to the audit and during the course of the audit, they had paid the entire tax along with interest - this is a very relevant factor, which should have weighed in the minds of the AO, that on the date when the audit completed the inspection, the entire tax liability along with interest have been paid – assessee is being taxed twice - the equal addition being in the nature of penalty, it does not automatically follow that in every case of non-disclosure, equal addition is warranted - there is absolutely no justification for equal addition. Imposition of tax on capital assets – Assessee contended that the same was exported and not taxable – Held that:- Though the AO while detailing the value of assets sold, has failed to advert into the effect of the export documents produced by the assessee - this should have been examined by the assessing officer to test the correctness of the stand taken by the dealer that they were export sales, zero rated and not liable to tax - Non-furnishing of state-wise break up details to the audit officials is of non-consequence why finalising the assessment - The assessing authority being a quasi-judicial authority should adjudicate the case independently with due application of mind - the assessing authority abdicated his power and was purely guided by the opinion of the inspecting team, which obliviously were officers superior in rank to the AO – the AO should redo the assessment with regards to the tax on sale of assets as the documents produced by the dealer have not been examined by the AO - as such, the consideration is not manifest in the assessment order - the dealer is entitled to reasonable opportunity to produce all records in support of their claim - therefore, the tax levied on the sale of assets is set aside and the matter is remanded for fresh consideration of the assessing officer after affording an opportunity of personal hearing to the petitioner/dealer. Non-payment of tax on the sale of asset to M/s. NSNPL – Held that:- The test applied by the AO to hold that the transfer is not a transfer of a business as a whole is incorrect - unless that issue has been addressed and a fact finding exercise made, the AO could not have straightaway held that the transfer was only partial and not the whole business - the effect of the assessment under the Income Tax Act with respect to this very transaction treating the same as a slump sale should have also been gone into, as it cannot be stated that the facts which were taken note of during the assessment under the Income Tax Act is wholly irrelevant while considering whether the sale was covered under Explanation III to 2(41) - the decision making process was incorrect - Therefore, the finding with regard to the non-payment of tax on sale of assets to NSNPL calls for interference and accordingly, it is set aside and the matter is remitted back to the AO to make thorough enquiry into the contentions raised by the assessee by applying proper test and to see whether the transaction would fall within the scope Explanation III to Sub Section (2) of Section 41 of TNVAT Act. Disallowance of sales returns – Held that:- There is no discussion or finding as to why there has been disallowance of sales returns stating sales return disallowed and the rate of tax imposed is 12.5% - Thus, such disallowance was without assessing reasons - Therefore, the imposition of tax on disallowance of sales return has to be necessarily set aside and remanded to the AO to issue notice to the assessee/dealer and after hearing their objection decide the issue afresh. Incorrect rate of tax adopted by the assessee as regards the sale of accessories and spare parts of the mobile phones or not – Held that:- The AO while considering the objections filed, held that the products sold as accessories along with mobile phones does not come under the category of Information Technology products - Parts and accessories of cellular telephone (mobile phone) specifically finds place vide Entry 13-A(f) under Part C of the First Schedule of the TNVAT Act and they have to be taxed at 14.5% and the proviso to Section 3(2) of VAT Act is not applicable. -The finding rendered by the assessing officer is perfectly justified, inasmuch as the headphones and accessories sold by the petitioner along with mobile phone falls under specific Entry 13-A(f) under Part C of the First Schedule and liable to tax at 14.5% - a specific entry would prevail over a general entry - The products/goods such as headsets of mobile phones, memory card, wireless car kit for mobiles and components and accessories of mobile phones are therefore taxable at the rate of 14.5% and this cannot be classified as information technology products – the finding rendered by the AO with regard to parts and accessories of mobile phones were being made in specific Entry 13-A(f) of Part C of the First Schedule of the TNVAT Act is valid and proper. Imposition of penalty – and whether the imposition of penalty was justified on the entire tax demand u/s 27(3) - Held that:- The AO has not brought out the willfulness in the manner it has to be established - circulars issued by the Commissioner under the erstwhile TNGST Act are saved in terms of Section 88(3)(i) of the TNVAT Act, in so far as they are not inconsistent with the provisions of TNVAT Act or the rules made thereunder until they are repealed or amended – the AO should have borne in mind the guidelines issued in the circular which as on date is a statutory circular and deemed to be valid and binding on the AO - the reasons assigned in this order wile deleting equal addition on the probable suppression of scrap sales would come to the aid of the petitioner to justify deletion of penalty - there is no justification spelt out in the impugned assessment order to impose penalty on the entire tax demanded - the penalty imposed is deleted – Decided partly in favour of petitioner.

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