TMI Tax Updates - e-Newsletter
February 22, 2013

Case Laws in this Newsletter:

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

News

1. Current Dispensation on Cotton to Continue

2. PM’s statement to the media at Parliament House on the start of the Budget session

Notifications

Central Excise

1. 03/2013 - dated 18-2-2013 - CE

Post Export EPCG Duty Credit Scrip Scheme notified

2. 02/2013 - dated 18-2-2013 - CE

Post Export EPCG Duty Credit Scrip Scheme notified

Customs

3. 08/2013 - dated 20-2-2013 - Cus

Amends Notification No. 39/96-Customs dated 23 July 1996 - Seeks to extend exemption to project LR-SAM of Ministry of Defence

4. 07/2013 - dated 19-2-2013 - Cus

Amends Notifications No. 05/2013-Customs and 06/2013-Customs dated 18/02/2013 - Post Export EPCG Duty Credit Scrip Scheme

5. 22/2013 - dated 20-2-2013 - Cus (NT)

Appoints Baddi, Distt, Solan - Himachal Pradesh as an ICD

Income Tax

6. 11/2013 - dated 19-2-2013 - IT

INCOME-TAX (SECOND AMENDMENT) RULES, 2013 - AMENDMENT IN RULES 31A & 31AA; SUBSTITUTION OF RULES 31ACB, 37J AND FORM NOS.15G, 15H, 16, 16A, 24Q, 26Q, 27C, 27D, 27Q & 27EQ AND INSERTION OF FORM NO. 26B

Circulars / Instructions / Orders

FEMA

1. 83 - dated 20-2-2013

Foreign Exchange Management Act,1999 - Import of precious and semi precious stones- Clarification

Highlights / Catch Notes

Income Tax

• Tax Exemptions: Chappati, Paratha, Samosa Manufacturing Qualifies; Mathia, Chorafali Repackaging Doesn't u/ss 10B & 80IB.

  Case-Laws - AT : Exemption u/s 1OB - Deduction u/s 80IB - Manufacturing of chappati, parath, samosa, dhokla constitutes manufacturing activity - But as in the case of “mathia“ and “chorafali“ the assessee does repackaging not to be constituted as manufacturing activity - AT
  Visit to Get Source

  ---

• Tax Dispute Over Trustee Relatives' Pay: No Section 13(1)(c) Violation Found, Previous Payments Accepted in Scrutiny Assessments.

  Case-Laws - AT : Disallowance of remuneration paid to relatives of the trustees - in the past also such type of payments were made and it was accepted by the department in scrutiny assessments - no violation of provisions of section 13(1)(c) proved - AT
  Visit to Get Source

  ---

• Interest-Free Advance Lacks Commercial Purpose; Interest on Loans Disallowed by Auditors for Assessee-Company's Benefit.

  Case-Laws - AT : Interest free advance without commercial expediency - Auditors have considered the aforesaid loans as prejudicial to the interest of the assessee-company as no interest is being charged on them - Interest not to be allowed - AT
  Visit to Get Source

  ---

• High Court Affirms Interest Expenses Deductibility u/s 36(1)(iii) for Both Capital and Revenue Purposes.

  Case-Laws - HC : Interest expenses - section 36(1)(iii) - It is immaterial whether the assessee had utilized the money for capital or revenue purpose - HC
  Visit to Get Source

  ---

• Court Rules Income Already Disclosed in Tax Return Before Search; No Additional Income Added Post-Search.

  Case-Laws - HC : Search and seizure – In the Statement of income of assessee that the income received on were disclosed in the regular return, of income prior to the date of search - No addition - HC
  Visit to Get Source

  ---

• Rectification Application u/s 154 Allowed by High Court; Not Barred by Section 154(1A.

  Case-Laws - HC : Jurisdiction u/s 154 – rectification application was made before the revisional authority itself for rectification. Such an application was maintainable and was not barred by section 154(1A) - HC
  Visit to Get Source

  ---

• Section 147 of Income Tax Act prioritizes Revenue over taxpayer in proceedings.

  Case-Laws - HC : Reassessment – the object and purpose of the proceedings under section 147 of the Act is for the benefit of the Revenue and not for the benefit of the assessee - HC
  Visit to Get Source

  ---

• Court Rules Section 30 Doesn't Allow Deduction for Ad Space Hire Charges, Calls for Legislative Amendment.

  Case-Laws - HC : If section 30 is interpreted as also allowing deduction of the hire charges for the space for the purpose of advertisement, it would amount to supplying casus omissus - HC
  Visit to Get Source

  ---

Indian Laws

• Prime Minister Opens Budget Session, Highlights Economic Growth, Tax Reforms, and Cooperation Among Political Parties for Progress.

