TMI Tax Updates - e-Newsletter
December 30, 2014

Case Laws in this Newsletter:

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

Articles

1. Updates about provision relating to service tax audit- Amended rule 5A also seems to be ultravirse and invalid provision.

   By: DEVKUMAR KOTHARI

2. CONSTITUTIONAL AMENDMENT FOR PROPOSED GST- Part-1

   By: Dr. Sanjiv Agarwal

News

1. Auction for Sale (Re-Issue) of Government Stock

2. Infusion of ₹ 60 crore in IFCI Ltd. to make it a Government Company

3. Video Conference meeting with Executive Directors of Public and Private Sector Banks held to Review Progress of Pradhan Mantri Jan-Dhan Yojana (PMJDY); Banks Opened 9.83 Crore Accounts under PMJDY and 7.28 Crore Rupay Cards Issued; 99.73% Survey Work has been completed and 95.30% Household Coverage has been Achieved

4. Major Initiatives and Achievements of Ministry of Corporate Affairs

5. Government to set up Saffron Production & Export Development Agency

6. RBI Reference Rate for US $

7. Government to take more steps to Facilitate ‘Make in India’ Initiative

8. Major Policy Initiatives, Programmes/Schemes Announced and Achievements Made with Regard to the Ministry of Finance in Last Seven Months

Circulars / Instructions / Orders

FEMA

1. 52 - dated 29-12-2014

Exim Bank's Line of Credit of USD 120.05 million to the Government of the Republic of Rwanda

2. 53 - dated 29-12-2014

Exim Bank's Line of Credit of USD 82 million to the Government of the Republic of Congo

3. 54 - dated 29-12-2014

Overseas Direct Investments by Indian Party – Rationalization / Liberalization

Highlights / Catch Notes

Income Tax

• High Court Confirms: Movie Distribution Exempt from Section 194C Tax Deduction Requirement.

  Case-Laws - HC : Whether the Tribunal was right in law in holding that cinecasting/distribution of movies would be outside the purview of section 194C requiring tax deduction at source - Held as yes since no work is carried out by the distributor - HC
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• Interest Charges u/ss 234B & 234C Apply to "Assessed Tax," Including Calculations u/s 115J/115JA.

  Case-Laws - HC : Charge of interest u/s 234B and 234C – “assessed tax“ is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment - HC
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• High Court Upholds Estimation of Washing Loss in Salt Production Due to Lack of Documentary Evidence by Assessee.

  Case-Laws - HC : Estimation of washing loss - possibility of washing loss during the production of salt - it cannot be said that the loss shown by the assessee is supported by a cogent documentary evidence - estimation of loss by CIT(A) sustained - HC
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• Satellite Rights Payments Not Royalty; Section 194J TDS Provisions Inapplicable.

  Case-Laws - AT : Requirement to deduct tax on payments made for acquiring satellite rights - the payments made by assessee not being in the nature of royalty, the provisions of section 194J will not apply - AT
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• Unabsorbed Depreciation Can Offset Rental Income Classified as Other Sources After Business Closure.

  Case-Laws - AT : Claim of set off of unabsorbed depreciation against the rental income treated as income from other sources – discontinued activity - set off allowed - AT
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Customs

• Court Rules TED Refund Valid for Supplies to EOUs Despite CENVAT Credit Eligibility; Strengthens Deemed Exports Principle.

  Case-Laws - HC : Refund claim of Terminal Excise Duty (TED) - Supply of manufactured goods to 100% EOU - Deemed export - refund cannot be denied on the ground that appellant is eligible for availing cenvat credit - HC
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• Court Confirms Confiscation of Misdeclared Muriate of Potash Exported as Industrial Salt; Penalty Imposed.

  Case-Laws - HC : Export of fertilizer grade Potassium Chloride (Muriate of Potash - MOP) by declaring it as industrial salt, chemical grade (sodium chloride) - confiscation and levy of penalty confirmed - HC
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• Appellant's Shipping Bill Conversion from Free to Drawback Approved Despite Initial Denial Due to Alert Circular.

  Case-Laws - AT : Denial of conversion of free shipping bill to drawback shipping bill - There was an alert circular issued against the appellant therefore, it was the compelling reason for not filing the shipping bills under drawback scheme - conversion allowed - AT
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Corporate Law

• Supreme Court Affirms SICA Section 22 Supersedes Debt Recovery Rules in RDDB Act for Distressed Companies.

  Case-Laws - SC : Recovery of Debts - The provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act. - SC
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Service Tax

• Joint Development Agreement: Selling Property via Power of Attorney Not Self-Service Per Service Tax Laws.

  Case-Laws - AT : Construction of commercial complex - Appellants entered into joint development agreement with land owners, constructed commercial complex of their portion and sold the property on the basis of Power of Attorney executed in their favour by the landowners - IT is not a case of self-service - AT
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• Retrenched Workers Form Society to Supply Labour to Hindusthan Copper Ltd; Taxable as Manpower Supply Service.

  Case-Laws - AT : All labourers who were retrenched from the Public Sector Undertaknig-M/s.Hindusthan Copper Ltd. has formed the society, and supplies the labourers on daily wage 'basis to M/s.Hindusthan Copper Ltd. only - prima facie taxable as manpower recruitment and supply agency services - AT
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• Demand Ignoring Revised Return Deemed Improper; Correct Procedure Requires Explanation of Discrepancies by Assessees. Stay Granted.

  Case-Laws - AT : Demand based on original return ignoring the revised return - when a revised return is filed, the proper course would have been to call the assesses and ask them to explain why the difference has arisen and why the taxable value was -not shown correctly - stay granted - AT
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• Assessee Entitled to Exemption Under Mid-day Meal Scheme per August 8, 2011 Notification Confirmed.

  Case-Laws - AT : Mid-day Meal Scheme - the assessee fulfils the requirements for entitlement to the exemption under the Notification dated 8-8-2011 - exemption allowed - AT
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Central Excise

• Demands in Central Excise Case Dismissed Due to Lack of Evidence on Clandestine Goods Removal.

  Case-Laws - AT : Clandestine removal of goods - Each link in the aspect of production and clandestine removal is required to be proved and since this has not been done, the demands are required to be set aside for lack of evidence in the matter. - AT
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• Appellant Fails to Prove Scrap as Duty-Paid for CENVAT Credit; Distinction Between Industrial and Bazaar Scrap Crucial.

  Case-Laws - AT : Availing CENVAT credit on scrap - industrial scrap versus bazaar scrap -the onus shifts to the appellant to prove that the scrap purchased is duty paid scrap which the appellant has not discharged at all. - AT
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• Water-Resistant Bonding Agent Production Ruled as Manufacturing, Subject to Excise Duty Under Central Excise Laws.

  Case-Laws - AT : Manufacturing activity or not - The final product is a water resistant bonding agent while the inputs are understood as aqueous polymer dispersion used in the modification of hydraulic setting system. - demand of duty confirmed - AT
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• Exemption Approved for Zinc Sulphate in Fertilizer Production; Clarification on "Fertilizer" Definition Provided.

  Case-Laws - AT : Exemption in respect of zinc sulphate (agricultural grade) that is used in manufacture of Fertilizer - scope of the term Fertilizer - exemption allowed - AT
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• Court Reviews Classification of Aswini Homeo Arnica Hair Oil: Medicament or Cosmetic? Stay Granted Pending Decision.

  Case-Laws - AT : Classification of Aswini Homeo Arnica Hair Oil - Classification as oil or medicament - the claim of the appellant that it is only a medicament and is not meant to be hair oil has substance - stay granted - AT
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• Cutting Fabrics and Quilts Not Manufacturing: No Machinery Means No Excise Duty Under Central Excise Regulations.

  Case-Laws - AT : Manufacturing activity or not - activity of cutting fabrics, cutting quilts manufactured of the fabrics - they do not have even any machinery for manufacturing quilt fabrics at all - prima facie case is in favor of assessee - AT
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VAT

• High Court Grants Tax Exemption for Resale of Used Motor Vehicles u/s 6(3) of DVAT Act 2004.

  Case-Laws - HC : Resale of the used motor vehicle - Claim of Exemption on sale of motor cars or other capital assets u/s 6(3) of the Delhi Value Added Tax Act, 2004 (DVAT) - Exemption allowed - HC
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Case Laws:

• Income Tax

• 2014 (12) TMI 1022
  Validity of notice for reopening of assessment u/s 148 - Notices are beyond a period of four years from the end of the relevant AY – Held that:- In terms of Section 32 of the Act the depreciation is allowed on a block of assets and unless the same is sold it continues to be reflected in the block of assets as the items are not individualized - the AO is not required to examine the stand of the petitioners in detail - where an efficacious alternate remedy is available, we would not normally as a matter of self-restraint exercise our extra ordinary jurisdiction under Article 226 of the Constitution of India – as held in Commissioner of Income Tax & others Versus Chhabil Dass Agarwal [2013 (8) TMI 458 - SUPREME COURT] - where in issuing the notice the Authority has acted contrary to the statutory provision or in defiance of the judicial procedure, the Court would interdict such a proceeding notwithstanding an alternate remedy - the impugned reopening notices have been issued in breach of the first Proviso to Section 147 of the Act which inter alia provides that in the absence of a failure to make and disclose true, full and complete disclosure, the AO has no jurisdiction to issue notice for reopening after the end of four years from the end of the relevant AY - there has been no failure to disclose truly and fully all material information at the time of original assessment proceedings.

