Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 24, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Highlights / Catch Notes
Income Tax
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Determination of Residential status u/s 6 - the conditions of stay of 4 years during the preceding four years and 60 days during the preceding years are met - assessee is resident in India - AAR
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Reference made to Valuation Officer u/s 142A(1) - AO merely acted under the directives of the superior and did not, on his own application of mind, desire to call for the report - reference is not valid - HC
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Application of circle rate on lease hold rights Section 50C applies only to a capital asset, being land or building or both, it cannot be made applicable to lease rights in a land - HC
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Power of Settlement Commission u/s 245H of the Act - Immunity from imposition of penalty and prosecution ITSC was not justified in taking a charitable view towards the assessee - HC
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Status of the Assessee going abroad for the purpose of employment only means that the visit and stay abroad should not be for other purposes such as a tourist or for medical treatment or for studies or the like - AT
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Determination of Arms Length Price In the guise of determination of ALP, the TPO cannot question the business decision of payment and determine that no services were rendered - AT
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Deletion on account of pre-operative expenses business had commenced at the stage when licence to explore the respective blocks was granted by the Govt. of India to assessee company. - AT
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Appeal before CIT(A) - The payment of tax after the filling of appeal before it is taken up for disposal, would be sufficient to validate the defective appeal - AT
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Eligibility for exemption u/s 11 - Approval u/s 10(23C) not granted - Educational institution Charitable purpose - if the assessee maintained separate books of account for letting out the function hall it has to be produced before AO - AT
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Deduction u/s 10B - The assessee has not been approved as a 100% EOU by the Board appointed in this behalf - But, for the entitlement for deduction u/s 10A as such no approval of the Board is necessary - AT
Customs
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Refund of SAD - when the sales invoices showed the amount of SAD as zero, the same is sufficient compliance with the condition of endorsement of invoices to reflect that SAD has not been passed on to the buyers - AT
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Refund of SAD - Whether an importer can be penalized for not having claimed exemption under Ntf No. 29/2010-Cus by refusing to grant refund under Ntf No. 102/2007-Cus -Held No - AT
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Denial of refund claim - Unjust enrichment - since no separate duty has been indicated in the invoices it has to be assumed that total burden of Customs duty has been passed on to the buyer of goods - AT
Service Tax
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Merely because the adjudicating authority has given an elaborate finding, it does not mean that the appellate authority need not discuss the matter and give a finding. Such an approach makes a mockery of the appeal proceedings - AT
Central Excise
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Rejection of refund claim - issuance of credit notes - the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned - AT
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Whether Cenvat Credit of service tax paid by a job-worker on the taxable service received by the respondent is liable to be denied to the latter on the ground that the job worker was not liable to pay the tax by virtue of exemption Notification No. 8/2005-ST - stay granted - AT
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Assessee is entitled to avail input credit on welding electrodes which has been used for repair and maintenance of plant and machinery - AT
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Cenvat Credit - Just because some calls may have been made by the employees for their person work, it cannot be presumed that mobile phones have been used by the employers for their personal work only - AT
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Availment of CENVAT Credit on capital goods - export of readymade garments - Export goods are not exempted goods. - credit allowed - AT
Case Laws:
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Income Tax
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2014 (2) TMI 903
Search conducted u/s 132 of the Act - Warrant issued in the name of the assessee - Whether there was a search in the premises of the assessee and the search warrant was made in the name of the assessee Held that:- The assessment was made consequent on the seizure of materials in the course of search operation under Section 132 of the Act - The search operation resulted in seizure of various documents pertaining to the assessee's transactions too - the assessee is clear in his understanding of the provisions, under which the block assessment was made and was quite aware of the fact that the assessment under Chapter XIVB was as a result of seizure of materials in the course of search operation in the premises where the assessee lived along with two other persons on whom the search warrant was issued thus, there is no justifiable ground to accept the plea of the assessee that the assessment made is bad in law. Jurisdiction for block assessment u/s 158BC of the Act Held that:- The procedure given u/s 158BC is the only procedure given under Chapter XIV-B for making block assessment, the reference to Section 143(3) notice read with proceedings under Section 158BC does not make the assessment as the one not falling under Section 158BD thus, as per the procedure laid down u/s 158BC there is no confusion in the mind of the Officer as to the provision it is proceeded against nor in the mind of the assessee that the assessment was made consequent on the seizure of materials in the course of search operation in the premises the Tribunal had already remitted the matter back to the AO thus, the AO id directed to expedite the matter without any further delay Decided against Assessee.