  News : PM’s statement to the media at Parliament House on the start of the Budget session
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2013 (2) TMI 483
  Claim of deduction u/s 10B rejected - CIT(A) held that the assessee is not a manufacturer - assessee submitts that it manufactures eatables from raw material and that it is separate and distinct product known in the market and is covered by definition of Section 2(29BA) - Assessee is a 100% EOU engaged in the business of manufacturing and export of various food products like Paratha, Samosa, Dholka, Idli, vada etc. - Held that:- As decided in Cit Versus Pankaj Jain Prop. Aagam Food Industries [2005 (12) TMI 525 - HIGH COURT OF JAMMU AND KASHMIR] the activity of production of the foodstuff is a manufacturing activity (except for the items outsourced from other parties). Manufacturing of chappati, parath, samosa, dhokla constitutes manufacturing activity as but as in the case of "mathia" and "chorafali" the assessee does repackaging. Further from the details of sales submitted by the assessee it is find that the sales includes sale of "coriander leaves", "chorafali", "custard apple pulp", "magaj ladu", "IQF shredded coconut" and "misc. items" from which it appears that the aforesaid items are sourced ready made and not manufactured in the factory of assessee. The total sales of such items as per the summary is Rs. 85,68,942/-. Thus the aforesaid items which have been outsourced and not manufactured in the premises of the assessee but have only been repackaged with some other connected activities at the assessee's premises cannot be considered to be a manufacturing activity by the assessee. The profit for the year includes the profit on sale on outsourced items & rom the profits, the break-up of profit earned from outsourced items is not available therefore the assessee shall not be entitled to deduction under Section 10B on profit earned on sale on outsourced items - Matter of quantification of the quantum of profits earned on out-sourced and self manufactured items needs verification, therefore the matter be sent back to the file of the AO for the limited purpose to determine the profits of self manufactured items and that of outsourced items. The AO shall compute the profits eligible for deduction u/s.10B and allow the deduction under Section 10B in proportion of the turnover of self-manufactured and outsourced items - partly in favour of assessee.

  ---

• 2013 (2) TMI 482
  Registration u/s.12AA(3) cancelled - activities of the Trust are neither genuine nor are being carried out in accordance with the objects of the Trust - Non filing of return of income u/s 139 - survey action u/s.133A - assessee is engaged in the business of running of educational institutions - as per AO assessee is required to be assessed like any other assessee and is not entitled to the benefit of section 11 and 12 because it is hit by section 13 - Relief given by the CIT(A) by holding that 50% of the Advertisement expenses as expenditure towards objects of the Trust - Held that:- Considering the fact that similar expenses were allowed in the past, no part of the advertisement expenses should have been disallowed especially when there is no dispute about the genuineness of such expenditure. Therefore, there is no violation of provisions of section 13(1)(c) of the I.T. Act - in favour of assessee. Disallowance of expenditure on Mercedez car and depreciation there on by holding the same to be in violation of section 13(1)(c) - Held that:- When the AO has allowed the expenditure on account of various other cars owned by the trust, therefore, merely because the assessee has purchased the Mercedez car to be used by the VVIP guests the AO should not have disallowed the expenditure and depreciation on such motor car especially when the AO in the past has not disallowed any expenditure on the Mercedez car owned by the trust. Therefore, in view of rule of consistency and in absence of any adverse material before the AO to take a contrary view no justification on the part of the AO and CIT(A) to hold that there is violation of provisions of section 13(1)(c) - in favour of assessee. Advancing interest free loan by the assessee trust to D.Y. Patil Education Society, a related concern - whether will attract provisions of section 13(1)(d) - Held that:- As decided in the case of Alarippu [2000 (5) TMI 30 - DELHI HIGH COURT] that a loan given by one charitable trust to another with similar object cannot be treated as an investment but an application of income. The words "investment", "deposit", and "loan" have different meanings. Also see Sarladevi Sarabhai Trust [1988 (3) TMI 53 - GUJARAT HIGH COURT] wherein held that if the trust makes an investment in the course of attaining its objectives, that investment is an application of income and it cannot be considered to be violative of section 13(1)(d) r.w.s.11(5) - in favour of assessee. Disallowance of remuneration paid to relatives of the trustees - CIT(A) deleted the addition - Held that:- Nowhere in the assessment order the AO has brought on record how much should have been the reasonable remuneration to the trustees and their relatives and what is the amount paid by similarly placed organisations to their employees. The submission of assessee that in the past also such type of payments were made and it was accepted by the department in scrutiny assessments for A.Y. 2000-01 to 2002-03 and no disallowance has been made could not be controverted by the DR. Under these circumstances order passed by the CIT(A) giving reasons for such deletion and in absence of any contrary material brought to our notice against the findings given by the CIT(A), no infirmity in the order found deleting the disallowance made by the AO u/s.40(A)(2)(b) of the I.T. Act - no violation of provisions of section 13(1)(c) proved - in favour of assessee. Disallowance of Telephone and Mobile expenses - CIT(A) deleted the addition - Held that:- No such disallowance was made in the scrutiny assessments for A.Ys. 2000-01 to 2002-03 and in absence of any contrary material brought no infirmity in the order of the CIT(A) deleting the disallowance on account of Telephone and Mobile expenses - in favour of assessee. Disallowance of maintenance expenses of flats at Gulmohar Society exclusively used by the founder of the trust violating the provisions of section 13(1)(c) - Held that:- AO did not give any notice to the appellant of his intention to disallow guest house expenses, substantively, on the basis of the statement of the caretaker, during the course of assessment proceedings, and, therefore, the appellant did not have any occasion or opportunity to file any evidence in support of its claim of guest house expenses. In fact, the appellant was not in the possession of the statement on the basis of which the AO was to make this addition. Under the circumstances, the appellant was prevented by sufficient cause from producing these evidences before the A0 during the course of assessment proceeding and therefore, admit them. These affidavits were sent to the AO for his comments on their impact on the assessment of the appellant. The AO has not given any specific comment on these affidavits. He has simply stated that these affidavits represent afterthought. It is an undisputed fact that disallowance of guest house expenses was made because of the fact that AO came to the conclusion that one particular portion of the guest house (flat Nos.G1 and G2) was used by trustee, exclusively. This conclusion was arrived at, substantively, on the basis of the statement of the caretaker of the guest house but as discussed above disallowance of guest house expenses cannot be made on the basis of statement of the caretaker on which reliance was placed by the AO - this disallowance of guest house expenses was not justified and is, therefore, directed to be deleted - in favour of assessee. Employee’s Contribution - whether not deposited within due date under the Act or deposited before the due date of filing of the return is an allowable expenditure - Held that:- CIT(A) relying on various decisions directed the AO to delete the disallowance wherein the payments are made prior to the due date of filing of the return taking the consistent view that Employee’s Contribution to P.F. & ESIC, if paid before the due date of filing of the return, is an allowable deduction - in favour of assessee.

