Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 15, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Rectification u/s 154 - AO is not justified in initiating further proceedings for rectification to impose his own view under the guise of rectification under Section 154 - HC
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Attachment of immovable property in respect of 25 flats - Tax Recovery Officer is bound to give effect of the order of the Assistant Commissioner who accepted the order of the Tribunal - HC
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Non deduction of TDS from cost of uniform items, stitching charges, washing expenses etc., reimbursed to the employees -FBT was paid - Not liable to TDS - AT
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Nature of incentive subsidy - Capital or revenue receipt - subsidy on the purchase of generator set - the same is capital subsidy and should go on to reduce the cost of asset - AT
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No doubt, the revised return cannot be taken cognizance of since the original return was filed belatedly. - However, an additional claim could be made before the appellate authority and the appellate authority is duty bound to consider the same. - AT
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Validity of notice u/s 148 – Assessment can not be reopened merely because credit of TDS given and income was not offered to tax since it is not any allowance or deduction or loss or relief - HC
Customs
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Short landing of the goods – Refund of Custom Duty - the whole amount had been deposited but the related goods have undisputedly not arrived in India. Refund allowed. - AT
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Exemption – Whether car is a new one or an old car - TAC certificate gives the name and address of the manufacturer correctly, therefore, the TAC produced by the appellant is correct and cannot be disputed and denied - AT
Corporate Law
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Liquidation - Transfer of property - Oral agreement - no disposition of the property before the order of winding-up - discretion u/s 536(2) cannot hence be exercised to protect or save such a transaction - HC
Central Excise
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Extended Period of Limitation – when the earlier show cause notices had been issued for the later period on the same set of facts - SCN for earlier period not valid - HC
Case Laws:
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Income Tax
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2013 (2) TMI 327
Rectification u/s 154 - Revenue contested that CIT(A) had directed to include only net commission receipts while arriving at deduction under Section 80HHC however, while excluding commission receipts set-off commission payment was wrongly given - whether rectification cannot be done when there are two possible interpretations ? - Held that:- Action of AO to re-open the issue on the ground of rectification, is not coming within the purview of Section 154 which clearly states that rectification power is available only if there is a mistake apparent from the record and the said power cannot be invoked either to nullify the earlier order, which became final or on the basis of change of opinion. AO having challenged the order of the CIT(Appeals) before the ITAT and the same having been dismissed and having allowed the said order to become final, he is also bound by the said order passed. As decided T.S.Balaram, Income-tax Officer v. Volkart Brothers [1971 (8) TMI 3 - SUPREME COURT] a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. Also see Seshasayee Paper & Boards Ltd. v. Inspecting Assistant Commissioner of Income Tax (1985 (3) TMI 37 - MADRAS HIGH COURT) & Assistant Commissioner of Income-Tax v. Saurashtra Kutch Stock Exchange Ltd. [2008 (9) TMI 11 - SUPREME COURT] Thus in the light of the above decisions of the Supreme Court and this Court, and having regard to the fact that the Assessing Officer has already passed re-assessment order as per the directions of the CIT(Appeals), he was not justified in initiating further proceedings for rectification to impose his own view under the guise of rectification under Section 154 and as such the questions of law raised are answered in favour of the Assessee and against the Revenue.
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2013 (2) TMI 326
Attachment of immovable property in respect of 25 flats - sale confirmed by Tax Recovery Officer - demands on account of tax for the recovery - petitioner undertook an housing project and as a consequence to the development of the project and the profit derived thereon, they sought the benefit of Section 80-IB(10) - Held that:- The sale was held on 11.1.1980. No application was filed for setting aside the sale either by the assessee or by the auction purchaser or by anyone interested in the property. On expiry of 30 days from the date of the sale the Tax Recovery Officer could have passed an order confirming the sale. However, the Tax Recovery Officer was injuncted by the writ of civil court from confirming the sale. The interim order issued by the civil court ceased to operate on 12.1.1998 whereafter an order of confirmation was passed on 25.3.1998 by the Tax Recovery Officer ignoring, or unmindful of, the important event which had taken place in between. Before 25.3.1998, the demand against the assessee admittedly stood reduced to nil. This fact was in the notice of Income-tax Officer as well as the Commissioner