TMI Tax Updates - e-Newsletter
December 29, 2012

Case Laws in this Newsletter:

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

Articles

1. SHARE APPLICATION MONEY IS NOT LOAN OR DEPOSIT- however preferable mode is through A/c payee cheques or other permitted banking instruments for receiving and refunding share application money.

   By: DEVKUMAR KOTHARI

News

1. Calendar for Auction of Government of India Treasury Bills

2. Anand Sharma, K V Thomas Review Fall in Domestic Price of Natural Rubber

3. Trai issues Recommendations on “issues Related to Entry of Certain Entities in to the Business of Broadcasting and/or Distribution of TV Channels”

4. Trai Releases Consultation Paper on “Definition of Adjusted Gross Revenue (AGR) in License Agreements for Provision of Internet Services and Minimum Presumptive AGR”.

5. Third Quarter Review of Monetary Policy 2012-2013 on January 29, 2013

6. Several Key Decisions Taken by Ministry of Housing & Poverty Alleviation During 2012 for Improvement of Infrastructure & Basic Services to Poor

7. Technology enabled transformation in the Financial Sector

8. Indicative Quantum of Market Borrowings by State Governments for the Quarter January- March 2013

Circulars / Instructions / Orders

FEMA

1. 64 - dated 27-12-2012

Exim Bank's Line of Credit of USD 19 million to the Government of the Co-Operative Republic of Guyana

2. 65 - dated 27-12-2012

Exim Bank's Line of Credit of USD 250 million to the Government of the Republic of Mozambique

Highlights / Catch Notes

FEMA

• Exim Bank Grants $250 Million Credit Line to Mozambique for Economic Development Projects Under FEMA Regulations.

  Circulars : Exim Bank's Line of Credit of USD 250 million to the Government of the Republic of Mozambique - Circular
  Visit to Get Source

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• Exim Bank Grants USD 19 Million Credit Line to Guyana Government Under FEMA Guidelines for Financial and Tax Updates.

  Circulars : Exim Bank's Line of Credit of USD 19 million to the Government of the Co-Operative Republic of Guyana - Circular
  Visit to Get Source

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Case Laws:

• Income Tax

• 2012 (12) TMI 847
  Challenging limitation on issuing notice u/s 158BD - Block assessment - Held that:- As per Section 158 BE(2)(b) the period of limitation for completion of block assessment in the case of other person referred to in Section 158BD shall be 2 years from the end of the month in which notice has been served on such other person in respect of the search conducted under Section 132. Therefore, it is obvious that the limitation starts only from the service of notice and not from any point of time prior thereto. Admittedly, notice in this case was served on the petitioner only by Ext.P6 dated 8.8.2012 and if it is so counted, the proceedings are well within time. This view has been accepted by the Division Bench of this court in Ext.P9 judgment also. Unexplained or inordinate delay - Proceedings against the petitioner's brother culminated only by Ext.P5 order of the Tribunal rendered on 28.6.2011. If that be so, as held in Ext.P9 judgment itself, proceedings could have been initiated against the other person, viz the petitioner, only thereafter. If that be the case, unable to agree with the counsel that there has been any unexplained or inordinate delay in this case - against assessee.

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• 2012 (12) TMI 846
  TDS on C & F agents - 2.2% under Section 194C OR 22% under Section 194-I - assessee is a well known manufacture of consumer goods such as detergent, soaps etc. hiring godowns on rent and also engages c & f agents - Held that:- What is discernable from the materials on record is that the assessee had rented premises from their landlords. Payments of rent were made after deducting the tax in terms of Section 194-I. What the assessee paid to the c & f agents as warehousing charges was the consideration in terms of the agreement which was tax deductible under Section 194C at 2.2.%. In this factual background it was for the revenue to have established how Section 194-I could be attracted to the amounts or charges paid to the c & f agents in terms of the agreements. No infirmity in the findings of the CIT(Appeals) as endorsed by the ITAT that Section 194-I can only be applied when the immovable properties are let out & none of the heads of payments made to C & F Agents by the assessee is a head of payment by way of rent - in favour of assessee.