  ---

• 2013 (2) TMI 481
  Deduction u/s 80IA - Initial Assessment Year - Assessee runs a spinning mill and has installed three wind mills first in A/Y 2003-04, second in A/Y 2005- 06 and the third in A/Y 2006-07 – A/Y 2007-08 was opted as initial Assessment Year for the purpose of claiming deduction u/s 80IA - Initially the loss from windmills was set off against profit of spinning mill division - Deduction u/s 80IA was not claimed during those years when it resulted in loss – As per AO the initial year should be taken as the year of commencement of business. Held that:- Respectfully, following the decision of the Hon'ble Jurisdictional High Court in the case of M/s Sri Velayudhasamy Spinning Mills [P] Ltd[2010 (3) TMI 860 - MADRAS HIGH COURT] the AO is directed to compute the profits u/s 80IA(5) of the Act as if such eligible business is the only sources of income of the assessee and only the losses of the years beginning from the initial Assessment Year are to be brought forward and not losses of earlier years which have been already set off against the income of the assessee. - Appeal of the Revenue is dismissed – Against the revenue.

  ---

• 2013 (2) TMI 480
  Disallowance u/s 40(a)(ia) – TDS was not deducted on payment for packing material - Held that:- It is for purchase of packing material, which does not attract the provisions of TDS - AO has also mentioned it as payment for packing material. As TDS was not deductible on the packing material - provisions of Section 40(a) (ia) are not attracted. Hence, the addition made of Rs.2,73,360/- u/s 40(a) (ia) on account of packing material is deleted – Against the revenue. Interest on loan given to subsidiary – Held that:- The facts as available on record indicate that the sum of money was given by the assessee-company out of business expediency. Punjab Biotehnology park, a subsidiary of the assessee-company and therefore, the assessee is deeply interested in the working of the said company. Besides, the subsidiary company has been set in pursuance of joint collaboration agreement to which the assessee is a party for the development of Biotechnology Park. The subsidiary company is required to act as a facilitator for development of the biotechnology park in which the assessee is also interested – Therefore loan standing in the name of Punjab Biotehnology park is guided by business expediency - The AO is directed not to disallow any interest attributable to the loans given by the assessee- company to the said subsidiary company – Against the revenue. Interest free advance without commercial expediency - A sum of Rs. 49,38,930/- has been treated by the assessee-company itself as loan and advance given to Shri A.S. Bhatia, maternal uncle of Managing Director – Held that:- loans and advances have been treated as unsecured loans given by the assessee without any stipulation regarding their re-payment and interest - Auditors have considered the aforesaid loans as prejudicial to the interest of the assessee-company as no interest is being charged on them – Therefore amount standing in the name of Shri A.S. Bhatia is in the nature of loan advanced by the assessee to him without any commercial expediency - The interest attributable to a sum of Rs. 49,38,930/- being the amount of diverted by the assessee-company for the personal benefit of Shri A.S. Bhatia is therefore liable to be disallowed. The AO is directed to re-compute the disallowance accordingly – Against the assessee. Payments made towards freight charges :- As decided in CIT V Bhagwati Steels, 326 ITR 108 (P&H), where f reight expenses incurred added to cost of goods in invoice raised and No inference that assessee paid any amount of freight separately, assessee is not liable to deduct TDS - Assessee not a defaulter under Section 194C- Income- tax Act,1961 s.s. 40(a) (ia), 194C(3) (i)- In favour of assessee. provisions of Section 40(a) (ia) in respect of sales commission - TDS is to be deducted if the amount exceeds Rs.2500/- as per the provisions of Section 194H - AO was right in disallowing the sales commission of Rs.21,191/- u/s 40(a) (ia) - Appeal of the assessee is partly allowed.

