Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 23, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Income arising on sale of assets leading to short term capital gains is not income derived from foreign exchange asset so as to qualify as investment income within the meaning of Section 115E of the Act. - HC
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Reopening of assessment - validity of notice - first and second notice returned as un-served with the report that the assessee had gone out for the medical treatment - third notice was issued after expiry of period of limitation - Not a curable defect u/s 292B - HC
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The assessee is a Non-Resident Indian and merely because there is a wrong description in the returns that he is a Resident, it would not alter the status of the assessee that he is a Non-Resident Indian for the assessment years in question - HC
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Prior period expenses - liability for over a 12 year period - HC confirmed the disallowance for salary of Managers, Officers on deputation from Hindustan Lever Ltd. for the earlier years - HC
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Transfer fees and non occupancy charges - contribution towards the transfer fees and non occupancy charges are covered by the principle of mutuality and is not chargeable to tax - HC
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Redemption of Stock Appreciation Rights (SARs) - Tribunal was not justified in holding that capital gain arose to the assessee on redemption of Stock Appreciation Rights which were having no cost of acquisition - HC
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Computation of Minimum Alternate Taxation (MAT) u/s 115JA - Assessee is entitled to reduce from its book profits, the profits derived from its CPPs, in determining tax payable for the purposes of Section 115JA of the Act. - SC
Customs
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Loss of imported waste paper in fire which were imported at concessional rate of duty to be used used in the manufacture of the paper/ paperboards/ newsprint - prima facie appellant cannot be penalized - AT
Service Tax
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Works Contract Service - termination of old contract and entering into new contract in the changed scenario post 1.6.2007 - whether change in classification to avail the benefit of composition scheme - demand set aside - AT
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Payment of service tax by the other person on behalf of assessee (the service provider) - prima facie service tax cannot be demanded again from the assessee - AT
Central Excise
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Provisional Assessment - The liability to pay interest on any amount payable to Central Government consequent to order for final assessment is not a situation to be found in the present case. - HC
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Rejection of refund claim - On one hand the department is accepting CAS 4 certificates for inter unit transfer clearances and on the other hand rejecting the refund claims lodged on the basis of the very same CAS 4 certificates which have been accepted. - AT
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CENVAT Credit - processing of membrane/disc imported for water filter system - activity of repacking after adding some features - not a manufacturing activity - duty cannot be demanded more than cenvat credit - AT
VAT
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Composite contracts - It is not a universal rule that if the works contract is on the turn key basis, it imbibed inseparation and indivisible but depends upon the construction of the contracts and the intention of the parties to be gathered therefrom. - HC
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Levy of sales tax / VAT on import of goods (yarn in this case) from outside India - Constitutional validity - Imposition of tax at entry level where sale or purchase of goods are not involved, does not seem to come within the purview of sub-clause (b) of clause (1) of Article 286. - Levy upheld - HC
Case Laws:
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Income Tax
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2015 (2) TMI 778
Short term capital gain derived from foreign exchange asset - whether on sale of bonus shares investment income within Section 115E of the Act accrued? - Assessee is a nonresident under the Act - ITAT extended the benefit of Section 115E of the Act to the Respondent-Assessee, as the issue stands covered by virtue of its decision in Trishala Jain (1990 (8) TMI 196 - ITAT DELHI-E) - Held that:- The words “derived from” was a subject matter of consideration in Cambay Electric Supply Industrial Company Ltd v/s. CIT [1978 (4) TMI 1 - SUPREME Court] wherein held that the expression “attributable” to wider then the expression “derived from”. Thus, the sale of old machinery was held not to be a profit and gains derived from the conduct of the business of generation of electricity. It was held in the above case that whenever Parliament wanted to give a restricted meaning, they use the word 'derived from'. This also support the Revenue's contention that any income earned by the sale of the investment cannot be said to be derived from a Foreign Exchange Assets. The words 'derived from' would normally indicate in case of shares, the dividend received on shares and not the sale of the shares. The amount received on sale of shares is not derived from it as it is received on the transfer of shares leading to extinguishment of all rights in the shares so sold. Thus the interpretation by the Revenue also find support from the fact that Section 115E of the Act specifically indicates income by way of long term capital gains to be entitled to the benefit of Section 115E of the Act as it is not considered to be an income derived from an investment. Chapter XIIA of the Act itself makes a distinction between income derived from an asset and an income arising on sale of assets, leading to long term capital gains. The later is a case of income being attributable to sale of assets. We hold that the income arising on sale of assets leading to short term capital gains is not income derived from foreign exchange asset so as to qualify as investment income within the meaning of Section 115E of the Act. - Decided in favour of the Revenue
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2015 (2) TMI 777
Disallowance u/s 40(a)(ia) - failure of the appellant to comply with Section 194C - assessee is proprietor of the business of sub-contractor for road construction - Held that:- Assessee is a sub-contractor, as per the agreement he was responsible for mixing of the material on given portion of the proposed road, he was not responsible to purchase the raw materials like sand, gitti etc. and it was purchased by the main contractor. Therefore, prima-facie the assessee was not responsible to deduct the TDS. - Decided in favour of assessee. Net profit computation - assessee has shown net profit rate @ 3.18% - books of account rejected - A.O. estimated the profit @ 8% and made addition confirmed by Tribunal - Held that:- As the raw material belongs to the main contractor and not to the assessee. Thus, there is a contradiction about the facts and same was not discussed in the Tribunal's order. In the case of Chandra Agrawal Vs. CIT, [1984 (1) TMI 45 - ORISSA High Court] it was observed that material supplied by the contractee cannot be taken into account. The profit rate should be estimated with reference to the net payment only after excluding the cost of material supplied to assessee in terms of the contract. The Tribunal has ignored the abovementioned factual as well as legal position. Restore the matter back for reconsideration - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 776
Reopening of assessment - validity of notice - first and second notice returned as un-served with the report that the assessee had gone out for the medical treatment - third notice was issued after expiry of period of limitation - Curable defect u/s 292B - Notice admittedly remained un-served on the appellant while the entire proceedings were carried out by assuming jurisdiction on the basis of Notice u/s 17.06.2005, which admittedly was issued beyond the period of limitation - bogus entries of sale proceeds of shares - Held that:- The remand report of the Assessing Officer makes it apparently clear that three different notices under Section 148 of the Act were issued on 24.03.2005, 28.03.2005 and 17.06.2005. The first notice dated 24.03.2005 was an invalid notice because no reasons to believe were recorded nor sanction order was obtained by the Assessing Officer. The second notice dated 28.03.2005 was a valid notice but came back unserved and this notice was dropped and no further action was taken on this notice. The third notice, which was issued on 17.06.2005 was issued after the period of limitation and, consequently, was an invalid notice. The Assessing Officer assumes jurisdiction under Section 148 of the Act only upon issuance of a valid notice. Since the notice dated 17.06.2005 was an invalid notice, the assessment order cannot be sustained. Reliance by the Tribunal that the notice dated 17.6.2005 was in fact a notice dated 28.3.2005, which was a curable defect under Section 292B is totally misplaced. Section 292B has no application in the instant case. The notice dated 17.6.2005 could not be treated as a notice dated 28.3.2005 or a notice in continuation of the notice dated 28.3.2005. Thus assessment order passed by the Assessing Officer under Sections 147 and 148 of the Act are quashed. - Decided in favour of the assessee.