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• 2012 (12) TMI 845
  Unexplained credit - share application money from 9 applicants - CIT (A) opined that the assessee had discharged the basic onus cast upon it after considering the ruling in Lovely Exports [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - Held that:- While there can be no doubt that in Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA) the Court indicated the rule of “shifting onus” i.e. the responsibility of the Revenue to prove that Section 68 could be invoked once the basic burden stood discharged by furnishing relevant and material particulars, at the same time, that judgment cannot be said to limit the inferences that can be logically and legitimately drawn by the Revenue in the natural course of assessment proceedings. The information that assessee furnishes would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. In the backdrop of this circumstance, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the AO in this case proceeded to draw inferences from. The AO also noticed that before issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging between Rs.90-190 per share and was able to garner a colossal amount of Rs.4.34 Crores, this Court is of the opinion that the CIT (Appeals) and the ITAT fell into error in holding that AO could not have added back the said amount under Section 68 - The question of law consequently is answered in favour of the Revenue.

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• 2012 (12) TMI 844
  Registration under Section 12A - Ext.P3 communication requiring the petitioner to rectify the defects - non-compliance of Ext.P3 thus Ext.P2 application for registration rejected - registration u/s 12A for the year 2010-2011 granted as per Ext.P8 - petitioner's request for restoration of Ext.P2 application - Held that:- Ext.P9 judgment has attained finality wherein it has been specifically found that Ext.P2 application was not pending. It was therefore that the petitioner sought restoration of Ext.P2. That request was considered by this Court and in Ext.P10 order, it was directed that the petitioner can seek restoration and the same will be considered if permissible in law. The authority has held in Ext.P11, that such a request is not permissible. The correctness of this conclusion of the respondent will depend upon the provisions of Section 12A of the Income Tax Act. Having gone through this statutory provision, it is unable to find any authority for the respondent to restore an application under Section 12A once rejected. If that be so, it is not permissible to restore an application and if so, the conclusion in Exts.P11 and P13 that the petitioner's request for restoration of Ext.P2 application is impermissible, cannot be said to be faulted. In that view of the matter, no tenable grounds justifying interference in the impugned orders.

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• 2012 (12) TMI 843
  Seeking return of documents seized as per Exts.P1 to P3 mahazars - search under Section 132 - Held that:- Books of account or other documents that may be seized under an authorisation issued u/s 132(1) can be retained by the authorised officer or the concerned ITO for a period of 180 days from the date of seizure, whereafter the person from whose custody such books or documents have been seized or the person to whom such books or documents belong becomes entitled to the return of the same unless the reasons for any extended retention are recorded in writing by the authorized officer/the concerned ITO and approval of the Commissioner for such retention is obtained. Sub-section (10) of 132 confers upon the person legally entitled to the return of the seized books and documents a right to object to the approval given by the Commissioner under sub-section (8) by making an application to the Central Board stating therein the reasons for such objection and under sub-section (12) it is provided that the Central Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. Thus the scheme of sub-sections (8), (10) and (12) of Section 132 makes it amply clear that there is a statutory obligation on the Revenue to communicate to the person concerned not merely the Commissioner's approval but the recorded reasons on which the same has been obtained and that such communication must be made as expeditiously as possible after the passing of the order of approval by the Commissioner and in default of such expeditious communication any further retention of the seized books or documents would become invalid and unlawful. In this case even the respondents have no case that Exts.R1(a) or (b) were communicated to the assessee. If that be so, the requirement of Section 132(8) is not satisfied and in which event, the retention of the documents beyond 30 days period of completion of the assessment was illegal. For that reason, the petitioner is entitled to succeed - writ petition disposed of directing the respondents to return the documents seized from the petitioner under Exts.P1 to P3 mahazars within four weeks of receipt of a copy of this judgment.