  ---

• 2013 (2) TMI 479
  Applicability of section 14A - Expenditure earning exempted income - Assessee company had invested Rs.1 crore from borrowed funds in equity of one M/s.Pankaj Extrusion Ltd. which was for the purpose of earning dividend income - Neither investment was made in the assessment year under consideration nor dividend received in the earlier year on such investment – Held that:- assessee had not received any dividend income in the previous year as also the fact that there was no investment made by the assessee during the year under consideration - Investment had been made prior to the impugned assessment year as well as the fact that interest bearing fund invested in the shares yielded no dividend income - As decided in Shree Shyamkamal Finance & Leasing Co. (P) Ltd v. ITO[2007 (10) TMI 446 - ITAT MUMBAI ], when interest bearing funds are invested in shares which yielded no dividend income, interest paid on such loan cannot be disallowed by invoking section 14A. Disallowance towards interest expenses applying the provisions of section 36(1)(iii) - Assessee had established a new unit where it invested a sum of Rs.11.09 lacs – Disallowed by CIT on the ground that the same should have been capitalized as per the amendment by the Finance Act 2003 holding that the said amendment was retrospective – Held that:- Interest on the borrowed fund was allowable deduction if the same was for the purpose of business. It is immaterial whether the assessee had utilized the money for capital or revenue purpose - Issue is covered by the decision in the case of Core Healthcare Ltd [2008 (2) TMI 8 - SUPREME COURT OF INDIA], wherein it was held that there is no difference between money borrowed to acquire capital asset or revenue asset - Amended provisions were applicable from the assessment year 2003-04 and they were not retrospective in operation.

  ---

• 2013 (2) TMI 478
  Estimation of GP - search & seizure u/s 132 of the Act were conducted - several incriminating documents were seized - notice u/s 158BD of the Act were issued on 24.11.1999 to file return for the block period commencing from 1.4.1988 to 8.1.1999 - Assessee filed a return on 11.12.2000 declaring undisclosed income of Rs.7.50 lacs – AO found unaccounted sales of bricks – Section 145 were invoked - On examination of the seized documents in respect of financial year falling under this block period, undisclosed income of Rs.70,13,557/- was determined by the AO. - AO adopted GP rate at 23% for the purpose of computing undisclosed income – Held that:- there is a specific provision u/s 158BC , which confers jurisdiction on the AO to invoke the provisions of Section 145 as also Section 144 of the Act. Thus, AO is competent to make estimate based on the incriminating documents. AO has extensively placed reliance on the seized documents and determined the sales of bricks outside the required books of account, which were admitted by the assessee for the financial year 1993-94, 1994-95, 1995-96 and 1998-99. AO worked out sale of bricks for the financial year 1996-97 at Rs.61,68,819/- whereas the assessee worked sales of bricks at Rs.59.63 lacs. Similarly, for the financial year 1997-98, the AO worked out the sales at Rs.64,26,735/- whereas the assessee worked out the sale of bricks at Rs.61,68,819/- Therefore, in these two financial years, viz 1996-97 and 1997-98, there is insignificant difference between the estimation made by the AO and the assessee. Having regard to the fact situation of the present case and the analysis of incriminating seized documents and case laws relied upon by the assessee,it is fair and reasonable to apply net profit rate at 7.85% - The AO is directed to apply NP at 7.85% for the purpose of computation of undisclosed income of block period – Appeal of the assessee is allowed for statistical purposes only.