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• 2014 (12) TMI 1021
  Applicability of section 55A - Whether the Tribunal was right in holding that the provisions of Section 55A would apply only to computation of income under the head Capital Gains – Held that:- Following the decision in as the similar matter has been decided in Smt. Amiya Bala Paul v. Commissioner of Income Tax, [2003 (7) TMI 4 - SUPREME Court] wherein it has been held that besides S.55A having expressly set out the circumstances under and the purposes for which a reference could be made to a Valuation Officer, there is no question of the AO invoking the general powers of enquiry to make a reference in different circumstances and for other purposes – thus, the provisions of Section 55A would apply only to computation of income under the head Capital Gains – Decided against revenue.

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• 2014 (12) TMI 1020
  Cinecasting/distribution of movies u/s 194C - Whether the Tribunal was right in law in holding that cinecasting/distribution of movies would be outside the purview of section 194C requiring tax deduction at source – Held that:- The Tribunal is justified in coming to the conclusion that the exhibition of film in the theatre has not been described in the Explanation, therefore, there is no case of the revenue, by which it can be held that the assessee was required to deduct tax at source from the payments made by it to the distributor of films - The Tribunal has rightly considered the agreement/arrangement between the parties and in detail discussed the same - as the distributor gets his share because he has acquired rights of the distribution of the films in the particular area and as no work is carried out by the distributor for which the payment is made - the Tribunal has rightly reversed the findings given by CIT(A) which was not borne out from the facts of the case and we confirm the decision of the Tribunal being correct interpretation of the provisions of I.T. Act – thus, the Tribunal was right in law in holding that cinecasting/distribution of movies would be outside the purview of section 194C of the Income Tax Act, 1961 requiring tax deduction at source – Decided against revenue.

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• 2014 (12) TMI 1019
  Charge of interest u/s 234B and 234C – Determination of income u/s 115J – Held that:- Following the decision in Jtc. IT., Mumbai Versus M/s Rolta India Ltd. [2011 (1) TMI 5 - SUPREME COURT OF INDIA] wherein it has been held that it is clear from reading Sections 115JA and 115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other provisions of the Act shall apply to the MAT Company (Section 115JA(4) and Section 115JB(5)) - amendments have been made in the relevant Finance Acts providing for payment of advance tax under Sections 115JA and 115JB - so far as interest leviable u/s 234B is concerned, the section is clear that it applies to all companies - the prerequisite condition for applicability of Section 234B is that assessee is liable to pay tax u/s 208 and the expression "assessed tax" is defined to mean the tax on the total income determined u/s 143(1) or u/s 143(3) as reduced by the amount of tax deducted or collected at source - there is no exclusion of Section 115J/115JA in the levy of interest u/s 234B - the expression "assessed tax" is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment – Decided in favour of revenue.

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• 2014 (12) TMI 1018
  Estimation of washing loss - possibility of washing loss during the production of salt - Onus discharged by assessee or not - Held that:- The Tribunal was rightly of the view that the assessee submitted additional evidence - additional evidence is in support of grounds of appeal of the assessee of which basic facts and material is on record – it is admitted in the interest of justice - due to peculiar and technicality of the process of production of salt possibility of washing loss could not be ruled out - it cannot be said that the loss shown by the assessee is supported by a cogent documentary evidence - In the absence of such supporting material, loss is to be estimated - taking into consideration the loss of the previous i.e. 5% loss, which has been accepted by the CIT(A) - but, the Tribunal currently came to the conclusion that the assessee did not even try to discharge its onus - The law of evidence mandate that if the best evidence is not placed before the Court, an adverse inference can be drawn as against the person who ought to have produced – relying upon CIT Vs. Krishnaveni Ammal [1983 (1) TMI 3 - MADRAS High Court] - the ends of justice and fair play demand that when the assessee produces additional evidence, opportunity should be given to the AO in rebuttal or otherwise and such order could not have been passed behind back of the AO in violation of the principles of natural justice – thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (12) TMI 1017
  Valuation of WIP - WIP was value of actual sales of moulds and not the cost of moulds or not - Restriction of addition of Rs. 20,97,008/- to R.4,14,403/- on unaccounted sales – Facts and material properly appreciated or not – Held that:- CIT(A) rightly was of the view that the value of the mould could have been taken at Nil - these moulds have not been accounted for in stock - There is no reason to assume that the mould had been valued at Nil - these mould have also not been accounted for in the books of accounts of the appellant - the appellant has not accounted for these moulds in the books of accounts - no material could be produced to show that Rs. 45,06,566/- mentioned in the WIP was value of actual sales of moulds and not the cost of moulds which was transferred from WIP – Decided against revenue. The assessee stated that the moulds of Rs. 4,14,403/- was defective and had no realizable value - the CIT(A) has held that the auditor of the assessee has denied to have received any information about moulds having Nil value - the CIT(A) opined that there is no plausible reason to value the moulds at Nil and the quantity of these moulds were not accounted for in the books of account - there is no plausible reasons for valuing these moulds at Nil - Since these moulds are also not accounted for in stock it stands to reason that these moulds have been sold outside books of accounts - the addition made by the AO on account of unaccounted sales is reduced from Rs. 20,97,008/- to Rs. 4,14,403/- revenue could not point out any specific mistake in the findings of the CIT(A) - No material has been brought to show that any error in the findings of the CIT(A) and to show that the moulds of Rs. 4,14,403/- were defective and their realizable value was Nil –thus, the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (12) TMI 1016
  Recall of order – Rectification of mistake apparent from record u/s 254 – Ex-parte order passed by Tribunal - Held that:- Assessee contended that the Tribunal did not consider the written submissions available on record and certain errors are crept in the order - assessee’s own funds have gone into the construction of the building and the assessee is entitled for deduction u/s 54F - a residential house was constructed at his cost on the land held by his wife - a small building already existed and the assessee built a full-fledged residential building - the matter could not be presented satisfactorily before the Tribunal as the assessee's representative was not in India and could not appear before the Tribunal on the date of hearing - The Tribunal decided the issue without considering the facts with reference to the application of the decision in the case of Smt. Gousia Begum And Others Versus Dy. Commissioner of Income-tax And Others [2013 (9) TMI 559 - ITAT HYDERABAD] and entitlement of petitioner to relief u/s. 54F as his funds have gone into construction of the building – also, the Tribunal did not consider the written submissions - there are certain errors in the Tribunal order dated 7th March, 2013 – the reasons provided by the assessee are satisfactory in nature, thus, the order of the Tribunal is recalled and the matter is remitted back to the Tribunal – Decided in favour of assessee.

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• 2014 (12) TMI 1015
  Requirement to deduct tax on payments made for acquiring satellite rights - Whether payments made by assessee for acquiring satellite rights of films is in the nature of royalty as defined u/s 9(1) Explanation 2 thereby requiring deduction of tax at source in terms with section 194J – Held that:- The payment made by assessee to the producers for acquiring satellite rights is towards outright sale, distribution or exhibition of cinematographic films, which are specifically excluded under clause (v) of Explanation 2 from being is treated as consideration paid towards royalty - the payments are outside the purview of section 194J of the Act - assessee cannot be fastened with liability u/s 201(1) and 201(1A) for having defaulted in deducting tax at source in terms of section 194J. Relying upon Mrs. K. Bhagyalakshmi Versus The Deputy Commissioner of Income Tax [2013 (12) TMI 1215 - MADRAS HIGH COURT] wherein it has been held that payments being towards sale, distribution or exhibition of cinematographic films would fall outside the scope of royalty as defined under Explanation 2 of section 9(1) - Though the agreement speaks of perpetual transfer for a period of 99 years, in terms of Section 26 of the Copy Right Act, 1957, in the case of cinematographic film, copy right shall subsist until 60 years from the beginning of the calendar year next following the year in which the film is published - the agreement is beyond the period of 60 years, for which the copy right would be valid, the document could only be treated as one of sale – thus, the order of the FAA is upheld being rightly of the view that the transfer in favour of the assessee as sale and therefore, excluded from the definition of "Royalty" as defined under clause (v) to Explanation (2) of Section 9(1) of the Act - the payments made by assessee not being in the nature of royalty, the provisions of section 194J will not apply – Decided against revenue.

