TMI Tax Updates - e-Newsletter
December 5, 2013

Case Laws in this Newsletter:

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

Articles

1. Inclusion of Free Supplies by Service Recipient – implication post Larger Bench decision under new Service Tax Regime

   By: RadheyShyam Mangal

2. Shocking amendment in section 66-Analysis of Punjab VAT (Second Amendment) Act, 2013-part 4

   By: AMIT BAJAJ ADVOCATE

3. AUDIT UNDER TAMIL NADU VALUE ADDED TAX ACT, 2006

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. RBI Reference Rate for US $ and Euro

2. Clarification in respect of the NJRS Request for Proposal Document.

3. Address by Shri Anand Sharma at the Plenary Session of the 9th Ministerial Conference of the WTO at Bali

4. Anand Sharma Resolute In Defence of Farmers and the Poor Addresses Plenary Session at WTO Ministerial Conference in Bali

Circulars / Instructions / Orders

FEMA

1. 78 - dated 3-12-2013

External Commercial Borrowings (ECB) by Holding Companies / Core Investment Companies for the project use in Special Purpose Vehicles (SPVs)

Highlights / Catch Notes

Income Tax

• High Court Dismisses Petition to Quash Rent Order Due to Unresolved Disputed Questions.

  Case-Laws - HC : Attachment of rent order – The petitioner's prayer for quashing of the attachment is so intrinsically linked to answers to these disputed questions as to be inseparable - petition dismissed - HC
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• High Court Upholds Provisional Attachment Order to Ensure Compliance with Tax Obligations During Pending Assessments.

  Case-Laws - HC : Pending assessments - Non-alienation of property without prior permission - Provisional attachment order – It is not appropriate to interfere with the order and its extension - HC
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• CIT Can't Revise Assessment Orders Aligned with Jurisdictional High Court Decisions, as Per Section 263.

  Case-Laws - AT : Validity of order u/s 263 - power of CIT - Once the Assessing Officer has followed a decision of jurisdictional High Court , then there was no jurisdiction to revise such assessment order - AT
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• Interest on Custom Duty Treated Like Custom Duty Itself for Payment and Accrual Purposes, Supported by Case Law.

  Case-Laws - AT : Interest on custom duty - accrual of expenses - The interest on custom duty has the same nature as custom duty and therefore it could be allowed on payment basis - AT
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• Taxpayer's Shed Deemed Business Asset, Section 23(1) Not Applicable, No Notional Rent Income Calculated.

  Case-Laws - AT : The shed owned by the assessee was a business asset and in case of business asset, provisions of Section 23(1) are not applicable - No notional income (rent) can be computed - AT
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• Premature sales tax payment is a capital receipt but not favorable for book profit u/s 115JB.

  Case-Laws - AT : Premature sales tax payment - if the assessee get the benefit, the said benefit is in the nature of the capital receipt - this issue in respect of the computation of the book profit u/s. 115JB of the Act has to be decided against the assessee - AT
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• Advertising Agency Penalized for Not Complying with TDS on Sub-Contractor Payments u/s 194C of Income Tax Act.

  Case-Laws - AT : Payment to sub-contractor – TDS u/s 194C – It is a case of one advertising agency getting work done from the other advertising agency i.e. a sub-contractor - disallowance confirmed - AT
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Customs

• Xanthan Gum correctly classified under Heading No. 39.13 as a natural polymer, not under Heading No. 13.01.

  Case-Laws - AT : Classification of Xanthan Gum - Classification under Heading No. 39.13 or Heading No. 13.01 - the appropriate classification for the product is 3913 which covers natural polym - AT
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Service Tax

• Refund Claim Rejected, But Credit Refund from Past Period Allowed in Later Quarters Per Notification No. 5/2006.

  Case-Laws - AT : Rejection of refund claim - refund of credit can be allowed of the past period in subsequent quarters and there is no such bar in the Notification N0. 5/2006 - AT
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• Rule 9 (1) Treats 'Invoice' and 'Supplementary Invoice' Equally in Service Tax Payment Obligations.

  Case-Laws - AT : During the period of dispute, with regard to service tax payment, the Rule 9 (1) did not make any distinction between ‘invoice’ and ‘supplementary invoice’ - AT
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• Sales Tax Not Included in Service Tax Calculation for Composite Contracts; Stay Granted.

  Case-Laws - AT : Composite contract for Sale and service - value of a transaction which is liable to or has been assessed to levy of sales tax must be considered outside the scope of the taxable value for the purpose of levy of Service Tax - stay granted - AT
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• Exemption for Commercial Coaching Services Includes More Than Just Standard Textbooks, Broad Application Confirmed with Stay Granted.

  Case-Laws - AT : Exemption under Notification No.12/03-ST cannot be restricted to sale of standard textbooks while determining value of Commercial Coaching Services - stay granted - AT
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Central Excise

• Revenue Department Cannot Alter Excise Exemption Benefits by Imposing New Conditions Like End-Use Certificates.

  Case-Laws - AT : Benefit of exemption notification - Revenue cannot legislate and introduce a new condition in the notification on its own and call for the end use certificates - rejection of certificates produced by the customers on flimsy ground cannot be accepted - AT
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• Bailing Slips Alone Insufficient for Proving Clandestine Removal in Central Excise Case Without Independent Evidence.

  Case-Laws - AT : Bailing slips recovered from third party – Sufficient proof for clandestine removal or not – in the absence corroborative evidence from independent source, demand can not sustain - AT
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• Credit Allowed for Sulphur Recovery Units as Capital Goods in High-Speed Diesel Production Process.

  Case-Laws - AT : Denial of capital goods credit - The Sulphur Recovery Unit & Standby Sulphur Recovery Unit have to be treated as the capital goods used in the manufacture of marketable HSD - credit allowed - AT
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• Pre-delivery inspection and free after-sales services costs by dealers excluded from vehicle assessable value for tax purposes.

  Case-Laws - AT : Inclusion of cost of pre delivery inspection (PDI) and free after sales services to assessable value of the vehicles sold - expenses born by the dealer - not includible - AT
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Case Laws:

• Income Tax

• 2013 (12) TMI 145
  Attachment of rent order – Held that:- The petitioner's claim as to exclusive ownership of the attached property is based upon a compromise decree. The petitioner also alleges that his wife is owner of the land pursuant to a gift deed and that she has constructed the shops, rent whereof has been attached - Apart from the legality of the decree and ownership of the property, adjudication of this petition would involve consideration of the status of Raj Kumar Basisht and his HUF, constitution of the firm on the relevant date and liability of its partners, and other disputed questions of fact which would necessarily require parties to lead evidence - The petitioner's prayer for quashing of the attachment is so intrinsically linked to answers to these disputed questions as to be inseparable. The petitioner is required to seek his remedy by approaching a civil court for declaration of his title – The petition is dismissed.

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• 2013 (12) TMI 144
  Shipping income – Held that:- The assessee claimed to be acting only as an agent of UK Company and hence the shipping income generated by it in India belongs to the UK Company - In the assessment of another company of the Group named IAL Shipping Agencies (Mumbai) Ltd., the Department had concluded that there is no Agent-Principal relationship between IAL. Shipping Agencies(Mumbai) Ltd. and IAL Container Line (UK)Ltd. - Since the claim of agent-principal relationship was denied, the department assessed the entire income derived from shipping business in the hands of IAL Shipping Agencies (Mumbai) Ltd. - Tribunal remanded the issue in the interest of justice de novo enquiry – Decided against assessee.