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2014 (2) TMI 902
Nature of services provided - Existence of Permanent Establishment DTAA between India and Brazil - Held that:- The services provided by the non-resident companies to the applicant company are line production services it is been held in the applicants own case that the payments of similar nature are specifically characterized as work for the purpose of section 194C by Explanation to that section thus, following the same ruling, the payments made by the applicant to the non-resident company specifically falls under the definition of work under section 194C of the IT Act and they will not be taxable without Permanent Establishment in India - the payment will not suffer withholding of tax under section 195 of the Income-tax Act, 1961.
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2014 (2) TMI 901
Determination of Residential status u/s 6 of the Act - Taxability of the receipts Held that:- When the assessee has come to India after leaving his employment outside India, the Explanation (a) to section 6(1)(c) will not be applicable - The total stay in India of the applicant for the preceding four years is for a period amounting to more than 365 days and total stay in India for the FY 2010-11 is for a period amounting in all to 119 days which is more than 60 days, requirements of sub-section (c) of section 6(1) is met by the applicant to become a resident in India. Taxability of proceeds received in India Conversion of ESOPs and RSUs Held that:- Explanation (a) to section 6(1)(c) is applicable only in a particular year when a person leaves India - The activities mentioned need not be necessarily proof of a visit, even a person staying permanently in India also does those activities - If a person returns to India after a long period of absence there is all the more reason he or she will like to go to visit relatives and friends in different places - Those activities are not necessarily indicators of a visit - When the applicant resigns from her employment in China, the reason for return to India does not seem to be only for a visit the contention that the applicant came to India only for a visit cannot be accepted thus, Explanation (b) to section 6(1)(c) of the Act is also not applicable - the applicant's case does not fall under Explanation (a) or (b) to section 6(1)(c) of the Act and having fulfilled the requirements of section 6(1)(c) of the Act her status will be resident in India - the amount of proceeds received in India on conversion of ESOPs and RSUs awarded to her by her employer in China will be taxable in India Decided against Assessee.
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2014 (2) TMI 900
Presumption of service of Notice u/ 148 of the Act Held that:- The aspect that the assessee had responded to a notice issued under Section 142(1) was not pursuant to the original notice dated 31.03.2006 - being a pure issue of fact, the Court disinclined to investigate the matter further given that no other question of law arises for consideration as to whether notice was served or deemed to have been served is subject to other conditions ordinarily a question of law there is no reason to believe that it is otherwise in the facts of the case Decided against Revenue.
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2014 (2) TMI 899
Remission made by Tribunal - Liability to deduct TDS u/s 194C of the Act Liability to pay interest u/s 201(1) of the Act Held that:- There is no finding as such rendered by the Tribunal and the purpose of the remit to the Assessing Officer is only with a view to enable him to make a proper determination of the facts -The assessee had not appeared before the Assessing Officer in the first instance - The Tribunal observed that the AO should obtain information whether the NGO's to whom payments were made are duly registered under Section 12(A) of the Income Tax Act, 1961 and whether they are liable to pay tax under the provisions of the Act - the Tribunal has clarified that if the payees were not Charitable Institutions whose income is exempted, the Assessing Officer would be at liberty to pass an appropriate order in accordance with law - the Tribunal has not issued a specific direction in regard to the provisions of Section 194C the appeal does not gave rise to any substantial question of law Decided against Revenue.