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• 2014 (12) TMI 1014
  Confirmation of addition by CIT(A) – Deposits treated as unexplained investment u/s 69 - Held that:- The source of such cash deposits have been explained by assessee to have originated from opening cash balance of Rs. 4,67,737 and cash withdrawals - assessee’s claim of availability of opening cash balance cannot be disbelieved - assessee has made cash deposits of Rs. 5,65,000 till 11/06/2009 – it would be reasonable to infer a part of cash deposits could have been met out of the opening cash balance available with assessee as on 01/04/2009 - deposits to the extent of Rs. 4,67,737 can be said to be from explainable source - cash deposits made on 06/10/2009, of Rs. 2,00,000 and on 06/11/2009 of Rs. 75,000 and Rs. 1,00,000 can reasonably be linked to cash withdrawals made on 07/07/2009 of Rs. 1,00,000, on 02/09/2009 of Rs. 75,000 and on 22/09/2009 of Rs. 2,00,000 - cash withdrawals have been completely overlooked by CIT(A) - assessee’s contention that peak negative cash balance of Rs. 1,45,863 as on 26/01/2010 can alone be considered for addition u/s 69 is acceptable – the order of the CIT(A) modified – Decided partly in favour of assessee. Deletions made by CIT(A) - Amounts received through cheque/RTGS Rs. 18,88,050 – Cash loan received from M/s Latabai Gupta Rs. 5,00,000 - Deposits from withdrawal made earlier Rs. 1,00,000 - Held that:- As far as the amount of Rs. 18,88,050 is concerned, it is established on record that the amount was received from six different persons through cheque/RTGS - when the source of deposits to the tune of Rs. 18,88,050 stood explained there is no justification in treating it as unexplained investment of assessee - In so far as deposits of Rs. 5 lakhs claimed to have been made out of cash loan of Rs. 5 lakhs received from Smt. Latabai Gupta is concerned, AO not only initiated but also imposed penalty u/s 271D of the Act against assessee for having received loan in cash in violation of section 269SS of the Act – the action on the part of AO is suggestive of the fact that he has accepted the cash loan to be genuine - CIT(A) was justified in deleting the addition to the extent of Rs. 5,00,000 - assessee has made cash withdrawal of Rs. 1,00,000 on 21/11/2009, whereas assessee made cash deposits of Rs. 1,00,000 on 17/12/2009 - it is reasonable on the part of CIT(A) to conclude that, cash withdrawal made earlier was utilized for making the deposit – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 1013
  Restriction of disallowance u/s 14A r.w Rule 8D(2)(ii) – Facts properly not appreciated by the lower authority - Held that:- Revenue rightly contended that neither the assessee nor AO is clear how much is to be disallowed for the reason that the details are not properly analyzed - none of the Authorities below have clearly sorted out the facts - even before the Tribunal , assessee could not substantiate, how the disallowance can be restricted at Rs. 68,69,801/- or at Rs. 74,06,707/- as the ground raised before the CIT(A) - the entire fact needs re-examination and hence, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue.

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• 2014 (12) TMI 1012
  Deletion of addition of undisclosed income – Incriminating documents found in search – Validity of admission of additional evidence in violation of Rule 46A – Held that:- In the course of search proceeding, particulars of transaction between the searched person and the proprietary concerns of the assessee were recorded - M/s Gian Chand Ramji Dass Group (the search person) were recording certain portion of their sales outside the books of account and many of these sales were made to two proprietary concerns of the assessee - assessee was asked to explain whether the purchases from M/s Gian Chand Ramji Dass Group, were duly accounted or not - There was lack of cooperation on the part of the assessee and did not provide the necessary material called for by the AO - CIT(A) deleted the disallowance for the reason that no incriminating documents against the assessee were found during course of search. M/s Gian Chand Ramji Dass Group has sold goods outside its book of account to the proprietary concerns of the assessee The addition of Rs. 6,81,067/- would not have been warranted, had assessee cooperated and produced the details called for in the course of assessment proceeding - The assessee ought to have furnished necessary material to show that the purchases from M/s Gian Chand Ramji Dass Group were duly reflected in the regular book account maintained by the proprietary concerns - CIT(A) is not justified in deleting the addition – thus, the matter is remitted back to AO for fresh consideration. The AO merely added the peak credit without giving any reasoning for treating the same as undisclosed income of the assessee - when the Bank accounts are reflected in the normal course of assessee’s business, there is no reason that the peak credit in the two bank accounts should be added as undisclosed income - the CIT(A)’s order deleted the addition of Rs. 10,83,460/- is upheld – Decided partly in favour of revenue.

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• 2014 (12) TMI 1011
  Claim of set off of unabsorbed depreciation against the rental income treated as income from other sources – discontinued activity - Held that:- Assessee rightly relied upon Commissioner Of Income-Tax Versus Premchand Jute Mills Limited [1986 (3) TMI 29 - CALCUTTA High Court] wherein it has been held that the assessee was entitled to carry forward the unabsorbed depreciation u/s 32(2) without any reference to section 57 - the assessee was entitled to deduction in respect of expenditure and depreciation in accordance with section 32(2) - The specific mention of section 32(2) in section 57 permits deduction of the unabsorbed carry forward depreciation of earlier years from the income received form plant, machineries or furniture let out – what is spoken to u/s 32(2) is as regards set off of unabsorbed depreciation as per clause (ii) of sub section (1) and when the unabsorbed depreciation could not be set off as against the income from business or profession by reason of there being no income available under the said heads and where there is income from other sources, effect must be given to Section 32(2) of the Act for that assessment year - thus, the order of the CIT(A) is set aside and the AO is directed to give appropriate relief to the assessee by allowing set off of unabsorbed depreciation of the AY 2003-04 and 2004-05 against the rental income assessed to tax in the years – Decided in favour of assessee.

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• 2014 (12) TMI 1010
  Deletion made u/s 14A – expenses attributable to earning exempt income or not - Held that:- In Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] it has held that Rule 8D is applicable from AY 2008-09, that does not mean that prior to the introduction of this Rule, no amount can be considered as incurred for the purpose of earning tax free income - The disallowance has to be made, first examining the accounts of the assessee and if the AO is satisfied that the accounts do not depict true picture, then he can work out the disallowance on the basis of a reasonable and acceptable method of apportionment - CIT (A) ought to have not deleted the disallowance in Toto, rather ought to have examined whether any disallowance is possible or not - she should have examined whether any expenditure attributable to earning exempt income can be identified for disallowance u/s 14A of the Act - the order of the CIT (A) is not sustainable – thus, the order is set aside and the matter is remitted back to the AO for re-adjudication. CIT in an order u/s 263 had made a clear direction that the amount disallowed u/s 14A would be adjusted in the book profit - if any disallowance is being made by the AO, in the regular course of assessment, then that disallowance would be included in the book profit, to be computed for the purpose of section 115JB - only the amount of computation can be replaced, because the Commissioner took it from the original assessment order which has been set aside – Decided in favour of assessee.

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• 2014 (12) TMI 1009
  Claim of deduction u/s 80HHC – Export incentives to be considered as part of profits or not - Held that:- Against the claim of deduction u/s 80HHC of Rs. 7,29,536/- of the Assessee, the claim of deduction was recalculated by A.O at Rs. 83,773/- in view of the amendment made by Taxation Laws Amendment Act, 2005 – Following the decision in Avani Exports vs. CIT [2012 (7) TMI 190 - GUJARAT HIGH COURT] wherein the amendment is quashed made by the Taxation Law and (Amendment) Act, 2005 with retrospective effect from 1st April 1998 by adding, second, third, fourth & fifth proviso to Section 80HHC(3) and held that the operation of the said section could be given effect from the date of amendment and not in respect to earlier assessment years of the assessees whose export turnover is above Rs. 10 crore - revenue has not brought any binding contrary decision in its support – thus, AO could not have reduced the claim of deduction of Assessee u/s. 80HHC – Decided in favour of assessee.

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• 2014 (12) TMI 1008
  Addition made by treating creditors as unverifiable creditors – addition u/s 41(1)(a) - Held that:- Out of the total addition made u/s 41(1), the major addition is with respect to Bhikubhai Patel - assessee has submitted that translated copy of the reply given by Bhikubhai Patel to the AO in response to the submissions issued to him u/s. 131 – assessee has not entered into any transaction with the Assessee’s firm in FY 06- 07,-07-08 & 09-10 - there is no finding either by CIT(A) or by the AO that the Assessee had entered into transaction with Bhikubhai Patel in year ending 31st March 2004 and the nature of transaction - this factual aspect needs fresh verification and for which the matter is remitted back to the AO for examination of the contentions of the assessee that the amount was payable since year ending 2004 - with respect to the other parties, there is no evidence either in the form of confirmation letter PAN number, addresses or any other form was submitted by the Assessee in support of its claim that the liability exists - no material has been placed on record by the Assessee to demonstrate that it has paid the creditors the amount in subsequent years nor there is any finding on the same of AO or CIT(A) - assessee should be granted one more opportunity and also to demonstrate the subsequent payments – thus, the matter is remitted back to AO – Decided in favour of assessee.

