TMI Tax Updates - e-Newsletter
February 20, 2013

Case Laws in this Newsletter:

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

Articles

1. CONDITION PRECEDENT TO INVOKE A BLOCK ASSESSMENT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government again Appeals to the Bank Employees not to join the Strike on February 20-21, 2013

Notifications

Customs

1. 05 / 2013 - dated 18-2-2013 - Cus

Post Export EPCG Duty Credit Scrip Scheme notified

2. 04/2013 - dated 14-2-2013 - Cus

Regarding inclusion of Visakhapatnam Airport in the list of ports permitted for exports and imports under Export Promotion Schemes-Amends various Notifications

3. 01/2013 - dated 8-2-2013 - Cus (NT)

Appointment of Public Custom Bonded Warehouse

Indian Laws

4. S.O.333(E) - dated 7-2-2013 - Indian Law

Additional charge of the post of Member, Securities Appellate Tribunal (SAT) to Shri P. K. Malhotra

5. Conf. 5 (19)/2008/TN/23260 - dated 22-1-2013 - Indian Law

The Chairman, Central Board of Trustees, (EPF) hereby constitutes the Regional Committee for the State of Tamil Nadu

Highlights / Catch Notes

Income Tax

• Court Rules Unaccounted Cash Can Offset Undisclosed Payments Against Higher Gross Profit Additions.

  Case-Laws - HC : Unaccounted cash - Once separate addition is made on account of higher gross profit, the undisclosed payment made by the assessee outside the books of account should be telescoped against the unaccounted income - HC
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• Use of Machines Not Considered Technical Services for Tax Purposes.

  Case-Laws - AT : Technical services - if a standard facility is provided through a usage of machine or technology, it cannot be termed as rendering of technical services. - AT
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• Company's Expense Allocation to Holding Firm Not Disallowable Despite Lack of Strict Formula, Per Section 40A(2)(b.

  Case-Laws - AT : Common facility charges being 20% paid to its holding company - mere fact that the allocation of expenses has not been made on the basis of rigid and detailed formula does not by itself make the expense disallowable under section 40A(2)(b) - AT
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• High Court Upholds CIT Decision: No Second Application for Interest Waiver u/s 220(2A) Allowed.

  Case-Laws - HC : Reduction or waiver of Interest u/s 220(2A) - First application was considered by CIT and rejected - there was no scope for any further application for the very same relief – No waiver - HC
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• Limitation Period Expiry Doesn't Extinguish Debt for Section 41(1) Income Tax Act; No Addition for Liability Cessation.

  Case-Laws - HC : Addition u/s 41(1) – cessation of liability - expiry of the period of limitation prescribed under the Limitation Act could not extinguish the debt - No addition - HC
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• Valuation substitution u/s 50C doesn't imply income concealment or inaccurate details, no penalty warranted.

  Case-Laws - AT : Penalty for concealment – Just because there is a substitution of valuation u/s 50C as the fair value, it cannot be said that there was any concealment of income or furnishing of inaccurate particulars - AT
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Indian Laws

• Government Urges Bank Employees to Avoid February Strike, Aims to Maintain Banking Services and Economic Stability.

  News : Government again Appeals to the Bank Employees not to join the Strike on February 20-21, 2013
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Service Tax

• Section 83 of Finance Act, 1994 confirms Section 11BB's application to service tax refunds under Notification No. 41/07.

  Case-Laws - AT : Refund - Notification No. 41/07 - Provisions of Section 83 of Finance Act, 1994 clearly provide that provisions of Section 11BB are made applicable to service tax matters - AT
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• Records Management Excluded from Service Tax on Storage and Warehousing of Goods Category per Section.

  Case-Laws - AT : Storage and warehousing Service – management of the records such as discharged cheques, vouchers, books of accounts, cannot be considered as storage and warehousing of ‘goods’ - AT
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Central Excise

• Cenvat Credit for Education Cess Allowed: Rule 3(7)(a) Non-Obstante Clause Doesn't Preclude Credit Claim u/s 3.

  Case-Laws - AT : Denial of Cenvat credit of Education cess - non-obstante clause in Rule 3(7)(a) of CCR, 2004 is applicable in respect of BED paid u/s 3. - Credit allowed - AT
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• DTA Clearances for Copper Alloys and Strips Allowed Up to 90% of FOB Export Value Under Policy 6.8(a.