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2014 (2) TMI 898
Reference made to Valuation Officer u/s 142A(1) of the Act -Valuation of investment in the construction/renovation of the property - Whether the requirements of exercising such powers u/s 142A calling for DVOs report are satisfied Held that:- The scheme of the provisions read harmoniously would lead to a situation where in case the Assessing Officer, during the pendency of assessment or reassessment, is of the opinion that sections 69, 69A and 69B of the Act can be invoked, in order to estimate such unexplained investment or expenditure in acquisition of bullion, jewellery or valuable article, he can resort to valuation by the Valuation Officer in terms of sub-section (1) of section 142A of the Act. No such material emerges from the record - neither from the order of reference nor from any other material, the revenue could point out that the Assessing Officer had invoked the provisions of sections 69,69A or 69B of the Act and in the process desired to obtain the estimate of unexplained investment or expenditure and for which purpose DVOs report was called - He simply gave no reasons in the order - No independent reasons, either flowing from the file or even in the form of an affidavit assuming the same would be permissible, are brought to notice the Assessing Officer merely acted under the directives of the superior and did not, on his own application of mind, desire to call for the report thus, in absence of any valid reasons for making a reference the order cannot be sustained Decided in favour of Assessee.
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2014 (2) TMI 897
Valuation u/s 50C of the Act application of circle rate on leasehold rights - Held that:- The contrast in language, given that Section 50C is a specific provision, which seeks to enact a presumption is significant - The valuation of the concerned State agency or the government that the cost of the land is, in the circumstances, higher, is determinative - there has been no such valuation in the present case - the Tribunal adopted an approach which appears to be correct, in that it took note of the proportionate transfer of leasehold rights for 54 years. If the Revenues contentions were to be conceded, then in the given facts of case, if the leasehold rights for residual period of 3 or 4 years were to be valued at par with the cost of acquisition of the full tenure of the lease of 90 years, absurd and anomalous results would ensue. - the contention of the revenue cannot be accepted there is no substantial question of law arises Decided against Revenue.
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2014 (2) TMI 896
Power of Settlement Commission u/s 245H of the Act - Immunity from imposition of penalty and prosecution Held that:- The criticism levelled by the revenue against the majority opinion of the ITSC granting immunity to the assessee is well-founded - Immunity can be granted only within the parameters of Section 245H(1) which requires full and true disclosure of income and co-operation from the assessee in the proceedings before the ITSC Co-operation implies an act of volition on the part of the assessee - the present assessee co-operated in the proceedings before the ITSC only when faced with the reports submitted by the CIT The ITSC was not justified in taking a charitable view towards the assessee - assessee did not make a full and true disclosure in the settlement application - it waited till the ITSC called for reports from the CIT which reiterated the facts established by the seized material. There was no spirit of settlement that ought to have been exhibited by the assessee in the application filed before the ITSC - it is not enough if it is shown in proceedings before the ITSC after being confronted with adverse reports, to which it had no answer Relying upon Ajmera Housing Co-operation and another v. CIT [2010 (8) TMI 35 - SUPREME COURT OF INDIA] - the fact that the assessee kept revising its application for settlement by disclosing higher income in the revised applications established that it did not make a full and true disclosure of income which it did not disclose to the assessing authority - the assessee cannot be said to have co-operated in the proceedings before the ITSC - The assessee ought to have offered the entire amount being the bogus purchases of cement and steel - It was only at that stage, when cornered and when it was unable to rebut the evidence and the facts established by the evidence, that the assessee came forward with the additional income which when added in the settlement applications thus, the assessee has failed to satisfy the twin conditions of Section 245H (1) and was, therefore, not entitled to the immunity. Power to review the order of ITSC Held that:- The decision in R.B. Shreeram Durga Prasad v. Settlement Commission [1989 (1) TMI 4 - SUPREME Court] followed - The sole overall limitation upon the Commission appears to be that it should act in accordance with the provisions of the Act - The scope of enquiry, whether by High Court under article 226 or by this court under article 136 is also the same the order of the ITSC (majority view) is contrary to the provisions of Section 245H(1) of the Act Decided in favour of Revenue.