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• Customs

• 2014 (12) TMI 1054
  Refund claim of Terminal Excise Duty (TED) - Supply of manufactured goods to 100% EOU - Deemed export - Denial in terms of the provisions of the Foreign Trade Policy 2009-14 framed under the Foreign Trade (Development and Regulation) Act, 1992 - Held that:- petitioner did not make any supplies against the ICB. Therefore, it would be covered by latter part of para 8.3(c), i.e. cases where refund of TED will be given. This intention is given effect by the second entry in column (a) of para 8.4 read with corresponding benefits spelt-out in column (c) which states that entitlement in terms of para 8.3 to refund is permissible. The eligibility for refund, therefore, would be in terms of these provisions and the unit has to apply for such refund - authorities in this case appear to have proceeded to make an order adverse to the petitioner and proceeded to hold that the petitioner was disentitled to the benefit of refund in view of some clarification given by the Policy Interpretation Committee, in its meeting of 04.12.2012 to the effect that “refund of CENVAT credit provisions are available under Excise rules and CENVAT rules which should be availed of rather than claiming refund”. This reasoning appears to have prevailed with the Policy Relaxation Committee as well in this case. Court also is unable to see the reason why the respondents were of the view that refund claim or benefit under the CENVAT regime under the Central Excise Act or the other statutory schemes framed under it is available. In this Court’s opinion, that regime operates in its own terms and is independent of the rights and liabilities of the petitioner and the respondents under the import-export policies framed under the 1992 Act - The respondents are hereby directed to process and pass appropriate orders in accordance with the 2009 policy in respect of the petitioner’s refund claims made through its applications dated 29.08.2012 and 16.11.2012 within three months - Following decision of Kandoi Metal Powders Mfg. Co. Pvt. Ltd. Versus Union of India And Others [2014 (2) TMI 773 - DELHI HIGH COURT] - Decided in favour of assessee.

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• 2014 (12) TMI 1053
  Confiscation of seized goods - Seizure of gold and silver bars - Gold bars bear the foreign origin marking but silver bars does not have the same - Appellant claims only silver bars - appellant acquitted by the Judicial Magistrate in the criminal proceedings initiated by the Customs Authorities under Section 135(1)(b)(i) - Whether the plea of the appellant that in view of the acquittal of the appellant in the criminal proceedings, there could not be any imposition of penalty in the adjudicating proceedings is correct - Whether the contention of the respondent that the criminal court has not gone into the question of mensrea and in such circumstances, the judgment of acquittal would not affect the finding of the Tribunal is correct. Held that:- Act contemplates two separate proceedings for the same act or omission and therefore, there is no question of double jeopardy involved, as rightly pointed out by the learned counsel appearing for the first respondent. - mere acquittal in the criminal proceedings before Magistrate court in every case cannot result in setting aside, ipso facto, the orders of the confiscation passed by the competent authority under the Act. Therefore, the contention of the appellant that the judgment of the Judicial Magistrate acquitting the appellant was binding on the Departmental Authorities, adjudicating the question of confiscation is not correct. As rightly pointed out by the learned counsel appearing for the first respondent, the fact of seizure of gold and silver bars recovered from the appellant's residence is not in dispute. In the criminal proceedings, it is the duty of the prosecution to prove the case beyond any reasonable doubt and also to prove the mensrea for the above said criminal act by adducing reliable evidence. In the instant case, the respondents have discussed in detail about the seizure of gold and silver bars from the residence of the appellant and the above said fact was not disputed by the appellant. Therefore, the appellant cannot be exonerated from adjudication proceedings. - only on the ground of acquittal in the criminal proceedings, the respondents need not exonerate the appellant from the adjudication proceedings regarding imposition of penalty and therefore, the final order passed by the Customs, Excise and Service Tax Appellate Tribunal is valid in law - Decided against assesse.

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• 2014 (12) TMI 1052
  Imposition of penalty - Benefit of Customs Notification No.80/95 dated 31.3.1995 under DEEC Scheme - Whether the importer is liable for penalty under Section 112 of Customs Act, 1962 or not on failure to fulfil the conditions of Duty Exemption Entitlement Certificate Notification 80/95 read with under Section 111(o) of CA'62 - Whether the Hon'ble Customs, Excise and Service Tax Appellate Tribunal is right in holding that the importer is not liable to fulfil the conditions of Duty Exemption Entitlement Certificate Notification 80/95 read with under Section 111(o) of CA'62 - Held that:- Export Import policy itself enables the Customs Authorities to exercise its power for confiscation or for imposing fine and penalty. In this case, the goods are not available for confiscation under Section 111(o) of the Customs Act and hence, no fine was imposed, however penalty was imposed. The findings of the Adjudicating Authority is that there is no material to prove that there is a bona fide default, which fact is now being corrected by the respondent by producing statutory documents issued by the Office of the JDGFT. This aspect of the case requires to be re-considered by the Adjudicating Authority. Tribunal is not justified in holding that no penalty can be imposed after payment of duty and interest as required by the Notification. The Tribunal did not look into the position of law as found in para 7.29 of the Export and Import Policy 1997-2002 and therefore fell into error. In view the documents now produced by the assessee showing that the assessee had discharged the export obligation for the purpose of regularising the bonafide default, the matter requires to be re-considered by the Adjudicating Authority on the issue of confiscation and penalty. Accordingly, we remand the matter back to the Adjudicating Authority. - Matter remanded back - Decided in favour of Revenue.

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• 2014 (12) TMI 1051
  Penalty u/s 114(i) - Confiscation of goods - Misdeclaration of goods - export of fertilizer grade Potassium Chloride (Muriate of Potash - MOP) by declaring it as industrial salt, chemical grade (sodium chloride) - Whether the Tribunal was right in coming to the conclusion that the appellant is liable for penalty in terms of Section 114 (i) of the Customs Act in the absence of any tangible evidence against the appellant - Held that:- the fact that the appellant was responsible for sourcing the bogus bill for the mis-declared goods from R.B. Trades as 'Industrial Salt' to support the unlawful attempt to export Muriate of Potash is evident from the materials available on record. The further fact that payments were made by the consignee, who is none other than the sister of the appellant, is also confirmed by the statement of Rajagopal, the father of the appellant and the consignee, Ms.Aruna Murugesh the sister of the appellant. The above fact clearly shows the active involvement of the appellant in the transaction. That the appellant is responsible for the attempt to illegally export by way of mis-declaration, contrary to prohibition in law is further evident from the statement of L.Subash Proprietor of Sharmi Exim Co., whose statement is to the effect that he consented to the said improper export only for the purpose of individual gain of Rs. 5,000/- per container. The complicity of the appellant further gets confirmed by the statement of the Custom House Agent, who stated that the false/bogus invoice of R.B. Trades were handed over to him by the appellant and that he proceeded to file the shipping bills on the instructions of the appellant. - In view of the clear and categorical evidence available on record, there appears to be no error in the order passed by the Tribunal confirming the findings of the original authority as well as the Commissioner (Appeals) on levy of penalty under Section 114 (i) of the Customs Act. Involvement of the appellant in the attempted export by way of mis-declaration contrary to prohibition imposed by law - Held that:- all the authorities have considered the material evidences available on record, including the statements and have given a clear finding that the appellant was actively involved in the improper and illegal attempt to export goods by way of mis-declaration contrary to prohibition imposed by law and, therefore, this Court sees no reason to differ with the findings of the authorities below. The finding on guilt of the appellant on the basis of the materials available on record is uniform in all proceedings below. The appellate court is not inclined to reappreciate the evidence unless it is shown that the impugned order is perverse, arbitrary and against the well established legal principles. There is no sound legal principle that appellant relies upon to interfere with the impugned order. The issues raised by the appellant in the present appeal are purely questions of fact and this Court finds no question of law, much less substantial questions of law, arising for consideration in this appeal. - Decided against assesse.

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• 2014 (12) TMI 1050
  Denial of conversion of free shipping bill to drawback shipping bill - there was no compelling reason beyond the control of the appellant for availing free shipping bill into drawback scheme - Maintainability of appeal - Order passed by Commissioner - Held that:- In fact, the argument of the learned AR is self contradictory as on one hand he submits that the Commissioner is not proper officer, the Asst. Commissioner is the proper Commissioner and on the other hand, he submits that the impugned order has been passed by the Asst. Commissioner. The stand of the learned A.R. is not consistent. Further, I find that in this case, in the communication from the Asst. Commissioner forwarded to the appellant stating that the learned Commissioner has taken the decision. Therefore, I hold that the appeal is maintainable before this Tribunal against the order of the Commissioner. There was an alert circular issued against the appellant therefore, it was the compelling reason for not filing the shipping bills under drawback scheme. In these circumstances, the learned Commissioner has committed an error for not considering the request of the appellant for conversion of free shipping bill to drawback scheme. - matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 1049
  Determination of FOB value - denial of the exorbitant claim of DEPB scrips - Held that:- To resolve the controversy between the parties, it would be fair to send back the matter to the adjudicating officer to issue notice to the respondent clearly stating why he disbelieves the value declared by the appellant. If such a notice is issued that shall serve the purpose of Rule 8 of the Export Valuation Rules. Upon receipt of the explanation of the respondent, learned authority shall examine the same threadbare and ignoring incredible evidence if any, shall consider only proper and cogent evidence to resort to the appropriate rule of valuation. - Decided in favour of Revenue.