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2015 (2) TMI 775
Entitlement to the concessional rate of tax under Section 115H - ITAT allowed the claim - assessee has not satisfied the procedural and substantive requirements under Chapter XII A of the Income Tax Act - Held that:- As relying on assessee's own case [2012 (4) TMI 205 - MADRAS HIGH COURT ] there is no dispute regarding the interest earned on the various deposits in the Bank, which is specified under Section 115 E of the Act and the assessee is subject to 20% of taxation. So, the argument of the Revenue that requirement of filing of the declaration does not arise since that is not the condition for getting the benefit. Therefore, the Tribunal correctly held that the assessee had no obligation to file any declaration under Section 115 H or 115 E of the Act. Therefore, the Tribunal had correctly held that the assessee was not obligated to file any such declaration until the assessment year 2002-03. In respect of the nature of investment, the Tribunal also come to a conclusion that the subsequent redesignation of the NRE accounts into NRNR accounts have been made only from out of the convertible Foreign Exchange lying to the credit of the assessee in his various accounts which had been opened with the inflow of the original Foreign exchange transferred to India as approved by the Reserve Bank of India. Factually, the Tribunal found that the assessee, at the time of filing the returns, was a "Non-Resident Indian and hence, the assessee would be entitled to file returns under section 115E of the Act. That apart, in the wake of the provisions of section 115E that he is a Non-Resident Indian and the income derived is from the investment in a bank, the claim of the assessee could be considered only under section 115E of the Act. Though the assessee had filed returns claiming benefit under section 115E read with section 115H of the Act, keeping in mind the factual scenario, the Tribunal had correctly held that the assessee is a Non-Resident Indian and merely because there is a wrong description in the returns that he is a Resident, it would not alter the status of the assessee that he is a Non-Resident Indian for the assessment years in question - Decided in favour of asssessee.
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2015 (2) TMI 774
Prior period expenses - liability for over a 12 year period - Disallowance for salary of Managers, Officers on deputation from Hindustan Lever Ltd. for the earlier years - Tribunal deleted disallowance - Held that:- So far as the sum of ₹1.52 crores is concerned, HLL never appears to have pressed for the arrears of wages and salaries for its employees for the period 1999-2003 to the extent claimed by the assessee on the basis of the debit note. Furthermore, large part of those amounts was in fact time-barred. That the debit note demanded ₹1.52 crores may be a matter of record. There is no evidence on the record that at any time during the relevant period 1999-2003 provisions were ever made on the basis of any material to suspect such claims by HLL. At the same time the Court cannot ignore the circumstance that the overwhelming majority of the Board of Directors of the assessee was comprised of HLL’s nominees who could conveniently impose this law which they did. The palpable exaggeration of this claim is also evident from the fact that HLL subsequently in the year 2013 conceded that it only claimed ₹81,22,072/-, which was payable towards the balance part of the payment of salaries of supervisors etc. In the circumstances, this Court is of the opinion that the ITAT’s reasoning affirming the order of the CIT(A) is entirely without justification. - Decided in favour of the revenue. Additional payment for earlier years towards short payment of processing charges - Tribunal confirmed deletion of addition done by CIT(A) - Held that:- Both the CIT and the ITAT took note of the fact that these amounts were disputed and were mere claims. The Company Court rejected it in its judgment dated 25.4.2013. In these circumstances, the Court finds no reason to interfere with the impugned judgment and the question of law is accordingly answered in affirmity and against the revenue.
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2015 (2) TMI 773
Revision u/s 263 - assessee has filed the return for the assessment year under consideration, at Satna (MP), while jurisdictional order was lying with the Central Circle, Allahabad. - Held that:- In the earlier years, the returns were filed at Allahabad or Banda. But there was no occasion to file the return at Satna (MP). The process were without proper jurisdiction and it has no value. When it is so, then we uphold the order passed by the CIT(A) under Section 263 of the Act. The same is hereby sustained alongwith the reasons mentioned therein. The impugned order passed by the Tribunal is hereby set aside. Decided against the assessee.
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2015 (2) TMI 772
Unexplained investment under Section 69B - assessee refereed matter to DVO - CIT(A) deleted the additions made for the assessment years 1994-1995 and 1995-1996, and directed the entire unexplained investment to be assessed as income for the assessment year 1996-1997 also confirmed by Tribunal - Held that:- In the case on hand, it is beyond any cavil that the books of account furnished by the assessee were never rejected. No explanation was called for from the assessee stating that there was concealment or understatement of amount in the books of account. The initial burden cast on the department to prove that there was understatement or concealment of income has not been discharged and, therefore, the Assessing Officer is not empowered to refer the matter to the Departmental Valuation Officer or rely on such report. - Decided in favour of the assessee
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2015 (2) TMI 771
Addition made under the head 'income of Electro Medical Maintenance Centre' - Tribunal restored the addition made by the Assessing Officer as assessee had agreed for the inclusion of income - Held that:- As the assessee has now produced the assessment order for the assessment year 1998-99 wherein the assessee had offered the amount of ₹ 4,61,642/- as income and was assessed accordingly, issue remanded back to the Assessing Officer to verify and pass appropriate orders. - Decided in favour of assessee for statistical purposes. Addition made under the head 'service charges received' - Tribunal restored the addition as he assessee was following mercantile system of accounting and the service charges that had accrued and received by the assessee for the relevant year should be added to income - Held that:- As the sum of ₹ 29,39,092/-, which is part of ₹ 24,08,748/-, which was omitted to be included in the return of income dated 16.11.1997, was offered as income in the assessment year 1997-98 by the assessee, issue remanded back to the Assessing Officer to verify and pass appropriate orders. - Decided in favour of assessee for statistical purposes. Addition made in respect of deposits in the current account in the Indian Overseas Bank - Tribunal restored the addition as the said income had not been offered as income in the original return as well as in the revised return - Held that:- addition of ₹ 7,44,340/-, as has been clearly recorded by the Assessing Officer that this amount does not reflect as a trading receipt, but only as unexplained deposit coupled with the statement of Directors in the presence of Chartered Accountant that it was not offered as income of the said year, the Tribunal was justified in upholding the order of the Assessing Officer. The Commissioner of Income Tax (Appeals) was not correct in ordering remand for considering the issue, since it was neither canvassed by the assessee nor was the issue before the Commissioner of Income Tax (Appeals). - Decided in favour of the Revenue.
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2015 (2) TMI 770
Penalty u/s 221(1) - ITAT restricting the quantum of penalty as done by CIT(A) to 5% of the unpaid self assessment tax instead of @ 20% levied by the assessing officer - Held that:- One cannot omit the fact that the taxes emanating from the search by the group had been paid and Settlement Commission was also approached. The self assessment tax of ₹ 97.81 lacs alongwith the interest was also paid in part by 31-12-2011. The CIT(A) has after considering all relevant facts proceeded to exercise bonafide discretion to reduce penalty. The decision so recorded is neither perverse nor arbitrary. The affirmation of this aforesaid order by the Tribunal cannot be said to be perverse or arbitrary much less does it give rise to any substantial question of law. - Decided against the revenue
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2015 (2) TMI 769
Transfer fees and non occupancy charges - whether covered by the principle of mutuality and is not chargeable to tax? - Held that:- Nothing has been brought on record to indicate that the respondent had received more amounts than allowed/permitted in the State Government Circular dated 9th August 2001. Further in the respondent-assessee's own case [2009 (7) TMI 1208 - BOMBAY HIGH COURT], this Court has decided the issue in it's favour and in the absence of any distinguishing feature, the Tribunal was obliged to follow the same accepting the assessee's plea that the contribution towards the transfer fees and non occupancy charges are covered by the principle of mutuality and is not chargeable to tax. This is precisely what the impugned order has done. - Decided in favour of assessee.