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• 2012 (12) TMI 842
  Deemed dividend u/s 2(22)(e) - reopening of assessment after expiry of four years - assessee had not furnished share holding pattern in respect of ITL Industries Ltd. for assessment year 2002-03 - Held that:- The assessee had let out the properties to M/s. ITL Industries Ltd. in the FY 2000-01 on deposit of Rs.95,68,938/- and monthly rent of Rs.1.5 lacs & vide letter dated 15.3.2001 had requested ITL Industries to increase deposit to Rs.2.00 crores and not to pay any rent during financial year 2001-02. It is clear from records that the assessee was in need of substantial funds for setting up of new project for which assessee was looking for funds from other parties as per its own submission. Money received from ITL Industries Ltd. is obviously of the nature of loans/advances and not deposit and, therefore, amount can not be considered as deposit merely on the ground that the same has been described as deposit in the balance sheet or in correspondence with ITL Industries Ltd. which is a group concern of the assessee. The argument of assessee rejected that he had received deposit and not loan/advances and hold that the assessee had received loan/advances during the year which are covered by the provisions of section 2(22)(e). The exception from the provisions of section 2(22)(e) is available if the money is advanced in the normal course of business of the company advancing the money. There is no provision for exemption on the ground that the money received has been used by the shareholder in its business. In the present case, there is no material to show that ITL Industries Ltd. advanced the money in the normal course of its business. As decided in CIT vs. V. Damodaran [1979 (10) TMI 5 - SUPREME COURT] & M.B. Stock Holding Pvt. Ltd. vs. ACIT [2001 (12) TMI 190 - ITAT AHMEDABAD-B] that business profit of the company accrued only at the end of the year and, therefore, current year business profit are not to be included in the accumulated profit relying on cases as submiited by assessee as no contrary decision of any High Court or Apex Court has been brought to notice by the DR section 2(22)(e) has to be applied only to loan/advances received during the year which was Rs.1,04,31,062/-. The opening balance of Rs.95,68,938/- was in fact not loan/advance but deposit given in connection with letting out of the properties in financial year 2000-01 and therefore, in the earlier year, no addition was required to be made under section 2(22)(e). Therefore, the accumulated profit of Rs.97,91,884/- till 31.3.2001 could not be adjusted against the said deposit in assessment year 2001-02 & will be available for addition u/s 2(22)(e) in respect of loan/advances of Rs.1,04,31,062/- received during the assessment year 2002-03. The argument of the assessee that out of the accumulated profit of Rs.97,91,884/-, sum of Rs.95,68,938/- has to be adjusted against deemed dividend in assessment year 2001-02 cannot be accepted as the said amount was deposit and provisions of section 2(22)(e) could not be applied in assessment year 2001-02. Therefore, in assessment year 2002-03 addition has to be made up to accumulated profit till 31.3.2001 which was Rs.97,91,884/- appeal of the assessee partly allowed.

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• 2012 (12) TMI 841
  Disallowance of motor car expenses – Depreciation on motor car – Expense in relation to personal usage of car – Held that:- Since assessee is not maintaining any log book and, therefore, there is no proof that the car has been used only for the purpose of business. The estimate disallowance of such expenses @5% is justified. In favour of revenue Estimate disallowance out of telephone expenses – Mobile expense for personal usage – Held that:- Personal usages of telephone/mobile is quite common and cannot be ruled out and in the absence of full details of call records etc., it is not established that these have been used only for the purpose of business. Therefore, the estimated disallowance is justified. In favour of revenue Estimate disallowance of expenses - Business promotion expenses - Conveyance expenses - Miscellaneous expenses - Office expenses - AO had disallowed 20% of such expenses on estimate which has been reduced by the CIT(A) to 10% - Held that:- The case of the assessee is that the nature of many of the expenses under these heads is such that no proper vouchers are possible. We agree that it may not be possible to have proper evidence in respect of conveyance and miscellaneous expenses etc, but since the expenses are not supported by the proper evidence, the estimated disallowance of such expenses is justified. The estimate disallowance of Rs. 50,000/- out of these expenses will meet the ends of justice. Partly allowed in favour of assessee Nature of income - Sale and purchase of shares – Investment activity or trading activity - Capital gain or business income – Held that:- All delivery based shares cannot be treated as an investment activity. Some shares have also been sold after a short duration of holding. Thus most of the transactions are speculative in nature. The share transactions from which the assessee has shown short term capital gain were of the nature of trading activity of the assessee. In favour of assessee

