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TMI Tax Updates - e-Newsletter
February 16, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
PMLA
Service Tax
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CST, VAT & Sales Tax
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Case Laws:
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Income Tax
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2013 (2) TMI 353
Entertainment tax exemption in respect Multiplexes - capital or revenue receipt - assessee contested that the subsidy received was after the completion of the cinema house and commencement of operation and used entirely for the business operation - Held that:- Considering the provisions of the State Government Scheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. From the combined reading of salient features of the scheme, no doubt in conluding that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee. As decided in Sahney Steel & Press Works Ltd. (1997 (9) TMI 3 - SUPREME COURT) the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined having regard to the purpose for which the subsidy was given. The very purpose of the scheme thus was to give incentive to the multiplex units which were found to be highly capital incentive - uphold the decision of the Tribunal in this respect to treat the exemption as capital. Whether the amount set aside by the assessee to provide for meeting liabilities other than ascertained liabilities was required to be added back while computing the book profit u/s. 115JB or not? - Held that: - As decided in Bharat Earth Movers v. CIT [2000 (8) TMI 4 - SUPREME COURT] the amounts set apart by an assessee to meet its liability on account of leave encashment of employees is not a contingent liability. It was observed that what should be certain is the incurring of the liability which should also be estimated with reasonable certainty though the actual quantification may not be possible then. Its requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. Also see Metal Box Co. of India Ltd. v. Their Workmen [1968 (8) TMI 53 - SUPREME COURT] wherein held that an assessee can while working out its net profits, provide from its gross receipts his liability to pay a certain sum towards gratuity liabilities of the employees. If such liability is properly ascertainable and it is possible to arrive at proper discounted present value. Also see Rotork Controls India (P.) Ltd. v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA]. Thus no hesitation in upholding the Tribunal's view that though actual payment of gratuity may be made at a later point of time upon periodical release of the employees from service, it is provision having been made on actuarial basis it cannot be stated to be an uncertained liability so as to add it back in terms of Clause (c) to Explanation 1 to Section 115JB.
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2013 (2) TMI 352
Jurisdiction u/s 263 by CIT(A) - directing AO to consider the issue of loss in derivative trading - AO treated the entire short term capital gain as business income and accepted the long term capital gain as such - assessee is dealing in shares and securities maintains dual portfolios, one in trading and another for capital investment - Held that:- As in the assessment years 1995-96 the capital gain was assessed as business profit by the AO as upheld by CIT(A) also confirmed by Tribunal & Hon’ble High Court too. In the assessment years 1996-97, 2001-02, 2002-03, AO himself has accepted the claimed capital gain / loss in the assessment framed u/s 147(3). In assessment year 2003-04 the AO treated "capital loss" as speculative business loss by applying provisions of Explanation to section 73. The Tribunal gave a categorical finding that assessee is doing both the business as well as investment activities in shares uphelding the claim of capital loss and held that the provisions of Explanation to section 73 cannot be applied to capital loss. In the assessment year 2005-06 the AO treated the short term capital gain as business profit. The CIT(A) allowed the assessee’s appeal upheld the short term capital gain also upheld by Tribunal. In the assessment year 2006-07 long term capital gain has been accepted by the AO. Only short term capital gain was disputed by the AO. The CIT(A) allowed assessee’s appeal. And the revenue went in appeal before the Tribunal which has been dismissed. In the assessment year under consideration the material fact also remained that the AO accepted the claimed long term capital gain in the order framed u/s 143(3). The CIT(A) keeping in view the past history of the case has also accepted the assessee’s claim of short term capital gain. The revenue in its appeal before the Tribunal has not raised any ground on the issue of capital gain. Thus as decided in the case of CIT vs. M/s. Escorts Ltd. (2011 (2) TMI 579 - DELHI HIGH COURT) where the nature of transactions have been accepted in the past, the CIT could have had no occasion to take recourse to revisionary powers u/s 263 on the fundamental aspect of the transactions in issue on which a view has been taken in earlier years. As per the past history of the case and in accordance with the principle of consistency, we are of the view that the only view which the AO could have taken was to accept the long term capital gain as such - thus assessment order in question was not erroneous as the AO has accepted the claimed long term capital gain and loss in derivative trading after conducting inquiry thereto and thus the assessment order cannot be held erroneous and thus also prejudicial to the interest of revenue - set aside the revisionary order - in favour of assessee.