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2015 (2) TMI 768
Disallowance of Medical expenses of a Director - Held that:- As relying on Porritts & Spencer (Asia) Ltd. Vs. Commissioner of Income Tax [2008 (9) TMI 918 - PUNJAB & HARYANA HIGH COURT] wherein it has been held that the medical reimbursement expenses are part of the salary covered under Section 40A(5) of the Income Tax Act, 1961. - Decided against revenue. Disallowance of Camp Office expenses - Directors' Wives accompanying their husbands on business tours - Tribunal deleted addition - Held that:- nce the Tribunal has recorded a finding of fact that the wives of the Directors had accompanied their husbands on business tour, therefore, such finding of fact does give rise to any substantial question of law. See Ram Bahadur Thakur Ltd. Vs. CIT [2003 (1) TMI 66 - KERALA High Court] and CIT Vs. Bhor Industries P. Ltd. (2005 (8) TMI 75 - BOMBAY High Court) - Decided against revenue.
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2015 (2) TMI 767
Addition on account of closing stock of stores, spares, tools etc. - Tribunal deleted addition - Held that:- Question of law has been answered in favour of the Revenue as relying on Commissioner of Income Tax (Central), Ludhiana Vs. M/s Highway Cycle Industries Ltd. [2015 (2) TMI 119 - PUNJAB & HARYANA HIGH COURT]. - Decided against assessee Advances of interest free loans to the associated concerns - Tribunal setting aside the disallowance - Held that:- Issue to find out the nexus between the borrowed funds and the diversion thereof in the form of interest free loans requires to be examined in the light of the judgment of the Hon’ble Supreme Court in S.A.Builders Ltd. Vs. Commissioner of Income Tax (Appeals) [2006 (12) TMI 82 - SUPREME COURT ] . The order of the Tribunal setting aside the disallowance is set aside and that of the Commissioner of Income Tax (Appeals) is restored. The Assessing Officer is directed to consider the disallowance in terms of the order of the CIT (Appeals), after examining the nexus between the borrowed funds and the diversion thereof in the form of interest free loans. - Decided against assessee
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2015 (2) TMI 766
Reopening of assessment - Tribunal cancelling the re-assessment as it was a case of change of opinion when the Assessing Officer had not expressed any opinion during the regular assessment proceeding - Held that:- The impugned order of the Tribunal has rendered a finding of fact on the basis of material before it, in particular the fact that during original assessment proceedings a query was made with regard to the same issue which was responded to by the respondent - Assessee and on satisfaction of the same, the Assessing Officer had passed an assessment order. Therefore, reopening of assessment on an issue in respect of which a query was raised and responded to by the assessee would amount to a change of opinion. No mention of any tangible material in the reasons recorded for issuing reopening notice under Section 148 of the Act. - Decided in favour of assessee.
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2015 (2) TMI 765
Reopening of assessment - Whether the bar of four years provided by first proviso of section 147 can be made applicable to the facts of the present case or not? - Held that:- No reason to believe that true and full disclosure was not made by the assessee to come out from the bar of four years as provided by first proviso to section 147 of the Act. Once the bar operates upon the power by express statutory provision, the action can be said as without jurisdiction. If the action of issuance of notice is without jurisdiction, it would be a case for interference under Article 226 of the Constitution. Thus the impugned action under section 147 and consequently issuance of notice under section 148 (Annexure-E) including disposal of the objection dated 10.10.2014 (AnnexureI) may not stand in the eye of law. Hence, they are quashed and set aside. - Decided in favour of assessee.
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2015 (2) TMI 764
Interest free money advanced to sister concerns - whether occasioned by commercial expediency or not? - Held that:- Perusing the impugned order as well as judgment in S.A.Builders Ltd. v. Commissioner of Income Tax(Appeals) and another(2006 (12) TMI 82 - SUPREME COURT) the question of commercial expediency viz-a-viz. money advanced to sister concerns is required to be considered. The Tribunal has not considered this aspect. Counsel for the parties agree that in this view of the matter, the appeal may be remitted to the Tribunal for adjudication afresh. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 763
Penalty u/s 271(1) (c) - tribunal upheld penalty for assessment years 1985-86 to 1987-88 - Held that:- No substantial question of law arises for consideration of this Court. The learned Tribunal has set aside the penalties for the assessment years 1982-83, 1983-84 and 1984-85, for the reason that assessed income was based upon estimated household expenses. Since such basis have been taken into consideration for three assessment years, we find that such reason cannot be the basis of setting aside the penalty in the three subsequent years i.e. 1985-86, 1986-87 and 1987-88, as the Tribunal itself has treated the years in question differently. The Tribunal has considered the revised income on the basis of unexplained deficiencies in the shape of Fixed Deposits(FDs), deficiency in stock, expenses incurred in cash and cash received on sale of property etc., therefore, the basis of penalty is not the estimated household expenses but the other reasons as there was difference of ₹ 70,000/- ₹ 26,000/- and ₹ 60,000/- in the assessment years 1985-86, 1986-87 and 1987-88 respectively on account of difference of the revised income and the income assessed. - Decided against assessee.
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2015 (2) TMI 762
Legality of an order passed under Section 127(2) - Power to transfer cases - Held that:- Perusal of the record as well as the reply reveals that the respondents are unable to refer to any show cause notice much less any communication that may answer to the description of a notice informing the assessee about the proposed change of jurisdiction. A reference in the post decisional representation filed by the assessee to a telephone call may give rise to an inference that the assessee was aware of a proposal to transfer jurisdiction, but does absolve the authority of its obligation to disclose the particulars of the proposed transfer. The presence of a representative of the assessee on 29.5.2014, as recorded in the order-sheet could have been relevant if this fact had been recorded in the impugned order or if the impugned order had recorded any contention raised by the said representative. A perusal of the impugned order reveals that it does not refer to any contention raised on behalf of the assessee thereby clearly proving that the assessee was not afforded any opportunity of hearing. Thus no hesitation in holding that the impugned orders are contrary to the provisions of Section 127 of the Act and consequently, set aside and direct the Commissioner of Income Tax, Gurgaon, to pass a fresh order after affording an opportunity to the petitioners to file their reply to the proposed transfer of jurisdiction - Decided in favour of assessee.
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2015 (2) TMI 761
Redemption of Stock Appreciation Rights (SARs) - Capital gain v/s perquisite under Sec.17(2)(iii)or under Sec. 28(iv) of the Act - Employee's Stock Option Plan (EOSP) - LTCG v/s STCG - Held that:- Considering the decision of Infosys Technologies Ltd. (2008 (1) TMI 17 - SUPREME COURT OF INDIA) wherein held the revenue had erred in treating amount being difference in market value of shares on the date of exercise of option and total amount ‘paid’ by employees consequent upon exercise of the said options as perquisite value as during the lock-in period there was no cash inflow to employees to foresee future market value of shares and the benefit if any which arose on date when option stood exercised was only a notional benefit whose value was unascertainable. The Tribunal was correct in treating the amount received on redemption of Stock Appreciation Rights as capital gain as against treated as perquisite under Sec.17(2)(iii) of the I.T. Act and in treating the amount received on exercising the opinion of Employee's Stock Option Plan (EOSP) as long term capital gains instead of treating the same as short term capital gains. However, the Tribunal was not justified in holding that capital gain arose to the assessee on redemption of Stock Appreciation Rights which were having no cost of acquisition. - Decided in favour of assessee.