of Income Tax. Attention of the Income-tax Officer as also the Tax Recovery Officer was also invited by the firm M/s. UPCC through its communication dated 22.11.1996. On 16.1.1997, assessee had specifically called upon the Income Tax Officer who had raised the demand against the assessee to confirm if all the recovery certificates issued against the assessee-firm had stood withdrawn or cancelled. In view of the facts within the knowledge of the department and the communications so made, the Tax Recovery Officer could not have confirmed the sale on 25.3.1998. Rule 56 casts an obligation on the Tax Recovery Officer to pass an order confirming the sale consciously and with due application of mind to the relevant facts relating to sale by public auction which is to be confirmed. Under Rule 63, confirmation of sale is not automatic. An order confirming the sale is contemplated to make the sale absolute. Ordinarily, in the absence of an application under Rule 60, 61 or 62 having been made, or having been rejected if made, on expiry of 30 days from the date of sale the Tax Recovery Officer shall pass an order confirming the sale. However, between the date of sale and the actual passing of the order confirming the sale if an event happens or a fact comes to the notice of the Tax Recovery Officer which goes to the root of the matter, the Tax Recovery Officer may refuse to pass an order confirming the sale. The fact that sale was being held for an assumed demand which is found to be fictitious or held to have not existed at all, in fact or in the eye of law, is one such event which would oblige the Tax Recovery Officer not to pass an order confirming the sale and rather annul the same. The High Court clearly fell in error in not allowing relief to the petitioner-appellant by setting aside the sale. As the order of the ITAT, which is the highest fact finding authority, held in favour of the petitioner assessee and that order has been given effect to as a consequence, the Tax Recovery Officer is bound to give effect of the order of the Assistant Commissioner who accepted the order of the Tribunal - the first respondent Tax Recovery Officer is directed to pass necessary orders, consequent to the proceedings of the ACIT, Circle XIV, accepting the order of the Tribunal. Taking note of the nil payment insofar as the assessee for all the assessment year, the Tax Recovery Officer has to release the property from attachment in terms of the order of the Tribunal and consequent order of the Assistant Commissioner, Circle XIV.
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2013 (2) TMI 325
Non deduction of TDS from cost of uniform items, stitching charges, washing expenses etc., reimbursed to the employees - demand raised by u/s. 201(1) & 201(1A) - assessee contested of paying FBT on the same - Held that:- As decided in assessee's own case in [2013 (2) TMI 303 - ITAT AHMEDABAD] This is not in dispute that FBT was paid by assessee-company on this expenditure and this is also admitted position that this expenditure is in the nature of employees’ welfare. As per sub-section 2 of section 115WB, it is provided that fringe benefit shall be deemed to have been provided by the employer to its employee if the employer has in the course of business incurred any expenditure on or made any payment for various purpose which includes employees’ welfare. As per clause-E of this sub-section, it does not come out that it has to be enquired and looked into whether the employee has incurred the amount given to him by the employer for the same purpose for which it was given to the employee. Thus for this reason the employer has paid FBT on a particular expenditure, it is considered as payment of income tax only on deemed income of the employee out of various expenditures incurred by the employer and hence, this is not relevant as to whether the employee has actually incurred those expenditures as intended by the employer in view of this fact that FBT was actually paid by the assessee-company on the impugned expenditure on uniform, washing allowance etc., the same cannot be considered as perquisites in the hands of the employees and therefore, there is no liability of the assessee-company to deduct TDS therefrom. See R & B Falcon (A) Pty Ltd. Versus Commissioner of Income Tax [2008 (5) TMI 2 - SUPREME COURT] - in favour of assessee. Non deduction of TDS on conveyance, maintenance, reimbursement expenditure (CMRE) to its employees every month based on their status, designation - Held that:- Employer is paying fringe benefit tax on CMRE cannot be ignored. Regarding this expenditure also this could not be shown or established by Revenue that FBT is not payable on this expenditure. This expenditure is also not incurred to fulfill any statutory obligation or to mitigate occupational hazards or fall in any other exclusion as specified in Explanation to clause-E of sub-section-2 of section 115WB. This also is an admitted fact that FBT was paid by the assesseecompany on this expenditure also there is no liability of the assessee-company to deduct TDS therefrom - in favour of assessee. Holiday home reimbursement - whether payments made reveals the case of the assessee company not covered under FBT & the same payment is a remuneration in addition to the salary taxable u/s 17(1)(iv) - Held that:- As there is no dispute about the fact that FBT was paid by the assessee company on this expenditure also the same cannot be considered as perquisites in the hands of the employees and therefore, there is no liability of the assessee-company to deduct TDS therefrom - in favour of assessee.