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2014 (2) TMI 895
Status of the Assessee Whether the assesseee is a resident or non-resident under section 6 of the Act A.O. found that assessee was not regularly employed abroad, but worked as a consultant for a foreign company - Held that:- The argument of the CIT(A) that assessee did not leave India and stationed outside the country is not material, as nowhere the section specifies that assessee should leave India permanently so as to reside outside the country - Even visit outside India for a period of or periods accounting in all to 60 days/181 days (as the case may be) will satisfy the condition specified in section 6(1) - Since the plain meaning is very clear, the argument of the CIT(A) that assessee has not left India permanently has no meaning - as working out the period of stay in India, Assessing Officer worked in one way and the learned CIT(A) analyzed the period in a different way - Relying upon CBDT v. Aditya Birla [1987 (11) TMI 5 - SUPREME Court] employment does not mean salaried employment but also includes self-employed/professional work - assessee's earning for consultancy fees from foreign enterprise and visit abroad for rendering consultation can be considered for the purpose of examining whether assessee's is resident or not. The Assessing Officer has calculated the period of stay in one particular manner which the learned CIT(A) examined and determined in another manner by excluding the travel to two places which are not supported by evidence to consider for the purposes of employment - going abroad for the purpose of employment only means that the visit and stay abroad should not be for other purposes such as a tourist or for medical treatment or for studies or the like - assessee has visited number of places but in some of the stampings, the visa was granted as 'tourist visa' and some of them are 'pass through visa's. Unless assessee travels on business visa or for the purpose of business/consultation, the entire period of travel abroad cannot be considered as 'going abroad for the purpose of employment' - Since these details have not been examined by the Assessing Officer on the basis of the visas obtained - this aspect requires examination by the Assessing Officer, to verify whether the visits are for the purpose of employment or for the purpose of tour or for any other reason and only to the extent of visits for the purpose of employment can be considered, while determining status of assessee as per the provisions of law - thus, the matter should be re-examined by the Assessing Officer to establish the number of days assessee was outside the Country so as to consider whether he is the resident or non-resident as per the provisions of the Act thus, the matter remitted back to the AO for fresh examination Decided in favour of Assesse.
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2014 (2) TMI 894
Determination of Arms Length Price Management fees paid Held that:- Assessee has given a detailed write-up as well as the services provided and benefit obtained which were not contradicted - The Assessing Officer did not believe the same in the absence of concrete evidence. Unless the Assessing Officer steps into assessee's business premises and observes the role of these companies/ assessee's business transactions, it will be difficult to place on record the sort of advice given in day-to-day operations - What sort of evidence satisfies the AO is also not specified - Assessee has already placed lot of evidence in support of claims - The decision in CIT Versus EKL APPLIANCES LTD [2012 (4) TMI 346 - DELHI HIGH COURT] followed - So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. Assessee has furnished copious material and valid reasons as to why it was suffering losses continuously and these have been referred to by us earlier - Full justification supported by facts and figures have been given to demonstrate that the increase in the employees cost, finance charges, administrative expenses, depreciation cost and capacity increase have contributed to the continuous losses thus, the TPO went beyond his jurisdiction in denying the payment out-rightly, whereas, his role is limited to determining the ALP - In the guise of determination of ALP, the TPO cannot question the business decision of payment and determine that no services were rendered thus, the direction of the TPO cannot be upheld at all - while allowing the ground on the question of claim of management fees as such, the quantification thereof is restored to the Assessing Officer to examine with reference to the agreement between the parties Decided in favour of Assessee. Deferred revenue expenditure Held that:- It could not be arrives at whether it is a capital expenditure or revenue expenditure - assessee has purchased certain photosets from Hindustan Lever for its business - In view of the conflicting