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2013 (2) TMI 351
Determination of ALP as NIL - SAP services - applying Comparable Uncontrollable Price ("CUP") method - addition to the total income on account of the international transactions entered by the appellant with its associated enterprises - assessee contested against the additions stating it to be transaction merely a means to siphon off profits from India - Held that:- TPO has to work out the ALP of the international transaction by applying the methods recognized under the Act. He is not competent to hold that the expenditure in question has not been incurred by the assessee or that the assessee has not derived any benefits for the payment made by the assessee and therefore he cannot consider the ALP as NIL. TP study done by the assessee in support of the ALP does not give out any comparable instances of similar transactions between the unrelated parties. As far as the determination of ALP under the Act is concerned, the provisions lay down that the assessee has to adopt one of the methods laid down in section 92C(1). The assessee has to substantiate the price that is paid to its AE as at Arm's Length within one of the methods so prescribed. As already noticed, the TP study of the assessee is not in tune with the provisions of section 92C. As in the course of hearing, it was suggested that the cost of providing SAP charges by Festo, Germany to all entities of the Festo group worldwide and the basis of allocation of cost by Festo, Germany to various group entities across the world should be submitted by the assessee with a view to enable the TPO to ascertain as to whether there has in fact been any profit element involved or was it a case of mere reimbursement of actual cost incurred for the Assessee by the parent company. The stand of the assessee has been that the payment was merely reimbursement of cost and in this regard attention was drawn to invoices raised by Festo, Germany on other group entities in other parts of the world. The assessee has also sought to file a chart regarding the benefits that the assessee received by paying the SAP charges and also that the payment was reimbursement of cost. Thus these submissions require a fresh consideration by the TPO in the light of the observations made above - remand the question of determination of ALP to the TPO for fresh consideration - in favour of assessee for statistical purposes.
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2013 (2) TMI 350
Invocation of the provisions of section 50C - assessee is a shareholder in company along with other shareholders and sold his shares for a consideration - Held that:- Section 50C provides for meaning of the "full value of the consideration" (FVC) and it is a deemed definition. Accordingly, when the assessee transfers a capital asset being land or building or both, for a consideration lesser than the value adopted, assessed by any authority of a State Government, the value so adopted or assessed shall be deemed to the 'full value consideration' for the purpose of computing capital gains u/s 48. The expression "assessable" has inserted into the statute for perspective application w.e.f 1.10.2009 whereas the assessment year under consideration is 2007-08 and 2008-09. The capital assets that are covered under the provisions are land or building or both. Expression "transfer" shall have to be a direct transfer as defined u/s 2(47)which does not include the tax planning adopted by the assessee. In the light of the above legal interpretation of section 50C in the instant case, what transferred by the assessee are the shares in the company and not the land or building or both. Assessee does not have full ownership on the flats which are owned by the company. The transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government. The company was deriving income, taxable under the head 'income from property' for more than a decade. The expression "assessable" is inserted in section 50C(1) of the Act is not relevant for the impugned assessment years. In such circumstances, the AO's decision to invoke the provisions of section 50C to the tax planning adopted by the assessee is not proper and it does not have the sanction of the provisions of IT Act. The provisions of section 50C are deemed provisions which are required to be strictly interpreted, it is not covered by the expressions of the present case. Therefore, order of the CIT(A) is required to be reversed with a direction to the AO to allow the claim of the assessee - in favour of assessee. Addition on additional consideration of money paid by the transferees to the company who utilized the same for repayment of loans of the company to its Directors - Held that:- The entries in the books of accounts vividly suggests that the transferees infused the money in the accounts of the company and the company repaid the liabilities of the Directors and it is not the case of the transferees paying additional consideration directly to the transferors of the shares i.e. capital assets. Therefore, considering the book entries the allegations of the AO do not have sustainable strength. Therefore, Income tax Authorities have fallen into error zone in deeming the loan repayments as an additional sale consideration - in favour of assessee.
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2013 (2) TMI 349
Deduction allowable u/s 10B - assessee is engaged in the activity of trading as well as manufacturing of export of dehydrated onions granted approval of 100% EOU by the Development Commissioner, Kandla Free Trade Zone - Held that:- As in the assessment year under consideration purchase and sale of dehydrated onions was of Rs.11,19,19,308/-. Out of the said total purchases of dehydrated onions of Rs.11,19,19,308/-, the assessee purchased from its group concern dehydrated onions of Rs.10,22,63,149/-. As observed during the assessment proceedings, the AO asked the assessee to furnish explanation that the material being purchased from its group concerns was at market rates but the assessee could not furnish any proof regarding the comparable market rates. There is also no dispute to the fact that the trading activity constituted 58.20% of total sales. The assessee worked out from the said trading activity negative profit (Rs.59,97,840/-). The assessee has shown the net profit from both the activities i.e. trading and manufacturing of Rs.1,46,32,804/-. The AO has stated that if the negative profit as calculated by the assessee on exports of onions which is a trading activity, the net profit on the sale of Rs.9,96,48,019/- that is from manufacturing activity actually performed by the assessee comes to Rs.2,06,30,644/- (net profit of Rs.1,46,42,804 + negative profit of Rs.59,97,840). Thus agreeing with the observation of the AO that the said calculation as given by the assessee has no merit considering that the net profit as per tax audit report for the entire business activity is 6.14% and on the other hand, the profit from actual manufacturing activity will be 20.70%. The assessee has not disputed the fact that the assessee is not maintaining separate books of account and has allocated some of the expenses to the trading activity which the CIT(Appeals) has held that the same should not be allocated to trading activity and be considered for manufacturing activity. Therefore, finding substance in the contention of the DR that when some of the expenses which should not have been allocated to trading and are allocated to manufacturing activity, the profit from manufacturing activity will reduce. There are also certain common expenses like establishment etc. which have not been considered by the CIT(Appeals) for allocation to the manufacturing activity. Considering the facts of the case, while computing profits & gains of eligible business, all the direct as well as indirect expenses have to be considered for computation of profits & gains of eligible activity to claim deduction u/s 10B. If excessive expenditure is considered in respect of activity which is not eligible for deduction u/s 10B, it will be unfair as profits and gains of an activity which is not eligible for deduction will be understated and on the other hand, the profits and gains of eligible activity will be inflated to get more deduction u/s 10B. Thus confirm the action of the AO in working out the deduction allowable to the assessee u/s 10B by reversing the order of CIT(Appeals) - in favour of revenue.