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2013 (2) TMI 324
Non-recoverable balance written off disallowed - allowed either as bad debt under section 36(1)(vii) or as business expenses under section 37 - assessee following a method of "Cash System Accounting" - Held that:- Such an expenditure cannot be allowed as bad debt under section 36(1)(vii) r/w section 36(2). Once the assessee has incurred expenditure on behalf of its principal and after making its efforts could not recover the said expenditure, this will result into a loss only and such a loss can be claimed in the year when the assessee was quite ascertained that the same could not be recovered. The party herein this case from whom the amount has to be recovered was in financial stringency and so much so that the joint venture agreement through which the said company (Motex) was formed got terminated in this year. It was due to this reason that the assessee can be said to have incurred the loss in this year only. Even when the assessee is following the method of "Cash System of Accounting",such a loss which is on account of trading or business cannot be disallowed. Such a loss cannot be treated as a business expenditure in the present year for the reason that the assessee is mainly carrying out agency business for various machinery component and accessories from which it gets certain percentage of income and any expenditure relating to agency business can be claimed in relation to such income. For claiming such expenses, the year of incurring of expenses is important in the method of "Cash System Accounting", therefore, such a loss which has been recognized in this year due to above facts, has to be allowed as a business loss. Thus, the amount of Rs. 14,35,644, though cannot be allowed as bad debt written-off but can definitely be allowed as a business loss - in favour of assessee. Computation of capital gains - sale consideration u/s. 50C being value adopted by the Stamp Duty Authority (SDA) OR actual sale consideration adopted by the appellant - Held that:- The provisions of clause (a) of sub-section (2) of section 50C, provides that where the assessee claims before the Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, the AO may refer the valuation of the capital asset to a valuation officer and once such a reference is made, the Assessing Officer is bound by such a valuation in terms of provisions of section 16A(1). In the present case, the assessee has objected to such valuation adopted by the stamp valuation authority and has also filed the copy of valuation report by an approved valuer. Therefore, the AO was required to make a reference to the valuation officer in terms of sub-section (2) of section 50C. Accordingly, the matter is restored back to the file of the Assessing Officer who shall make a reference to the Valuation Officer and to get an estimate of fair market value for determining the valuation of the asset which is the subject matter of sale - in favour of assessee for statistical purposes. Addition u/s 68 - Held that:- The addition made by the AO is wholly erroneous as the assessee has filed a copy of sale agreements in respect of sale of flats wherein it has been mentioned that the said property has been sold for a total sale consideration of Rs.13,80,000. Once the money has been received by way of sale of a property duly mentioned in the sale agreement, it cannot be held that the same remains unexplained. Even the Commissioner (Appeals) has not cared to go through the order passed under section 154, wherein the AO has rejected this contention on the ground that the matter is sub-judice before the Commissioner (Appeals) - addition made by AO stands deleted - in favour of assessee.
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2013 (2) TMI 323
Addition u/s 68 – Cash credit - Unexplained cash deposit - Identity and creditworthiness of the depositors – Held that:- As The A.O. has not put any queries so far as this amount of Rs.1,00,000/- received by Shri B.G. Patel from Dhirubhai V. Patel of USA is concerned. The A.O. has not established that this amount given by Sri B.G. Patel to the assessee was not out of the money received by him from Dhirubhai V. Patel of USA.A.O. himself has stated in the remand report that on examination of depositor Mr. Patel he found to have earned income of Rs. 3,00,000/- from agriculture and animal husbandry. Mr. Patel also confirmed to have advanced amount of Rs. 1,00,000/- to the assessee during the course of examination while the A.O. was preparing its remand report. Creditworthiness of Shri B.G. Patel is established and he, therefore, delete the addition u/s 68. In his confirmation letter Shri. Patel has also mentioned that details of cheque number through which the above amounts were paid to the assessee for purchase of plots. Shri Jigar A. Patel has also given the detail of bank in his confirmation letter from which the above payments were made to the assessee. In favour of assessee Addition u/s 40A(3) – Purchase of land in cash - Payment made in cash above Rs. 20,000 – A.O. treating the assessee to have been engaged in the business of purchase and sale of land – Held that:- A.O. has not been able to make out a case that the lands purchased were shown by the assessee as stock in trade. Said amount not included in P&L account of assessee, shown in asset side in balance sheet. Therefore decides in favour of assessee Capital Gain or business income – Long Term capital gain from sale of land - A.O. argued that the assessee used to get the agricultural land converted in the non-agricultural land and small pieces of plots of land and then used to sale the plots to the customers – Held that:- Assessee has shown the long term capital gain in respect of sale of land which was purchased in March, 1994. It is also not in dispute that this land was shown by the assessee under the head fixed assets. The assessee sold this land during the year under consideration i.e. almost after 13 years. Therefore, the profit arising on account of sale of such land has rightly been treated by ld. CIT(A) as long term capital gain and not business income. In favour of assessee