  Case-Laws - AT : As per the provisions of para 6.8 (a) of the Foreign Trade Policy, the DTA clearances of Copper Alloys Coin Blanks and Copper Zinc Nickel Strips can be made upto 90% of the FOB value of its export. - AT
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• Cenvat Credit Allowed on Exempted Goods if Duty on Final Product is Accepted by Revenue Authorities.

  Case-Laws - AT : Cenvat Credit - Payment of duty on exempted goods - once the duty on final product has been accepted by the Revenue, in such a case the credit cannot be denied. - AT
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Case Laws:

• Income Tax

• 2013 (2) TMI 438
  Reduction of the gross profit rate – AO applied the gross profit rate at 9.54% and assessee declared it at 8.5% - Held that:- the previous history of the assessee was indicative that total turnover was sustained and that whenever there was increase in the sale there was a fall in the gross profit rate – Accordingly application of 8.50% instead of 9.64% of the G.P. rate directed – Against the revenue. Discrepancy in the cash book and disallowance of brokerage, travelling expense and HRA – As decided in CIT vs. Banvari Lal Bansidhar when gross profit rate is applied that would take care of everything and there was no need for the AO to make scrutiny of the account incurred on the purchase made by the assessee – these expenses should be allowed – Against the revenue. Unaccounted cash – AO found that payment of Rs.80,000/-, was not entered into the books of account and accordingly treated as unaccounted payment and addition was accordingly made - Held that:- Once separate addition is made on account of higher gross profit, the undisclosed payment made by the assessee outside the books of account should be telescoped against the unaccounted income earned on account of higher gross profit rate – No addition should be made - Against the revenue.

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• 2013 (2) TMI 431
  India Germany DTAA - payment made to Pehla Testing Laboratory (Pehla) Germany towards type tests - whether the payment made to Lab in Germany, for carrying out certain tests on circuit breakers manufactured by assessee for the purpose of certification, so as to meet the international standard, falls within the meaning of fees for technical services and is taxable within the meaning of section 9(1)(vii)? - Held that:- Assessee before the AO after drawing his attention to the flyer received from the Pehla had categorically pointed out that the standard service provided by the PTL is without any human intervention. This factor has not been disputed by him. Even before the CIT (A), this contention has been deposed again by the assessee. None of the authorities have either rebutted this contention of assessee, or has given any adverse remark or findings that there was any human intervention in the process. CIT (A) as well as AO have gone merely by the fact that such a type testing services provided by the PTL is highly sophisticated and technical, and it cannot be considered as non technical. The CIT (DR) had argued that for observing the process, preparing the report, issuance of certificate and for monitoring of machines, human involvement is definitely there, therefore, it cannot be held that there is no human intervention. This cannot be the criteria for understanding the term "technical services" as contemplated in Explanation 2 to section 9(1)(vii). If any person delivers any technical skills or services or make available any such services through aid of any machine, equipment or any kind of technology, then such a rendering of services can be inferred as "technical services". In such a situation there is a constant human endeavour and the involvement of the human interface. On the contrary, if any technology or machine developed by human and put to operation automatically, wherein it operates without any much of human interface or intervention, then usage of such technology cannot per se be held as rendering of "technical services" by human skills. It is obvious that in such a situation some human involvement could be there but it is not a constant endeavour of the human in the process. Merely because certificates have been provided by the humans after a test is carried out in a Laboratory automatically by the machines, it cannot be held that services have been provided through the human skills. Therefore, the contention raised by the learned CIT (DR) does not appeal much . Thus if a standard facility is provided through a usage of machine or technology, it cannot be termed as rendering of technical services. Once in this case it has not been disputed that there is not much of the human involvement for carrying out the tests of circuit breakers in the Laboratory and it is mostly done by machines and is a standard facility, it cannot be held that Pehla Testing Laboratory is rendering any kind of technical services to assessee. Thus to hold that payment made by assessee to the PTL in Germany is not in consideration for rendering of any kind of "technical services" either in the nature of managerial or technical or consultancy services. Therefore, it does not fall within the ambit of section 9(1)(vii) - in favour of assessee.

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• 2013 (2) TMI 430
  Valuation of two plots sold - Held that:- CIT (Appeals) as also ITAT were fully justified in not placing any reliance on the Inspector's report and by describing it only as an opinion without any material evidence to back the same. Consequently, the Tribunal was justified in adopting the only other values that were available to it and those were the circle rates of the two localities at the time of the sales of the said plots. Going by the circle rates, the Tribunal has concluded that no inference was called for in respect of the plot at Radhey Shyam Park at Rs.2,900/- per sq. yd., whereas, the value of the plot at Rajinder Nagar Industrial Area was to be re-calculated at the rate of Rs.2,500/- per sq. yd. No substantial question of law arises for consideration.