  ---

• 2013 (2) TMI 477
  Search and seizure – Search u/s 132(1) conducted on 4.9.2002 - sale-deeds, Cash, Fixed Deposit, RBI Relief Bonds, purchase of jewellery in the name of family members were found – ROI were filed, for the block period beginning from 1.4.1996 to 4.9.2002, in response to notice u/s 158BC declaring income as nil – Additions were made by the AO on account of unexplained investment in construction, undisclosed income by way of sale consideration, undisclosed investment - Held that:- Construction was made in the year of 1993 and In regular returns, the profit had been offered to tax and the same had been accepted by the Department - Also confirmed by the Ahmedabad Municipal Corporation, and therefore, cost was incurred before the block period and assessee offered 8% of such income of sale proceeds of shops in regular income tax returns. Details of bank deposits were made available and bank account of assessee's son was also disclosed - There were explained deposits in bank account which were part of regular transactions and which were not only disclosed but from the sale proceeds of the shops, profits was offered for tax by the assessee in the regular returns filed with the Income Tax Authority and therefore, it did not sustain such additions. With regard to the “unexplained investment – In the Statement of income of assessee that the income received on these investment were also disclosed in the regular return, of income prior to the date of search - Issue were decided in favour of assessee.

  ---

• 2013 (2) TMI 476
  Jurisdiction under section 154 – An order was passed under section 264 by CIT, in revision against an order under section 143(3) - claim of the assessee to the extent of contribution towards the payment of gratuity was allowed to the extent of Rs. 6.80 lakhs while the balance amount of Rs. 31.25 lakhs was disallowed – The assessee applied under section 154 for rectification – The CIT declined to entertain the application – Held that:- In the present case, the revisional authority had passed an order in revision. The application for rectification was not made before the Assessing Officer who passed the assessment order which was the subject-matter of revision but the application was made before the revisional authority itself for rectification. Such an application was maintainable and was not barred by section 154(1A) – Order set aside and restored the proceedings arising out of the application for rectification under section 154 to the Commissioner of Income-tax – In favour of assessee.

  ---

• 2013 (2) TMI 475
  Reassessment – Income assessed on reassessment cannot be less than the income originally assessed - Assessee is a plot owner society,received a sum as the TDR premium from its members - In the original return of income, the assessee had offered the TDR premium to tax after deducting the expenditure incurred by it - Notice issued under section 148 to show cause as to why the expenditure incurred for earning the TDR premium should not be disallowed – Held that:- As decided in Sun Engineering Works P. Ltd[1992 (9) TMI 1 - SUPREME COURT] the object and purpose of the proceedings under section 147 of the Act is for the benefit of the Revenue and not for the benefit of the assessee and, therefore, in the reassessment proceedings, the assesse be permitted to convert the reassessment proceedings as his appeal or revision in disguise - Since the decision of the Income-tax Appellate Tribunal is contrary to the aforesaid decision of the apex court, the impugned decision of the Income-tax Appellate Tribunal is quashed and set aside and the matter is restored to the file of the Income-tax Appellate Tribunal for fresh decision in accordance with law. TDR premium amount received by the assessee has been voluntarily offered to tax, the question of considering the taxability of that amount by applying the principle of mutuality in the reassessment proceedings does not arise at all - It is only the expenditure claimed to have been incurred by the assessee which is disallowed in the reassessment order that has to be considered by the Income-tax Appellate Tribunal – Appeal disposed of accordingly

  ---

• 2013 (2) TMI 474
  Expenditure incurred on hired space on hoardings – Whether expenditure incurred on hired space on hoardings would come under section 37(3A) read with sub-section (3B), despite the fact that rentals are allowance under section 30 of the Act ?– Assessee claimed deduction of (i) expenditure incurred on hired space on hoardings, and (ii) expenditure incurred on statutory advertisement like printing of technical data sheets, printing of stationery, etc., under the general head of advertisement and publicity. – Held that:- If the assessee is a tenant in occupation of a premises for the business or profession, the rent paid for such premises and the cost of repairs incurred, if any, shall be allowed to be deducted. Crucial words in section 30 are "use of the premises for the purpose of business or profession". By no stretch of imagination, it can be inferred that the hire charges paid for advertisement hoardings would also come within the ambit of use of the premises for the purpose of business. Section 30 has nothing to do with advertisement, publicity or sales pro-motion. Giving very plain meaning of the language in section 30, it has to be construed as dealing with the deduction of rent, rates, taxes, repairs and insurance paid for the premises used for the business or profession either as a tenant or otherwise as a tenant. It does not take within its fold expenditure incurred for advertisement or publicity. If section 30 is interpreted as also allowing deduction of the hire charges for the space for the purpose of advertisement, it would amount to supplying casus omissus. The expenditure under the head expenditure incurred on hired space does not come within the purview of publicity, advertisement or sales promotion. Section 37(3A) read with sub-section (3B) is very specific that it is only the expenditure incurred for advertisement, publicity and sales promotion which are to be given ordinary meaning. Mere hiring a on hoardings cannot be treated as expenditure for advertisement or publicity or sales promotion - In favour of the Revenue