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2013 (2) TMI 348
Re opening of assessment - difference in professional income as shown in the P & L account & TDS certificates - Held that:- Professional receipts as per the profit and loss account were far more than aggregate of professional receipts as per tax deduction at source certificates. Thus it is difficult to understand as to how can anyone form belief, or even a suspicion, that an income has escaped assessment. The income which is offered to tax is clearly more than the income as per the tax deduction at source certificates. It is, therefore, a clear case of non-application on this aspect of the matter and, in any case, the reassessment proceedings have been initiated on the short ground of need for verification of which cannot be a legally sustainable reason for reopening a completed assessment even under section 143(1).In this view of the matter, the very initiation of reassessment proceedings on the facts of this case was devoid of legally sustainable merits. Therefore, quash the reassessment proceedings - the appeal for the assessment year 2005-06 & 2006-07is allowed in the terms indicated above - in favour of assessee.
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2013 (2) TMI 347
Additional Depreciation on plant and machinery - disallowance as assessee additional depreciation as plant and machinery which were acquired in assessment year 2005-06, whereas the installation of the said plant and machinery was completed on 31.1.2006 i.e. in the year under consideration - Held that:- During the year for claiming additional depreciation u/s 32(i)(iia) both the conditions that new machinery or plant has been acquired and installed after 31.3.2005 were required to be fulfilled . Since undisputedly the new machinery or plant in question were not acquired after 31st day of March, 2005, the authorities below were justified in denying the claimed additional depreciation under the said provisions on that basis. Agreeing with the view of the Ld. CIT(A) that the court interprets a law and cannot legislate. The action of the authorities below in this regard is thus upheld. The ground is accordingly rejected.
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2013 (2) TMI 346
Condonation of delay - Period of limitation – Delay of 1 year 8 months 25 days in filling of appeal before Tribunal - Assessee argued that expert person to whom he had assigned the work for filing appeals did not file them in time as he was busy in March ending work – Sickness of assessee’s mother Held that:- The courts view applications relating to lawyer's lapses more leniently than applications relating to litigant's lapses. If the appeals could not be filed in time on account of expert's failure to attend the case, the appellants could not faulted. The sickness of mother was also a contributing factor as the assessee was engaged in attending her as she had come to Ahmedabad to stay in his house. In the circumstances, it was not the case that the assessee was guilty of indolence on his part or responsible for whiling away the time. As decided in case of Perumon Bhagvathy Devaswom (2008 (7) TMI 836 - SUPREME COURT) that sufficient cause should be understood in pragmatic and practical manner. The cause shown by the assessee was genuine and bonafide. The explanation given by him constituted a sufficient cause and the Tribunal ought to have condoned the delay, instead of adopting a pedantic approach – In favour of assessee
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2013 (2) TMI 345
Penalty u/s 272B – Wrong quoting of PAN in TDS return - Whether there was reasonable cause for alleged failure on the part of the assessee Superintendent of Police in wrongly quoting PAN in respect of 196 employees of the department - Held that:- Assessee deducted TDS correctly and revised PAN and filed the revised statement on Form 26G, hence there was sufficient compliance with the provisions of section 139A. There was sufficient cause shown which would be a question of fact in the given facts and circumstances – In favour of assessee
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2013 (2) TMI 344
Disallowance of interest u/s 40A(2)(b) - Excessive or unreasonable payment of expenditure to related parties - Assessee was paying the interest to outsiders at different rates of interest ranging from 12% to 18% P.A - The assessee has paid the rate of interest to the related parties at 18% P.A - Disallowed the interest to the related parties at the rate of 3% per annum – Held that:- The assessee itself has paid interest to outsiders at the rate ranging from 12 to 18% and no reason has been assigned by the CIT(A) while upholding the fair market rate of interest at 15% during the period. The rate of interest at 18% P.A could not be said to be excessive or unreasonable - In favour of assessee Disallowance in account of bad debts u/s 36(1)(vii) – Held that:- Following the decision in case of T.R.F. LTD. (2010 (2) TMI 211 - SUPREME COURT) that it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - In favour of assessee Unaccounted advance – Search & Seizure – Document found during search shows that assessee has lent some advance money to employee for marriage and construction of house – Held that:- Advance given by assessee could not be controverted by assessee. Employee of the assessee-firm and the assessee was given specific opportunity in this regard by the AO during the course of assessment proceedings. The assessee could not prove with evidence that the amount pertained to the later A.Y 2007-2008. Employee has signed voucher of the assessee-firm on revenue stamp. Addition confirmed - In favour of revenue Depreciation u/s 32- Claim of depreciation was not made in the original return of income file u/s 139 – Assessee claim depreciation u/s 153A – Held that:- Following the decision in case of Eversmile