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• 2013 (2) TMI 429
  Credit of TDS allowed proportionally - disallowance as appellant has failed to correlate the job income returned vis-à-vis the vendor cost/job order cost - CIT restricted the TDS credit to the extent of the revenue credited to the profit and loss account over the receipt as per the TDS certificate - Held that:- Prescription of section 199 mandates allowing of credit for TDS in the year in which the income on which such tax deducted, is offered for taxation . As the assessee-offered the entire amount to tax in the instant year there is no justification in allowing only the proportionate part of the tax deducted at source. As the authorities below have followed the revision order of CIT for assessment year 2003-04 while taking the view that the credit will be given for TDS only to the extent of the amount credited in P&L account since, the view taken in assessment year 2003-04 is reversed by the Tribunal, set aside the order of CIT(A) and allow Ground taken by the assessee - in favour of assessee. Adhoc disallowance of common facility charges being 20% paid to its holding company - Held that:- AO has made no effort to demonstrate as to what would be fair market value of services and proceeded to disallow the same on adhoc basis as overall percentage of expenditure incurred. The disallowance in the present case is thus based on quantum of expenditure incurred rather than the fair market value of services for which expenditure is incurred. This approach, is contrary to the scheme of the Company. As decided in Indo Saudi Travel Services P. Ltd.,[2008 (8) TMI 208 - BOMBAY HIGH COURT], the legal proposition that payment to a sister concern cannot be disallowed under section 40A(2)(b) of the Act unless tax avoidance motive is established and as in the present case DR does not dispute that both the companies i.e. the assessee and parent company are taxed at the same rate and have sufficient taxable profits. Thus the mere fact that the allocation of expenses has not been made on the basis of rigid and detailed formula does not by itself make the expense disallowable under section 40A(2)(b) thus the impugned disallowance was indeed uncalled for on the facts of this case - in favour of assessee.

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• 2013 (2) TMI 428
  Reduction or waiver of Interest - waiver of interest to the extent of 50% - Held that:- petitioner has various assets in her name and also has many income there from, the Commissioner has not satisfied that the petitioner was eligible for the full waiver. Such exercise of discretionary power of the Commissioner cannot said to be perverse warranting interference in a proceedings under Article 226 of the Constitution of India – There waiver up to 50 % allowed – However amount due shall be permitted to be paid in five equal monthly instalments –Accordingly writ petition disposed.

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• 2013 (2) TMI 427
  Reduction or waiver of Interest - Assessee challenges order refusing for waiver under Section 220 (2A) - Assessee contended that his case is fit for consideration under Section 220 (2A). – Held that:- Second application of assessee was also rejected for non-co-operation evidenced by default in making payment - It was after two unsuccessful attempts that the assessee again approached the CIT which was again rejected on the ground of non co-operation - Power conferred under Section 220 (2A) is not a power which could be invoked in a recurring manner on every change in circumstance – The first application having been considered by the competent authority and rejected; there was no scope for any further application for the very same relief – No waiver allowed – Against the assessee.

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• 2013 (2) TMI 426
  Agency commission to foreign agent – Held that:- When the factum of actual receipt of sale proceeds to the extent of net invoice amount is established beyond any doubt, there is no justification in overlooking upon those speaking facts on the technical ground that the assessee has claimed the DEPB benefit on the gross amount of the invoice. The DEPB claim was made by the assessee on the basis of permission granted by the RBI and that has nothing to do with the actual amount of export sales proceeds received by the assessee in the form of convertible foreign exchange - Assessee not responsible for an additional income – Against the revenue. Addition u/s 41(1) – cessation of liability - AO required the assessee to furnish confirmation from the creditors with their complete details – Assessee could not satisfy the AO on this issue – AO invoked Section 41(1) – Held that:- Remission has to be granted by the creditor – Unilateral act on the part of the debtor cannot bring about a cessation of his liability - cessation of the liability may occur either by reason of the operation of law, i.e. on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability, or a contract between the parties, or by discharge of the debt – Assessee has shown the said amount as its outstanding liability in the balance-sheet if the revenue wanted the tax amount invoking Section 41(1) of the Act, onus was on the revenue to bring some positive material – Further in the case of Sugauli Sugar Works (P.) Ltd. [1999 (2) TMI 5 - SUPREME COURT] it was held that the principle that expiry of the period of limitation prescribed under the Limitation Act could not extinguish the debt but it would only prevent the creditor from enforcing the debt, has been well settled– Against the revenue.