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• 2012 (12) TMI 840
  Disallowance of lease rent – lease of plant & machinery used for business – Hire purchase - AO has allowed such deduction for the previous and subsequent assessment years – AO on the ground that machinery would become the property of the Lessee even though there is no agreement to that effect and ownership remains with the Lessor - Held that:- As concluding from the facts of the case that books of Lessor and taken into account as income of the Lessor and paid tax thereon. There is no material placed on record to show that the transaction is that of hire purchase and not lease agreement. The Revenue has not denied that it did not allow such deduction for the previous years and subsequent year of assessment year in question. AO has disallowed the deduction only for the A.Y 1997-98. Following the decision in case of S. A. BUILDERS LTD. (2006 (12) TMI 82 - SUPREME COURT) appeal decides in favour of assessee

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• 2012 (12) TMI 839
  Gold deposit scheme, 1999 – Redemption of Gold Bond - Capital Gain – Long term capital gain or short term of capital gain – Period of holding – Cost of acquition – Board's circular No. 415 - Assessee compute capital gain from cost and date of acquisition of the gold i.e. the date on which the gold has been received to assessee on the redemption of the gold bond – AO computes capital gain from day and cost on which sum it was deposited with gold bond scheme – Sale of gold acquired on the redemption of gold bond - Assessee deposited gold on 22.11.1999 - Redemption certificate of gold was issued on 22.11.2006 - Sold gold on 07.11.2007 Period of holding - Held that:- In the Board's circular No. 415, it was decided that for the purpose of computation of capital gains, the cost of acquisition of the gold would be the market value of the bonds on the date of redemption. On the date of maturity, i.e., 22.11.2006, the certificates of gold were redeemed, therefore, 22.11.2006 should be considered as the date of acquisition of the gold for the purpose of computation of capital gains. Cost of acquition – Held that:- The cost of acquisition of the gold is to be taken, i.e., value of gold on the date of redemption of certificates when a new capital asset has come into existence in possession of the assessee. Earlier, the gold in possession of the assessee had lost its identity when the same was converted into bonds. The Bonds cannot be treated as gold nor the gold can be treated as bonds. Therefore, the cost and the date of acquisition of the gold for the purpose of computing the capital gains be taken as the date on which the gold has been received by assessee on redemption of the gold bonds, i.e., 22.11.2006. In favour of assessee

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• 2012 (12) TMI 838
  Non-deduction of TDS on payment of Export Commission - disallowance u/s 40(a)(ia) - CIT(A) deleted the addition - Held that:- Incontrovertible evidence on record that the payment of commission has been made to agents outside India for services rendered outside India. The relationship between the assessee and the agents are principal to principal. The agents to not have any PE in India. Any tax that would accrue or arise is only outside the country and not in India. Very importantly this payment does not also fall within the ambit of Section 9(1)(vii) as the services under consideration is not for any technical service rendered nor could be taken as a job which was managerial in nature. It is only for facilitation of the sales of the assessee outside India. There was no agreement between the assessee and the agents and no such agreement was even required, since the transaction was of payment of commission for services rendered- as decided in CIT, A. P. Versus Toshoku Limited (and Another Appeal) [1980 (8) TMI 2 - SUPREME COURT] sales commission which were earned by the non resident for services rendered outside India could not be deemed to be income which had either accrued or arisen in India - Thus the assessee was held not to be liable for TDS under Chapter XVII-B of the Act - against revenue. Addition on account of retention money - Held that:- The facts are that the customer retains money in respect of a completed contract for satisfactory performance of the contract for which the due diligence is undertaken. On demonstration of satisfactory performance of the contract, the money as released finally to the assessee, otherwise it has to repair the fault or pay liquidated damages. Thus such money withheld by the customer does not accrue as income to the assessee on completion of the turn-key project, the reason being that right to receive the money does not accrue to the assessee. This money accrues as income when the stipulated condition is satisfied which may be in the nature of showing satisfactory performance of the project. Therefore, the amount is taxable on accrual basis in the year in which stipulated condition is satisfied. Thus following the Tribunal's order in the assessee's own case for AY 2007-08 the amount in question does not accrue as income to the assessee on raising the bill after completion of the project. Rather, the income arises on performance of the conditionalities of the agreement - against revenue.