  ---

• 2013 (2) TMI 473
  Penalty for Concealment of Income – Whether Penalty u/s 271(1)(c) should be imposed or not – Search was carried out in the business premises of the assessee – Found that the assessee had invested Rs. 11 lakhs in two properties and this had not been disclosed – Held that:- Assessee had made a statement under sub-section (4) of section 132 of the Act stating that he had acquired the property out of the income which was not disclosed by him. Subsequently, the assessee filed a return of income before the expiry of time specified under section 139 of the Act and he also paid the tax thereon. Moreover, the assessee had not acted in a contumacious manner. In fact, the assessee had made a clean breast of the entire facts and had admitted the purchase of the property from the income which was not disclosed. The non-disclosure of the income was due to the facts that the assessee was an uneducated and illiterate petty contractor who received payments only after deduction of tax at source. It is under these circumstances that the assessee believed bona fide that no further tax was required to be paid. In T. Ashok Pai v. CIT [2007 (5) TMI 199 - SUPREME COURT] the Supreme Court observed that if the explanation given by an assessee is taken to be bonafide, the question of imposition of penalty under section 271(1)(c) of the Act would not arise. Since assessee had complied with the provisions of clause (2) of Explanation 5 to section 271(1)(c) of the Act, no penalty Shall be imposed – Against the revenue.

  ---

• Corporate Laws

• 2013 (2) TMI 471
  Adherence of principles for decision making process – whether the decision has been taken adhering to correct principles that are pertinent and applicable to the decision making process – Issue is single judge could not have entered into a roving enquiry and contrary to the concept of judicial review under articles 226 and 227 of the Constitution of India, since a writ court is not to enter into the justifiability of the decision, as an appellate court – Held that:- He has accepted number of additional affidavits on record, recorded observations and issued certain directions, though the solitary grievance was that the SEBI has failed to act appositely on the complaints filed by the writ petitioner. In course of hearing of the appeals, two complaints were made to the SEBI - but no decision or outcome was communicated to the respondent - Thus, mandamus issued to the SEBI is to take a decision on the basis of the complaints filed and communicate the decision to the complainant-respondent - An appeal would lie from such a decision – Appeals accordingly disposed of without any order.

  ---

• Service Tax

• 2013 (2) TMI 487
  Direction to pre-deposit a sum of Rs. 1.50 crore out of confirmed demand of Rs. 7.48 crore for the purposes of hearing the appellant's appeal on merits - disallowance of entitlement to the benefit of Notification No. 1/2006-S.T. & also invoked the extended period of limitation by alleging suppression - Held that:- Tribunal in the impugned order has proceeded on the basis that no evidence with regard to sale of goods and materials used in providing services was led by the appellant. This ignores the evidence led before the Commissioner in adjudication proceedings. As that the evidence of the value of goods supplied was on record and the Tribunal has not taken even a prima facie view on the same. The works contract/job work may not separately provide for sale of the goods but may be a composite amount for doing the work. Therefore, the supply value of goods has to be understood in the context of the work contract/job work contract to determine whether it included in it also the sale of goods. Besides, it is the contention of the appellant that the demands are barred by limitation as well as the duty amount has been wrongly computed in the show-cause notice and if the correct rate for Works Contract Services under the composition scheme at 4% is applied the appellant would be entitled to refund of service tax - set aside the impugned order and remand the matter to the Tribunal to consider afresh the stay application filed by the appellant after hearing the parties.

  ---

• 2013 (2) TMI 486
  Cargo Handling Services & Airport Services - short payment of Service tax for the period 16.08.2002 to 9.9.2004 and from 10.09.2004 and onwards respectively - CA for the appellant submits that they had submitted a reconciliation statement reconciling the difference in the figures reflected in the Service Tax-3 returns and in the Balance sheet as the Balance sheet is prepared on “accrual basis” whereas the liability to pay Service Tax is on “cash basis” therefore, they are bound to be difference between these two figures - Held that:- The adjudicating authority has not rebutted the claims of the appellant after examining the figures furnished by them and the reconciliation statement submitted by them. Thus, the ground for rejection of the claim made by the appellant is flimsy. Nothing prevented the adjudicating authority to call for relevant records of the appellant and satisfy himself as to the correctness and accuracy of the figures submitted by the appellant, in case he had any reason to doubt the veracity of the appellant's claim. Therefore the matter has to go back to the adjudicating authority for consideration afresh by keeping in mind the fact that while the balance-sheet figures are on accrual basis, the liability to discharge Service Tax is on cash basis. The reconciliation statement provided by the appellant shall be examined carefully in detail and if need be by calling for the relevant records from which the figures have been taken - in favour of assessee by way of remand.