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• 2013 (12) TMI 143
  Pending assessments - Non-alienation of property without prior permission - Provisional attachment order – Held that:- The assessee against whom the attachment order has been passed is one of the petitioners - The assessments for the years 2011-2012 and 2012-2013 are still pending - It is not appropriate to interfere with the order and its extension - The assessing Authority is directed to complete the assessment for the years within the extended period – Decided in favour of petitioner.

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• 2013 (12) TMI 142
  Foreign exchange Fluctuation – Held that:- Following Dredging Corporation of India Ltd [2011 (7) TMI 584 - ITAT VISAKHAPATNAM] - The gain on account of foreign exchange fluctuation, is related to the activity of operating qualifying ships - It has to be taxed under the Tonnage Tax Scheme as provided under Chapter XIIG of the Act – Decided in favour of assessee. Gratuity – Held that:- The amount paid towards gratuity is deductible u/s 43B - The Assessing Officer was directed to verify the bank account, and examine the matter in the light of such other evidence – Partly allowed in favour of assessee. Expenses on issue of FCCB – Held that:- The Assessing Officer was directed to examine the issue of allowability or otherwise of the expenses incurred by the assessee in connection with the issue of FCCBs - Partly allowed in favour of assessee.

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• 2013 (12) TMI 141
  Penalty u/s 271(1)(c) – Held that:- Following CIT vs. Suresh Chand Mittal [2001 (6) TMI 63 - SUPREME Court] - The return of income filed in response to notice under section 148 the assessee has already declared the income sought to be taxed - It does not amount to concealment of particulars of income. When the income itself is declared, there is no concealment about it - Even though in the original return, claim of long term capital gain was made, yet the assessee much prior to the notice issued u/s 148 of the Act had surrendered the amount of such long term capital gain and paid tax amounting to Rs. 3 lakhs voluntarily – Decided against Revenue.

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• 2013 (12) TMI 140
  Transfer pricing adjustment - Held that:- The relevant points raised on behalf of the assessee do not find any mention or proper discussion in DRP s direction which it is obliged to do so. The DRP is a quasi judicial authority and when dealing with a lis pending before it, it is obligatory on its part to ascribe cogent reasons as to why the assessee s contentions are not acceptable. In the present case, no such finding or reasons have been given in its order - All the issues raised in the appeal are restored for fresh adjudication. Transfer pricing adjustment - Held that:- The difference in capacity utilization affects the profitability mainly because of the difference in rates at which the fixed overheads are absorbed or allocated depending on the level of capacity utilization - If the fixed overheads allocation or absorption of comparable is brought at the level of the assessee, it would nullify the effect of difference in capacity utilization on the profit margin - If the depreciation in case of a comparable is allowed at the same rate of its operating cost instead of the actual depreciation claimed, if it is lower, this adjustment, will take care of difference in capacity utilization - The order of CIT(A) is set aside for the A.Y. 2008-09.

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• 2013 (12) TMI 139
  Expenses debited to the Profit s own case for assessment years 2006-07 and 2007-08 - The assessee had been allowed 100% depreciation on the asset used for R s own case for the assessment years 2006-07 and 2007-08 - The provisions of TDS are not applicable in the year and provisions, as the TDS have been deducted by the assessee, when the bills have been booked – As per amendment brought by the Finance Act, 2005 in section 40(a)(ia) with retrospective effect from 1st April 2005 in the first proviso – Decided in favour of assessee. Scientific research expenditure - weighted deduction under section 35(2AB) – Held that:- Following assessee’s own case for earlier years - Once the R s own case for the assessment year 2007-08 - TDS is not required to be deducted as the provisions of section 194H is not applicable as the sale was made on principal-to-principal basis - Regarding service coupon - The matter has been set aside to the file of the Assessing Officer - Partly allowed for statistical purposes. Depreciation on intangible asset – Held that:- Following assessee’s own case for assessment year 2007-08 - The existence of an agreement to acquire technology is not sufficient to claim depreciation. There has to be some active or passive use of technology knowhow during the year - Decided against assessee. Reversal of provisions for medical benefits – Reversal of FCCB premium - Held that:- The amount which has been disallowed in the assessment year 2007-08 then in the assessment year 2008-09, deduction has to be allowed on the amount reversed in this year as it will lead to double taxation, one in the assessment year 2007-08 and the other in the assessment year 2008-09 – Decided in favour of assessee. Octroi incentive - Revenue receipt or not – Held that:- The assessee has received octroi incentive as per the "package scheme of incentive" declared by the Government of Maharashtra - Following the principle laid down by Hon ble Supreme Court in Ponni Sugar and Chemicals Ltd. - The purpose test for which subsidy is given has to be applied for deciding the issue - If the object of the subsidy is to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy is on capital account and if the subsidy claimed is to enable the assessee to run the business more profitably then the receipt is on the revenue account - This fundamental principle has not been examined either by the Assessing Officer or by the Tribunal - The matter should be restored back to the file of the Assessing Officer to consider the scheme and the objects for which such incentive was given and to decide the issue in view of the principle laid down. Sale proceeds of R&D assets - Held that:- Following Pruthvi Brokers & Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] - Appellate authorities can accept the new claims that were not made before the AO - An assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised - They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter - The claim of the assessee is allowed subject to verification of the evidence filed by the assessee before the Assessing Officer - Decided in favour of assessee. Sub-letting of the property – Held that:- The income from letting out the property to Ridge Business Centre has been assessed as business income in earlier years - When the income which has been derived from stock-in-trade and has been accepted as business income, then the computation has to be made under section 28 and not under section 23 - The assessee has duly shown the income received / accrued from Ridge Business Centre as business income, then any further rent realized by Ridge Business Centre form the third party cannot be said to have been earned / received or accrued to the assessee company - No further income can be attributed to the as business income and not from the income from house property – Decided in favour of assessee. Deduction under section 80IC – Held that:- Following assessee’s own case for earlier years - The Assessing Officer was directed by the Tribunal to quantify the loss for the year under consideration and give clear cut findings as to whether the unit at Haridwar was set up in January 2006 or not - Partly allowed for statistical purposes.

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• 2013 (12) TMI 138
  Validity of order u/s 263 – Enhanced compensation - Held that:- Following CIT Vs Prem Singh [2010 (12) TMI 460 - PUNJAB AND HARYANA HIGH COURT] - Whenever the possession of the land has been taken before 6.1.1994, then such land is to be treated as agricultural land - Enhanced compensation could not be brought to taxation – The reading of the assessment order passed u/s 143(3) read with section 147 on 26.12.2008, shows that proceedings were kept pending because the assessee was directed to file the intimation regarding outcome of the decision regarding compensation before the Additional Session Judge, Panchkula - Compensation of the land belonging to the assessee was taken on 17.6.1992 - Before issue of Notification No. 9447/F.No. 163/3/87 dated 6.1.1994, therefore, enhanced compensation on the same is not taxable - Interest u/s 28 of the Land Acquisition Act was also part of the compensation – Following the decision of Hon'ble Apex Court in the case of CIT v G.M. Mittal Stainless Steel P. Ltd [2002 (12) TMI 13 - SUPREME Court] - Once the Assessing Officer has followed a decision of jurisdictional High Court , then there was no jurisdiction to revise such assessment order. The power of the Commissioner under section 263 had to be exercised on the basis of the material that was available to him when he exercised the power - The satisfaction of the Commissioner was, therefore, not based on material either legal or factual, which alone would give him the jurisdiction to take action under section 263 – Decided in favour of assessee.