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• 2013 (2) TMI 425
  Re-opening u/s 147 – Reopening was made after four years from the end of the impugned assessment year despite the original assessment having been completed under Section 143(3) of the Act – Held that:- Re-assessment proceedings initiated were valid, since assessee had failed or not disclosed the facts necessary for the assessment fully and truly before the AO in respect of its claim for deduction under Section 80-IA of the Act and in respect of its claim for expenditure incurred in promoting MRF Pace Foundation – Against the assessee. Disallowance of expenditure incurred in MRF Pace Foundation – Held that:- Expenditure incurred for the said Foundation for training individuals in cricket game could not be held as a business activity of the assessee and therefore, the claim for such allowance was not allowable under Section 37 of the Act - Against the assessee. Disallowance under Section 14A – Held that:- As held in Godrej & Boyce Mfg. Co. Ltd v. DCIT[2010 (8) TMI 77 - BOMBAY HIGH COURT] that Rule 8D is applicable from assessment year 2008-09 – Further In the case of CIT v. Hero Cycles[2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT ] it was held that it could not be taken as a rule that some expenditure was always incurred in respect of the exempt income earned – In this case assessee itself had made a disallowance of Rs. 66,312/- - It can not be said that no expenditure whatsoever was incurred for earning the exempt income – Case was referred back to AO – Allowed for statistical purpose. Amortization of lease charges paid in respect of leasehold lands - It has already been held against assessee by this Tribunal – Against the assessee.

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• 2013 (2) TMI 424
  Penalty for concealment – Assessee filed return admitting nil income – During the relevant previous year sold land - consideration shown in ROI was Rs. 41,29,500/- and Rs. 80,76,100/- respectively – But value adopted by stamping authority was 41,33,280/- and Rs. 1,02,02,400/- – AO levied penalty u/s 271(1)(c) – Held that:- Section 50C calls for substitution of the actual consideration, with the value adopted by stamping authority – But, the actual consideration received by the assessee will not get altered by such substitution - It is only for the purpose of computation of capital gains, the substitution is done by AO - Clause (2) of Section 50C clearly gives the assessee a right to claim before AO that the value adopted by the stamp valuation authority exceeded fair market value. Further it can not be said that assessee was non-cooperative just because the registered sale deed copies were not furnished – Sale deeds in general are collected by the buyers and unless buyers give a copy to sellers, it may not be easy for a seller to get copies thereof. Just because there is a substitution of valuation mentioned in Section 50C of the Act as the fair value, it cannot be said that there was any concealment of income or furnishing of inaccurate particulars – No penalty should be levied u/s 271(1)(c) - Against the revenue.

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• 2013 (2) TMI 423
  Interest on loan for ESOP – Employee of the assessee availed bank loan to acquire ESOP shares – Assessee paid this interest - Employees at the first instance opted for ESOP, later on, the employees declined to subscribe to the ESOP therefore, the loan had to be repaid along with interest – Whether this interest should be allowed as expenditure – Held that:- CIT was of the view that the loan was not availed for the purpose of business of the assessee and, therefore, such interest could not be allowed as a deduction - However he has remitted the matter back to AO - order of CIT remanding back the issue to AO sustained - Decided against assessee. Revision u/s 263 - The contention of the assessee was that CIT has not dealt with any issue that was subject matter of adjudication and exceeded his jurisdiction – Held that:- Section 263 authorises a Commissioner of Income-tax to revise any order passed by any subordinate authority, which is found to be erroneous and prejudicial to the interests of the Revenue. The order passed by the assessing authority to give effect to the orders of the Tribunal is “any order” passed by an assessing authority, who is subordinate to the Commissioner of Income-tax - In that way the Commissioner of Income-tax has not exceeded his jurisdiction available to him under section 263 of the Act – Against the assessee.

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• 2013 (2) TMI 422
  Exemption u/s 80P(2) – whether the assessee was entitled to exemption u/s 80P(2)(a)(i) in respect of interest received from the members of the society – Held that:- In order to earn exemption under section 80P(2) a cooperative society must prove that it had engaged itself in carrying on any of the several business referred to in sub-section (2) - society must be engaged in carrying on the business of banking or providing credit facilities to its members – It is required to examine the Memorandum of Association, Articles of Association, returns of income filed with the Department and status of the business indicated in such returns – Issue was restored to the file of the AO – Appeal stands partly allowed for statistical purposes.