Construction Co.Pvt.Ltd. (2011 (8) TMI 495 - ITAT MUMBAI) that the AO has to compute total income of the assessee on the basis of the return filed and there was no scope for arguing that the assessee has been rendered powerless to even lodge a claim in respect of which deduction was not allowed earlier. As the Revenue has not doubted the genuineness of the claim of the assessee for allowance of the depreciation - In favour of the assessee Disallowance u/s 40(a)(ia) - Delay in making payment of TDS – Held that:- The computation of income for the earlier A.Y. 2005-2006 shows that, the assessee has added back the amount of Rs. 5,13,093/- as income for the A.Y.2005-2006, and therefore the deduction on payment basis should have been allowed during the relevant A.Y. 2006-2007. Following the decision in case of Eversmile Construction Co.Pvt.Ltd. (2011 (8) TMI 495 - ITAT MUMBAI) applies to the issue. The claim of deduction of Rs. 5,13,093/- on actual payment basis for the relevant A.Y. is allowable subject to verification by the AO. Remand back to A.O. Addition on account of deficit in stock - Search proceedings – Held that:- Overall yield of the assessee is better than the earlier years and likewise the GP and NP rate were also better than the earlier years. There is a force in the assessee submission that no actual weighment was done and it was only way of ad hoc measurement of quantity of stock on the date of search. The difference in the value of stock at Rs. 63,274/- is only margin. In favour of assessee Addition on the basis of noting found in loose paper diary – Search & Seizure – Unaccounted sale – Reassessment u/s 153A - The assessee on these papers has mentioned the figure of Rs.17.25 lakhs as “tuvar dal” and Rs.5.69 lakhs as “churi dal” - The assessee could not explain that to whom these were sold and where the entries were made in its accounts – Held that:- Merely because no question on this issue was asked at the time of search proceedings and that the overall yield, GP and NP rates of the assessee is higher than the earlier assessment year, is not ground to say that no addition could be made. The sale figure of Rs. 17.25 lakhs and Rs. 5.69 lakhs making the total of Rs. 22.94 lakhs seems to be unaccounted sales for which the profit element as well as investment element is addable as income of the assessee. We find that it would not be reasonable to add the entire amount of Rs.22.94 lakhs taking the unaccounted sales as undisclosed income of the assessee. In this view of the matter, we hold that it shall be reasonable to add the net profit element at the rate of 5% of the total sale and also 5% on account of investment element in the unaccounted sales of dal totaling to Rs.22.94 lakhs, and accordingly, we sustain the addition of Rs.2.30 lakhs representing the net profit – Partly allowed in favour of assessee
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Customs
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2013 (2) TMI 342
Waiver of pre-deposit - Stay of recovery - Duty, interest and penalty - Undervaluing the goods - Suppression of value of goods - Valuation under import of goods - Revenue argued that the importer and supplier are related person and the assessee had undervalued the good - Revenue is demanding duty at the price at which the goods are being traded in India after deducting the sales tax - Held that:- Duty is being demanded on the basis of the sale price of traded goods in India without taking into consideration of the profit margin. The assessee had made out prima facie a strong case in their favour. Stay granted and waive pre-deposit
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2013 (2) TMI 341
Revision u/s 130 - Show-cause notice u/s 28 - Assessee has exported a consignment of iron ore on payment of export duty @ Rs.50/- per M.T. by availing the benefit of Notification No.62/2007 Cus. Dt. 03/05/2007 - Assessment of the relevant shipping bill was provisional against execution of a bond and production of a bank guarantee by the exporter - A sample of the goods drawn for analysis by the Chemical Examiner was reported to have contained 62.10 % of Fe by weight - As iron ore containing more than 62% Fe by weight attracted the normal rate of export duty @ Rs.300/- per M.T. - The assessment was finalized on this basis without grant of the benefit of the above Notification - show-cause notice was issued to the respondent demanding differential duty of Rs.55 lakhs - A duplicate sample of the goods was sent to the Central Revenues Control Laboratory (CRCL), for re-testing for iron content - The CRCL's report showed Fe content to be 59.4% and moisture content to be 0.32% - Commissioner dropped the proposals raised in the show-cause notice Held that:- Following the decision in case of JAIN SHUDH VANASPATI LTD.(1996 (8) TMI 108 - SUPREME COURT OF INDIA) show-cause notice u/s 28 could have been issued unless and until the order passed under Section 47 had been first revised under Section 130 of the Act. The issuance of the show-cause notice under Section 28 of the Customs Act was in order and the order passed in adjudication thereof by the learned Commissioner is also in order. Decides against revenue
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Corporate Laws
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2013 (2) TMI 340