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• 2014 (12) TMI 1048
  Condonation of delay - Inordinate delay of more than 5 years - Change of address - Delay in receipt of order - Held that:- As per the provisions of Section 153 of the Customs Act, the order is to be served by tendering or sending by Registered Post and in case the order is not served in that manner by processing it on notice board of the Custom House - adjudication order was sent on the address which was given in the bills of entry and the same was received back with the postal remark “Left” and, therefore, the same has been displayed on the notice board as per the provisions of Section 153 of the Customs Act which provides that in case the order was not served by tendering or by post the alternative service is by displaying on the notice board. In view of this, we find no merit in the contention of the applicant is that order is not properly served on the applicant. In view of this the condonation of delay application is dismissed - Condonation denied.

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• 2014 (12) TMI 1047
  Date of communication of order - Refund claim - Whether the date of passing of the order completing the provisional assessment shall be considered or the date of communication of order shall be considered to count limitation for filing refund application - Held that:- facts are not in dispute exhibiting that the provisional assessments in the case of the appellant were completed prior to the communication of the final assessment order. The date on which a public order is served on the person to whom that is meant, such date of service is counted for remedial measure if the person on whom the order served is aggrieved. The date of communication is deceive for different purposes of law in respect of the person to whom the order is meant and on whom that is served. Whether the refund arising out of completion of provisional assessment shall undergo the process of Section 27 when the refunds related to the period prior to 13-7-2006 - Held that:- when refund arises upon completion of provisional assessments, that flows suo motu under law prior to 13-7-2006 to the assessee without an application being made. The refund so arsing does not under go the process of Section 27 of the Customs Act, 1962 but is covered by the Section 18 of the said Act. However Section 18 has undergone amendment with effect from 13-7-2006 with necessary implication that even refund arising on completion of provisional assessment shall be governed by Section 27 of the said Act. By that amendment, bar of limitation as well as unjust enrichment are enacted to the law. Therefore before 31-7-2006, the refund arising upon completion of the provisional assessments is not intended by law to undergo the test of limitation as well as unjust enrichment in terms of law laid down by the Hon’ble High Court of Delhi in the case of the present appellant reported in [2012 (1) TMI 31 - DELHI HIGH COURT]. Following the ratio laid down therein, appeal of the appellant is allowed and the refund is payable to the appellant. - Refund allowed.

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• Corporate Laws

• 2014 (12) TMI 1023
  Recovery of Debts - Whether provisions of SICA would prevail over the RDDB Act – Company failed to repay loan installments - Difference of opinion regarding - Decision of larger bench of Apex Court - The High Court set aside the Order passed by the Debt Recovery Appellate Tribunal, Delhi (DRAT) and held that in view of the bar contained in Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) no recovery proceedings could be effected against M/s. Arihant Threads Ltd. - Held that:- sub-section (1) of Section 22 may be divided into two parts. In one part, it provides that "no proceedings" be instituted for the winding up of the industrial company or for execution, distress or the like against any of the properties of such industrial company, and in the second part it provides that "no suit" for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advances granted to the industrial company, "shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority." “Application for recovery" cannot specifically be described as proceedings for execution, distress or the like against any of the properties, but it is certainly a proceeding which results in and in fact had resulted in the execution and distress against the property of the Company and is therefore liable to be construed as a proceeding for the execution, distress or the like against any of the properties of the industrial company - such a construction would be within the intendment of Parliament wherever the proceedings for recovery of a debt which has been secured by a mortgage or pledge of the property of the borrower are instituted - Surely, there is no purpose in construing that Parliament intended that such an application for recovery by summary procedure should lie or be proceeded with, but only its execution be interdicted or inhibited especially - the proceedings by way of an application for recovery according to a summary procedure as provided under the RDDB Act are not referred to in Section 22 simply because the RDDB Act had not then been enacted. The Court found a harmonious scheme in relation to the proceedings for reconstruction of the company under the SICA, which includes the reconstruction of debts and even the sale or lease of the sick company's properties for the purpose, which may or may not be a part of the security executed by the sick company in favour of a bank or a financial institution on the one hand, and the provisions of the RDDB Act, which deal with recovery of debts due to banks or financial institutions, if necessary by enforcing the security charged with the bank or financial institution, on the other. The purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial institutions. Both the Acts are "special" in this sense. However, with reference to the specific purpose of reconstruction of sick companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts. Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and the SICA may be considered to be a general law in this regard. For this purpose we rely on the decision in LIC v. D.J. Bahadur [1980 (11) TMI 157 - SUPREME COURT OF INDIA]. - Normally the latter of the two would prevail on the principle that the Legislature was aware that it had enacted the earlier Act and yet chose to enact the subsequent Act with a non-obstante clause. In this case, however, the express intendment of Parliament in the non-obstante clause of the RDDB Act does not permit us to take that view. Though the RDDB Act is the later enactment, sub-section (2) of Section 34 specifically provides that the provisions of the Act or the rules thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA. The term "not in derogation" clearly expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in any way. This, in effect must mean that Parliament intended the proceedings under SICA for reconstruction of a sick company to go on and for that purpose further intended that all other proceedings against the company and its properties should be stayed pending the process of reconstruction. While the term "proceedings" under Section 22 did not originally include the RDDB Act, which was not there in existence. Section 22 covers proceedings under the RDDB Act. The provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act.

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• Service Tax

• 2014 (12) TMI 1046
  Refund claim - recovery of the refund already sanctioned to the appellant - no nexus between the input services and the output services - Held that:- Services in respect of which credit is proposed to be denied and refund sanctioned to be demanded back are held to be input services in the case of the very same assessee in previous final order. Both the issues are no longer res integra and therefore we consider it appropriate that the matter itself should be finally decided even though the learned AR strongly opposed it and submitted that only stay may be granted and decision an appeal may be postponed. When this Tribunal already has taken a view in respect of the very same services in two orders passed in respect of the very same appellant, one of which has been referred to above and the Hon’ble High Court also has taken a view in respect of the refund rejected on the ground that ISD registration should have been taken, I consider that it would be appropriate to decide the issue finally at this stage itself especially because the learned counsel submitted that this is a recurring issue and if a final order is not passed at this stage, there will be recurring litigation, it may not be proper to allow to continue - Decided in favour of assesse.

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• 2014 (12) TMI 1045
  Construction of commercial complex - Appellants entered into joint development agreement with land owners, constructed commercial complex of their portion and sold the property on the basis of Power of Attorney executed in their favour by the landowners - Held that:- IT is not a case of self-service - Appellants have clearly provided service to the landowners – No infirmity in the demand – Order of the Commissioner (A) requiring the appellant to deposit the entire amount of service tax adjudicated is reasonable and does not require interference. However, in the interest of justice, we give another opportunity to the appellant to deposit the amount ordered by the Commissioner (A) within 10 weeks - Matter remanded back - Decided partly in favour of assessee.

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• 2014 (12) TMI 1044
  Waiver of pre-deposit of Service Tax - manpower recruitment and supply agency services - appellant submitted that all labourers who were retrenched from the Public Sector Undertaknig-M/s.Hindusthan Copper Ltd. has formed the society, and supplies the labourers on daily wage 'basis to M/s.Hindusthan Copper Ltd. only.- Held that:- Prima facie we find that the Applicant had rendered services under the category of manpower recruitment or supply agency services. However, keeping in view the financial hardship expressed and taking into account that the Applicant is a society formed for the welfare of the labourers it would be prudent at this stage to direct deposit of the amount offered by them. Consequently, the Applicant is directed to deposit the amount of Rs. 2.00 Lakhs within a period of eight weeks - Partial stay granted.

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• 2014 (12) TMI 1043
  Denial of refund claim - CENVAT Credit - refund claim has arisen because the appellants have accumulated credit since the CENVAT credit cannot be utilized by them in the absence of provision of service in domestic tariff area - No nexus between the output service and the input service - Held that:- prima facie the appellant is eligible for the credit of service tax paid on input services and the matter had not attained finality as regards the decision relied upon by the Revenue. Accordingly we consider that appellant has made out a prima facie case for complete waiver. - Stay granted.

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• 2014 (12) TMI 1042
  Waiver of pre deposit - demand based on original return ignoring the revised return - Port Service, Goods Transport Agency Service - Held that:- Rule 7B itself does not require any reason to be given while filing the revised return. In fact it is not required since the assessing officer has power to scrutinize the report and call for records and documents in case he has any doubts or needs any clarification. Therefore when a revised return is filed, the proper course would have been to call the assesses and ask them to explain why the difference has arisen and why the taxable value was -not shown correctly. Instead the revised return has been ignored and the tax demand has been confirmed ignoring the revised return completely. We feel that there is no case for a tax demand in this case at all. Accordingly we consider that the appellant has made out a case for complete waiver of pre-deposit and stay against recovery - stay granted.

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• 2014 (12) TMI 1041
  Waiver of pre deposit - ineligible benefit of Notification No. 12/2003-S.T - Held that:- There is no dispute as to the fact that the appellant herein has been raising separate bills for the service rendered and for the materials supplied. The appellant has been claiming of the benefit of Notification No. 12/2003-S.T. which clearly talks about the availment of benefit if the materials are billed separately. Prima facie, we find that the decision of the Tribunal in the case of Sobha Developers Ltd. (2009 (9) TMI 342 - CESTAT, BANGALORE) may be applicable. Accordingly we find that the appellant has made out a prima facie case for the waiver of pre-deposit of the amounts involved. Application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of the appeals. - Stay granted.