  ---

• 2013 (2) TMI 485
  Container movement charges and Local transport charges – Whether Service tax on container movement charges and local transport charges is leviable under CHA service and freight charges is under GTA service –Appellant is a registered service provider of “Custom House Agent” service - not paid Service tax on Container movement charges and Local Transport charges for the period from 18-4-2006 to 31-3-2008 – Held that:- There is no allegation in the show cause notice seeking to demand Service tax under “Custom House Agent” service or “Goods transport Agency” service. However the demand had been confirmed under those heads without invoking them in the SCN. Appellant also arranges transportation of goods belong to the exporter/importer by engaging GTA - Consignment note issued by GTA clearly shows the importer or exporter as the consignor – Consignment note also mentions that the Service tax is to be paid by the consignor or the consignee. Even though the appellant pays freight charges to the GTA, separate invoice is raised on the clients for the transportation – In this invoice, it is clearly mentioned that the Service tax on the transportation is payable by the importer or exporter and the appellant is not liable to pay Service tax thereon – Consignor or consignee has discharged appropriate Service tax – Appellant is not liable to pay Service tax on freight charges paid by him and reimbursed by their clients under GTA services as it would result in double taxation. Further As decided in Lee & Muir Head Pvt. Ltd. v. Commissioner of S.T.[ 2008 (10) TMI 131 - CESTAT, BANGALORE ] All activities of CHA other than Custom House Agency cannot be taxed under CHA service, applicant are not liable to pay Service tax on container movement charges and transportation charges under CHA services and on freight charges under GTA services. When the services of container movement charges which is nothing but transportation of containers from the CFS to the port is not includible in the value of Custom House Agent Services – Order set aside – Appeal allowed – In favour of assessee.

  ---

• 2013 (2) TMI 484
  Maintenance of software – Applicability before 1.6.2007 - Notification No. 20/2003 and Notification No. 7/2004 – Whether the appellant is liable to pay Service tax on maintenance of software during 9-7-2004 to 30-8-2005 under the category of “Maintenance and Repair Service” – Appellant realized consideration towards maintenance of Software from their customers for the period 9-7-2004 to 30-8-2005 – Held that:- Underlying principle in Kasturi & Sons Ltd. v. UOI[2011 (2) TMI 76 - HIGH COURT OF MADRAS] is that Service tax cannot be levied by issuing circular. Circular cannot override the provision of Finance Act, 1994. As per the decision in this case, Service tax is not liable to be taxed by way of Circulars without enabling provisions under Finance Act, 1994. Accordingly appellant is not liable to pay Service tax prior to the period of 1-6-2007 – In favour of assessee. Cenvat credit on the Service tax paid towards telephone and medical insurance of employees – In Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT ] it has been held that the assessee is entitled for input service credit of the services, which are availed in course of their business and manufacturing activity. Since appellant had utilized both the disputed services in relation to their business activity and in the course of their business activity - Appellant is entitled to the credit of input service availed by them on the Service tax paid towards telephone and medical insurance of the employees – In favour of assessee. Further appellants genuinely believed that software maintenance did not attract Service tax during the period from 9-7-2004 to 30-8-2005. - started paying Service tax w.e.f. 1-9-2005 even when the maintenance of software was not taxable - Therefore no suppression of facts with an intention to evade payment of Service tax - Entire demand for the maintenance of software and for wrong availment of ineligible credit is not sustainable as the ingredients to invoke the extended period under Section 73(1) of the Finance Act are absent in the instant case – set aside the order – Appeal allowed.

  ---

• Central Excise

• 2013 (2) TMI 472
  Refund claim - 100% E.O.U. - Assessee engage in manufacture and export of Precision Electro Mechanical Assemblies, parts of Medical Equipments, etc. - services were used for manufacture of the goods - Held that:- As concluding from the facts that the original authority has taken a verification report from the jurisdictional range officer and found that the impugned services have been “used by them in relation to the manufacture of the finished goods and also in the day-to-day activities like procurement of raw materials, production and quantity control, marketing and sale & export of the finished goods.” This finding of the original authority has not been rebutted in the grounds of appeal. In favour of assessee