Maintainability of Suit of recovery on non obtaining of permission of the Union Government under Section 86 of the CPC - Recovery of dues together with interest based on a contract for carrying out the work of interior decoration at certain offices of the Appellant - Held that:- Section 86 of the CPC applies to a suit instituted against a corporate body which carries on trading or business activities so long as the ownership of the share capital vests in a foreign State. Where section 84 confers a right on a foreign State to sue, sec 86(1) in substance imposes a liability on foreign States to be sued, though this liability is circumscribed and safeguarded by the limitations prescribed by it. That is the effect of s. 86(1) In deciding as to whether a particular foreign State is a foreign State for the purpose of Section 86 recognition de jure or de facto by the Union Government had the same consequence. Foreign companies carry on business in India. They bring investment, finance and trade. Indian companies carry on business abroad, taking with them investment and our enormous human resource base. The contractual and commercial obligations which they assume are governed by the discipline of the law. In their commercial and business operations such corporate entities cannot claim an immunity to civil actions. Qatar Airways carries on commercial airline operations. It brings and takes passengers and cargo to and from India. It operates offices, engages employees, solicits business and carries on activities of a commercial airline here, as abroad. The claim is founded on a purely contractual and commercial dealing between the Appellant and the Respondent. The Appellant is not a foreign State within the meaning of sub- Section (1) of Section 86. It has a distinct legal personality of its own which finds recognition in the contractual relationships into which it enters. Those contractual relationships occasioned by its business activities in India would be subject to the jurisdiction of a competent court in this country. For these reasons, the learned Single Judge was not in any error in holding that the suit was maintainable. The Union Government has been correct in its assertion that the question of permission of the Union Government did not arise and, as urged by ASG, that the provisions of Section 86 are not attracted. Appeal stand dismissed. On the request of Counsel appearing on behalf of the Appellant and in order to enable the Appellant to seek recourse to its remedies against this judgment continue the stay granted on 8 August 2012 for a further period of four weeks from today. In view of the dismissal of the Appeal, the Notice of Motion taken out in appeal does not survive.
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2013 (2) TMI 339
Winding up petition - Petitioner a company registered in Hong Kong was supplying to the Respondent computer peripherals and digital cameras payments were permitted on D/A basis within 90 days from the date of bill of lading - as on 28th February 2005 a sum of USD 59,743.90 (principal + interest) was outstanding - Held that:- In the absence of Respondent denying its liability which is reflected in its audited balance sheet as on 31st March 2006, the entry in the books of accounts of the Respondent that the aforementioned amounts were outstanding to the Petitioner should be taken to be acknowledgment of the debt. In the above circumstances, this Court is satisfied that the Respondent is unable to liquidate its debts within the meaning of Section 433 (2) of the Act. Accordingly, the petition is admitted. The OL is appointed as PL of the Respondent directed to take over the assets of the Respondent together with its books of accounts and other relevant records as may be available at the registered office of the Respondent. The OL is permitted to seek police assistance where required. The OL will file a status report in this Court within four weeks & also confirm that the interim order passed by the Court on 27th April 2004, and made absolute on 22nd November 2011, restraining the Respondent ‘from selling, alienating, transferring or parting with the immovable assets without the leave of the Court’, has been duly complied with. The OL will take necessary steps to ensure compliance with this direction by the Director of the Respondent. The Petitioner is directed to effect publication of the citation of this petition in the official gazette, ‘Statesman’ and ‘Danik Jagran’ in terms of Rule 24 of the Rules.The Directors of the Respondent are directed to strictly comply with the requirements of Section 454 of the Act and Rule 130 of the Rules and furnish to the OL a statement of affairs in the prescribed form verified by an affidavit within a period of 21 days from today.
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PMLA
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2013 (2) TMI 343
Attachment of Property – whether the order of provisionally attachment passed by the Enforcement Director ceases to have effect after expiry of period of 150 days – petitioner has objected on the ground that the time period of 150 days as laid down in sub Section (3) of Section 5 of the. At, 2002 has since lapsed and, as such, the complaint cannot be adjudicated upon by the Adjudicating Authority – Held that:- The principle is rested upon a public policy enunciated in the maxim 'actus curiae neminem gravabit”. This maxim is founded upon justice and good sense and also affords safe and certain guide for the administration of law. By virtue of the intervention of a Court, which intended to examine the veracity of the claim made in the case, no party can be construed to have been prejudice by the delay that occasioned in testing the question by the Court. The principle laid down shall also be applicable in the facts of the present case. The delay caused on account of the proceedings having been stalled on the statement made by the respondent which he later on sought to rectify by moving an application for proponing of the date of hearing, cannot be used to prejudice the respondents. Thus, the period from the date when the respondent gave an undertaking before this Court i.e. 07.06.2011 till the passing of the order shall have to be excluded from the stipulated time period of 150 days as provided under the Act, 2002 for the purpose of sub Section (3) of Section 5 of the Act, 2002 – Petitions disposed of with liberty to the petitioner to file his reply/response.