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2015 (2) TMI 760
Rent paid to P.S.I.D.C. for guest house - ITAT upholding the order of the CIT(A) deleting addition - Held that:- Sections 37(4) and (5) of the Act are unambiguous in their intent and purpose that expenditure claimed by an assessee on account of guest house charges would not fall under Section 30 of the Act and therefore, cannot be allowed as a deduction. The Tribunal has, therefore, erred in deleting the addition made by the AO by relying upon Section 30 of the Act. The first question is, accordingly, answered in favour of the revenue by holding that payment of guest house charges cannot be allowed as a deduction. - Decided against assessee. Subscription paid directly in the form of cash - treatment as a perquisite in view of Section 40-A (5)(a) (ii) - Held that:- A due consideration of the facts reveals that subscription has been made to professional institutions and clubs. The subscription, therefore, cannot be treated as a perquisite under Section 40(A) (5a) of the Act. Reliance may be placed upon a judgment of the Delhi High Court in Commissioner of Income Tax Vs. Shriram Refrigeration Industries Ltd. (1992 (5) TMI 15 - DELHI High Court). - Decided against revenue. Extra shift allowance - ITAT allowing allowance on the basis of the concern as a whole working as an extra shift - Held that:- ITAT has relied upon a circular issued by Central Board of Direct Taxes while holding in favour of the assessee. A perusal of the judgment in Saraswati Industrial Syndicate's case (1981 (3) TMI 40 - PUNJAB AND HARYANA High Court) reveals that it does not pertain to extra shift allowance and is, therefore, irrelevant. The question has even otherwise already been answered in favour of assessees by in South India Viscose Ltd. Vs. Commissioner of Income Tax, (1997 (7) TMI 9 - SUPREME Court) - Decided against the revenue. Reduction of capital employed by proportionate liabilities in the new tractor division and the foundry division - Held that:- The controversy is covered against the revenue by circular No.380, dated 10.04.1984, issued by the Central Board of Direct Taxes and a judgment of the Bombay High Court in the case of Indian Oil Corporation Vs. S. Rajagopalan ITO, (1973 (4) TMI 12 - BOMBAY High Court ). Counsel for the revenue is unable to raise any meaningful argument against the circular or the aforesaid judgment and had not been demonstrated that the borrowings made by the assessee travelled to the two units.- Decided against the revenue.
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2015 (2) TMI 759
Computation of Minimum Alternate Taxation (MAT) u/s 115JA - whether the assessee would be entitled to reduce the book profits to the extent of profit derived from its CPPs, while computing MAT under Section 115JA? - Held that:- The High Court in [2008 (11) TMI 44 - DELHI HIGH COURT] has correctly relied upon the decision of Tata Iron and Steel Co. Ltd. v. State of Bihar [1962 (9) TMI 49 - SUPREME COURT] to conclude it is quite evident that assessee's CPPs can as a matter of principle derive profits which is in point of fact embedded in the ultimate profit earned on the sale of the final product. - Assessee is entitled to reduce from its book profits, the profits derived from its CPPs, in determining tax payable for the purposes of Section 115JA of the Act. - Decided in favour of assessee.
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Customs
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2015 (2) TMI 784
Classification of imported fabrics - Covered textile fabrics or otherwise - A material can not be said to covering itself to be called covered material - Held that:- In the present case, the only material is polyester and therefore there is no ambiguity requiring predominance test. In case it is contended that the impugned goods are not consisting of two or more textile fabrics of different composition as they are made of only polyester, even then it would suffice to say that as per the said Explanatory Note, when a textile fabrics layered with another textile fabrics of a different material (by sewing gumming etc.) is not to be covered under the scope of 'covered fabrics' (CTH 59.07), then a textile fabrics covered by another textile fabrics of the same material will be (even more) not covered under the scope of 'covered fabrics' of CTH 59.07. Thus the appellants' contention that the said H.S.N. Note is not applicable for the purpose of classification in their case as there is only one material (Polyester) involved in their goods is totally untenable; indeed existence of only one material, as stated earlier, obviates the need to carry out the predominance test. Having thus analyzed, it may be reiterated that once the impugned goods are not held to be classifiable under CTH 5907, then even the appellants do not contend that in that case too they would not be classifiable under CTH 55151230. Non supply of information - Held that:- During the hearing before CESTAT the appellants did not take up the issue of valuation but they have mentioned in the appeal papers that in spite of their request, copies of alleged contemporaneous evidence for raising the value had not been given to them. We find that the Commissioner has clearly noted in the impugned order that they were informed vide letter dated 2.2.2007 to inspect/procure copies of desired documents and the same were supplied on 22.2.2007 under proper acknowledgment. After that the appellants did not desire personal hearing and categorically wrote that the issue may be decided on merit. Thus appellants contention in this regard in their appeal papers is untenable and that may be the reason why the issue of valuation was not raised by them during hearing before Cestat. - Decided against the assessee
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2015 (2) TMI 783
Classification - Import Low Ash Metallurgical Coke and Low Ash Low Phosphorous Coke - Procedure for drawl of sample and method of testing - Exemption under Notification No. 35/90-Cus dated 20.3.1990 - Concessional customs duty of 20% ad valorem in respect of coke with phosphorous contents of 0.035% or below - Benefit of doubt - Held that:- From the records of the case, it is seen that the goods were imported in July, 1990 and November, 1990. As per the test report furnished by the Chinese supplier and the Testing Agency in Japan, who conducted the test at the behest of the importer, the phosphorous content was found much lower than the 0.035%. The goods were again tested by the Customs laboratory in Goa at the time of importation and as per the Colour Text Comparison method, the phosphorous content was found to be less than 0.035% and the goods were provisionally cleared. After clearance by the customs, the assessee once again got the goods tested by M/s SGS (India) Pvt. Ltd., who also found the samples to be contain phosphorous less than 0.035%. As against the test reports by various agencies, Revenue wants to rely on the test report of the CRCL, which conducted the test in 1993 almost two years after the samples were drawn. There is nothing on record to show that the samples, which were drawn, were kept in airtight containers or the samples were drawn in accordance with IS 436 prescribed for drawal and testing of the samples. In other words, there is no evidence adduced by the Revenue to show that the samples were representative and the sample could not have deteriorated with the passage of time. The Chief Chemist who was cross-examined had also accepted that only the samples kept in airtight containers would not deteriorate. However, there is no evidence forthcoming in this regard adduced by the Revenue. The decision of the Tribunal in the case of Rajkot Engineering Association [1999 (1) TMI 292 - CEGAT, MUMBAI]clearly supports the appellant s case. In the said case, it was held that if the samples were not drawn as per the prescribed procedure and were not kept in airtight containers, the result of such samples can be mis-leading and cannot be accepted. The same view was taken by this Tribunal in the case of Adani Exports Ltd. [2009 (8) TMI 439 - CESTAT, AHMEDABAD]. In view of the foregoing position, the benefit of doubt has to go to the appellant as the Revenue has failed to discharge the burden cast on it to show that the appellants are not eligible for the benefit of exemption Notification No. 35/90-Cus. Decided in favour of appellant.