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2013 (2) TMI 322
Transfer Pricing – Arm length Price - International transaction entered into with Associated Enterprise - TPO has not accepted the ALP of international transaction – Assessee is following CPM (Cost plus method) whereas TPO argued for TNMM (Transactional Net Margin Method) as appropriate Held that:- Where an assessee has followed one of standard methods of determining ALP, such a method cannot be discarded in preference over transactional profit methods, unless revenue authorities are able to demonstrate fallacies in application of standard methods. While there is no particular order or priority of methods which the assessee must follow and no method can invariably be considered to be more reliable than others, TNMM and Profit Split Method (PSM) are treated as methods of last resort which are pressed into service only when the standard methods i.e. CUP Resale Price Method (RPM) and Cost Plus Method (CPM) cannot be reasonably applied. As concluding from the facts of the case if we exclude four super normal profit companies from the list of comparables and recompute the OPM from the list of comparables adopted by the TPO, the average OPM comes to 18.91% whereas the Net Profit Margin of the assessee is 18.11%. Do not any reason for TP adjustment. In favour of assessee
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2013 (2) TMI 321
Personal expenses - Section 37(1) - Disallowance part of Telephone expenses - Travelling expenses - Vehicle maintenance – Personal expenditure – Held that:- These disallowances were made by the A.O. on the ground that personal use of the facility cannot be ruled out. No specific defect showing that concerned expenditure was incurred for personal use of the assessee has been pointed out by the A.O. The additions in this regard are only on estimate basis without any dollop of cogency – In favour of assessee Nature of incentive subsidy - Capital or revenue receipt - subsidy from the Haryana State Government on the purchase of generator set – A.O. opined that assessee was required to reduce the cost of generator set by this amount and then claim the depreciation on the balance amount – Held that:- Following the decision in case of Ponni Sugars & Chemicals Ltd. (2008 (9) TMI 14 - SUPREME COURT) the subsidy in the case was granted by the State Government on the purchase of generator set. Hence, the same is capital subsidy and should go on to reduce the cost of asset – In favour of assessee The case law from the Apex court in the case of P.J. Chemicals (1994 (9) TMI 1 - SUPREME COURT) is also not applicable on the facts of the case. In the said case the subsidy was with reference to a percentage of capital cost, which is not the case here.
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2013 (2) TMI 320
Belated return u/s 139(4) – Deduction u/s 80IB – Deduction u/s 80IC – Construction of a fiscal statute - Assessee contended that due date of furnishing return has been specified under sub-section (1) of Section 139, in sub-section (4) of Section 139 permission has been granted to furnish the return even after expiry of the due date for furnishing return specified under sub-section (1) of Section 139 Held that:- In the matter of construction of a fiscal statute, one is required to read the words used by the Legislature rather than go into the question of reasonableness, rationality and beneficial ness of a part of the statute. In the event, within the plain words used in the statute, a person is entitled to the benefit granted by the statute, he would be entitled to the same, but, if not, he would not be entitled to the benefit, thus, given Section 80AC, it has been provided that only when the return has been furnished on or before the due date specified under sub-section (1) of Section 139, the assessee concerned will be entitled to the deductions admissible under Section 80IB or Section 80IC. In favour of revenue
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2013 (2) TMI 319
Additional claims before the appellate authorities - Return under section 139(1) was filed belatedly - Whether the assessee makes a claim of depreciation or not in his return of income, the A.O. is duty bound to grant depreciation allowance by virtue of Explanation 5 to section 32(1) of the Act - The claim of depreciation was not made in the original return filed, therefore assessee files revised return during course of assessment proceeding u/s 143(3) – Held that:- No doubt, the revised return cannot be taken cognizance of since the original return was filed belatedly. However, an additional claim could be made before the appellate authority and the appellate authority is duty bound to consider the same. The assessee is entitled to raise additional grounds, not merely in terms of legal submissions but in respect of new claim not made in the return filed. The CIT(A) has not examined the issue in correct perspective taking into consideration the Explanation 5 to section 32(1) of the Act and the Board’s Circular No.14 (XI-35) of 1955, dated April 11, 1955. CIT(A) has to be decide as to whether the asset on which depreciation is claimed is a business asset and if so, to allow the claim of the assessee in accordance with law. Remand back to revenue
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2013 (2) TMI 318