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Service Tax
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2013 (2) TMI 359
Penalties u/s 76, 77 and 78 of Finance Act, 1994 - Non discharge of Service Tax liability on advance & commission received as mandap keepers - Held that:- The appellant is a registered mandap keeper there could be a situation where the appellant could be under a bonafide belief as to not to discharge the Service Tax liability on the advance amount received, during the material period as the issue of Service Tax liability under the Mandap Keeper services also was in litigation finally settled by Hon'ble Apex Court in the case of Tamilnadu Kalyana Mandapam Association (2004 (4) TMI 1 - SUPREME COURT OF INDIA). As the appellant had discharged the Service Tax liability on being pointed out & is not contesting the Service Tax liability and interest thereof the lower authorities should not have issued the show cause notice as provisions of Section 73 (3) may apply in this case. See Mangal Karyalaya Pvt.Ltd (2007 (4) TMI 40 - CESTAT, MUMBAI) - in favour of the appellant. This is fit case for invocation of provisions of Section 80 of Finance Act, 1994 for setting aside the penalties imposed on the appellant under Sections 76, 77 & 78 of Finance Act, 1994, as the appellant could be under a bonafide belief that they need not discharge the Service Tax on the amount of advance received by them - set aside the penalties imposed under Sections 76, 77 & 78 of Finance Act, 1994.
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2013 (2) TMI 358
Penalties u/s 76, 77 and 78 of Finance Act, 1994 - Non discharge of Service Tax liability on advance & commission received as mandap keepers - Held that:- The appellant is a registered mandap keeper there could be a situation where the appellant could be under a bonafide belief as to not to discharge the Service Tax liability on the advance amount received, during the material period as the issue of Service Tax liability under the Mandap Keeper services also was in litigation finally settled by Hon'ble Apex Court in the case of Tamilnadu Kalyana Mandapam Association (2004 (4) TMI 1 - SUPREME COURT OF INDIA). As the appellant had discharged the Service Tax liability on being pointed out & is not contesting the Service Tax liability and interest thereof the lower authorities should not have issued the show cause notice as provisions of Section 73 (3) may apply in this case. See Mangal Karyalaya Pvt.Ltd (2007 (4) TMI 40 - CESTAT, MUMBAI) - in favour of the appellant. This is fit case for invocation of provisions of Section 80 of Finance Act, 1994 for setting aside the penalties imposed on the appellant under Sections 76, 77 & 78 of Finance Act, 1994, as the appellant could be under a bonafide belief that they need not discharge the Service Tax on the amount of advance received by them - set aside the penalties imposed under Sections 76, 77 & 78 of Finance Act, 1994.
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2013 (2) TMI 357
Ropeway services - whether will come within the meaning of ‘tour’ and accordingly, service tax is payable thereon - whether the assessee was a tour operator or not? - Held that:- Tribunal has held that assessee is not a tour operator as assessee provides transportation facility from one of its establishments to another establishment of the assessee. This facility is not the main business of the assessee, but is an ancillary to its main business of providing ropeway service. By providing the facility of transportation from Mansa Devi to Chandi Devi and vice versa, assessee did not carry out tour operation. It facilitated journey of its clients from one place to the other as is being done by the passenger transporters while carrying out their transportation business. No scope of interference required - no service tax liability arises.
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2013 (2) TMI 356
Constitutional validity of Section 67 - Expenses and salary paid to the Security Guards by Security Agency – Petitioner’s Challenge is against fixation of the value of ‘taxable service’ under Section 67, reckoning the ‘Gross amount, without segregating the expenses towards salary and statutory payments under the ESI/EPF, which constitute the major portion of the total figure involved - Contention of the petitioner is that they are virtually ‘Man Power Recruiting Agents’ and that their service should be valued on the quantum of the commission they receive – Held that:- How the tax has to be realised, what should be the manner of imposition, what should be the extent of liability to be mulcted upon, who are the persons/class/individuals to be brought within the service tax net etc., are matters for the Government to decide, as a measure of policy. It is in furtherance of the said policy, that the law has been enacted by the Parliament by virtue of the power conferred upon it as per the residual entry, i.e., Entry 97 of List I of the Seventh Schedule. As observed in T.N. Kalyana Mandapam Assn. v. Union of India and Others[2004 (4) TMI 1 - SUPREME COURT OF INDIA] it is well settled that the ‘measure of taxation’ cannot affect the nature of taxation and therefore, the fact that service tax is levied as a percentage of the gross charges for catering, cannot alter or affect the legislative competence of the Parliament in the matter. Further Man Power Recruiting Agency service is a separate entity which was brought within the Service Tax Net w.e.f. 7-7-1997 as per the Finance Act, 1997, whereas the Security Agency Service was brought in for the first time only w.e.f. 16-10-1998, as per the Finance Act, 1998. Both the above terms have been separately defined under Section 65 – In the case of the latter, the Security Agency is the ‘Employer’ of the security personnel deployed to cater to the requirements of the service receivers, for which the service receivers effect the payment to the service providers, as per the terms of the contract – The ‘Master and Servant relationship is between the Security Agency and the Security Personnel engaged and not between the Service Receivers and the Security Personnel. The service providers are very much authorised and entitled to pass on the liability towards salary and statutory payments to the ‘Service Receivers’ by raising the Bills including such amounts payable as Service tax. The role of the Security Agencies like the petitioners is only to act as ‘agents’ in the matter of collection of Service tax. - Decided in favor of revenue.