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2015 (2) TMI 782
Loss of imported waste paper in fire which were imported at concessional rate of duty - Benefit of Notification No.21/2002-CUS dated 01/3/2002 - condition of the exemption was that the waste paper was to be used in the manufacture of the paper/paperboards/newsprint - Imported Waste paper destroyed in fire in factory - Accident is an act of God - Held that:- In the present case we find that the Adjudicating authority has not expressed any doubt that is was an accidental fire beyond the control of the appellants. Indeed the Commissioner has clearly held that it is not in dispute that the impugned goods were imported and after their receipts in the factory and entry in the appellants records, got destroyed in a fire accident on 12.6.2012. This destruction of the impugned goods by fire was an act God on which the noticee had no control. Having thus observed, the Adjudicating authority held that it would not be fair to penalize the noticee. This clearly shows that the bonafides of the appellants are not in doubt. Thus we find that not only the jurisprudence cited on the issue but also the Judgment of CESTAT in case of Vamsadhara Paper Mills Ltd. [2009 (6) TMI 801 - CESTAT, BANGALORE] fully support the appellants case. Therefore we waive the requirement of pre-deposit and allow the appeal. - stay grated.
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2015 (2) TMI 781
Import of Sub-standard quantity goods - Re-export - Confiscation of goods - Violation of Drug and Cosmetics Act, 1940 and rules - Statutory sampling plan not followed- Not tested as per Drugs and Cosmetics rules. - Held that:- On going through the above provision as regards the standard of goods i.e. condoms, it is provided that standard of mechanical contraceptives should be as provided under the Schedule R. According to which testing of Bursting Volumes and Pressure test should be done in accordance with plan set out in Annexure III to this Schedule. Annexure III prescribed that for batch size 150001 lakhs to 5 lakhs, the sample size should be 315 pieces and out of 315 pieces if the rejection number is 11 or more the batch is liable for rejection. As against the aforesaid method of testing provided under Drugs and Cosmetics Rules, 1945, it is observed from the test report given by Central Drugs Testing Laboratory, Chennai, the norms prescribed in Rules were not followed inasmuch as batch size taken 45 pieces, therefore the test carried out by the Central Drugs Testing Laboratory, Chennai can not be considered in accordance with law. On this serious discrepancy, the appellant pointed out to the authority and also requested the re-testing of the sample in accordance with the method prescribed under Drugs and Cosmetics Rules, 1945. The same was neither considered nor sample was re-tested. Therefore, I am of the view that subject goods was not liable for confiscation. I also agree with the Ld. Counsel that Rule 141 of the Drugs and Cosmetics Rules, 1945 provides for re-shipment of the goods and goods admittedly re-exported. For this reason also the goods are not liable for confiscation and also not liable for consequential penalty. The ratio applicable of the judgments- [2008 (7) TMI 671 - CESTAT, MUMBAI] [2009 (11) TMI 773 - CESTAT BANGALORE] relied upon by the Ld. Counsel are squarely applicable in the present case. Decided in favour of appellant.
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2015 (2) TMI 780
Post shipment amendment under section 149 of the Customs Act,1962- Rejection in Amendment in Shipping Bill- Focus Product Scheme - Reward Scheme Shipping Bills- Held that:- In Circular No. 6/02-Cus dated 23.1.2002, which provides for exemption norms for export goods at port of export and in para 2.1(A) in respect of Factory Stuffed Export Cargo regarding the Scale of Examination, it is mentioned that no examination except (a) where the seals are found tampered with, or (b) there is specific intelligence in which case, permission of Deputy/Assistant Commissioner would be required before checking. Further, in para 2.2, it is provided that in all cases in respect of consignment selected for examination, a minimum of two packages with a minimum of 5% of packages (subject to a maximum of 20 packages from a consignment) shall be opened for examination will be selected by the system. Relating to the inspection report and invoices, the appellant states that in respect of both the export consignment 70 and 45 cartons were opened which being 10% of total number of cartons in each consignment, and the same are much more than maximum number of cartons (20) prescribed under the Board's Circular. Having considered the rival contentions and considering the documents on record, I find that the reason given in the impugned order upholding rejection of conversion of shipping bill under Section 149 is extraneous and is also perverse on the basis of information available on record. It is evident that the goods for export have been examined by the Customs official, who have examined 10% of the consignment and the cartons examined are much more than prescribed no. of cartons i.e. 20. Further, the containers were stuffed and sealed in the presence of the Customs Officer, thus, I hold that the reason for rejection of conversion of bill is bad. Decided in favour of appellant.
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Service Tax
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2015 (2) TMI 801
Commercial or Industrial Construction Service - Works Contract Service - Change of contract from old contract to new contract is only an amendment with the same object i.e. construction of City Centre Mall - Works Contract (Compositon Scheme for payment of Service Tax) Rule, 2007. Held that:- It is apparent that two contracts are different in factual details. The clauses relating to Retention money and Mobilization advances are very significant clauses in such type of Agreements. In the present case, these two clauses are quite different in the earlier Contract and the later Contract. Further evidence has been provided by the appellant in the form of Ledger abstract showing payment made to the appellant by M/s City Centre Mall Pvt. Ltd., Nashik. The Ledger abstract clearly indicated that the payments are differentiated as under the old contract and the new contract. Therefore, we arrive at the conclusion that the old contract was terminated w.e.f. 31.5.2007 and a fresh contract was executed w.e.f. 5.6.2007. Having stated that the fresh contract from 5.6.2007 is to be considered as a new contract, there cannot be any objection to classify the service rendered in this contract as a Works Contract Service, which was introduced w.e.f. 1.6.2007. The provider who opts to pay tax under the Rule shall exercise such option prior to payment of Service Tax. We find force in the appellant's contention that the fact that they had started paying tax under the Works Contract Composition Scheme is quite evident from the rate of tax reflected in the ST-3 returns. In any case, they had exercised option on 26.9.2007, the substantial benefit cannot be denied for procedural deficiency of delay in opting for Works Contract Service by a specific declaration under Rule 3. More so, when no format has been prescribed for making/exercising an option nor has it been specified as to whom the option must be addressed. Reliance is placed on the case of Bridge and Roof Company [2012 (6) TMI 491 - CESTAT, NEW DELHI] - Decided in favour of appellant.
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2015 (2) TMI 800
Benefit of small scale exemption under Notification No. 6/2005-ST - Services under brand name of others - Services provided under Business Auxiliary Service - Penalty imposed u/s 76, 77 & 78 - - option to pay 25% of the mandatory equal penalty - Held that:- It is a fact that the appellant had rendered Business Auxiliary Service to IOC and therefore it is not correct to say that they had rendered service in the brand name of IOC. Accordingly their contention that they are eligible for SSI benefit is sustainable. Levy of penalty - simultaneous penalties under Section 76 and 78 - Held that:- The High Court has held that no simultaneous penalties under Section 76 and 78 may not be justified even if those penalties were legally not mutually exclusive, in the cases of CCE Vs. First Flight Curios Ltd. [2011 (1) TMI 52 - High Court of Punjab and Haryana], in case of CCE, Chandigarh-I Vs. M/s. Cooltech Corporation [2010 (12) TMI 78 - PUNJAB AND HARYANA HIGH COURT] and also in case of CCE, Vs, Pannu Property Dealers, Ludhiana [2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT] - There is also force in the appellants contention that neither in the Order-in-Original nor in the Order-in-Appeal option had been given to them to pay 25% of the mandatory equal penalty if the adjudicated liability of service tax and interest along with 25% of the mandatory equal penalty are deposit within 30 days and that such option should be given to them now. - Matter remanded back - Decided conditionally in favour of assessee.