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• 2014 (12) TMI 1040
  Commercial Training and Coaching service - Bar of limitation - Held that:- demand pertains to the period September, 2003 to January, 2005. During this disputed period, Respondents were having valid permission from Chhattisgarh Government for functioning as University. When State Government itself granted them permission for running a University, there cannot be any intention of evasion of Service Tax by the Respondents. We therefore do not find any infirmity in the impugned Order-in-Appeal - Decided against Revenue.

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• 2014 (12) TMI 1039
  Waiver of pre deposit - Reimbursible expenses - Excess pension amount deducted - Tax on House Rent Allowance (HRA) - Held that:- demand is based on the estimates prepared by M/s. RINL (service recipient) towards various expenditure including salary for the personnel of CISF (Appellant) for ensuring that security services are available. This demand also included medical expenditure incurred by M/s. RINL on CISF. The Department has contended that it is reimbursible expenditure. Prima facie, we find that this cannot be considered as reimbursible expenditure since in the first place this expenditure are not incurred by CISF at all. Therefore, prima facie, appellant has made out a case. Second demand is approximately Rs. 10.61 lakhs on the ground that the appellant has collected excess pension charges from M/s. RINL. Learned counsel submits that in respect of the amount relating to subsequent period from 1-4-2009, Service Tax has been discharged. The dispute is only for the earlier period during which the Service Tax was not paid. Since there was no liability on the service prior to 1-4-2009, we find that this claim of the appellant appears to be justifiable. The third demand is approximately Rs. 17 lakhs. M/s. RINL provides accommodation to CISF employees and in this case, no HRA is paid to CISF. Since there is no question of receipt of HRA by the appellant, there is no question of payment of Service Tax on the notional value of the HRA which is presumed to be received by the appellant for reimbursement to CISF. Therefore, in this case also, we do not find that it can be covered under reimbursible expenditure or under the category of payment for the service rendered. Prima facie, the appellant has made out a case. Accordingly, there shall be waiver of pre-deposit and stay against recovery of the adjudged dues during pendency of the appeal. - Stay granted.

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• 2014 (12) TMI 1038
  Mid-day Meal Scheme - Exemption order No. 2/2/2011-Service Tax, dated 8-8-2011 - Outdoor catering services - Held that:- By an ad hoc exemption order No. 2/2/2011-Service Tax, dated 8-8-2011, the Central Govt. in purported exercise of powers under Section 93(2) of the Act granted exemption from the liability to tax in respect of outdoor catering service provided by a NGO registered under any Central Govt. Act or State Act, or centrally assisted Mid-day Meal Scheme, during the period 10-9-2004 to 2-10-2010. That the assessee fulfils the requirements for entitlement to the exemption under the Notification dated 8-8-2011, is not contested by Revenue. - impugned adjudication orders are set aside - Decided in favour of assessee.

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• 2014 (12) TMI 1037
  Business Auxiliary Service - Delivery of money to the ultimate beneficiary in India as per directions given by their principal representative for which the respondents get commission - whether the activity is liable to service tax under Section 65(19) of the Finance Act, 1994 - Held that:- Tribunal in case of Paul Merchants Ltd. reported in [2012 (12) TMI 424 - CESTAT, DELHI (LB)] by majority decision has held that advertisement and sale promotion by agent/sub-agent is to be treated as export of the service and therefore not liable to the service tax. Following the said decision we are of the view that activity undertaken by the respondents are not liable to service tax being the export of service. Accordingly we uphold the Order-in-Appeal - Decided against Revenue.

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• Central Excise

• 2014 (12) TMI 1036
  Clandestine removal of goods - manufacture of the fireworks - Search at the alleged secret office of the assessee - presumption regarding documents/computer recovered - department rejected the request for cross examination on the ground that the said persons being employee of M/s Hingora could have been compromising parties. - Held that:- The veracity of the statements needs to be always checked and cross checked before relying upon such statement. M/s. Hingora were well within their rights to ask for cross examination of these employees to bring on record that the statements tendered by these employees could not be relied upon for making allegation against the Appellants. In our considered opinion, due to non-granting of the cross examination of above said persons, no reliance can be placed upon these statements and thus the statement of these persons cannot stand test of the law. - Decision of of Hon’ble Apex Court in the case of Shalimar Rubber Industries v. Collr. of C.E., Cochin [2002 (11) TMI 91 - SUPREME COURT OF INDIA] followed. Records were not recovered from regular business premises. Some of these records related to production were said to be tallying with the records seized from the factory. However in the show cause notice there is nothing stated that the details of goods found were tallying with the details of the clearances on payment of duty or otherwise and to whom. We find that the entire case of the revenue is based upon the dispatch details found from the files and data recovered from the secret office. However except these evidences there is virtually no other evidence to reflect upon the clandestine production and removal by M/s Hingora. Alleged dispatch details and the parallel invoices said to be found from the secret office contained the name of the parties to whom the goods were cleared as well as other details. However no evidence is appearing on record that the officers investigated such recipients, inspite of their details appearing in all such alleged clearance records. In such case, it has to be held that the said evidence is uncorroborated. In all clandestine removals, it has been now well laid that the crux of the issue in respect of clandestine removal is that Revenue cannot proceed solely on the basis of a seized private notebook maintained by a worker unless the entries are corroborated by various other pieces of evidences in as much as that Revenue has to show that appellants have purchased the inputs from market and utilised the same and that the same has been sold to particular persons through invoices or otherwise and the money has flowed back as capital. In this particular case, admittedly the only piece of evidence is a notebook seized from the premises of the appellant. It was brought to the notice of the seizing officers that it was maintained by the Accountant who was very much present during the time of investigation. It was the duty of the investigating officers to have sought explanation from the said Accountant with regard to the entries made therein. Non-examination of the Accountant has rendered the document inadmissible in evidence. Appellants have also brought to the notice of the Revenue that fireworks are required to be insured mandatorily while removing the same and various authorities are required to be informed and permission obtained. Revenue has not examined this point in the correct perspective. The danger of removal and penal consequence of non-insurance is a serious matter and the Commissioner ought to have relied on same evidence to show as to how they could manufacture and remove such controlled explosive commodity without proper protection and insurance. Merely to give finding that such clandestine removal is done secretly and stealthily and they do not follow the law is not acceptable in the peculiar facts and circumstances of this case. There is no other corroborative evidence with regard to the sale and purchase by particular persons and there is no evidence of removal through any transporter and the transporters have not been examined and statements recorded. Each link in the aspect of production and clandestine removal is required to be proved and since this has not been done, the demands are required to be set aside for lack of evidence in the matter. For bringing the charges of clandestine removal the evidences decided by various case laws as above. However in the present case in absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods by M/s Hingora Industries we hold that the charges of clandestine removal against M/s Hingora Industries are not sustainable. Thus, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand against M/s Hingora Industries and imposes penalty on them is not sustainable and is liable to be set aside and we do so. There is no sustainable demand, consequential penalties on various other appellants, who are in appeal before us, would also automatically be set aside - Decided in favour of assessee.