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• Customs

• 2012 (12) TMI 836
  Outstanding refund claim - assessee seeking refund the amounts due to them with interest - Held that:- As decided in SHREE SIMANDAR ENTERPRISES case [2012 (9) TMI 538 - KERALA HIGH COURT] which arose from 2012 (8) TMI 176 - KERALA HIGH COURT the event of the petitioners producing documents pertaining to the identity of the person to whom refund is to be made along with proof of address and also bank account number and executing an indemnity bond undertaking to keep the department indemnified against future claims by someone else who might produce the original of the duty paid challan, the respondent will refund the amount payable to the petitioners. Also to pay interest at 6% per annum was also vacated - directions for refund of excess fine and penalty without interest.

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• Corporate Laws

• 2012 (12) TMI 835
  Scheme of Amalgamation - Held that:- No proceedings under sections 235 and 251 of the Companies Act, 1956 are pending against any of the Applicant Company as on date of the present Application & the scheme has been approved by the Board of Directors of the Applicant Companies. In view of the written consent / NOC given, the requirement of convening meetings of Shareholders, Unsecured Creditors of Applicant Company nos. 1, 3 & 4 & Five Secured Creditors, holding 99.99% of total debts of Secured of Applicant Company no. 5 / the Transferee Company is dispensed with. Direct the meeting of Un- Secured Creditors of Applicant Company no. 5 / Transferee Company on 09.02.2012 (Saturday) at 10.30 a.m & Unsecured Creditors of Applicant Company no. 2 / Transferor Company no. 2 shall be held on 09.02.2013 (Saturday) at 1.30 Noon at Sri Sathya Sai International Auditorium, Bheeshm Pitahmah Marg, Pragati Vihar, Near Nehru Stadium, New Delhi -110003 to be headed by appointed Chairperson and the Alternate Chairperson - direction to publish advance notice of aforesaid meetings in defined newspapers & Individual notices minimum 21 days in advance. If the quorum is not present in the meeting, the meeting would be adjourned for 30 minutes and the persons present in the meeting would be treated as proper quorum - Voting and proxy is permitted as filed with the companies at their registered offices, not later than 48 hours before the said meeting. The Chairmen / Alternate Chairmen shall file their reports within 2 weeks of the conclusion of the meeting.

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• 2012 (12) TMI 834
  Scheme of Amalgamation - Held that:- No proceeding under Sections 235 to 251 is pending against the Applicant Company as on the date of the present Application.The proposed Scheme has been approved by the Board of Directors of Applicant Company. Unanimous consent accorded to the Scheme of Arrangement from Shareholders, Secured and Un-secured Creditors of both the companies - the requirement of convening meetings of Shareholders, Secured Creditors and Un-secured Creditors of the Transferor Company is dispensed with - scheme allowed.

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• 2012 (12) TMI 833
  Scheme of Arrangement for de-merger - Held that:- The proposed Scheme has been approved by the Board of Directors of both the Applicant Companies. In view of the written consents/NOC given, the requirement of convening meetings of Shareholders of the Demerged Company and the Resultant Company are dispensed with. As both the Un-secured Creditors of the Resultant Company have given their written consents/NOC to the proposed Scheme accordingly, the requirement of convening meeting of Un-secured Creditors of the Resultant Company is also dispensed with. No requirement of convening the meetings of the Secured/Un-secured Creditors of the Applicant Demerged Company & secured creditor in the Applicant Resultant Company as they do not have any - application of demerger so allowed.