Validity of notice u/s 148 – Escaped assessment - Excessive relief - Re-opening of assessment – Reason to believe - Reason of reopening the assessment that credit for TDS was wrongly allowed in the original assessment - Assessee had claimed credit for tax deducted at source on estimated basis as TDS certificates of this amount were not available with the assessee at the time of filing return - During assessment u/s 143(3), royalty income from Indian concerns was determined and TDS was allowed by the A.O. However, as the above income was not disclosed in the income tax return, TDS credit against this income should not have been allowed Held that:- It is intended for the benefit of the assessee who had omitted to file the TDS certificate along with the return of income but subsequently produces the same before the A.O. within two years from the end of the assessment year in which the income relevant to the TDS is assessable, in which case the A.O. can amend the assessment order and grant the relief, invoking the powers u/s 154 None of the three clauses of the Explanation applies to case. Clause (a) speaks of no return having been filed; that is not the case here. Clause (b) speaks of a return having been filed without an assessment being made and the assessee had understated the income or has claimed excessive loss, deduction, allowance or relief in the return. This also is not the case here. Clause (c) has several sub-clauses and none of the situations applies to the petitioner's case. It cannot be so construed as to rope in cases where credit for TDS, which is a credit given against the tax payable and is not any allowance or deduction or loss or relief against the income chargeable to tax was erroneously given. There is, therefore, no merit in the reasons recorded by the revenue for reopening the assessment - Notice quashed – In favour of assessee
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Customs
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2013 (2) TMI 317
Short landing of the goods – Refund of Custom Duty - Instead of 1000 units of heat detectors only 100 units have been received – Whereas custom duty has been paid in respect of 1000 units - CHA who has been duly authorized by the importer has sought for refund vide letter dated 6.9.2006 – The importer filed the claim in proper format along with relevant documents on 28.7.2007 - Held that:- Since the relevant documents have not been produced along with the claim dated 6.9.2006 and the refund claim was not in the proper format. Nevertheless, it would be in the interest of justice to treat the letter dated 06.9.2006 as refund claim. After all, the whole amount had been deposited but the related goods have undisputedly not arrived in India. Refund allowed. In favour of assessee
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2013 (2) TMI 316
Exemption under Notification No. 21/02 at Sr. No. 344(2) – Whether car is a new one or an old car - Show cause notice was issued on the charges that the appellant has mis-declared the car as new - Car liable for confiscation under Section 111(m) of the Customs Act, 1962 - Appellant liable to penal action under Section 112(a) of the Customs Act, 1962 - Commissioner ordered that since the car is used one, therefore, the appellant is liable to pay differential duty of Rs. 11,43,304/-, a redemption fine of Rs. 12 lakhs and a penalty of Rs. 10 lakhs under Section 112(a) of the Customs Act, 1972. Held that:- As per Board’s Circular No. 1/2005-Cus., dated 11-1-2005, the Board has clarified that a new imported vehicle for the purpose of this chapter shall mean a vehicle that has not been registered for use in any country according to the laws of that country, whereas as per the referred Customs Notification, it should not be registered anywhere prior to importation. It was also noted that in many countries, registration of the vehicle is an essential requirement for moving the vehicle from the showroom or the factory to the airport. To verify whether the registration is a technical formality or not, the field formations may compare the date of dispatch of the car with the date of registration – In this case, the car has been registered with the UK authorities on 20-5-2005 and was exported to India within 9-6-2005 i.e. almost within 19 days of its registration and the registration certificate clearly explicit that the vehicle is for direct export and cannot be used on UK roads prior to export. This clearly indicates that the vehicle is registered only for export purposes. Therefore, in terms of Board’s Circular No. 1/2005, dated 11-1-2005, the vehicle is a new one. Further name and address of the manufacturer of complete vehicle is M/s.“Toyota Motor Engineering & Manufacturing Europe SA/NV”, Bruxelles (Brussels). If the name of manufacturer is correct then allegation of forged TAC is not sustainable as held by Hon’ble Apex Court in the case of Parminder Kaur Parminder Kaur v. State of UP[2009 (10) TMI 657 - SUPREME COURT ], wherein the Hon’ble Apex Court has held that not every interpolation or tampering with a document amounts to a forgery. For there to be forgery, it is imperative that the document has been altered for some benefit or gain to a person and in the absence of such a benefit, there is no forgery – In this case TAC certificate gives the name and address of the manufacturer correctly, therefore, the TAC produced by the appellant is correct and cannot be disputed and denied - Allegations in the show-cause notice are not sustainable. Further Page 1 of the TAC column 5 provided the name and address of the manufacturer and the same has been shown as manufactured at Brussels, which is admittedly not a forged document and page 2 of the TAC only shows the name and address of the assembly plant and as per DGFT Policy Circular No. 5/2004-2009, dated 15-10-2004, the TAC may be provided from a signatory country to the 1958 Agreement under WP 29. It can be seen from the list of the signatory to W.P. agreement, that UK is one of the signatory – The same view has been taken by this Tribunal in the case of Vikram Tannan[2008 (3) TMI 205 - CESTAT MUMBAI], wherein it was held that TAC may be provided from any signatory country to the 1958 Agreement and Revenue’s insistence that TAC should be obtained from country of origin is not correct - Impugned order set aside and appeal is allowed with consequential relief - Registry was directed to return the DDs, which were taken into the custody by this Tribunal at the time of final hearing, to the appellant – In favour of assessee.