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• 2013 (12) TMI 137
  Freight payment – Tax at source not deducted - Held that:- The risk assumed by assessee cannot be said to have been transferred to lorry owner and if there is no transfer of risk, the lorry owner cannot be said to have executed any part of contract - As per the provisions of section 194C the sub contractor is a person who carries out the whole or any part of the work undertaken by the assessee - Lorry owner was not involved in carrying out any part of the contract undertaken by the assessee spending time, money and energy etc. by taking the risks associated with main contract work - In the absence of above said characteristic attached with sub contract the payment made to lorry owner stands at par with payments made towards salary, rent etc. - The payments made for hired vehicle was a sub contract payment is not correct and not based on relevant facts and circumstances – The assessee was not liable to deduct tax at source as per the provisions of section 194C of the Act - Decided in favour of assessee.

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• 2013 (12) TMI 136
  The TPO has taken wrong segment of comparable company (Crisil Ltd) and in fact the correct segment should have been "research and information services - The TPO in his show cause notice has also taken this particular segment information which disclosed the operating margin at 9.20% - The learned Commissioner (Appeals) has rightly appreciated the information and has held that the TPO has taken a wrong segment for the purpose of comparing the margins and if the correct segment is taken into consideration, then its operating margin can be considered as comparable - The segmental information of Crisil Ltd. has rightly been included in the set of comparables for the purpose of comparability analysis by the learned Commissioner (Appeals) - As per the proviso to section 92C(2) - Such a benefit cannot be given in view of the retrospective amendment by insertion of sub -section 2A in section 92C - In any case, +/-5% is not a standard deduction which is to be given on the arithmetic mean - When the variation between the arm's length price so determined and the price at which internal transaction has actually been undertaken does not exceeds 5%, than only the benefit of tolerance range of +/-5% is to be given – The CIT(A) was incorrect on this view – Partly allowed in favour of Revenue - Decided in favour of assessee. Leased line charges, V-sat charges – Held that:- Following Kotak Securities Ltd. v/s ADIT, [2009] 25 SOT 440 [2008 (8) TMI 592 - ITAT MUMBAI] - V-SAT charges and transaction charges cannot be held to be rendering of technical services and, accordingly, cannot be considered to be covered under section 194J - The TDS is not required on the payment of V-SAT charges and lease line charges – Decided against Revenue. Interest paid to SEBI – Held that:- Following ACIT v/s Bulls and Bears Portfolios Ltd. [2011 (1) TMI 1056 - ITAT DELHI] 48 SOT 0527 - The interest paid to the SEBI for registration fees is a fee which is allowable as deduction in terms of the provisions of section 43B and would be allowable when such an interest is paid as per the SEBI (Interest Liability Scheme) 2004 – Decided against Revenue. Penalty to stock exchange – Held that:- Following assessee's own case for the assessment year 2000-01 - The payments are in the nature of processing fees for bad/short delivery, wrong claim for the corporate benefit, late reporting delayed settlement of IT trades, margin shortage charges etc - The charges are computed based on the penalty points calculated based on default and find their mention in the statement issued by NSCCL as processing charges, the charges so levied as penalty is found to be compensatory in nature - Such penalty payment has been held to be compensatory in nature – The decision of CIT(A) is justified and confirmed – Decided against Revenue. Securities transaction tax – Held that:- The appellant has deducted higher amount of STT than it was required to deduct from its FII client - The excess amount so retained by the appellant has been treated by the appellant as his income in the subsequent i.e. A.Y. 08-09. Such treatment of excess deduction in the A.Y. 08-09, clearly gives the nature of such deductions as income - Such excess deduction done by the appellant cannot be considered to be as per the prescribed charging of SIT and as such if the amount is not refunded back to the clients from whom such deduction is made, then the same should be offered to tax in the year when such excess deduction has taken place - STT payable for the assessment years 2005-06 and 2006-07 have been offered for tax for the subsequent years – The issue was restored for fresh decision.

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• 2013 (12) TMI 135
  Assessment u/s 153A - Sub-Contract payments – Books of accounts not maintained - Held that:- The assessee was reopened under section 153A - In all the four years, the assessments have been completed u/s 143(3) after examining the books of account - The issues have been crystallized in the respective assessment years, no appeals were filed in those cases, therefore, the orders would not get abated – Following All Cargo Global Logistics Ltd. Vs. DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] - The assessments that are pending, the AO retains original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of these assessment years separately - The assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means, a) books of account, other documents found in the course of search which were not produced in the course of original assessment, and b) undisclosed income or property disclosure in the course of search - The AO cannot make any other regular additions as done in the original assessment in the course of reassessment u/s 153A unless there is fresh material found during the course of search relevant to the assessment years under consideration – There was no reference to any specific seized document which has a direct relevance for the year under consideration which means that there was no incriminating material against the appellant for this assessment year that can prompt the AO to re-agitate the issues which was otherwise settled in the regular assessment completed earlier - Decided against Revenue.

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• 2013 (12) TMI 134
  Contract works - estimation of income - Held that:- Following Ferro Concrete Construction (India) (P) Ltd. V/s. CIT [2005 (1) TMI 93 - MADHYA PRADESH High Court] - It is incidental to the business activity, any income earned by sale of empty bags/containers/drums cannot be said to be an income from other sources but it is an income from business activity of the assessee - Therefore, The income from metal account, miscellaneous income or interest on fixed deposits are relatable to the business of contracts carried on by the assessee - However, interest income earned on fixed deposits is chargeable to tax as income from other sources - Also the income should be assesseed by applying net profit rate of 8% to this income - Partly allowed in favour of assessee. Disallowance u/s 40(a)(ia) - Held that:- Following CIT V/.s. Banwari Lal Banshidhar [1997 (5) TMI 37 - ALLAHABAD High Court] - No disallowance could be made in view of the provisions of Section 40A(3) read with rule 6DD(j) of the Income-tax Rules, 1962, as no deduction was allowed to and claimed by the assessee - When the gross profit rate was applied, that would take care of everything and there was no need for the Assessing Officer to make scrutiny of the amount incurred on the purchases made by the assessee - Decided against Revenue.

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• 2013 (12) TMI 133
  Modus operandi - Providing accomodation entries - Held that:- The assessee has indulged in circular and multiple transactions, by layering through floatation of more than 90 companies - Huge amount of cash has been deposited and transferred to and from assessee's bank account - Tax can be levied only on peak unexplained credit - It is impossible to arrive at the correct assessable amount - The burden of proof is on assessee to prove the chain of transaction, then only correct income can be computed - The isue was set aside for fresh examination.

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• 2013 (12) TMI 132
  Loans taken - Held that:- The AO should have made proper inquiries to satisfy himself regarding the genuineness of the creditors etc - The AO should have asked the assessee to furnish the required details such as PAN number etc. of the creditors and secondly he himself could have summoned the records and in case of need the creditors by issuing summons under section 131 - The issue was restored for fresh decision. Interest on laons taken - Held that:- The assessee had submitted the necessary details to the AO regarding the interest payment which in fact was relating to the loans taken in the past and not during the relevant year - Decided against Revenue. Cash deposit - Held that:- The Bank account of the assesee was forming the part of the regular books of the account maintained by the assessee - The cash deposits were sufficiently explained and also tallied with the books of accounts of the assessee - Decided against Revenue.