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2015 (2) TMI 799
Waiver of pre deposit - payment of service tax by the other person on behalf of assessee (the service provider) - Commercial Training or Coaching Services - Held that:- Applicant contended before the adjudicating authority that the entire service tax liability of their Coimbatore Branch had been discharged by M/s. Maya. Adjudicating authority observed that service tax liability has to be discharged by the applicant, service provider and therefore he has not accepted the payment of tax by M/s. Maya. In this context, Ld.AR drew the attention of the Bench to relevant portion of the order of Commissioner (Appeals). But, we are not impressed with the submission of Ld. AR on the ground that the adjudicating authority had not disputed the payment of tax by M/s. Maya in the adjudication order. We find that the case law relied upon by Ld. AR, where no tax was paid by other persons. Prima facie , we find that the tax was paid by M/s. Maya which should have been paid by the applicant, according to Revenue. Hence the applicant has prima facie a strong case for waiver of entire amount of tax along with interest and penalty. Accordingly, we waive the predeposit of the entire amount of tax and penalty till disposal of appeal. - Stay granted.
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2015 (2) TMI 798
Condonation of delay - Delay of 1 day in filing the appeal - Held that:- Commissioner (Appeals) should have condoned the delay under the circumstances and consider the stay application and appeal on merits in accordance with law. Accordingly, we condone the delay of one day in filing the appeal before the Commissioner and remand the matter to the Commissioner (Appeals) for fresh decision after considering the stay application and appeal filed by the appellant. Needless to say that the appellant shall be given reasonable opportunity to present their case before an order is passed. - Delay condoned.
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2015 (2) TMI 797
Modification of stay order - Waiver of pre deposit - Held that:- Considering the final order passed by Principal Bench at Delhi in the case of Greater Noida Industrial Development Authority [2014 (9) TMI 306 - CESTAT NEW DELHI] and also the order of the Hon'ble High Court of Bombay in the case of City & Industrial Development Corporation of Maharashtra Ltd. [2014 (11) TMI 127 - BOMBAY HIGH COURT], we modify our order [2014 (9) TMI 697 - CESTAT MUMBAI] by waiving the requirement of pre-deposit of ₹ 185 crore and direct the registry to list the appeal for final hearing without insisting on any pre-deposit. Revenue is restrained from recovery of dues adjudged against the appellant during the pendency of the appeal. - Modification allowed.
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Central Excise
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2015 (2) TMI 794
Provisional Assessment - Demand of interest on payment of differential duty before formal finalization of assessment - Held that:- Rule 7 and its subrules if read together would denote as to how the Revenue secures itself against any provisional assessment. If on a provisional assessment, certain amount of duty is paid, but it is not accurate and correct, then, the final assessment is contemplated on a finalization of the assessment. Upon finalizing, it is possible that the Revenue will determine the duty liability and to that of something more that has been recovered in the provisional assessment. When that exercise is finalized and consequent thereon that the Assessee shall be liable to pay interest on any amount payable to the Central Government. The liability to pay interest arises on any amount payable to Central Government and consequent to order for final assessment under Rule 7 subrule (3). We are in agreement with the Assessee in the present case that the later part of subrule (4) is not attracted. The liability to pay interest on any amount payable to Central Government consequent to order for final assessment is not a situation to be found in the present case. It is not the argument of the Revenue that what was paid by the Assessee as differential duty and prior to finalizing of the assessment, is not correct, accurate or proper computation of the liability. Having found that the final assessment resulted in nothing due and payable to the Government, we do not find any justification then to recover interest. If the interest was to be recovered and was indeed payable on the date on which the Assessee made payment of differential duty and prior to finalization of the assessment, then, the Rule would have specifically said so. In the absence of any such stipulation in the Rules the dictum in the decision of the Hon'ble Supreme Court in J.K. Industries Ltd. [2011 (3) TMI 373 - KARNATAKA HIGH COURT] would apply. If that principle can be applied, then, there was no liability to pay interest. If the liability to pay interest between the time or the period of provisional assessment and payment of differential duty until the final assessment has to be read in the Rule, that is not possible. The interest in this case is not payable merely on equitable considerations. Such being the position, we do not find that the Tribunal was justified in dismissing the Assessee's Appeal. It is unfortunate that the Tribunal ignores and brushes aside even orders of this Court. Had the Tribunal noted the facts in Ispat Industries Ltd. [2010 (10) TMI 178 - BOMBAY HIGH COURT] and Tata Motors Ltd. [2011 (3) TMI 531 - CESTAT, MUMBAI] it would have possibly concluded that those orders would bind it in this case. Decided in favor of appellant.
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2015 (2) TMI 793
Input services- Wrongly availed Cenvat credit of service tax paid on outward and inward freight- Held that:- Having considered the rival contentions and the grounds of appeal, I find that the CENVAT Credit of services availed by the manufacturer is available from the place of removal, which in the appellant's case herein is railway station on the goods have been sold on FOR basis and Port at which goods have sold at FOB basis. Further, I find that the findings of facts are in favour of the appellant to the effect that the appellant have satisfied the three conditions specified in the Circular. Further, I agree with the appellant that the Hon'ble Gujarat High Court in the case of Inductotherm India Pvt. Ltd.[2014 (3) TMI-921 (Guj. HC)] has held that in case of export of Cargo Handling Services, the Service Tax paid thereon is available as input services, as in such case, the place of removal is Port. Appeal allowed in favour of appellant.
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2015 (2) TMI 792
Rejection of refund claim - payment of excess duty on the clearance of copper rod to their sister unit as per CAS-4 - respondent has not followed the provisional assessment under Rule 7 of the Central Excise Rules, 2002 - Incorrect CA certificates - Unjust enrichment - Held that:- The fact that appellants have not followed the provisional assessment under Rule 7 of Central Excise Rules, 2002 is irrelevant to the instant case and also cannot be the ground for rejection of refund claim. Sale made to independent buyers and the assessment method adopted thereto is totally irrelevant and out of context in so for as the present refund claims are concerned when CAS 4 certificates filed for the refund period have not been disputed by the department. On one hand the department is accepting CAS 4 certificates for inter unit transfer clearances and on the other hand rejecting the refund claims lodged on the basis of the very same CAS 4 certificates which have been accepted. Rejection of the refund claim does not appear to be legally correct. Therefore the impugned order is set aside and lower authority directed to re-examine the entire issue and pass fresh orders, after observing principles of natural justice. The appellant shall also satisfy the respondent that there is no unjust enrichment. As held by the Hon ble High Court of Madras in C.C. vs. B.P.L. Ltd. [2010 (7) TMI 66 - MADRAS HIGH COURT]. Refund unjust enrichment, proof of - No evidence other than a Chartered Accountant certificate produced Certificate merely a piece of evidence acknowledging certain facts and in itself not sufficient to show that duty in relation to refund not passed on to another person. If it was otherwise, then the certificate would prevail over consideration of issues before authorities, a situation which was not contemplated under statue. Production of documents or other evidence was necessary for this purpose. As the refund claims are subject to payment of interest, in this case the refund claims pertains to the period from July 2008 to March 2011 and the matter in litigation for such a long period therefore, the direction of this Tribunal to decide the refund claim within 30 days are necessarily to be followed. - Decided against Revenue.
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2015 (2) TMI 791
CENVAT Credit - differential quantity of scrap - shortage has been found on eye estimation basis - statements were recorded under threat - during the course of adjudication, the appellants sought cross-examination of Panchas witnesses which was denied - violation of principles of natural justice - Held that:- In this case an investigation was done in the factory on 31.07.2002. It is an admitted fact that physical verification of raw material was not done and the stock was taken on eye estimation basis. It was found that there was shortage of 2042.405 M.T. Therefore, the CENVAT credit was attributed to the shortage which was worked out to ₹ 17,97,316/-. The weighment of raw material was disputed by the appellants on the very next day and lodged their protest before the Addl. Commissioner concerned and request for weightment on physical basis of raw material but the said request has been turned down by the adjudicating authority on the premise that the letter dated 01.08.2002 is an after-thought. I have gone through the statement of Director recorded subsequently also but these statements do not confirm the acceptance of the shortage of raw material by the Director. Further, I find that the case has been made out on the basis of Panchnama drawn during the course of investigation and the permission for cross-examination of panchas was not given to the appellants. Therefore, I hold that there is a violation of principles of natural justice. In these circumstances, I set aside the impugned order and remand the matter back to the adjudicating authority - Decided in favour of assessee.