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2013 (2) TMI 355
Supply of water supply to SEZ – It is claimed that inasmuch as the State Government is committed to provide water supply to SEZ, the State Government of Rajasthan should be treated as either a developer of SEZ or a contractor. Once the State Government of Rajasthan is treated as a developer or a contractor, the applicant becomes a sub-contractor and therefore, the activities of the sub-contractor in terms of agreement with a Department of a State should be treated as supply of services to SEZ developer and therefore, the services rendered by them are exempted. – Held that:- Government of Rajasthan could not be treated as a developer of SEZ or a contractor. Therefore, the applicant’s activities cannot be treated, prima facie, as service rendered to any SEZ developer. On the aspect of time-bar, basis for availing exemption by them was their claimed belief that the Government of Rajasthan was a developer of SEZ or a contractor which cannot be treated as bona fide – No financial hardships pleaded - Appellant was directed to deposit an amount of Rs. 30 lakhs within a period of six weeks report compliance to Assistant Registrar. The Assistant Registrar to report to the Bench .Subject to compliance, there shall be waiver of pre-deposit of balance of dues as per the impugned order and stay of recovery thereof till the disposal of the appeal.
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Central Excise
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2013 (2) TMI 338
Demand against appellant on the basis of record of the 3rd party, when the writer of 3rd party was not allowed to be cross-examined - Held that:- 3rd party is the Weigh Bridge. The appellant is Noticee No.1 before the Deputy Commissioner, Central Excise, whereas the Mill is Noticee No.2. The Deputy Commissioner has taken note of the statement of Shri Sandeep Jain, Director of the Appellant admitting that vehicle Nos. PJL - 3686 and PBL – 2541 are owned by them and are used for transportation of steel ingots to their buyers. It has been recorded that he was evasive to the question as to how their vehicle was weighed at Weigh Bridge and tried to mislead the Department that slag/waste must have been weighed. The Deputy Commissioner returned a finding that slag/waste carries no commercial value, therefore, he concluded that entries of weighment recorded in Weigh Bridge are of transaction between the Mill and the appellant. After recording such finding, the Deputy Commissioner dealt with the plea of Mill in respect of cross-examination of employee of Weigh Bridge. The appellant has not sought the cross-examination of the employee of Weigh Bridge, as the appellant has never disputed the correctness of the record of Weigh Bridge, which is apparent from the findings recorded by the Deputy Commissioner based upon the statement of Shri Sandeep Jain. Therefore, question No.(b) does not arise for consideration. Entitlement to benefit of cum-duty - Held that:- The entitlement to the benefit of cum-duty is dependent upon the bona fide payment of duty. Since such fact has not been asserted or discussed either before the Deputy Commissioner or before the Tribunal, the appellant cannot be permitted to raise a question of law, which is based upon a fact. Entitlement to reduced amount of penalty as per sec 11AC - Held that:- As Tribunal has not ordered payment of penalty within a period of 30 days. The appellant has not deposited penalty within 30 days from the date of order of the Adjudicating Authority. Consequently, the appellant is not entitled to reduced amount of penalty. Contention against penalty - no specific role was attributed to the appellant in respect of clandestine removal of excisable goods in the SCN - Held that:- The appellant was associated during the course of investigation and made a statement on 24.01.2002, wherein he has admitted that truck No.PB 10 U 9913 is owned by him and has been weighed at the Weigh Bridge. It is not the stand of the appellant that he is not connected with the affairs of the firm or was not actively working for the firm. The finding recorded shows that in fact the appellant was in the know of the entire things and was actively associated with the working of the firm. He was served with the show cause notice. Though the reply of the appellant was not on record, but the orders passed by the Deputy Commissioner and the Tribunal leave no manner of active role of the appellant in clandestine removal of excisable goods. Thus, he has been rightly made liable for payment of penalty.