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• 2013 (12) TMI 131
  Validity of assessment u/s 153A – Held that:- Assessing Officer has issued a notice u/s 142(1) read with section 153A - No separate notice prescribed in the Income-tax Rule u/s 153A - Notice issued u/s 142(1) read with section 153A of the Act was sufficient to comply the legal requirement of notice to be issued u/s 153A of the Act - The assessee himself has replied to the Assessing Officer that the return filed on earlier date may be taken as return filed in response to the notice u/s 153A – Decided against assessee. Non-issuance of notice u/s 143(2) – Held that:- The Assessing Officer issued notice u/s 142(1) of the Income-tax Act, 1961 and notice u/s 143(2) - A questionnaire was issued for the A. Y. 2006-07, copy of the handwritten questionnaire was also placed on records wherein 13 details were asked by the Assessing Officer - The Assessing Officer has served on the assessee a notice requiring him to produce evidences on which the assessee relied in support of the return – Following Ashok Chaddha vs. ITO [2011 (7) TMI 252 - Delhi High Court] - There is no specific provision in the Act requiring the assessment made under s. 153A to be after issue of notice under s. 143(2) - The two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him – Decided against assessee. Share application money – Held that:- The assessee submitted the related documents of the investors to the Assessing Officer to prove the genuineness of the amount received as application money - The Assessing Officer has not raised any doubt for the authenticity of the above details and documents filed by the assessee - The Assessing Officer has also not made any enquiry for issuing notice u/s 133(6) or summons u/s 131 - No incriminating documents were found and seized during the search operation – Following CIT vs. Orissa Corporation [1986 (3) TMI 3 - SUPREME Court] - The evidences submitted by the assessee cannot be thrown out without any enquiry specially when there is no material to implicate the assessee in a collusive arrangement - The details submitted show that the investors companies were sister concerns of the assessee and having the same address and common directors - The Assessing Officer has not pointed out any specific defects in the details submitted by the assessee – Decided against Revenue. Unsecured loans received from directors – Held that:- The assessee submitted the required details including the address of the Directors and creditors and also the ledger accounts of these persons - The copy of the bank statement from where the money was received was also furnished, the acknowledgement of return of income, computation of income and PAN of both the Directors/creditors were also submitted - The Assessing Officer has not made any further enquiry in this regard and has not pointed out any defect in the documents submitted - The transactions were carried out through banking channels and necessary confirmations were also filed – The transactions were treated to be genuine - No incriminating document found and seized during the search operation with regard to the loans taken from the directors/creditors – Decided against Revenue.

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• 2013 (12) TMI 130
  Accomodation entries – Held that:- The assessee and his brother are engaged in providing hawala entries to the Naphtha dealers against the cash which was being deposited in the bank account and after deducting their commission income the amount was released to the dealers in the garb of sales - The relevant document were filed before the CIT(A) which show that the assessee’s bank account was operated by Shri Naresh Vora the brother of the assessee - The deposit found in the assessee’s bank account has been considered in the assessment of assessee’s brother Shri Naresh Vora and an addition @ 4% on account of unaccounted commission has been made in the hand of the brother of the assessee - There cannot be a double addition of the same amount when it has already been made in the hand of the assessee’s brother - This fact that the deposit of cash in the bank account in the case of the assessee has already been considered for addition on account of commission income in the hand of the assessee’s brother Shri Naresh Vora is required to be verified at the level of the Assessing Officer – The issue was restored for fresh adjudication. Cash deposits out of sale of chemicals – Held that:- The CIT(A) has confirmed the addition made by the AO on the ground that no document/material was available on record to support the fact of cash deposits being already included in the aggregate of cash deposits as computed in the hand of Shri Naresh Vora - Neither the AO nor the CIT(A) has given any finding on the issue that out of the total cash deposit in the bank certain amount is regarding the sales made by the assessee during the year on which the net profit has been declared in the return of income – The issue was restored for fresh decision. Loan received - Addition u/s 68 – Held that:- No fresh loan taken by the assessee during the current year under consideration - The CIT(A) has compared the unsecured loan as on 31.3.1993 to 31.3.1995 - The outstanding balance of unsecured loan as on 31.3.1994 has not been taken into account so as to compare with the unsecured loan as on 31.3.1995 in order to find out any increase of unsecured loan during the year –It would be justified to verify the amount of fresh loan taken during the year under consideration - The issue was restored for fresh decision.

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• 2013 (12) TMI 129
  Interest on custom duty - accrual of expenses - Held that:- The accounts have been prpared on a non going concern basis and it is also mentioned that the management had no intention to continue the business in the unforeseeable future - The assessee had decided to close down the operation as the project was not viable - Therefore,only the expenses required for maintaining the corporate identity of the company could be allowed - The interest on custom duty has the same nature as custom duty and therefore it could be allowed on payment basis - The details filed on record show that the payment had not been made this year but in the immediate preceding year and in the subsequent year - Decided against assessee. Technology transfer fee - Held that:- The technical collaboration agreement had been entered into for starting a nursery for commercial production of bivoltine silk cocoons - The project ultimately became unviable and never started - Any expenditure incurred in connection with the project such as technical fees etc, has been considered as capital expenditure by CIT(A). Other expenses which are quite insignificant have also been rightly disallowed as the business has discontinued - Decided against assessee.

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• 2013 (12) TMI 128
  Renting of immovable property – Business income or Income form property – Held that:- The assessee company has leased out its entire business premises for the use of the holding company - Following Shambhu Investment (P.) Ltd. [2003 (1) TMI 99 - SUPREME Court] - Merely because income is attached to any immovable property cannot be the sole factor for assessment of such income as income from property; what has to be seen is what was the primary object of the assessee while exploiting the property – If main intention is for letting out the property, or any part thereof, the same must be considered as rental income or income from property - In case the main intention is to exploit the immovable property by way of complex commercial activities, it must be held as business income – The assessee has not exploited its business asset for commercial purposes - The shed was never used for its business purpose and immediately after construction, the shed was given to its holding company - Accordingly, for claiming depreciation, the assessee has shown the rental income as business income as there is no other expenses claimed by the assessee in its profit and loss account - The factory shed was constructed by the funds of the holding company and was used by the holding company - The business asset created by the assessee was only for the purpose of holding company and not use of assessee - The holding company was the owner of the shed as the assessee is a hundred percent subsidiary of the holding company – Decided against assessee. Rental income – Held that:- The shed owned by the assessee was a business asset and in case of business asset, provisions of Section 23(1) are not applicable - No notional income can be computed in view of the provision of Section 23(1) – Decided in favour of assessee.

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• 2013 (12) TMI 127
  Reimbursement of expenses - Tax not deducted at source - Held that:- The payment was made by the assessee company to other towards reimbursement of expenses actually incurred without any mark-up or element of profit - The payment was not towards service charges or income of that company - Decided in favour of assessee. Rent Expenses reimbursed - Held that:- The disallowance u/s 40(a)(ia) has already been deleted in this aspect therefore the issue should be decided on that basis - The issue was restored for fresh decision. Prior period expenses - payment of bonus - Held that:- The assessee could not establish that the liability on account of payment of bonus pertaining to A.Y. 2007-08 was crystalised during the year under consideration neither before CIT(A) nor before the Tribunal - Decided against assessee. Expense relating to A.Y. 2008-09 - Disallowed in A.Y. 2009-10 - Held that:- The expenses could be allowed in the A.Y. 2008-09 as pertains to this A.^Y. only - Decided in favour of assessee.

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• 2013 (12) TMI 126
  Transfer Pricing Adjustment – Held that:- There is no defect in the audited segmental accounts submitted by the assessee - Its entire work depends on the man hours and it is maintaining a system known as TMA which generates monthly reports for the purpose of tracking man hours. The assessee has given the details regarding the man hours utilized by it for the purpose of each project and on the basis of such system the assessee has prepared the segmental accounts - Ceratin expenses such as nature of job work; consulting fee and service charge; staff welfare; rent; rate and taxes; repairs; insurance postal and telegraph; traveling and conveyance; electricity water and gas cannot be said to be non-allocable on the basis of man hours relating to non bidding activity of EPC Division - The difference between ALP determined by the Ld. TPO in respect of AE transactions and ALP charged by the assessee is less than 5% - Decided in favour of assessee. Guarantee Commission – Held that:- The assessee had issued counter guarantee to its Associated enterprise and had received guarantee commission @ 1.2% per annum - TPO applied 3% guarantee commission - The assessee has not submitted any contradictory evidence to suggest that the rate applied by Ld. TPO at 3% was not appropriate - The evidence submitted by the assessee relates to Bank Guarantee which is less than 1.00 crore - The said evidence cannot be taken as comparable instance – Decided against assessee.