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Corporate Laws
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2013 (2) TMI 315
Winding up petition - Respondent were unable to pay debts owing to the Petitioner - agreement entered between the parties for the sale of design - as stated by petitioner that by an email dated 8th October 2010, the Respondent admitted and confirmed its liability towards US$ 350,000 being the balance consideration after deducting tax at source - Held that:- Respondents in its reply dated 19th June 2012 to the notice dated 26th May 2012 has denied any liability whatsoever. It is, inter alia, stated in the reply that he is not liable to pay any sum of US$ 350,000 or any other amount under the Agreement dated 18.05.2008 as alleged. In fact the said sum has not even become due or payable. Even in spite of this, if petitioner initiates any winding up proceedings or any civil suit or any other proceedings, as threatened in notice, he will take all required steps to protect themselves against petitioner illegal actions besides making him responsible and liable for all consequences arising therefrom. The Petitioner has been asked to withdraw the notice and directed to extend the technical support to the Respondent pursuant to the agreement for the sale of design for the process. As decided in Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami (1965 (1) TMI 16 - IN THE SUPREME COURT OF INDIA) that a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the Court. Aslo see M/s. Madhusudan Gordhandas v. Madhu Woollen Industries Pvt. Ltd. (1971 (10) TMI 49 - SUPREME COURT OF INDIA) & In Pradeshiya Industrial & Investment Corporation of U.P. v. North India Petrochemicals Ltd. (1994 (2) TMI 267 - SUPREME COURT OF INDIA). Thus in the present case, the Court is not persuaded to hold that the requirements of Sections 433 and 434 read with Section 439 are satisfied. The response of the Respondent to the legal notice issued by the Petitioner raises disputed questions of fact, which will require examination of evidence in other appropriate proceedings. It is not possible to conclude that the defence of the Respondent is a mere “moonshine” and not bonafide - winding up petition dismissed.
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2013 (2) TMI 314
Applicability of section 536(2) of the Companies Act 1956 - whether the alleged transfer of property in question in favour of the Appellant by the company in liquidation is validated? - Winding up proceedings - whether transaction was in interest of company? - Held that:- Effect of Section 536(2) is that where a winding-up proceeding is by or subject to the supervision of the Court, any disposition of the property of the company which is made after the commencement of the winding-up is void, unless the Court otherwise orders. If a transfer is not completed before an order of winding-up has been passed, an application would not be maintainable before the Court for a direction to the Official Liquidator to complete the transfer. The case of the Appellant before the Court is that there was an oral agreement under which the property was to be sold to the Appellant for Rs.30.00 lakhs. There is admittedly no written document evidencing the transaction which is alleged. Significantly, the original proposal which the Appellant submitted, was in her capacity as the chief promoter of a proposed industrial co-operative society. MIDC declined to grant its no objection after the order of winding-up was passed. First and foremost, it is evident that there was no disposition of the property before the order of winding-up was passed on 27 March 2008. Secondly, even assuming that there was such a disposition before the order of winding-up came to be passed, it is evident that there is no foundation or basis on which the Court could have arrived at the conclusion that the transaction was in the best interest of the company. Admittedly, the transaction involving the sale of the property of the company, was not in the ordinary course of business. The fact that such a transaction is in the interest of the company has to be pleaded and proved. There is a complete failure to make a disclosure of the essential terms of the transaction both before the learned Company Judge and in appeal before this Court. As stated earlier, there is no written document evidencing the terms of the transaction. All that the Appellant states is that an amount of Rs.30.00 lakhs was paid to the company between May 2007 and September 2007. There is neither any pleading nor any proof on the record before the Company Judge that the transaction was arrived at on the basis of the prevailing market value. On these facts and on the basis of the principles set out in the consistent line of judicial precedent on the subject, it would be impossible to come to the conclusion that the transaction was in the interests of the company. Property belonging to a company does not lie at the pleasure of the company or its Board of Directors. A disposition made after the commencement of proceedings for winding-up has to be justified as being in the ordinary course of business or, if it is not in the ordinary course of business, by a proper disclosure of the underlying rationale and the basis and terms of the transaction. Nothing of the kind has been attempted to be explained before the Company Judge or before this Court in appeal. The discretion under section 536(2) cannot hence be exercised to protect or save such a transaction - Single Judge was not in error in declining to order that the alleged disposition in favour of the Appellant would not be void. Clearly the disposition is unlawful and void for the reasons indicated above.
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Service Tax
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2013 (2) TMI 331
Seeking modification of the stay order - Held that:- Plea for modification of original stay order which has already merged with Hon'ble High Court's order obviously it is incompetent to modify the stay order. The party has not complied with the time-bound direction of the Hon ble High Court either. There is no clear statement of any payments made by the appellant for the period April 2004 to June 2005, nor is there any claim of further payments within the prescribed time towards pre-deposit of Rs. 14 lakhs ordered by this Bench. Miscellaneous application rejected - appeal gets dismissed for non-compliance with Section 35F of the Central Excise Act as applicable to the Service Tax
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2013 (2) TMI 330
CENVAT credit of the service tax paid on GTA service - denial of Credit as GTA service was not an output service for the appellant - demand of service tax and education cesses - April 2007 to March 2008 - Held that:- As decided in Commissioner vs. Nahar Industrial Enterprises Ltd. [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] in view of paragraph 2.4.2 of CBEC Excise Manual of Supplementary Instructions one who was engaged in the manufacture of excisable goods and used to avail GTA service in connection with such manufacture as also to pay service tax on such service in the reverse charge mechanism, was deemed to be the provider of output service (GTA service) and, accordingly, held to be entitled to utilise CENVAT credit on inputs/input services/capital goods towards payment of service tax on the GTA service - in favour of assessee.