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• 2013 (2) TMI 421
  Addition on account of low gross profit - Assessee filed its income by declaring the total income at Rs.32,69,385/-. On scrutiny assessment was finalized with addition of Rs.29,19,650/- on account of low gross profit – Held that:- There was drastic fall in the gross profit as compared to the previous years - this happened on account of increase in production cost and marginal increase in sale price of cloths – Further Tribunal relied upon the orders of other persons in the group of the assessee firm where identical issue had arisen for its consideration and where it reduced the addition to 60% - In absence of any possibility of verification in connection with purchases, sales, consumption of material, it sustained the addition only upto 60% - The issue is purely factual in nature - There is hardly any question of law- Case dismissed. .

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• Customs

• 2013 (2) TMI 420
  Waiver of pre-deposit - Purchase of fraudulent DEPB scrips - Section 129E of the Customs Act. - Used to discharge the duty liabilities at the time of clearance of the goods - Applicants are involved in import against the fraudulent DEPB scrips obtained by them from one of the broker namely V. Sankaran - Applicant contended that the applicants except V. Sankaran are bonafide purchasers of DEPB scrips and they were not involved in purchase of fraudulent or fake DEPB scrips Held that:- As regards V. Sankaran, we find that it is a case of fraud played by V. Sankaran actively in the matter. Therefore, direct V. Sankaran to make a predeposit of 50% of the penalty amounts confirmed against him And direct the other applicants to predeposit the amount of duty confirmed less already paid.

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• Corporate Laws

• 2013 (2) TMI 419
  Winding up petition and to appoint the official liquidator - Held that:- It is found from the order sheet that the respondent himself has admitted the debt and he filed memo and further his memo again reflected in the joint memo filed and based on the post dated cheques issued in terms of the memo/joint memo, the petition was closed. The post dated cheques came to be dishonoured. Hence, it is a fit case to allow the petition & respondent company is ordered to be wound up - petitioner directed to communicate the order to the ROC within a period of 15 days from the date of receipt of copy of this order. The Official Liquidator is appointed - petitioner is directed to deposit a sum of Rs. 15,000 to the Official Liquidator within a period of four weeks from the date of receipt of copy of this order to meet the initial expenses to initiate winding up proceedings.

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• 2013 (2) TMI 418
  Refund amounts collected through RHPs - direction to furnish the details with supporting documents to establish whether they had refunded any amount to the persons who had subscribed through RHPs as directed in [2012 (9) TMI 559 - SUPREME COURT] dated 31st August, 2012 - Held that:- As in non compliance of order of Supreme Court Sahara Group deposited only Rs. 5120 crore with SEBI but failed to pay full amount as directed, all the assets mentioned in Serial nos.1 to 9 of Table 'A', of SIRECL viz investments in Group Companies, group entities, Special Purpose Vehicles and partnership firms belonging to Sahara Group and the investments mentioned at S. Nos. 10 and 11 in Table 'A' are liable to be attached. Sahara India Real Estate Corporation Limited is directed to furnish details of investments, if any, other than those enumerated above, within 21 days from the date of this order and is restrained, with immediate effect, from operating its accounts or demat account or redeeming any of the mutual fund units owned and/or held by it with all the branches of all the banks and withdrawing any investment made therein. Also directed to furnish the details pertaining to nature of development rights, names of special purpose vehicles and what constitutes "stake" and the details of companies, firms etc., as enumerated in the affidavit and the annexures filed before the Hon'ble Supreme Court on 04.01.2012, within 21 days from the date of this order. And not to dispose of the units of mutual funds valued of Rs. 23 crores as on 30.11.2011 and to recover its investments in partnership firms belonging to the Sahara Group to the extent of Rs. 125 crores as well as loans and advances of Rs. 204 crores as on 30.11.2011, as mentioned in S. No. 12 of Table 'A' and deposit the proceeds thereof with SEBI Also to immediately deposit cash and bank balances and fixed deposits in its name with SEBI of Rs. 1655 crores and not to transfer any shares held by it in any company, to any person and to deposit with SEBI, share certificates representing the purchase of 22, 05,64,045 shares of Aamby Valley Limited a consideration of Rs. 5207 crores . Also attachment and Directions given with regard to Shri Subrata Roy Sahara, Ms Vanadana Bhargava, Shri Ravi Shanker Dubey and Shri Ashok Roy Choudhary - directors of company - freezing of all the bank accounts/demat accounts & attachment of all movable and immovable properties standing in their names.