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2015 (2) TMI 790
CENVAT Credit - processing of membrane/disc imported for water filter system - processing repacking after adding some features and sold the same as membrane - manufacturing activity or not - appellant was under the bona fide belief that the activity undertaken by them amounted to manufacture and, therefore, they discharged excise duty liability on the membrane so cleared. They also availed CENVAT Credit of the CVD and SAD paid on the imported membrane for discharging excise duty liability - Whether the appellant has paid the excise duty on the membrane cleared by them and amounts so paid is more than the credit taken by the appellant in respect of CVD and SAD paid on imported membrane - Held that:- In their reply to the show-cause notice, the appellant had specifically mentioned that the excise duty liability discharged by them on the membranes cleared is more than the credit taken of CVD and SAD. However, the adjudicating authority has not given any finding in respect of this contention made by the appellant. Therefore, even in a case where the activity did not amount to manufacture, the appellant was not required to reverse any credit. However, the adjudicating authority has not considered this aspect; therefore, the matter has to go back to the adjudicating authority to verify whether the excise duty liability discharged by the appellant on the process of manufacture undertaken is more than the credit taken in respect of the CVD and SAD on such membranes. If it is found that the appellant has paid more excise duty, then the question of reversal of credit would not arise in the light of the various decisions in the case of Creative Enterprises [2008 (7) TMI 311 - GUJARAT HIGH COURT], Ajinkya Enterprises [2012 (7) TMI 141 - BOMBAY HIGH COURT] and Narmada Chematur Pharmaceuticals Ltd. (2004 (12) TMI 93 - SUPREME COURT OF INDIA). - Matter remanded back - Decided in favour of assessee.
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2015 (2) TMI 789
Cenvat Credit - Transfer of credit - amalgamation - On granting common registration for these two divisions, the appellant merged the separate Cenvat credit accounts of the two divisions. At that time there was some Cenvat credit balance available in the Excel Fibre Division which was used commonly for payment of duty on all the finished products including the Viscose staple fibre - Held that:- Impugned order is an Ex-parte order passed without hearing the appellant. Prima Facie, we also find that the judgment of Hon ble Madras High Court in the case of CCE Madurai vs Rajshree Sugars and Chemicals Ltd. reported in [2013 (6) TMI 654 - MADRAS HIGH COURT], appears to be applicable to the facts of this case but this judgment has not been considered by the Commissioner and he decided the matter Ex-parte. In any case we do not find any justification as to how the penalty of ₹ 50 lakh can be imposed on the appellant company under Rule 27 of the Central Excise Rule 2002, the maximum penalty imposable under which is only 5000/-.The impugned order is, therefore, set aside and the matter is remanded to the Commissioner for denovo adjudication after hearing the appellant and also keeping in view the judgment of hon ble Madras high Court in the case of Rajshree Sugar and Chemicals Ltd.(Supra). - Decided in favour of assessee.
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2015 (2) TMI 788
Interest on delayed refund- Held that:- Relying on the decision of ITC Ltd.[2004 (12) TMI 90 - SUPREME COURT OF INDIA], the appellant is entitled for interest on delayed refund from the period after three months of order was passed by the Tribunal till sanction of the refund, i.e. during the period 5.10.2002 to 31.8.2004. Decided in favour of appellant.
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2015 (2) TMI 787
SSI exemption - use of brand name of others - - Imposition of interest - Penalty u/s 11AC - Assessee were affixing/stitching labels of registered brand Sheetal on the children s garments purchased from non-duty paying SSI units and cleared the same without payment of Central Excise duty - Held that:- it is seen that the appellant has admitted that the brand Sheetal is of Shri Dhiren B. Shah hence should have sought clarification from department as to correct position of law. Be that it may, we uphold the duty liability and the interest thereof as there is no serious contest. - Demand of duty confirmed. Levy of penalty - Held that:- Appellant could have entertained a bonafide belief that the brand Sheetal being their own; as it is undisputed that Shri Dhiren B. Shah was the Director of the Company, and the brand was registered in his name and the appellant has also made an application with the Trade Mark authorities to register the brand in their name; and they did not pay excise duty as they were only affixing label of a seller. Since there could be confusion on this issue and the period involved in this case being the time when these provisions were introduced for the first time we find the appellant’s submission of there being no intention to evade duty has a strong force. Escapement of duty, if any, in the facts and circumstances of this case, may be due to bonafide belief of the appellant of interpretation of Notification 38/2003-CE. On this ground, we set aside the penalty imposed on the appellant in this appeal - penalty waived - Decided partly in favour of assessee.
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2015 (2) TMI 786
Restoration of appeal - Pre deposit ordered - Compliance made by due date - Appeal dismissed for non compliance - Restoration application mistakenly taken as extension of stay order - After noticing mistake extension of stay denied - Held that:- applicant complied with the stay order before the date of dismissal of appeals. The Tribunal by order dtd 24.3.2006 dismissed the appeals for non compliance of the stay order. In May 2005, the applicant filed the applications for restoration of appeal dismissed for non-compliance of stay order. It seen from the Notice dtd 21.7.2014 of the Registry of the Mumbai Bench of the Tribunal that the said applications for Restoration of appeals inadvertently listed as extension for stay order and the Tribunal by orders time to time extended the period of stay orders. However, in 2014 it was noticed by the Registry of Mumbai Bench. Apparently, there is no fault on the part of the applicant. - applicant filed applications for restoration of appeal within two months from the date of dismissal of the appeals. The Registry of the Tribunal wrongly listed as application in extension of stay order. In our considered view, the order dtd 24.3.2006 should be recalled and the appeal should be restored in its original number in the interest of justice. - Appeal restored.
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2015 (2) TMI 785
Waiver of predeposit - Commission paid to overseas commission agent related to SEZ unit - Irregular availment of service tax credit - Held that:- The appellants have paid service tax under reverse charge relating to commission paid to overseas commission agent for sales and other transactions. There is no dispute on the fact that overseas commission agent rendered service to both appellant's unit at Koratty and also to SEZ unit at Kakkanad. The appellants are liable to pay service tax under reverse charge only in respect of value of service of appellant unit. There is no legal provision to pay service tax on value of services pertaining to SEZ unit. Further, there is no service tax liability on the SEZ units as they are covered under exemption, therefore, prima facie , I find that appellants are not entitled to take service tax credit pertaining to the value of services rendered by the overseas commission agent to the SEZ unit. Appellants are liable to pay service tax only on the value of services related to Koratty unit. Therefore, prima facie , I find that the appellants have not made out a case for waiver of predeposit of entire dues. - Stay granted partly.