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• Service Tax

• 2012 (12) TMI 850
  Writ of Certiorari - Business Auxiliary Service - demand of service tax, Interest thereon and penalty - invoking extended period of limitation - Held that:- As the petitioner does not plead violation of principles of natural justice, lack of jurisdiction or that the impugned order has been passed in an arbitrary and capricious manner by the authority but on the interpretation of the various provisions based on factual issues in the case. It is trite law that this court under Article 226 of the Constitution will not be a court of appeal or examine for itself the correctness of the decision impugned and decide what is the proper view to be taken or the order to be made. As decided in Veerappa Pillai vs Raman and Raman Limited [1952 (3) TMI 31 - SUPREME COURT] that where matter involves disputed questions of fact or mixed question of law and fact or even ordinary question of law, it could be raised in appeal provided under the statute. See also Sohan Lal vs. Union of India [1957 (3) TMI 45 - SUPREME COURT], Basant Kumar v. Eagle Rolling Mills (1964 (2) TMI 73 - SUPREME COURT) & Thansingh vs. Superintendent of Taxes [1964 (2) TMI 79 - SUPREME COURT]. Therefore prima facie this court is not inclined to interfere with the order at this stage. As a result the petitioner has to pursue the alternative remedy provided under the Act. Writ Petition stands disposed.

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• 2012 (12) TMI 849
  Refund of duty - direction by Tribunal to return the excess amount recovered over and above the Service Tax amount within 30 days and report compliance - Held that:- While passing the order dated 12.10.2012, it was committed by the A.R that notice under section 87 has been withdrawn and the direction of the Tribunal will be complied within one month. Two months have elapsed since then and no action has been taken by the concerned officer. This is wilful disobedience of the directions of this Tribunal. Accordingly, the Dy. Commissioner, Service Tax Division, Raigad Commissionerate is hereby directed to show cause as to why contempt proceedings shall not be initiated against him for non-compliance of the direction of this Tribunal vide order dated 12.10.2012 cited supra. This notice is returnable within 15 days from today.

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• 2012 (12) TMI 848
  Writ of Certiorari - challenging the notice of attachment of immovable property alleging default in payment of service tax - Held that:- The petitioner is not the owner of the property in question, thus is not open for her to challenge the notice of attachment. If the notice has been wrongly issued to the petitioner, it is open to the petitioner to give a representation to the respondent authority setting out the details of the transaction that has taken place as above. If any action is proposed to be taken as against the petitioner, thereafter the petitioner can defend such action as per law. At this stage, no relief as sought for can be granted. The petitioner, however, is directed to give a reply to the respondent authority explaining the facts as above so as to enable the department to take appropriate action as per law without expressing any opinion on the merits of the case. Writ petition disposed of in the above terms.

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• Central Excise

• 2012 (12) TMI 837
  Rebate claim rejected - fake and non-existent weavers from whom unprocessed fabrics were procured as declared by Alert Circulars issued by the Surat Central Excise Commissioner - contravention of Rule 7(2) of the Cenvat Credit Rules, 2002 - Held that:- In order to get the credit of CENVAT, Rule 7(2) cast a duty upon the appellants to take all reasonable steps to ensure that the inputs or the capital goods in respect of which the appellants had taken credit of CENVAT are the goods on which appropriate duty of excise as indicated in the documents accompanying the goods, has been paid - See Sheela Dyeing & Printing Mills P. Ltd. vs. C.C.E. & E, Surat-1 [2008 (7) TMI 209 - HIGH COURT GUJARAT] As in the present case the petitioners have admittedly not taken the steps enumerated in the Explanation to Rule 7(2) of the Cenvat Credit Rules thus the Revenue Authority rightly denied rebate of duty - against assessee.

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• 2012 (12) TMI 832
  Rejection of refund claim - Doctrine of Unjust enrichment - Held that:- Both the lower authorities failed to appreciate the fact that when it is apparent on record that the appellant is availing the benefit of SSI exemption under Notification no. 8/2003 and clearing the goods without payment of duty, the question of unjust enrichment does not arise - as the appellant has paid a sum of Rs.1.5 lakhs during the course of investigation & no show-cause notice has been served on the appellant for appropriation of the amount collected by them during the course of investigation impugned order is not sustainable in the eyes of law and same is set aside and appeal is allowed with consequential relief.