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• Service Tax

• 2013 (2) TMI 436
  Non-payment of interest on the amount of refunds belatedly sanctioned to them - Held that:- There being no dispute regarding belated sanction of refund to the appellant, the appellant is eligible for the interest on such belatedly sanctioned refunds. The amount of interest needs to be calculated by the lower authorities, period after three months of filing of the refund claim by the appellant with the authorities, till the amount is refunded to them. See NIRMA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD [2011 (3) TMI 1257 - CESTAT, AHMEDABAD] Notification No. 41/07. dated 6-10-2007 itself provides clearly that the relevant date for determination of limitation is the date on which proper officer of Customs makes an order permitting clearance and loading of the goods for exportation. Therefore the finding that the claim is time-barred because it is filed beyond the period when counted from the date of ARE-1 is appears to be against the provisions of Notification No. 41/07-S.T., dated 6-10-2007. Provisions of Section 83 of Finance Act, 1994 clearly provide that provisions of Section 11BB are made applicable to service tax matters, there is no reason as to why this aspect has not been verified before rejecting the refund claim by both the lower authorities - the impugned orders are required to be set aside and the matter is remanded to the original adjudicating authority to verify the facts, correctly record them and also apply the statute correctly to the facts of the case - in favour of assessee as directed.

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• 2013 (2) TMI 435
  Storage and warehousing Service – whether the records such as discharged cheques, vouchers, deeds, agreements, books of accounts of banks and corporate houses would come under the category of ‘goods’ – Assessee provided the services for storage and retrieval of records of banks and corporate houses and the records consisted of discharged cheques, vouchers, agreements, books of accounts - Department was of the view that the activities undertaken by the assessee comes under the category of taxable service of “storage and warehousing” – Held that:- very reference to the definition of goods under the Sale of Goods Act implies that “Saleability” is a necessary condition to consider something as ‘goods’. Even in common parlance, it has been held in a number of judgments by the Hon’ble Apex Court that goods are something which can come into the market for being bought and sold. As decided in the case of in R.D. Saxena v. Balram Prasad Sharma [2000 (8) TMI 1001 - SUPREME COURT OF INDIA] files maintained by a bank pertaining to their clients cannot be equated with goods as they are not saleable goods and they do not have any marketability - Therefore, in the instant case also, the various old records such as discharged cheques, vouchers, books of accounts, in respect of which the service was rendered by the assessee to his clients such as banks and corporate houses for management of the records, cannot be considered as storage and warehousing of ‘goods’ - Assessee are not liable to pay any service tax – In favour of assessee.

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• 2013 (2) TMI 434
  Storage and Warehousing service – Whether the appellant is liable to pay Service tax under ‘storage and warehousing service’ – Appellant have earned “Auction Income” realized from the auction proceeds of the abandoned cargo by the importers. auction income is retained by the appellant in lieu of the storage and warehousing charges due from the importer Held that:- A clarification has been sought as to whether Service tax is payable on abandoned cargo which are auctioned by the CFS as no service is rendered to any person. In the case of auctioned goods, the proceeds of the auction goes first to the cost of auction, then towards customs duties and then to the custodian of the goods. It is clarified that no cargo handling service can be said to have been rendered in such cases, therefore Service tax is not leviable – It is pertinent to note here that when the Board had issued this clarification for ‘Cargo Handling Service’, the service of ‘Storage and Warehouse’ was not brought under Service tax net. Board’s said clarification on ‘cargo handling service’ would equally apply to ‘storage and warehousing service’ by inference. Even though the appellant is the custodian of the goods and not the owner, still transfer to title of the goods takes place during the auction and hence it is to be treated as a sale. The fact of sale is also evident from the sales tax having been paid by the successful bidder. Thus, when the transaction is one of sale and not a service, the question of payment of Service tax will never arise – Therefor appellant need not to pay any Service tax – In favour of assessee. Extended period of limitation - Whether the extended period can be invoked - Held that:- ‘Auction income’ has been duly and fully reflected in the appellants’ books of accounts and that there has been no intention whatsoever on the part of the appellants to hide the ‘auction income’ from the knowledge of the department. Further it is also not the case of department that the ‘auction income’ has not been reflected in their regular books of accounts so as to invoke extended time limit. This has also been decided in CCE v. H.M.M. Ltd.[ 1995 (1) TMI 70 - SUPREME COURT OF INDIA]). Therefore extended period of limitation cannot be invoked in the instant case – In favour of assessee.