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2013 (2) TMI 329
Notification No. 41/2007 – Whether the appellants are entitled for refund as per the Notification No. 41/2007-S.T., dated 6-10-2007 – Assessee filed refund claims under Notification No. 41/2007, dated 6-10-2007 as amended on commission paid to foreign commission agents. Exports were made under Drawback Scheme and DEPB Scheme and for the export made under Drawback Scheme, it was duly indicated by the Custom Department for the entitlement of Drawback in the shipping bills – foreign sales commission being considered as “input service – Held that:- Service tax paid on foreign commission has not been factored in computation of All industry rate of drawback prior to 2007 or after 2007 and that there services are not input services but are services linked to exports. Further Notification No. 33/2008, dated 7-12-2008 amended Notification No. 41/2007-S.T., dated 6-10-2007 omitted the clause “(e) the said goods have been exported without availing drawback of service tax paid on the specified services under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995” However 2% FOB value was increased to 10% of FOB value as per amended Notification 33/2008 dated 7-12-2008. In this case refund claims were filed before the date of said amendment and hence the restriction of 2% of FOB value by the Lower Adjudicating Authority needs no interference. Therefore the stand taken by the Lower Adjudicating Authority in rejecting the refund claims on the export made under Drawback Scheme founds to be not sustainable – In favour of assessee.
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2013 (2) TMI 328
Transaction charges or Turnover charges – whether the appellant is liable to pay Service tax on the transaction charges or turnover charges collected – Appellant are engaged in the business of stock broking registered with the department under the category of “Stock Broking Services “ and “Banking and Financial Services” – Also collected turnover charges or transaction charges of the total value of transaction from their clients through their branches for the services provided to their clients. This amount was paid to the stock exchange for getting the Computer to Computer Link (CTCL) facility appellant - Held that:- It is the obligation of the stock broker to collect a specified percentage as transaction charges on their traded value from their clients and pass the same to the respective stock exchanges. The appellant is collecting the transaction charges from his clients as a ‘pure agent’ as per Rule 5(2) of Service Tax (Determination of Value) Rules, 2006 and pass the same to the stock exchange. Further it is not the case where stock broker had collected any excess amount from his clients and had not paid such amount to the stock exchange. The Pure Agent issue is not under dispute. Therefore, appellant are coming under the category of “Pure Agents” – Therefore turnover charges or transaction charges are not includible in the taxable value and the appellant is not liable to pay Service tax on the same during the disputed period – In favour of assessee. Cenvat credit towards employees insurance, food charges – Whether the appellant is eligible for the Cenvat credit availed on Service tax paid towards employees insurance, food charges, subscription/books/periodicals and travelling expenses – Appellant had availed credit on the Service tax paid towards employees insurance, food charges and travelling expenses which are not used in providing their output service It has been decided in the case of Ultratech Cement Ltd.[ 2010 (10) TMI 13 - BOMBAY HIGH COURT ] that the assessee is entitled for input service credit of the services, which are availed in course of their business and manufacturing activity. Thus, the services which were availed during the course of their business activity are eligible input services to take credit – In favour of assessee. Credit taken on debit notes – Whether the appellant is entitled for the credit taken on debit notes issued by their associate company – Held that:- The appellant submitted that the relevant debit note is a valid document. This implies that all the relevant details required as are available in any invoice are available in these debit notes. Hence, the details available in the debit notes and also the genuineness of payment of Service tax by the service provider satisfy the conditions laid down in Rule 9(2) of CCR, 2004 for permitting Cenvat credit. Also in the case of Phasrmalab Process [2009 (4) TMI 142 - CESTAT AHMEDABAD] it has been held that if details required under Rule 9(2) of CCR 2004 is satisfied, then the appellant is entitled for credit based on debit notes – In favour of assessee.
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Central Excise
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2013 (2) TMI 313
Interest u/s 11AB – Delay in reversal of Cenvat Credit – Input clear as such - Assessee manufacture excisable goods during the period March 2001 to August 2001 – Cenvat Credit reverse on 5.10.2001 – Held that:- The assessee’s ground that they are not required to reverse the Cenvat credit at all is not acceptable at this stage as they have not challenged the confirmation of demand of credit involved before proper forum by way of appeal. Following the decision in case of SKF India Ltd. (2009 (7) TMI 6 - SUPREME COURT) that for delayed payment interest is payable. As the provisions of Section 11AB for payment of interest came on 11.5.2001, therefore on delayed reversal of credit the respondents are liable to pay interest for the period from 12.5.2001 to 5.10.2001. Partly in favour of revenue
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2013 (2) TMI 312
Waiver of pre-deposit, interest and duty - Whether Cenvat Credit can be denied on the ground that the activity undertaken does not amount to manufacture, inspite of duty on final product accepted by the revenue - Manufacture - Denial of CENVAT Credit - Cutting and slitting of stainless steel coil - Rule 14 of the Cenvat Credit Rules, 2004 - Section 5 B of the Central Excise Act, 1944 - Assessee had paid the duty after reversing the credit and from PLA - Held that:- Prima facie the applicant had a strong case, in view of the decision in the case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT) relied upon by the assessee, waive the pre-deposit of duty, interest and penalty and recovery thereon stayed during the pendency of the appeal. Waive the pre-deposit of duty, interest and penalty. Stay application allowed.