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• 2014 (12) TMI 1035
  Availing CENVAT credit on scrap - industrial scrap versus bazaar scrap - allegation that they have availed CENVAT credit on bazaar scrap procured under the guise of ship breaking scrap - The allegation is that the duty-paid scrap was diverted and the dealer supplied bazaar scrap using the duty-paying documents on the strength of which the appellant took the credit. - Interest u/s 11AB - Penalty u/s 11AC and Rule 26 - Onus to prove - Held that:- Appellant did not place orders for the purchase of scrap directly on the manufacturer of scrap or dealer. The orders were placed through brokers such as Al-Karim Scrap Traders Pvt. Ltd., Singh & Sons, Maruti Trading Company and so on. These brokers, who placed the order for the scrap from the dealers and who supervised the supply of scarp, in their statements have confirmed that the supply of scrap made was of bazaar scrap and not from the duty paid scrap obtained from manufacturers. Further, it is a fact on record that the scrap received was not of the required quality and hence debit notes were issued to the suppliers (dealers) for supply of inferior quality scrap. Besides, the officials of the appellant-firm also corroborated the fact that what was received and used by the appellant was bazaar scrap and not industrially generated scrap. In these circumstances, the appellant could not be held to have satisfied/complied with the requirements of Rule 7(2) of CENVAT Credit Rules 2001/2002. Sub-rule (4) of Rule 7 of CENVAT Credit Rules, 2002 makes it abundantly clear that the onus of proving admissibility of CENVAT credit lies on the person availing the credit. In Besco Ltd. vs. Commissioner of Central Excise [2000 (8) TMI 217 - CEGAT, KOLKATA] the Tribunal dealt with a situation where bazaar scrap was supplied and the same was shown to be purchased from dealers registered with the department who had issued the invoices without actually supplying the material. This Tribunal held that the department cannot be expected to go to the source from where the appellant ought to have procured the bazaar scrap and as long as the department can corroborate by evidences to show that mala fide nature of transactions, the same is sufficient. In the present case, from the statement of the brokers, it is evident that what was supplied by the registered dealers were scrap procured from bazaar and not duty paid scrap. Therefore, the onus shifts to the appellant to prove that the scrap purchased is duty paid scrap which the appellant has not discharged at all. Rule 7(4) of the CENVAT Credit Rules, 2002, as it stood at the relevant time, placed the onus to prove the eligibility to avail CENVAT credit on the person taking the credit. Once the Revenue discharges the burden that the particulars declared in the documents on the strength of which credit had been availed are not genuine or are fake, then the onus is on the assessee to prove that they have availed the credit correctly and are entitled for the credit. That onus cannot be countenanced on the ground of hardship or inconvenience. It is also on record that M/s. Simandhar Steel Movers (India) Pvt. Ltd., who was the main dealer from whom the appellant procured the scrap, did not participate in the appeal proceedings at all which also shows that the scrap supplied by them to the appellant is not duty paid. As regards the scrap procured from other dealers, through brokers, it is seen from the statements of brokers and also the transporters that the scrap was sourced from not the manufacturers but from various traders. Confirmation of demand of CENVAT credit fraudulently taken to the extent of Rs. 1,62,39,751/- along with interest thereon is clearly sustainable in law. The appellant is also liable to penalty for an equivalent amount under Rule 13 of the CENVAT Credit Rules, 2002 read with Section11AC of the Central Excise Act, 1944. - Decided against the assessee. As regards the confiscation of bazaar scrap seized, valued at Rs. 10,14,98,444/- from M/s. ISSAL, the said goods are not excisable at all. Therefore, the question of their confiscation and imposition of redemption fine in lieu of confiscation does not arise at all. - Decided in favor of assessee. Levy of personal penalty on dealers - Held that:- Penalty can be imposed under Rule 26 only when notices had knowledge that the goods are liable to confiscation. In the present case, the goods supplied by the dealers are bazaar scrap which is not excisable and, therefore, the question of confiscation of such bazaar scrap would not arise at all. What the dealers have done is that they have supplied non-CENVATable scrap along with CENVAT documents. Penalty for issuing fake/bogus CENVAT document was provided for in the statute only in 2007. Since in the present case, the period is 2001-02, in the absence of specific provision in law for imposition of penalty for issue of fake/bogus documents, penalties imposed on the dealers and brokers will not sustain. Accordingly, we set aside the penalties imposed on the dealers and brokers.

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• 2014 (12) TMI 1034
  Manufacturing activity or not - Levy of duty on water resistant bonding agent - The appellants' claim is that since the manufacturing process undertaken by them is only of diluting the inputs and repacking the same, their activities do not amount to manufacture and hence, no excise duty is payable on their final product namely, Sika Latex and Sika Latex Power - Revenue, on the other hand, is claiming that the final product of the appellant is the ‘water resistant bonding agent', which is used as an additive to cement mortar/concrete to improve the adhesive and water resistant property of such cement mortar/concrete, while their inputs are “Styrofan D 623 AP” and “Apcotex TSN 100”, which are aqueous polymer dispersion used in the modification of hydraulic setting system - Held that:- The inputs are aqueous polymer and dispersion which are being processed to make it suitable as water resistant bonding agent. In our view, Revenue has discharged the burden from the literature of the final product as also that of inputs, the process being carried out leads to transformation of inputs into a final product having distinctive name, character or use. Inputs are not being sold by their manufacturer as water resistant bonding agent at all but as a product which manufacture after experiment can be used for diverse applications. In our view, Revenue has discharged the burden that final products are new products with distinctive name, character or use. - maintenance of elaborate records and conduct of quality test ipso facto dos not mean that the process amounts to manufacture, however, it is to be noted that if the process is very simple of dilution, then there is no need to keep elaborate records and there will be no need to conduct quality test for each batch (it can be concentration test only). - in the facts and circumstances of the case, the product having distinct name, character and use comes into existence from the inputs. The final product is a water resistant bonding agent while the inputs are understood as aqueous polymer dispersion used in the modification of hydraulic setting system. Name of inputs or process of transformation is a trade secret and is not known to trade or users. - Decided against the assessee. Computation of liability that the value to be taken as cum duty, we find force in the argument and we remand the matter back to the adjudicating authority to re-compute the duty liability considering the selling price as cum duty price. Keeping in view the nature of dispute, we set aside the penalty imposed. - Matter remanded back - Decided partly in favour of assessee.

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• 2014 (12) TMI 1033
  Non following the procedure for sending the goods for Job work and receiving the goods back after processing - use of private challans - voilcation of rule 57 F(6) (i) rule 57F(4), Rule 57F(6)(ii), 57F(7), Rule 9(1), rule 53, rule 173F, rule 173G(4) indicating that goods cleared for job work have to be accompanied by proper job work challans - Confiscation of goods - Penalty u/s 11AC - Held that:- Detailed procedure has been laid for job work or clearance of inputs/ partially processed inputs, reversal of credit on clearance and availment of credit on receipt back of goods to the factory. Admittedly these procedures have not been followed and further no duty has been paid/reversed by the respondents towards removals for job works in contravention of rule 57F(6) (1). There is clear admittance by the Director of the company that they have not followed the procedure and removals have effected without following laid down procedure, it is evident that benefit of job work could not be extended only based on verification report of Assistant Commissioner that goods have come back to the factory, knowingly well that private Challans have been used and no records have been maintained. In absence of maintains of records in the factory, and non-intimation to the Central Excise authorities no co-relation was possible. - Decided in favor of revenue. Regarding demand of duty on clearance of castings without following job work procedure, I do not find force in revenue s appeal as they have already accepted that all goods have came back. Once revenue itself is satisfied, no question of demanding duty arises. Of course, for violation of job work procedure and non-reversal of 10% of the value, penal provisions are attracted. However I do not agree with revenue for imposition to equal penalty considering that appellants were not aware about correct procedures. No mens-rea has been imputed manifesting their intention to defraud the revenue knowingly, thus equivalent penalty is not justifiable. - From the facts as brought on record it is observed that a very casual approach has been adopted by the appellant. Accordingly, I consider that penalty has to be imposed on appellants to ensure that the legal provisions are not ignored rendering these provisions as redundant. Regarding other issue of dropping demand and not imposing any fine and penalty on seized goods, I find that non-recording of goods in excise records has been manifested and admitted by the partner. For non-accountal, no lenient view could be taken. Goods were rightly liable for confiscation and redemption fine and penalty imposable. Commissioner (Appeals) was not right in dropping demands and penalties on this account. Departmental appeal is liable to be accepted. Non-recording of goods in excise records has been manifested and admitted by the partner. For non-accountal, no lenient view could be taken. Goods were rightly liable for confiscation and redemption fine and penalty imposable. Commissioner (Appeals) was not right in dropping demands and penalties on this account. - Penalty imposed on Director - Decided partly in favour of Revenue.

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• 2014 (12) TMI 1032
  Clandestine removal of goods - Lack of evidences - Cross examination opportunity not given - Held that:- Even though the Commissioner has concluded that there was such removal of huge quantity of finished products, there is no discussion or evidence available to show excess consumption of raw materials, electricity, etc. No statement of people concerned with production has been recorded. The whole case is based on loose sheets recovered from the house of Shri Manoj Mitulal. These sheets belong to Shri Sohanraj Mehta according to the Revenue. However, no statement has been recorded from Shri Manoj Mitulal at all. He was not made available for cross examination also. The whole case depends upon the interpretation of loose sheets and the version of Shri Sohanraj Mehta which was changed several times during the period and unless the cross-examination of the persons was allowed, the appellants could not defend the case properly. What is required to be proved by the department is preponderance of probability and therefore we need to examine whether on the basis of evidence collected and investigations done, a case has been made out against the appellant or not and we are not required to examine what are the omissions in the investigation. We find that in the impugned order there is no mention of surprise visits of the officers and the supervision/control exercised by the department and how the assessee could produce excess quantity in spite of such intense supervision. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 1031
  Denial of refund claim - Notification No. 225/1986-C.E., dated 3-4-1986 - held that:- Though the appellants were taking up the matter with their jurisdictional Central Excise authorities by repeated correspondence, but it is seen that no refund claim was filed by the appellant with the department. As such, the said letter of the Assistant Commissioner cannot be held to be an appealable order and Commissioner (Appeals) was not within his powers to entertain the appeal filed against the letter addressed by the Assistant Commissioner to the appellant. Otherwise also without there being any refund application by the appellants, the lower authorities could not have decided the refund claim either by rejecting the same or by accepting the same. - Decided against assesse.