  ---

• 2013 (2) TMI 470
  Stay petition - Waiver of pre-deposit of penalty - Rejection of rebate claim - Assessee are merchant exporters - Exported the goods which are purchased from M/s Metro Industries under duty paying documents - Assessee filed a rebate claim in respect of the exported goods - AO argued that assessee colluded with M/s. Metro Industries in falsifying and creating fictitious central excise invoices and ARE 1 - Held that:- The applicants have colluded with M/s. Metro Industries but find no such evidence in the adjudication order against the applicants. In these circumstances, the pre-deposit of penalty is waived. Stay granted

  ---

• 2013 (2) TMI 469
  Reversal of CENVAT credit wrongly taken - seeking stay in respect of the interest and penalty - Held that:- In as much as the appellant is not disputing the tax liability they cannot dispute the liability to pay interest as the interest is a consequential liability on account of delay in payment of tax. Thus the appellant directed to make a pre-deposit of interest liability within six weeks and report compliance on 26.10.2012. On such compliance being reported, pre-deposit of penalty is waived and recovery thereof stayed during the pendency of the appeal

  ---

• 2013 (2) TMI 468
  Waiver of demand - Stay petition - CENVAT credit on capital goods - Rule 4 (4) of Cenvat Credit Rule 2004 - Depreciation claim on amount of CENVAT credit on capital goods - Appellant claims to have had made amends in their books of accounts and consequently there was no more claim of depreciation under the Income Tax Act. - Held that:- there is no valid documentary evidence of the appellant having relinquished their claim of depreciation. no copy of any revised Income Tax assessment order is available on record. Therefore, the assessee has no prima facie case on merits. Waiver of pre-deposit rejected and Stay petition allowed subject to deposit of duty.

  ---

• 2013 (2) TMI 467
  Stay Petition - Valuation of goods - Captive consumption - Rule 4 or under Rule 8 of the Valuation Rules, 2000 - AO argued that in respect of clearances of the goods made to the assessee's other unit, the Rule 8 is applicable - Assessee contended that Rule 8 is applicable only when the entire clearances are made to captive consumption and not when there are independent sales at the factory gate - Held that:- Since the facts of the case ISPAT INDUSTRIES LTD.(2007 (2) TMI 5 - CESTAT, MUMBAI) are similar to the case decided in favour of assessee. Therefore stay granted

  ---

• 2013 (2) TMI 466
  SSI Exemption - Using brand/trade name of another - Assessee engaged in the manufacture of aluminum utensils - Chapter 76 of the Tariff - Under a brand name "NIRLEP" - Brand name of "NIRLEP" pertained to and was registered in the name of another - Notification No. 8/99 - Held that:- Following the decision in case of RUKMANI PAKKWELL TRADERS (2004 (2) TMI 69 - SUPREME COURT OF INDIA)and MAHAAN DAIRIES (2004 (2) TMI 73 - SUPREME COURT OF INDIA) that it does not make any difference whether the goods on which the trade name is used are the same in respect of which the trade name is registered. Even if goods are different so long as the trade name of some other company is used, benefit of small scale exemption Notification is not available. In favour of revenue

  ---

• 2013 (2) TMI 465
  CENVAT Credit - Capital goods rule 2(a) of the CENVAT Credit Rules 2004 - Whether CENVAT credit was admissible of G.C. Sheets/G.P. Sheets – Assessee claimed these are components/spares/accessories of the cement mill – The effect that the sheets had been used in the Kiln Feed GCT and Kiln ESP Gas Dedusting and also for increasing the storage space in the Storage Yard - AO argued that the sheets had been used for replacing of the roof over the cement mill - Held that:- Question to be settled in this case is on a fact and the same is as to the manner of use of the G.C./G.P. Sheets. Therefore it is not possible to identify any nexus between such finding and the case law discussed in the impugned order. Therefore, appeal remand with a direction to the original authority to take fresh decision on the substantive issue after giving the assessee one more opportunity to substantiate their claim and after physical inspection of Plant and Machinery if deemed necessary. Remand back to AO

  ---

• CST, VAT & Sales Tax

• 2013 (2) TMI 488
  Section 3(1) of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Area Act, 1990 invoked to ask for further details including family details to verify whether the vehicle was used for the period of fifteen months as specified under the Act - Held that:- All that is required under the Act is proof of the registration of the vehicle and its use. Since the registration certificate itself gives the address proof, it is not clear as to why the authority asked for further documents which are not required under any provision of law. It is not the case of the respondent that the address shown in the registration certificate is bogus or that it is a fraudulent address. Thus it is totally irrelevant and there is no scope under section 3(1) of the Tamil Nadu Tax on Entry of Motor Vehicles into Local Area Act, 1990 to make such an enquiry on the family status of the petitioner In such view of the matter the respective petitioner can be directed to submit the original registration certificate of the vehicles and establish their case before the authority.

  ---