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2013 (2) TMI 311
Waiver of pre-deposit - Stay Petition - Provision of slow/non-moving inventory - Rule 3(5B) of CENVAT Credit Rules, 2004 - slow/non-moving inventory written off to the tune of 95% - Held that:- The assessee have retrieved significant percentage of quantity of inputs for which provision was made for subsequent use, it may not be a case of “write off fully” attracting the provisions of Rule 3(5B) of CENVAT Credit Rules. Waive pre-deposit dues and Stay granted
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2013 (2) TMI 310
Waiver of pre-deposit - Stay petition - Rule 4 of the CENVAT Credit Rules, 2004 - Job work - Returned the final product without payment of duty - Benefit of Notification No.214/86-CE dated 25.03.1986 - Held that:- We do not find any commission/omission attributable to the assessee which made them ineligible for the benefit of Notification No.214/86-CE. If there is any failure, it is at the end of the supplier and it is not known how the supplier having no factory of his own has been allowed to register as a manufacturer under Central Excise Law. Prima facie, the action taken against the assessee may not be justified. Waive of pre-deposit of dues and Stay granted
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2013 (2) TMI 309
Request for adjournment - Press Mud - Manufacture of sugar - Rule 6 of the CENVAT Credit Rules, 2004 - Assessee has availed credit in respect of common input services used in the manufacture of dutiable goods as well as the goods cleared without payment of duty - Revenue argued that the assessee is liable to pay duty @ 5%/10% of the value of the Press Mud - Held that:- Following the decision in case of THE AMARAVATHI CO-OPERATIVE SUGAR MILLS LTD (2012 (8) TMI 377 - CESTAT, CHENNAI) that the Press Mud and Sludge arising during the course of manufacture of Sugar and Molasses are waste and non-excisable. in favour of assessee
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2013 (2) TMI 308
Notification No. 33/99-C.E., dated 8-7-1999 – C.B.E. & C. Circular dated 8-12-2006 (F. No. 209/11/2005-CX-6) – Claim of rebate of duty - The applicants purchased the inputs i.e. menthol - which was manufactured by M/s. Eldorado Holdings Pvt. Ltd., a unit located in the North East who cleared (input) menthol by availing exemption under Notification No. 33/99, dated 8-7-1999 – Rebate claim rejected because the same was not admissible in terms of Notification No. 37/2007-C.E. (N.T.), dated 17-9-2007 read with Rule 18 of the Central Excise Rules, 2002 – Held that:- As per the Central Excise invoices, in the hand of the buyers, all such goods are duty paid, despite the fact that the manufacturers availed exemption by way of refund. The buyers are eligible to avail Cenvat credit of duty so borne by them or rebate of duty so paid on the inputs in case of export – Board’s instructions dated 8-12-2006 cannot be applied to such units as it clarifies that the term ‘duty paid’ used in Rule 18 of the Central Excise Rules, 2002 does not include that portion of duty, which is subsequently refunded to the ‘manufacturer’ (units availing area based exemption). Units located in other parts of the country are permitted to take full credit of duty paid on the inputs (procured from J&K North East, Sikkim and Kutch) under Rule 12 of the Cenvat Credit Rules, 2004. This rule is a special dispensation to ensure that the manufacturing units in North East etc., are not placed at disadvantage vis-à-vis units outside such areas. Further, there is no bar on utilizing this credit for payment of duty on goods cleared for exports. The units located in other parts of the country manufacture the goods, and pay the applicable excise duty on export of goods, and therefore, they are eligible to claim rebate of said duties under Rule 18 of the Central Excise Rules, 2002. In the present case, the units located in other parts of the country are the manufacturers, and no portion of duty paid by them is refunded to them, therefore rebate cannot be denied to such units.
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CST, VAT & Sales Tax
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2013 (2) TMI 332
Detention of goods - appellant seeking release of the goods detained - TNVAT Act, 2006 - Held that:- Section 67(4) of the TNVAT Act, 2006 provides for release of goods on payment of tax or the security either voluntarily or under protest. In such view of the matter, direction is issued to the respondents to release the goods forthwith if the tax is paid either voluntarily or under protest.
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