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• 2013 (12) TMI 125
  Premature sales tax payment - Held that:- The assessee has availed the benefit of Sales tax Deferral benefit scheme - The assessee prepaid a part of the said liability at it's net present value (NPV) - The assessee opted for repayment of the sales tax liability before the commencement of the scheduled repayment period on the NPV - Following Sulzer India Ltd. [2010 (11) TMI 728 - ITAT, MUMBAI] - The benefit so gained by the assessee cannot be termed as remission/cessation of liability and consequently no benefit has arisen to the assessee in terms of section 41(1)(a) - Decided in favour of assessee. Premature sales tax payment - Included or excluded form book profits - Held that:- Following Sulzer India Ltd. [2010 (11) TMI 728 - ITAT, MUMBAI] - Amount paid by the eligible unit as per the formula on the NPV made by SICOM Ltd. and if the assessee get the benefit, the said benefit is in the nature of the capital receipt - this issue in respect of the computation of the book profit u/s. 115JB of the Act has to be decided against the assessee - Decided in favor of revenue.

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• 2013 (12) TMI 124
  Payment to sub-contractor – Tax not deducted at source – Held that:- The assessee has booked advertisements for various clients – The assessee was not an accredited agent, therefore, the advertisement was routed through M/s Ram Advertising Service – Provisions of TDS would apply when a client makes payment to an advertisement agency - It is a case of one advertising agency getting work done from the other advertising agency i.e. a sub-contractor - When an advertisement is booked, some part of the work may be done by one agency and some part by another agency - In the absence of any evidence to show that M/s Ram Advertising Services has not provided any services, the only conclusion possible is that such agency had provided some services, therefore, the provisions of section 194C(2) are clearly applicable - There is no evidence to show that assessee is not an accredited agency and only M/s Ram Advertising Service is the accredited agency – Decided against assessee. Staff refreshment and travelling & conveyance – Held that:- No details have been filed by the assessee to examine whether any personal expenditure can be said to have been incurred – Partly allowed in favour of assessee.

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• 2013 (12) TMI 123
  Cash deposit in bank account - Held that:- The assessee failed to produce the books of account nor give any explanation vis-a-vis the source of cash deposits in the bank account. In the absence of any explanation or any evidence being produced by the assessee, The onus cast upon the assessee was not discharged - The assessee failed to give the list of such persons who had advanced the said cash to the assessee - The assessee even failed to bring on record any evidence to prove its stand that it was the amount received from such persons who were his clients - The assessee failed to file any confirmation in respect of the said cash credits nor any of the persons were produced for examination before the Assessing Officer, though specific direction in this regard was given by the Assessing Officer within the course of recording of statement of the assessee, during assessment proceedings - Decided against assessee.

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• 2013 (12) TMI 122
  Reassessment u/s 147 - Escaped Income - Held that:- The assessee has earned profit on sale of shares which is exempt under section 10(38) which was the part of profit and loss account - The failed to mention this amount in the schedule of exempted income - This cannot be the income escaped from assessment - This was claimed in the return of income, but, there was only a mistake in the code under which the claim was made - Assessee had not made any claim unconnected with the item of income alleged to have been concealed by it, nor it had raised a fresh claim genetically different from one which was made in the return of income - Exemption under Section 10(38) is a statutory allowance for long term capital gains arising out of sale of listed equity shares on which securities transaction tax have been paid - It is not a case of claim for deduction by way of expenditure - Assessee was entitled to such claim and it could not have been denied for a technical reason that the serial number against which the claim was made in the return of income was incorrect - None of the authorities had verified whether the amount effectively represented sale proceeds of listed securities - The issue was remitted back to the file of the Assessing Officer for fresh decision.

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• Customs

• 2013 (12) TMI 121
  Demand of differential duty - Waiver of pre deposit - Under valuation of goods procured - Held that:- asking to deposit entire amount of duty, interest and penalty and also the penalties imposed on other partners by first appellate authority to hear the appeals, seems to be harsh. In our view, the appellant should be put to some condition to hear and dispose the appeal by first appellate authority as they have not made the prima facie case for complete waiver of the amounts involved - Stay granted partly.

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• 2013 (12) TMI 120
  Imposition of redemption fine and penalty - Obtaining of pre-shipment inspection certificate in respect of the impugned scrap from the designated agencies - Held that:- appellants have committed a breach of the Foreign Trade Regulations inasmuch as they have not obtained the necessary certificates from the listed agencies. However, there are two factors which call for leniency in respect of these two cases. Firstly, the impugned cargo on inspection was found not to contain any explosives or other objectionable material and secondly, M/s. Bureau Veritas, Miami from whom the pre-shipment certificate has been obtained have been notified as the authorised agencies for many other countries, such as Singapore, Philippines, Oman, Mauritius and several other countries - Penalty reduced - Decided partly in favour of Appellants.

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• 2013 (12) TMI 119
  Sub letting of license - Payment charged for sub letting of license - Violation of Regulation of 12 of CHALR, 2004 - Held that:- if the Customs clearance has been done through intermediary and business was got through intermediary, the same is not barred by the provisions of CHALR, 2004 and it cannot be stated that the appellant has sub-let or transferred his licence - mere fact of bills raised on the intermediary cannot be held against the CHA firm to prove that the CHA licence was sub-let or transferred. Violation of Regulation 13(a) - Revocation of license - Held that:- Obtaining an authorisation from the importer does not mean that the same should be obtained directly; so long as the concerned import documents were signed by the importer, it amounts to authorisation by the importer and, therefore, it cannot be said that there has been a violation of Regulation 13(a). As regards the last charge, i.e. the appellant did not transact the business through his employee but through Shri Sunil Chitnis thereby violating the provisions of Regulation 13(b) - Both Shri Sunil Chitnis and Shri Ashish Patekar, authorised signatory of the appellant CHA, has admitted that it was Shri Sunil Chitnis, who undertook the clearance work on behalf of the CHA. Mere signing of the documents does not prove that the clearances were undertaken by the appellant CHA - Regulation 13(b) has been violated by employing Shri Sunil Chitnis for doing the clearance work of M/s. Advanced Micronics Devices Ltd. Revocation is an extreme step and a harsh punishment, which is not warranted for violation of Regulation 13(b). Accordingly, we are of the view that forfeiture of security tendered by the appellant CHA is sufficient punishment and revocation is not warranted - Decided partly in favour of Appellant.

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• 2013 (12) TMI 118
  Classification of Xanthan Gum - Classification under Heading No. 39.13 or Heading No. 13.01 - Import of consignment of Xanthan Gum USP 80 Mesh - Held that:- even though the product might have natural origin, it has been subjected to various processes and the product no longer retains the characteristics of a natural secretion. Heading 1301 covers Lac, natural gum, resins, resin gum, and oleo resins. The said heading does not cover products which have been processed further by using various processes. The classification of the product has also been examined by the US customs and it has been noted in the classification ruling that “Xanthan Gum is obtained by microbial fermentation from the Xanthomonas campestris organism. At the end of the fermentation process, the Xanthium Gum is recovered from precipitation in isopropyl alcohol, then dried and milled.” The said ruling further notes that CTH 13.01 covers natural gums, resins, gum resins, oleoresins and balsams. They may be crude, washed, purified, bleached, crushed or powdered, but excludes such items that have been subjected to more complicated processes such as treatment with water under pressure, treatment with mineral acids and treatment with heat. In other words, when the natural gum is further processed, it falls outside the CTH 13.01. Since the product is a natural polymer, the US customs has ruled that it merits classification under CTH 3913.90 - Therefore, the appropriate classification for the product is 3913 which covers natural polym - Therefore, decided against Revenue.