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2013 (2) TMI 337
CENVAT Credit availed on goods which were short received from the job worker - Short payment of Excise Duty - Invoking extended period of limitation - Held that:- There is no dispute regarding job worker is engaged in melting of copper cathode and after melting such copper cathode, the process of manufacturing includes making of copper strips. Admittedly, there is a loss which is approx. 5% of the quantity of goods sent to job workers. Both the lower authorities have not accepted this fact and held that the provisions of Rule of 4(5)(a) of CENVAT Credit Rules envisages the receipt of entire goods back from the job workers. The said findings are in consonance with the law as has been laid down in Bharat Radiators Ltd (2002 (3) TMI 685 - CEGAT, MUMBAI), Vema Metal & Conductors Ltd (2007 (3) TMI 444 - CESTAT, NEW DELHI), Tata Motors Ltd (2010 (10) TMI 458 - CESTAT, KOLKATA). I find that the judgment of the Tribunal in the case of Tata Motors Ltd (supra) wherein held that the credit cannot be denied in respect of the process loss at the hand of job worker. In view of the above we find as the Revenue has not denied the fact that the quantity which was found short on account of processing hence the demand is not sustainable hence set aside. Also see CMC (India) [2010 (1) TMI 485 - GUJARAT HIGH COURT] - in favour of assessee.
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2013 (2) TMI 336
CENVAT Credit availed on fake documents - reversal of CENVAT Credit demand and imposed penalties - Held that:- As during the period July 2003 to December 2003, when the respondent-assessee took CENVAT Credit there is no adverse finding indicating that the respondent had not filed RT-12 return. Show Cause Notice was issued on 20.06.2008. It is beyond the period of limitation demand raised need to be set aside - in favour of assessee.
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2013 (2) TMI 335
Non compliance of making predeposit - CENVAT credit in question had been taken on structural materials which were partly used in the construction of civil foundation for a Kiln and partly used to fabricate structural support to capital goods - Held that:- The appellant request for modification of the direction for pre-deposit was also considered by the appellate authority which rejected their plea of undue hardships for want of documentary evidence. The appellate authority appears to have, by and large, followed the principles of natural justice also. Nevertheless, for the ends of justice, one more opportunity to the appellant to make the requisite pre-deposit - appeal allowed by way of remand with a direction pre-deposit 50% of the disputed CENVAT credit within six weeks from the date of receipt of a certified copy of this order and report compliance.
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2013 (2) TMI 334
CENVAT credit on slow-moving raw-materials written off their books of accounts - demand of amount equal to the CENVAT credit taken thereon in terms of Rule 3(5B) of the CCR 2004 - Held that:- Documentary materials produced by the appellant indicate that the party had categorically stated before the original authority that they had not written off their books of accounts any quantity/value of slow moving stock and that the confusion had arisen on account of a clerical mistake whereby a wrong account head happened to be entered in the inventory account. Apellant's letter dated 28.06.2010 addressed to the Central Excise Range Officer indicates that it was accompanied by certain details of accounts in the form of Journal Voucher, summary of Journal Vouchers etc. & were also available to the original authority but not considered by it. One of the grounds of the appeal is clearly to the effect that the appellant had taken back the amount credited, in the financial year 2009-10. A copy of the relevant document showing reversal of CENVAT credit appears to have been enclosed to the said memorandum of appeal - the appellate Commissioner's order suffers from non-application of mind and hence deserves to be set aside - documentary evidence in support thereof need to be examined by the original authority - in favour of assessee by way of remand.
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2013 (2) TMI 333
Duty demand on Bagasse - Held that:- Bagasse is classified under sub-heading 2303 20 00 of Central Excise Tariff Act. Neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners are not liable to duty either by payment or by reversal in respect of bagasse sold by the petitioner. As the petitioners have paid the entire duty and interest under protest, the entire deposited amount shall returned to them. Impugned Circular dated 28.10.2009, issued by the Central Board of Excise and Customs, the Circular dated 3.10.2009 issued by the Central Excise, U.P., Lucknow and demand notice dated 24/27.9.2010 issued by the Joint Commissioner, Customs Central Excise and Service Tax are hereby quashed.
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CST, VAT & Sales Tax
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2013 (2) TMI 360
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, the larger relief sought for to quash the impugned goods and vehicle detention notice is declined and a direction is issued to the respondents to release the goods forthwith if the tax is paid either voluntarily or under protest. Composition fee - Held that:- The authorities will proceed in accordance with the provisions of Section 72 of the TNVAT Act, 2006 for which the authority is entitled to seek appropriate security from the petitioner, an outside state dealer by way of bank guarantee or bond at the discretion of the authority. The petitioner is entitled to file a revision under Section 54 of the TNVAT ACT, 2006, if required.
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Indian Laws
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2013 (2) TMI 354
Condonation of delay in filing application for leave to appeal - Held that:- Delay in this case is of 465 days, first delay is of 118 days when the appeal was originally filed and for this delay it is claimed that the advocate of the applicant at the trial court told the applicant that limitation for filing an appeal against acquittal is 180 days while it was 60 days. It is claimed that in this way there had been a delay of 118 days. The second delay is after filing of the appeal and rasing of the objections. Thereafter the delay is quite considerable i.e. of 347 days and surprisingly no reason is given as to how this delay of 347 days occurred. It is a case where virtually no cause is stated to explain the delay and there is nothing before this court to consider for deciding if the same is sufficient cause or not. As stricter approach is to be there in this case, because the delay is inordinate no reason worth the name on the record given by the applicant for holding that there had been sufficient cause for the delay - no ground to condone the delay in filing the application for leave to appeal.
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