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• 2012 (12) TMI 831
  Classification of sugarfree chewing gum – Sub-heading 2106 90 99 v/s 2106 90 91 - Held that:- The products in question are "food preparations not elsewhere specified or included" (Heading 21.06). Explanatory Notes to HSN Heading 21.06 also justify this classification. As per these notes, Heading 21.06 includes, inter alia , "Sweets, gums and the like (for diabetics in particular) containing synthetic sweetening agents (Eg: Sorbitol) instead of sugar”. Admittedly, the subject products are gums containing synthetic sweetening agents instead of sugar. Therefore they have been rightly classified under Heading 2106 of the CETA Schedule. However, the HSN Explanatory Notes appear to be of no aid to sub-classification of the goods, therefore, classification of the goods as “diabetic foods” must be based on evidence of the chewing gums having been medically prescribed as “diabetic foods” and marketed as “diabetic foods”. The Revenue whose burden it was to gather such evidence to justify classification of the chewing gums as diabetic foods under S.H. 2106 90 91 failed to do so. On the contrary the assessee has been able to show that the subject products were not marketed as diabetic foods, thus the “orbit” chewing gums were rightly classified under the residuary sub-heading 2106 90 99 - in favour of assessee.

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• 2012 (12) TMI 830
  Eligibility to take Cenvat credit – Whether storage up to the place of removal used in the definition of input service will cover storage at the place of removal also – Held that:- The place where goods are stored after clearance from the factory on payment of duty can be considered as "place of removal" for the purpose of Rule 2(l) of Cenvat Credit Rules, 2004 is no longer res integra because of the clarification issued by the CBEC in the matter and approved by the decision in the case of LG Electronics (2010 (4) TMI 322 - CESTAT, NEW DELHI) and Ambuja Cements v. Union of India [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT]. Therefore the godowns at Agra and Farrukhabad are to be considered as "place of removal" for the appellant notwithstanding the fact that sugar is an item subjected to specific rate of duty. Rule 2(l) of Cenvat Credit Rules specifically includes many post manufacturing activities like service relating to sales, promotion etc and therefore standard prescribed for inputs cannot be adopted for input services. Therefore not convinced by the argument advanced by Revenue that these services have no nexus the goods manufactured. No reason to deny Cenvat credit of tax paid on Rent of godown at Agra/ Farrukhabad, Sugar handling charges at the said godowns & Security services availed at the said godowns - cash disbursement is for procurement of raw material, and has direct nexus with the manufacturing activity & so is the case of insurance of cashier. In the matter of Vehicle Hire charges and insurance of company owned vehicles already there are decisions of the High Courts allowing credit of service tax paid on such service. In the case of charges of gay rope mask, assessee submits that this is services required for their efficient functioning at the place of procurement of raw material and it has got direct nexus in the manufacturing activity - appellants are eligible for the disputed Cenvat credits.

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• 2012 (12) TMI 829
  Refund of pre-deposit - Held that:- The actions of the adjudicating authority and the appellate authority show a design to refuse the refund under one pretext or the other. This cannot be approved of at all. Amount involved should be refunded forthwith along with interest from the day commencing after expiry of three months from the date of filing of the original refund application to the date of actual refund of money to the appellant - matter can be referred before the Tribunal if the refund is not sanctioned before 30.9.2012 for appropriate further action in the matter - appeal allowed in above terms.

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• CST, VAT & Sales Tax

• 2012 (12) TMI 851
  Revised assessment orders u/s 27(1)(a) of the Tamil Nadu Value Added Tax Act 2006 - assessee contested against non providing of opportunity of hearing in terms of Section 40(2) - Held that:- Keeping in view the nature, scope and consequences of direction under sub-rule (7) of Rule 633 of the Excise Manual as decided in Kesar Enterprises Limited v. State of Uttar Pradesh [2012 (12) TMI 828 - SUPREME COURT] the principles of natural justice demand that a show-cause notice should be issued and an opportunity of hearing should be afforded to the person concerned before an order under the said Rule is made, notwithstanding the fact that the said Rule does not contain any express provision for the affected party being given an opportunity of being heard. If the requirement of an opportunity to show cause is not read into the said Rule, an action thereunder would be open to challenge as violative of Article 14 of the Constitution of India on the ground that the power conferred on the competent authority under the provision is arbitrary. The principle will hold good irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi-judicial as decided in Sahara India (Firm) v. CIT [2008 (4) TMI 4 - SUPREME COURT] - matter remitted to the first respondent for fresh disposal on merits after providing an opportunity of hearing to the petitioner before deciding the revision of assessment.

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