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• 2013 (12) TMI 117
  Penalty imposed under Section 112 (a) - Penalty for improper importation of goods - Interpretation of the words that a person is liable "to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees whichever is greater" - Held that:- When the words used are "not exceeding a particular amount", it does not mean that the amount so specified becomes the minimum penalty to be imposed - Even otherwise, considering the nature of dispute and the stakes involved it is not appropriate for the department to have carried an appeal against the order of the original authority to the Commissioner (Appeals) and then to the Tribunal as well - Decided against Revenue.

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• Corporate Laws

• 2013 (12) TMI 116
  Infringement of registered trademark - Passing off and delivery up - Transfer of domain name Rendition of accounts – Held that:- No written statements have been filed on behalf of the defendants and no reply was given - the averments of the plaintiff and the documents filed by them are uncontroverted - there is no reason not to accept the same - The plaintiffs have filed a host of documents to establish their case - The plaintiffs have in excess of a hundred domain names worldwide, it is evident that the use of the domain name www.amexgroup.in by the defendants is likely to cause confusion among consumers and members of the trade - Relying upon Yahoo! Inc Vs. Akash Arora & Anr [1999 (2) TMI 630 - DELHI HIGH COURT]. The plaintiffs have been vigilant about protecting and defending their intellectual property rights, as they have placed on record the proceedings in the various other suits filed by the plaintiffs wherein the Courts, as well as arbitration forums, have protected the rights of the plaintiffs - The Plaintiffs and the Defendants are operating in the same sphere of activity i.e of financial services - A printout of the defendant’s website reveals that the defendants offer financial and investment services which are identical to the services for which the plaintiffs’ marks are registered - the plaintiffs have successfully been able to establish that the defendants are violating the statutory rights of the plaintiffs’ registered trademark under Section 29 of the Act and are also passing off their services as those of the plaintiffs causing deception and confusion. Punitive damages are founded on the philosophy of corrective justice - the purpose involved is to discourage parties from indulging in acts of deception - The Plaintiffs are also entitled to the damages of Rs 5 lakhs in addition to costs of the suit – Decided in favour of Petitioner.

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• Service Tax

• 2013 (12) TMI 158
  Condonation of delay - Delay occurred due to heavy work load of the dealing person - Held that:- It is apparent from the affidavit, that on 24.9.2012 the demand draft was prepared and grounds of appeal were put up for approval before the General Manager who approved on 5.10.2012. It is not clear as to why the appeal was not filed thereafter. We are not satisfied with the reason that after preparation of the appeal why the said learned counsel sought for clarification on 12.10.2012 and in the meantime the Accounts Officer could not provide the clarification as he was admitted in Apollo Hospital on 29.9.2012. We are not satisfied with the reason as stated in the affidavit. It is seen that despite the preparation of appeal and approved by the General Manager on 5.10.2012, the appeal was filed only on 11.1.2013. It is a clear case of gross negligence and inaction on the part of the appellant - Condonation denied.

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• 2013 (12) TMI 157
  Rejection of refund claim - Notification No. 5/2006 dated 14.3.2006 - Input invoices were not raised in period January to March, 2012 - Held that:- input invoices are dated prior to the period of refund claim and the date of payment made to the input service provider is also prior to the claim of the refund - refund of credit can be allowed of the past period in subsequent quarters and there is no such bar in the Notification N0. 5/2006 - there is no bar in allowing the refund of the Cenvat credit pertaining to the period prior to refund period claimed by the appellant - these invoices are not in the name of the appellant and in fact are in the name of the M/s Niranjan Seshadri. I find as these invoices are not in the name of the appellant unit, the lower authority has rightly denied the refund in respect of the Cenvat credit in respect of these invoices - Following decision of CCE Vs. Chamundi Textiles (Silk Mills) Ltd. [2011 (3) TMI 193 - CESTAT, BANGALORE] - Appeal partly allowed.

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• 2013 (12) TMI 156
  Refund of accumulated Cenvat credit - Rule 5 of the Cenvat Credit Rules, 2004 - Notification No. 5/2006-CE - Restriction on availment of Cenvat credit - Availability of Cenvat credit of service tax paid by the service provider under supplementary invoices - Restrospective or prospective - Held that:- Cenvat credit availed can be availed by a manufacturer or provider of output service on the basis of challans evidencing the payment of service tax by a person liable to pay the service tax or an invoice, bill or challan issued by the provider of input services or an invoice, bill or challan issued by input service distributor under Rule 4A of Service Tax Rules, 1994 - supplementary invoice evidencing payment of additional duty amount is not to be treated on a different footing vis-a-vis the original invoice evidencing original payment of duty as both these documents were issued under the same provisions of law. Moreover in the Service Tax Rules, 1994 there is provision only for issue of invoice by the service provider or input service distributor and, as such, the Service Tax Rules also do not mention the issue of supplementary invoices when additional service tax is required to be paid due to any reason. In view of this, the term ‘invoice’ mentioned in Clause (f) and (g) of Rule 9 (1) of Cenvat Credit Rules, 2004 has to be treated including supplementary invoice, as during the period of dispute, with regard to service tax payment, the Rule 9 (1) did not make any distinction between ‘invoice’ and ‘supplementary invoice’. Restriction during the period prior to 1/4/11 was only in respect of supply of inputs and capital goods as provided in clause (b) of Rule 9 (1) and such restriction in supply of services was introduced only w.e.f. 1/4/11 by inserting clause (bb) to Rule 9 (1). Since Rule 9 (1) (bb) does not has retrospective effect, the provisions of the same cannot be applied during the period prior to 1/4/11. I find that same view has been taken by the Division Bench in the cases of M/s JSW Steel Ltd. Salem Works vs. CCE, Salem reported in [2008 (9) TMI 74 - CESTAT, CHENNAI], Chaphekar Engg. Pvt. Ltd. vs. CCE, Pune-I [2013 (11) TMI 1362 - CESTAT MUMBAI] and Secure Meters Ltd. vs. CCE, Jaipur -II reported in [2010 (1) TMI 284 - CESTAT, NEW DELHI]. Moreover, when a restriction on availment of Cenvat credit in respect of input services has been introduced from a particular date by inserting a provision and that provision is not retrospective, the same cannot be applied with retrospective effect - Decided in favour of assessee.

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• 2013 (12) TMI 155
  Demand of service tax - Banking and Financial Services - Held that:- appellant has now placed the Chartered Accountant's certificate showing that there is excess payment of service tax of Rs. 23.77 lakhs for the year 2007-08. In our considered view, the appellant should be given an opportunity to demonstrate payments before the original authority in respect of the excess payment as stated in the application. Accordingly, we set aside the impugned orders and remand the matter to the original authority to decide afresh after considering the payment insofar as excess payment of service tax of Rs. 23.77 lakhs and other issues - Decided in favour of assessee by way of remand.

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• 2013 (12) TMI 154
  Waiver of pre deposit - Composite contract for Sale and service - Benefit of Notification No.19/2003-ST and Notification No.1/2006-ST - Section 65(105)(39a) - sale, supply and installation of Computers and Software - Held that:- prima facie, explicate the principle that the value of a transaction which is liable to or has been assessed to levy of sales tax must be considered outside the scope of the taxable value for the purpose of levy of Service Tax, under the Act. This apart, the process followed by the adjudicating authority in suo motu applying the benefits of exemptions Notifications and failing to assess the taxable value of the services provided or in analyzing the validity of the Petitioner’s claim that only 2% of the value of the contracts was attributable to the taxable service component, appears fallacious - Stay granted.