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• 2014 (12) TMI 1030
  Exemption in respect of zinc sulphate (agricultural grade) that is used in manufacture of Fertilizer - scope of the term Fertilizer - Notification No. 4/2006-C.E., dated 1-3-2006 - Held that:- Dispute was the subject matter of the earlier decision of the Tribunal, though in the context of the different Notification No. 81/75. In the case of Punjab Micronutrient Ltd. v. C.C.E. - [1990 (4) TMI 122 - CEGAT, NEW DELHI] as also in the case of C.C.E. v. India Phosphate and Carbonate - [1997 (12) TMI 208 - CEGAT, NEW DELHI], it stand held that classification of fertilizer under a particular tariff heading is not a pre-requisite condition for extending the benefit of exemption Notification. Inasmuch as the zinc is essential for growth and development, the same has to be considered as fertilizer. It is seen that at the time of the decision of the Tribunal in referred case, there was no Explanation attached to the Notification No. 81/75 which was under consideration. However, the Explanation was subsequently included in the said Notification, which is identical to the Explanation as available in the present Notification No. 4/2006. It is further seen that neither in the earlier Notification No. 81/75 nor in the present Notification No. 4/2006, there is any requirement of the fertilizer to be classified under Chapter 31 also. The only requirement in the present Notification which was also introduced in the previous Notification by way of including Explanation is to explain the meaning of fertilizer. It stands mentioned in the Explanation that fertilizer shall have the meaning assigned to it under Fertilizer (Control) Order, 1985. Both the decisions referred to by the ld. Advocate have taken note of the fact that zinc sulphate is included in the Fertilizer (Control) Order, 1985. As such, the said condition of Notification also stands fulfilled by the assessee. - Decided in favour of assesse.

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• 2014 (12) TMI 1029
  Seizure of goods - Non accounting of goods - Intention to remove goods without payment of duty - Held that:- Appellant, during adjudication, had taken stand that the goods were not fully manufactured inasmuch as the process of lime mixing was to be done - There is no test conducted by any expert so as to conclude as to whether the lime mixing has already done or not. As such only fact of excess goods, which are also disputed by the appellant to be not fully finished, read with the statement, cannot held to be confiscable, in the absence of any evidence to show that they were either in the process of being removed clandestinely or were meant for clandestine removal. Accordingly, I set aside the impugned order - Decided in favour of assessee.

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• 2014 (12) TMI 1028
  Waiver of pre deposit - Classification of product - Classification of Aswini Homeo Arnica Hair Oil - Classification as oil or medicament - Held that:- Product manufactured by the appellants is a medicament and they have a drug licence issued by the appropriate statutory authority who has recognized it as a drug. Further he also submits that no evidence has been brought out by the Revenue to take the stand that it is not recognized as a medicament but used as hair oil - product manufactured by assesse contains 4 homeopathic medicaments as ingredients namely Arnica Mount, Cantharis, Pilocarpin and Cinchona. Drugs help in preventing hair fall and dandruff. He also produced a sample bottle of the drug. On going through the label we find that it has been stated that the oil prevents hair fall and dandruff. Further it also states that it has to be applied to the scalp and left overnight. Learned counsel also submitted that it does not have any perfume added. - two facts mentioned namely, absence of perfume and the advice that it should be used for massaging the scalp and left overnight. And the fact that there is no advice that it can be used as hair oil would go in favour of the appellant. The common understanding of the hair oil is somewhat different. In our opinion this is what makes the item before us as distinct product. Therefore the claim of the appellant that it is only a medicament and is not meant to be hair oil has substance - appellant has made out a prima facie case for waiver - Stay granted.

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• 2014 (12) TMI 1027
  Waiver of pre deposit - Manufacturing activity - activity of cutting fabrics, cutting quilts manufactured of the fabrics - Held that:- Activity of cutting fabrics and wadding according to the sizes required cannot be said to amounting to manufacture since activity does not result in any new product with distinct name, character and use. The fabrics and wadding so cut are sent to job worker who manufactures quilts and after the quilt is received, the appellants undertake inspection, packing and sale. Inspection, packing and sale of quilt cannot be considered as manufacture. Further as submitted by the appellants, they do not have even any machinery for manufacturing quilt fabrics at all. Prima facie, we find that the appellant has a case in their favour, Therefore, in our opinion, the matter can be heard without insisting on any redeposit. However, in view of the fact that Commissioner has rejected the appeal after asking them to pay the entire amount of duty along with penalty which in our opinion was not required, we are constrained to remand the matter to the learned Commissioner - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 1026
  Valuation of goods - Section 4A - Discharge of excise duty liability on Retail Sale Price (RSP) basis - Held that:- issue is no longer res integra. Since in the instant case, the goods are not meant for retail sale, the question of valuation of the same under Section 4A would not arise at all. This is the view taken by the Tribunal in the appellant’s own case [2008 (8) TMI 77 - CESTAT NEW DELHI] and Geoffery Manners & Co. Ltd. [2006 (8) TMI 56 - CESTAT, MUMBAI] - Decided in favour of assesse.

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• CST, VAT & Sales Tax

• 2014 (12) TMI 1025
  Classification and rate of tax on 'Dates' and 'Date Syrups' - Validity of clarification issued in Clarification No.40/2003 dated 27.01.2003 – Clarification is prospective or retrospective - Held that:- Section 28 A of TNGST Act empowers the Commissioner to issue Circulars and Clarifications concerning the rate of tax under the Act - The impugned clarification does not withdraw the clarification dated 13.8.2002, but states that earlier clarification is modified to the effect that 'Wet Dates' of foreign origin whether imported directly from other countries or purchased from other States are liable to be taxed at 2% in Entry 9 of Eleventh Schedule of TNGST Act - The modification on the impugned clarification was made without notice to the petitioner - Based on which notices were issued proposing to demand tax at 20% - the AO received the petitioner's objection as well as the request for waiver and called upon the petitioner to explain as to why tax should not be levied at 20% on first sale of imported 'Wet Dates' as per Entry 9 of Eleventh Schedule for the year 2002-03 - Similar notices were issued to all the three companies. In MOHAN BREWERIES AND DISTILLERIES LIMITED v. COMMERCIAL TAX OFFICER, PORUR ASSESSMENT CIRCLE, CHENNAI AND OTHERS [2004 (9) TMI 617 - MADRAS HIGH COURT] the Court examined the scope of the Circular issued u/s 28-A of the TNGST Act and held that the circular is binding on the authorities and even if the authorities want to withdraw the same, it could be done prospectively - the first ground for rejecting the petitioner's objection is held to be contrary to the decision which examined the very power of the first respondent to issue clarifications/circulars in exercise of power under section 28-A of the TNGST Act. Whether the impugned clarification dated 27.1.2003, is in consonance with Entry 9 of Eleventh Schedule of TNGST Act – Held that:- The petitioner's commodity being 'Wet Dates', falling within Part-D Entry 11 (2) of the First Schedule to the Act - Apart from that there were three other conditions to be fulfilled - It should have a foreign marking, it should not be sold in Indian brand name or trade mark and it should not be an item which had undergone any form of reprocessing, reassembling, re-constitution or repacking in India - Thus, going by the clarification issued by the first respondent, which is undoubtedly statutory, the commodities purchased by the petitioner by way of Inter-State sale could not be termed as imported goods. The clarification is beyond the scope of Entry 9 of the Eleventh Schedule - The clarification states that foreign goods whether imported directly from other countries or purchased from other States, the expression purchase from other States is conspicuously absent in Entry 9 of Eleventh Schedule - Therefore, by virtue of clarification, the respondent cannot add any expression or phraseology, which is not contained in the Statute - Therefore, the impugned clarification has to be necessarily held to be bad in law – the Clarification cannot be given retrospective effect, which is precisely what the respondents have done in the case of the petitioners - Therefore, such retrospective application of the clarification was also illegal – thus, the impugned clarification is illegal, unsustainable and contrary to the settled legal principles as stated above and accordingly, the same is quashed –Decided in favour of petitioner.

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• 2014 (12) TMI 1024
  Resale of the used motor vehicle - Claim of Exemption on sale of motor cars or other capital assets u/s 6(3) of the Delhi Value Added Tax Act, 2004 (DVAT) - motor cars to be treated as plant or not - Held that:- Section 9(9) of the DVAT Act is not applicable and appellant dealers were/are not entitled to input tax credit on motor vehicles. Once this is clear, we can appreciate the legislative mandate in granting exemption in respect of sale price paid in respect of capital goods provided the conditions mentioned section 6(3) of the DVAT Act are satisfied. - In the cases of the appellants, if these conditions are satisfied then the sale price received by the appellant dealers on sale of used motor vehicles would not be included in the turnover for it would be exempt from tax under Section 6(3) of the DVAT Act. Therefore, in view of the accepted and admitted facts, section 6(3) of DVAT Act would be applicable and the benefit cannot be denied. Scope of the plant under DVAT - Held that:- the word ‘plant’ has not been defined in the DVAT Act and in ordinary sense it includes whatever apparatus is used by a business man for carrying on his business but not his stock-in-trade which he buys or makes for sale - the word ‘plant’ or ‘machinery’ is not restricted only to mechanical processes or apparatus – the same has been decided by the Supreme Court in the case of Scientific Engineering House Pvt. Ltd. vs. CIT [1985 (11) TMI 1 - SUPREME Court] wherein it has been held that Plant will include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. However, in order to qualify as plant, the article must have some degree of durability – exemption allowed - Decided in favour of appellant dealers.

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