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• 2013 (2) TMI 433
  Ship Management Service vs. Business Support Service – registered for Business Auxiliary Services, Good Transport Agency, Ship Management Services and Renting of Immovable Property services - Assessee was in agreement with Eagle Ship Management Private Limited, an overseas Company - to provide facilities like Office space, telephone, secretarial assistance and other facilities at assessee’s office premises - As per the agreement effective from 1-9-2006 to 31-8-2009, assessee was appointed as an agent to the principal, M/s. Red Eagle Ship Management Pvt. Ltd., a company incorporated in Singapore – Held that:- Primary and essential nature of service is providing crews to the ships; that ship management service under Section 65(96a) includes engagement or providing crews; that crew members of the ship fall under the category of seafarers since these activities are specifically included under Ship Management Service under Section 65(96a) of the Act. When a taxable service is, prima facie, classifiable under two or more sub-clauses, Section 65A(2)(a) says “the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description. There is a specific inclusion of providing of crews under Section 96(96a)(ii) meant for ship management service. Whereas there is no such inclusion in BSS. Therefore the supply or providing of seafarers to ESMPL, a foreign Company, would definitely classifiable under ship management service. Further they fall under Export of service as these services satisfy the condition prescribed in terms of Rule 4 read with Rule 3 and hence can be exported without payment of tax. C.B.E. & C.’s Circular No. 111/05/2009-S.T., dated 24-2-2009, it is clarified that for category III services (Rule 3(1)(iii)) the relevant factor is the location of the service receiver and not the place of performance and in the instant case it is admitted that the location of service receiver is outside India – Aappellant is not liable to pay Service tax for the surviving demand period. Notification No. 4/2004-S.T. clearly exempts all taxable services provided to a Developer of SEZ or a SEZ unit for consumption of the services within such SEZ. - whether the Steamer Agent’s services could be treated as consumption of services within SEZ units - Just like Courier, Telecommunication and Manpower recruitment services, this Steamer Agent’s service is also provided by service providers from outside SEZ and the provision of service commence from outside the SEZ premises, but ends within the SEZ units and construed to be consumed within SEZ premise. Invocation of extended period of time – Appellant are filing returns regularly and their unit is audited periodically, the Department is aware about the fact of the services rendered by them. Thus there is no suppression of facts with an intent to evade payment of tax - proviso to extended period of time cannot be invoked. Thus the demand in the instant case is partly hit by limitation of time and the period w.e.f. 1-4-2007 alone will survive as it is within a period of one year from the relevant date.

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• Central Excise

• 2013 (2) TMI 417
  Denial of Cenvat credit of Education cess - Rule 3 of the Cenvat Credit Rules, 2004 - Rule 3(7)(A) of the Cenvat Credit Rules does not specifically allow availment of Cenvat Credit of Education Cess - Invoice issued by 100% EOU - Notification No.23/2003-CE dated 01/03/2003 - Held that:- Following the decision in case of EMCURE PHARMACEUTICALS LTD. (2008 (1) TMI 147 - CESTAT, MUMBAI) that non-obstante clause in Rule 3(7)(a) of CCR, 2004 is applicable in respect of BED paid u/s 3. - In favour of assessee

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• 2013 (2) TMI 416
  Waiver of pre-deposit – Stay Petition - Demand - DTA clearance by 100% EOU - Calculation of Duty payable in respect of DTA clearances - proviso to Section 3 (1) of the Central Excise Act, 1944 - Whether on the aggregate of the duties of customs (basic customs duty + cess + Additional customs duty + cess) which is the excise duty payable on the DTA clearances, the education cess would be chargeable again – Held that:- Since the issue still pending with Larger Bench, it can be said that the appellant have an arguable case Classification of the Coin Blanks – Appellant classify under Heading No.74.09 - Department classify "articles of copper" under sub-heading no.74.19 on the basis of Section Note 6 to Section Note XVI – Held that:- Section Note VI to XVI is in respect of the machinery items, it would not be correct to apply the same to the products of Chapter Note 74 falling under Section XV. Moreover, coin blanks which are used for manufacture of coins have not attained the shape or character of an article and as such, the same cannot be said to be articles of Copper or Copper Alloys. Therefore, of prima facie view that in terms of Chapter Note 1 (g) to Chapter 74, the Copper Alloys Coin Blanks would be correctly classifiable under Heading no.7409 Entitlement of DTA clearances – 100% EOU manufactures two or more products for export – Department claimed that DTA entitlement of each product would be limited to 50% of the FOB value of its exports – Assessee claimed that he can sell any product into DTA upto 90% of the FOB value of its clearances - Held that:- Since the items exported by the appellant the Copper Alloys Coin Blanks and Copper Zinc Nickel Strips are the similar products, both falling Under Heading no.7409 and since their DTA clearances are within the overall entitlement of 50% the FOB value of the exports. As per the provisions of para 6.8 (a) of the Foreign Trade Policy, the DTA clearances of any one of these products can be made upto 90% of the FOB value of its export. DTA sales of Copper alloy coin blanks are well within 90% of their clearances. Therefore, does not appear to be sustainable – Stay granted