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• 2013 (12) TMI 153
  Waiver of pre deposit - Computer Coaching and Training Services - Benefit of Notification No.10/2003-ST - Held that:- exemption under Notification No.12/03-ST cannot be restricted to sale of standard textbooks while determining value of Commercial Coaching Services. We find that Revenue has not made out any case that the value of materials sold is far in excess of the cost of the materials and the appellant has shifted the value of services to the value of materials. Therefore, at this stage, we are of the view that the amount already deposited is sufficient for admission of appeal and there shall be stay on collection of balance dues arising from the impugned order during the pendency of the appeal - Stay granted.

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• 2013 (12) TMI 152
  Failure to file return - Port Service - Willful suppression of facts with intent to evade payment of tax - Held that:- adjudicating authority has clearly recorded that the petitioner was fully aware of its liability towards discharge of tax, that it had collected the entire tax from the client M/s. Kolkata Port Trust and had retained the amount with itself without remitting it to the Government; that only after detection of the evasion, some payments were made; that the statutory ST-3 Returns were never filed; and that all these circumstances cumulatively legitimate the inference of wilful suppression and contravention of the provisions of the Act with a view to evade remittance of tax - no infirmity whatsoever with the adjudication order, warranting grant of waiver of pre-deposit. On this premise,we reject the application for waiver and direct the petitioner/appellant to remit the entire adjudicated liability to the credit of Revenue within four weeks from today. In default, the appeal stands rejected for failure of pre-deposit, under the provisions of Section 35F of Central Excise Act, 1944 as applicable to the provisions of Finance Act, 1994 - stay denied.

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• 2013 (12) TMI 151
  Demand of service tax - Collection of maintenance charges - Held that:- adjudicating authority had already accepted that the applicant is eligible for the CENVAT credit against the confirmed demand. The learned counsel submits that the deductions claimed on electricity and water charges before the Commissioner was not considered by the Commissioner. We agree with the submission of the learned AR insofar as the eligibility of CENVAT credit was not verified by the jurisdictional authority. We direct the applicant to deposit 50% of the tax as demanded and CENVAT credit may be adjusted - Upon such deposit, predeposit of the balance dues stands waived and recovery thereof stayed during the pendency of the appeal - Partial stay granted.

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• 2013 (12) TMI 150
  Demand of service tax - Import of goods by air - Demand confirmed on transportation of goods by air - Held that:- applicant is not direct recipient of service from the foreign based service provider and therefore no tax liability can be fastened on them in terms of Section 66A of the Finance Act, 1994 - Stay granted.

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• 2013 (12) TMI 149
  Eligibility of CENVAT credit - Testing and Analyses Service - Receipt of new drugs from foreign based companies for testing and analyzing on human beings/volunteers - Held that:- The testing of new drugs has been done in India with the help of volunteers and reports are being submitted to foreign based drugs companies. Prima facie, we do not find any service being rendered to the volunteers in connection with the testing of the drugs. The service is contained in the form of test reports which have been submitted to foreign based drugs companies. Further, the alternative plea of the appellant that the service of testing and analysis relating to new drugs are exempted is also relevant - Following decision of Commissioner of Service Tax, Ahmedabad v. B.A. Research India Pvt. Ltd. [2009 (11) TMI 213 - CESTAT, AHMEDABAD] - Stay granted.

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• 2013 (12) TMI 148
  Stay application - CENVAT Credit - Group Insurance service - Held that:- Prima facie, insurance of employees is an input service necessary for maintenance of work force which manufactures final product. Therefore, I grant waiver of pre-deposit of duty amount and there shall be stay on collection of dues arising from the impugned order during pendency of the appeal - Following decision of CCE, Bangalore v Stanzen Toyotetsu India (P) Ltd [2011 (4) TMI 201 - KARNATAKA HIGH COURT ] - Stay granted.

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• 2013 (12) TMI 147
  Cenvat credit on input services - Credit availed for service tax paid on the insurance premium for covering the risk of the employees employed in the factory on contract basis - Held that:- they have statutory obligation to take insurance to care for persons working in the factory. Even if there is no statutory obligation, they have considered it to be in their business interest to do so. Services availed for such insurance can be prima facie considered to be an input service for manufacture - Stay granted.

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• 2013 (12) TMI 146
  Rectification of mistake - Restoration of appeal - Respondent contends that application is not maintainable as it seeks to rectify an alleged mistake in a Miscellaneous Order passed - Rectification in miscellaneous order or final order - Held that:- The present application, undisputedly, seeks rectification of what is said to be an ‘apparent mistake’ in a Miscellaneous Order passed by this Bench earlier. The application is not maintainable - Following decision of CCE, Mumbai v. Pleasantime Products [2009 (2) TMI 545 - CESTAT, MUMBAI] - Rectification denied.

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• Central Excise

• 2013 (12) TMI 115
  Availment of benefit of CENVAT Credit on capital goods - Depreciation u/s 32 of the Income Tax Act, 1961 – Documents not produced to adjudicatory authority - Waiver of Pre-deposit – Held that:- The Appellant have recently procured a Certificate from the Income Tax Authority, wherein it certified that the Appellant had not availed depreciation on the capital goods - the Certificate now produced had not been produced earlier before the Adjudicating Authority for scrutiny and consideration – the case is remitted back to the Adjudicating Authority to consider all issues afresh – Decided in favour of Assessee.

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• 2013 (12) TMI 114
  Inclusion of cost of pre delivery inspection (PDI) and free after sales services to assessable value of the vehicles sold - Held that:- Following M/s. Tata Motors Ltd. Versus Union of India & Others [2012 (9) TMI 244 - BOMBAY HIGH COURT] - As and when the car is removed out of the factory, Excise duty is payable - The assessable value has to be determined u/s 4(1)(a) of the central excise act as amended - the assesses and the dealers were not related to each other and the price was the sole consideration – Thus, the value to be taken up for the purposes of Excise duty is the transaction value. A dealer is required to carry out Pre Delivery Inspection as well as said services in regard to a car which is sold to a customer - a dealer is required to pay an amount to the assessee towards the cost of the car and a dealer cannot charge more than the amount specified by the assessee - The difference between the price so fixed by the assessee and the price paid by the dealer constitutes what is called as dealer’s margin - A dealer has to spend money to conduct PDI as well as render said services - the dealer is required to perform PDI as well as said services as a part of the dealer’s responsibility cast on him as per the dealership agreement. In all cases where the expenses incurred towards PDI and said services are solely borne by the dealer and the manufacturer have nothing to do with the said expenses then adding those expenses in the assessable value would be contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the Central excise Act - Revenue have not been able to place on record any material to show that the amount incurred towards PDI and said services can fall within the definition of the transaction value - Thus as per Section 4(3)(d) of the Central Excise Act, 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer – Decided against Revenue.

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• 2013 (12) TMI 113
  Denial of cenvat credit – No contrary evidence with the revenue to substantiate the claim - Assessee followed first in first out method for clearance of goods –– Held that:- The officers had visited and verified the stock for the purpose of availment of CENVAT credit - During such visit if they could not and did not verify whether there was any stock received from other than manufacturers and result was availment of CENVAT credit on the quantity declared, demand for CENVAT credit availed attributing a portion of the same to the traders cannot be sustained unless backed by investigation and evidence - in this case, the investigation conducted has strengthened the case of the appellants since in the statements the concerned representatives have stated that the appellants were following the practice of storing goods received from manufacturers and traders separately and using them separately and at the time when verification was conducted only raw materials received from manufacturers was taken into account - In the absence of any contrary evidence unearthed during investigation other than arithmetical calculations, the order cannot be sustained – Decided in favour of Assessee.