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CST, VAT & Sales Tax
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2015 (2) TMI 796
Composite contracts - Amendment under VAT Act - No change done under CST Act - Deeming sale - whether in the absence of an amendment in the Central Sales Tax Act specifically applying its provisions to a transfer of property in goods involved in the execution of a works contract, the provisions of Sections 3, 4 and 5 contained in Chapter II can be held applicable to such a transfer - Held that:- prior to the Forty-Sixth Amendment, a distinction was being made between a ‘works contract’ which was entire and indivisible and a works contract composed of two distinct and separate contracts-one, for transfer of materials and other, for payment of remuneration for services and for work done. The non-availability of the legislative power of the States under Entry 54 of the State List, as construed by this Court in the Gannon Dunkerley case was confined, in its appliction, to works contracts falling in the first category, i.e., contracts which were entire and indivisible and it was permissible for the States to impose tax on sale or purchase of goods where the parties had entered into distinct and separate contracts one for the transfer of materials and other for payment of service and for work done. The provisions of Sections 3, 4 and 5 of the Central Sales Tax Act were applicable where there were two separate contracts. As a result of the Fortysixth Amendment, the contract which was single and indivisible has been altered by a legal fiction into a contract which is divisible into one for sale of goods and other for supply of labour and services and as a result such a contract which was single and indivisible has been brought on a par with a contract containing two separate agreements. Since the provisions of Sections 3, 4 and 5 were applicable to such contracts containing two separate agreements, thee is no reason why the said provisions should not apply to a contract which, though single and indivisible, by legal fiction introduced by the Fortysixth Amendment, has been altered into a contract which is divisible into one for sale of goods and other for labour and services. If the legal fiction introduced by Article 366 (29- A) (b) is carried to its logical end it follows that even in a single and indivisible works contract there is a deemed sale of the goods which are involved in the execution of a works contract. Such a deemed sale has all the incidents of a sale of goods involved in the execution of a works contact where the contract is divisible into one for sale of goods and the other for supply of labour and services. Even in the absence of any amendment having been made in the Central Sales Tax Act (after the Forty-sixth Amendment) expressly including transfers of property in goods involved in execution of a works contract, the provisions contained in Sections 3, 4 and 5 would be applicable to such transfers and the legislative power of the State to impose tax on such transfers under Entry 54 of the State List will have to exercised keeping in view the provisions contained in Sections 3, 4 and 5 of the Central Sales Tax Act. For the same reasons Sections 14 and 15 of the Central Sales Tax Act would also be applicable to the deemed sales resulting from transfer of property in goods involved in the execution of a works contract and the legislative power under Entry 54 in State List will have to be exercised subject to the restrictions and conditions prescribed in the said provisions in respect of goods that have been declared to be of special importance in inter-State trade or commerce Court noticed the decision rendered in case of M/s. Binani Bros (P) Ltd -Vs- Union of India & Ors reported in [1973 (12) TMI 77 - SUPREME COURT OF INDIA] and found the distinguishing feature that since the said MS Pipes imported by the company were used for erection and commissioning of the plant in the same conditions as they were imported and were not used in any manufacturing process, the Sales Tax cannot be attracted. It is, therefore, settled that the state cannot by legislature imposed Sales Tax of the inter-State sale or the sale by import in relation to a works contract provided the same is used in commissioning of the project on turnkey basis in the same form without changing its character through a manufacturing process. The power of the state to legislate on imposition of Sales Tax in relation to the works contract is not unfettered but a restrictive one. After the Forty-sixth amendment in the Constitution, the works contract is capable of being divorced into a supply and the labour and service. It is not a universal rule that if the works contract is on the turn key basis, it imbibed inseparation and indivisible but depends upon the construction of the contracts and the intention of the parties to be gathered therefrom. The Deputy Commissioner has simply proceeded on the basis that though the separate contracts are entered into between the parties but they are on a turn key basis, it partakes the character of indivisible and inseparable works contract exigible to the State Sales Tax. There is no finding recorded in the impugned order on the nature of the transaction reflected in the books maintained by the petitioner and the return filed in this regard. Since the same required a voluminous documents to be looked into which this Court has no occasion to look into it, it is not possible to ascertain whether the sale of transfer of property in goods in connection with the Inter State Sale or by import can be segregated and the said authorities is incompetent to levy tax under the State Legislation. - it would be proper that the Deputy Commissioner should re-look the judgment in the light of the law enunciated above and to record his findings and the reasons in relation thereto. The order impugned is thus set aside. - Matter remanded back - Following decision of M/s Gannon Dunkerley and Co. and Ors. -Vs- State of Rajasthan & Ors reported in [1992 (11) TMI 254 - SUPREME COURT OF INDIA] - Petition disposed of.
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2015 (2) TMI 795
Levy of sales tax / VAT on import of yarn from outside India - Constitutional validity of impugned notification dated 13.9.2001 - Government has amended its earlier notification dated 29.1.2001 and imposed tax in pursuance to power conferred by Clause (b) of Sub Section 1 of Section 3A of the Act at the point of sale to the extent of 20 per cent on yarn imported from outside India and 4 per cent on yarn of other kind - Jurisdiction of State Government - Held that:- Tax has been imposed providing therein that imported goods brought into the State of U.P., shall be liable to tax at the rate of 20%. Virtually, it is the entry fees over the foreign items brought into the State of U.P. It has got no relationship with either the sale or purchase or the import or export. - There appears to be no ambiguity in the letter and spirit of Article 286 of the Constitution of India. It should be interpreted as a whole right from the head note i.e., beginning which indicates that it relates to imposition of tax on sale and purchase of goods. Thus, if the sale and purchase of goods take place outside the country and brought into the territory of India, no tax may be imposed but when it is brought into the State like in the present case, the State of U.P., sub-clause (b) of Article 286 does not seem to come in the way. A collective reading of the three entries; 53, 56 and 60 seem to confer power on State Government to impose tax in case goods are brought into the State of U.P. for consumption, use or sale therein or it is carried into the State of U.P. through road or on inland waterways. Entry No.60 is wider and empowers the State Government to impose tax on trades. - Thus, the case relied upon by the learned counsel for the petitioners as well as other cases referred to hereinabove, negate the State power to impose tax where transaction of sale and purchase took place outside the country. Article 286 of the Constitution does not debar the State to impose tax when an item is brought into the State. Article 286 should be read in reference to context i.e., imposition of tax on sale or purchase of goods. Subject to condition of sub-clause (a) and sub-clause (b), sale and purchase of goods is condition precedent to ascertain the right of State to impose tax at its end. Imposition of tax at entry level where sale or purchase of goods are not involved, does not seem to come within the purview of sub-clause (b) of clause (1) of Article 286. Case relied upon by the petitioners' counsel does not seem to be applicable to the facts and circumstances of the present controversy. 35 In view of the above, these writ petitions lack merit and fail - Decided against assessee.
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Indian Laws
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2015 (2) TMI 779
Rejection of interim custody of vehicle seized - Default in payment of bank loan - Vehicle illegally transporting about 528 quarters of country made liquor, each containing 180 ml - Held that:- Finding of guilt has not been given by a competent criminal Court. The seized vehicle is lying in the premises of the police station since 28th May, 2012. If the vehicle is not given in interim custody, then it is likely to suffer damage. In view of the above facts and the law laid down by the Hob’ble Supreme Court in the case of Sunderbhai Ambalal Desai (2002 (10) TMI 773 - SUPREME COURT) the instant case is a fit case, in which interim custody can be given in exercise of inherent powers under Section 482 of Cr. P.C. - in case the petitioner furnishes a solvent surety of ₹ 6.5 lacs having a recent and valid solvency certificate alongwith a personal bond in the like amount to the satisfaction of the concerned trial Court, then the seized vehicle i.e. Bolero bearing registration No. CG-10FA-2281 shall be given in interim custody of the petitioner, if he is the registered owner thereof, subject to the certain conditions - Decided conditionally in favour of assessee.
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