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• 2013 (2) TMI 415
  Common inputs - Manufacture of dutiable as well as exempted goods - By product -Rule 57A - Assessee engaged in manufacture of sugar and ethyl alcohol (rectified spirit) - During the manufacture of the final product, press mud and spent wash come into existence and the same were mixed together and converted into bio-compost and cleared without payment of duty - Held that:- Following the decision in case of Manakpur Chini (2012 (7) TMI 474 - CESTAT, NEW DELHI) that the bio-compost cleared by the sugar manufacturer is not liable to duty. In favour of assessee

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• 2013 (2) TMI 414
  Waiver of Pre-deposit - Extended period of limitation u/s 11A - Demand - Suo motu availment of credit on 27.2.2008 - Intimated to the department by the appellant vide letter dated 28.2.2008 - Department issued a notice dated 17.6.2011 demanding reversal of suo motu credit - Held that:- In spite of this information furnished by the appellant, the department issued notice only on 17.6.2011, i.e. after lapse of about 3 ½ years. Prima facie the appellant has made out a strong case in their favour on the ground of limitation. Waive pre-deposit and stay granted

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• 2013 (2) TMI 413
  Cenvat Credit - Payment of duty on exempted goods - Waiver of Pre-deposit - Job worker - Applicant is a merchant exporter - Imported raw material was supplied to M/s Maharashtra Seamless Ltd. - under rule 4(5) of the CENVAT Credit Rules, 2004 - Applicant has no facility to manufacture the goods, therefore, the credit in respect of the raw material is not available to the applicant - Notification 53/2003-Cus. - Held that:- Following the decision in case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT) that once the duty on final product has been accepted by the Revenue, in such a case the credit cannot be denied. As the applicant had paid more duty than the credit now being denied, pre-deposit of the dues is waived. Stay Granted

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• CST, VAT & Sales Tax

• 2013 (2) TMI 437
  Violation of the principles of natural justice - Assessment order ( passed rejecting assessee's request to grant more time - Held that:- As per this office notice dated 18/10/2012, the dealer was granted an opportunity of being heard in person on 5.11.2012. The assessee has availed the above chance through their Authorized representative & argument put forth by the Authorized representative at the time of personal hearing was only the repetition of what they had represented in the reply dated 01.11.2012." There is no averment in the writ petition that the aforesaid statements in Ext.P3 are factually incorrect. If that be so, petitioner was afforded an opportunity of hearing on 5/11/2012 which is after receipt of Ext.P2 reply. This belies the case of the petitioner that Ext.P3 assessment order was passed in violation of the principles of natural justice. For that reason, decline to interfere.

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• Indian Laws

• 2013 (2) TMI 432
  Condonation of delay of 58 days in filing the Revision Applications against the certificates issued u/s 101 of the Maharashtra Cooperative Societies Act at the behest of the Respondent No.3 society which claimed an amount of Rs.1,88, 289 which are the outstanding dues owed by the Petitioners and an amount of Rs.4,78,580 which are the outstanding dues owed by the Petitioners - Held that:- Petition is required to be allowed and the delay of 58 days in filing the Revision Applications deserves to be condoned as from the facts which have come on record, there can be no dispute about the fact that the Director of the Petitioners was not keeping well and as contended by him was suffering from chest pain. The undergoing of the stress test by the Director of the Petitioners is a pointer to the fact that he was undergoing treatment for heart ailment. The fact that the report of the stress test does not disclose that the Director of the Petitioners required any further treatment, would not go against the case of Petitioners whilst seeking condonation of delay of the said 58 days, as the fact remains that the Director of the Petitioners had undergone a stress test. The revisional authority has proceeded on an erroneous assumption that every day's delay has to be explained by the Petitioners. The concerned authority to hear the Revision Applications on merits and in accordance with law. The Petitioners to pay costs of Rs.3,000/to the Respondent No.3 society in each of the above Petitions within a period of two weeks from date and file evidence of the same before the revisional authority.

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