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• 2013 (12) TMI 112
  SSI Exemption - Clubbing of value of clearances under Notification No.9/2001 – Held that:- There was absence of investment by the Karta therein on behalf of the HUF - There was no investment of the fund by Mohali Chandigarh for day-today carrying on the business by two Mohali units except that there was sharing of infrastructure and using of common utilities as well as availing service of manpower - There is nothing on record to show that late Shri Avdesh Garg was controller of these two Mohali units making the proprietors thereof as well as partner of M/s Suchita Steels, Mohali dummy - Nothing is on record to show that late Avdesh Garg was the financial controller as well as beneficiary of the three units - In absence of inextricable link between Avdesh Garg showing his vested interest in Mohali units, so also no pecuniary interest of Chandigarh unit in two Mohali units was proved - the adjudication cannot be approved – Decided against Revenue.

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• 2013 (12) TMI 111
  Denial of capital goods credit - Norms of Pollution Control Board and direction of Ministry of Environment – Revenue was of the view that the plant which has reduced the sulphur content of the diesel is not a plant installed which should get capital goods credit – Held that:- There is nothing material found to hold that the sulphur recovery plant is not integrally connected plant with the DHDS plant - Revenue could not prove that there is no integral connection between DHDS plant and low sulphur recovery plant - The Sulphur Recovery Unit & Standby Sulphur Recovery Unit have to be treated as the capital goods used in the manufacture of marketable HSD meeting the ISI specifications and which is a dutiable final product – Decided in favour of Assessee.

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• 2013 (12) TMI 110
  Clandestine removal of goods – No evidence raised - Held that:- Following M/s Arch Phatmalabs Ltd., Vs CCE [2004 (12) TMI 188 - CESTAT, BANGALORE] - demand is not sustainable in the absence of evidence regarding receipt of inputs or manufacture of goods and removal - The Revenue has not advanced any evidence on record to show that clearances were effected in each invoices which are infact replica of original invoices being despatch invoice and proforma invoice - there is no other evidence reflecting upon the clearance of the final product or in respect of raw material and its utilization in the clandestine manufacturer of final product - Commissioner (Appeals) has rightly set aside the confirmation of demand made of clandestine removal which in turn are based upon the despatch invoices and proforma invoices which are nothing but replica of the original invoice – Decided against Revenue.

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• 2013 (12) TMI 109
  Remission of duty – Goods damaged by fire – determination of quantum of goods lost - Held that:- The adjudicating authority has correctly observed that as per records maintained by the assessees and as per report of the inspection which were given immediately after the fire loss is to the extent of around 39.580 MT - if the differential quantum of fabrics has not been destroyed by the fire and inasmuch as the same are not available also with the assessee, there is no explanation by the Revenue where said quantum has gone - There is no allegation of clandestine removal or evidence of the same - Decided against Revenue.

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• 2013 (12) TMI 108
  Bailing slips recovered from third party – Sufficient proof for clandestine removal or not – Held that:- Apart from the bailing slips, there is no evidence on record, corroborating the allegation of the Revenue- the assessee admitted having written 56 bailing slips but clarified that the same were in relation to the goods traded by him in his personal capacity - there is nothing on the said bailing slips connecting them to the appellant - There is also virtually no other evidence to reflect upon the clandestine manufacture and clearance by the appellant - allegation of clandestine removal is required to be arrived at on the basis of sufficient and positive evidence and the onus to produce such allegation is on the Revenue - The allegations cannot be sustained on the basis of documents recovered from a third person, without any corroboration in material particular’s from independent source - There was no justification for confirmation of demand against the appellant based upon such documents produced by a third person and having no nexus or link with the appellant – order set aside – Decided in favour of Assessee.

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• 2013 (12) TMI 107
  Entitlement for benefit of Notification No. 4/97 and subsequent Notification No. 5/98 – Held that:- There is no such condition of producing end use certificates in the notification, which grants concessional rate of duty on the simplicitor ground that such circles are intended for use in the manufacture of utensils and handicrafts - as long as there is an intention to use the sheets and circles in the manufacture of utensils and handicrafts, the benefit of notification is required to be extended, without actually verifying as to whether such sheets/circle stand actually used in the manufacture of utensils/handicrafts. Revenue cannot legislate and introduce a new condition in the notification on its own and call for the end use certificates - the revenue insistence on such production of account of the customers is neither in terms of the notification nor any other condition of the said notification requires them to do so - rejection of certificates produced by the customers on flimsy ground cannot be accepted – Decided in favour of Assessee.

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• 2013 (12) TMI 106
  Inclusion of Assessable value u/s 4 of Central Excise Act, 1944 - Additional income recovered as freight/unloading and carting charges over and above the transaction value – Held that:- Following CCE, Nagpur v. Ram Krishna Electricals Pvt. Ltd. [2011 (7) TMI 976 - CESTAT, MUMBAI] - During transportation of goods from the factory gate to the destination there can be certain charges incurred far handling of finished goods which the appellant has recovered only as cost of transportation - There is no evidence on record to show unloading expenses, cartage etc are not borne by the transporter - In the absence of any such evidence, the entire element of freight shown separately in the invoices is nothing else but freight charges - any amount collected separately as freight in the invoices cannot be included in the assessable value even if certain amounts have been collected in excess of the actual transportation cost - amount charged as freight and separately shown in the invoices cannot be included in the assessable value u/s 4 of the Central Excise Act, 1944 – decided in favour of Assessee.

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• CST, VAT & Sales Tax

• 2013 (12) TMI 160
  Validity of Assessment order – Petitioner contended that notice not served - Breach of principles of natural justice – Held that:- The petitions involve seriously disputed questions of fact as well as questions of law on merits of the controversy - it would be appropriate for the petitioner to avail the alternative remedy of filing appeal before the Deputy Commissioner of Sales Tax (Appeals) - in case the petitioner files appeals before the Deputy Commissioner of Sales Tax (Appeals) , the appellate authority shall entertain the appeals and examine all contentions without raising the plea of limitation as far as the filing of appeals is concerned – Decided in favour of Petitioner.

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• 2013 (12) TMI 159
  Validity of Show cause notice – Re-assessment of escaped assessment - Denial of adjustment of sales tax on purchase of paddy – Held that:- S/s Gaya Deen Kailash Chand vs. State of UP & others [2013 (3) TMI 425 - ALLAHABAD HIGH COURT] - If the grounds are relevant and have a nexus with the formation of opinion regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section - Whether the grounds are adequate or not is not a matter which would be gone into by the High Court or Supreme Court, for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue - What can be challenged is the existence of the belief but not the sufficiency or reasons for the belief - At the same time, the belief must be held in good faith and should not be a mere pretence. M/s Aryaverth Chawal Udyog & Others Versus State of U.P. & Others [2008 (5) TMI 602 - ALLAHABAD HIGH COURT] - Initiation of re-assessment cannot be held to be invalid - There was no good ground to entertain the challenge inasmuch as the circular is only by way of clarification and does not take away the jurisdiction of assessing authority of re-assessment - No writ can be issued to prohibit a person to correct a legal mistake - A writ jurisdiction is meant for doing justice and not to perpetuate injustice or technicalities - the show cause notices proposing re-assessment of the escaped turnover issued under Section 21 (2) of the U.P. Trade Tax Act are valid – Decided against Petitioner.

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