nature of findings, any finding whether the expenditure is capital or revenue cannot be given - the contention of assessee is accepted to direct the allowance of depreciation for the balance of the period until the life of the asset in accordance with the provisions of the Act thus, the Assessing Officer is directed to allow depreciation in later years if not, already given to the asset capitalized by the Assessing Officer himself in this assessment year Decided partly in favour of Assessee. Outstanding service tax liability Disallowance u/s 43B of the Act Held that:- the claim of the assessee is accepted that so much of the service tax not paid/payable cannot be disallowed under section 43B - there is nothing on record to examine whether the claim of service tax has been charged to P & L account - If the same is claimed as an expenditure in the P & L account, the amount to that extent cannot be claimed as an expenditure and to that extent, whether the amount is disallowable under section 43B or under section 37(1), the disallowance is required - The reversal of entry even though happened in the books of accounts in the later year, does not affect the computation of income during the year and the same also does not come within the purview of disallowance under section 43B as the amount is not claimed otherwise thus, the matter is remitted back to the AO for examination Decided in favour of assessee. Disallowance of deduction u/s 80HHE of the Act Held that:- In the absence of any contrary material brought on record by the Revenue against the finding of the learned CIT(A) and keeping in view the fact that there is no dispute that assessee company is simply carrying on market survey and that survey is complied as a data and such data is processed and sent to other countries - in view of the CBDT Notification No.S.O.890(E) dated 26.9.2000, assessee is engaged in the export of data processing and accordingly he is entitled to deduction u/s 80HHE of the Act - the order of the CIT(A) upheld - Decided against Revenue. Confirmation of Penalty u/s 271(1)(c) of the Act - Disallowance of management fees at NIL - Held that:- Mere disallowance of an amount that too on transfer pricing provisions does not attract penalty under section 271(1)(c), as it cannot be considered as either the concealment of income or furnishing of inaccurate particulars - Relying upon DCIT vs. RBS Equities India Ltd. [2011 (8) TMI 459 - ITAT MUMBAI] - payment of management fees is genuine and to be allowed and the matter is restored to the file of Assessing Officer to examine the quantification of the fee claimed as per the agreements thus, there cannot be any issue of levy of penalty thus, the penalty levied is unwarranted and cancelled Decided in favour of Assessee.
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2014 (2) TMI 893
Restriction u/s 14A of the Act Held that:- Where the assessee had own interest free funds many times over the investment made in Indian subsidiaries and further there was no direct nexus between interest bearing borrowed funds and such investment, no disallowance of interest expenditure could be made u/s 14A of the Act - where the Revenue failed to establish that the assessee had incurred any expenses for earning dividend income from amount borrowed, no addition could be made by invoking the provisions of Section 14A of the Act - The assessee had substantial interest free fund in the form of share capital and reserves - the AO has brought no material on record to show that any interest bearing borrowed funds were utilized by the assessee for making investment in shares in any of the years under consideration The decision in CIT Vs. Suzlon Energy Limited [2013 (7) TMI 697 - GUJARAT HIGH COURT] followed - the assessee has substantial interest free fund to meet his tax free investments yielding exempt income, it can be presumed that such investments were made from interest free funds and not loan funds - the order of the CIT(A) confirmed Decided against Revenue. Deletion of interest expenditure made u/s 36 of the Act Held that:- The decision in The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd [2009 (1) TMI 4 - HIGH COURT BOMBAY] followed - a global position of the availability of funds has to be examined and after sufficiency of non-interest bearing funds is established then only claim can be allowed and directed the AO to take this decision also in consideration - none of the lower authorities have found that on global examination of availability of interest free funds with the assessee was not sufficient for advancing interest free advance to the subsidiaries - the disallowance of interest again was not warranted thus, the disallowance of interest expenditure of both the years is set aside Decided against Revenue.
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2014 (2) TMI 892
Deletion on account of pre-operative expenses Business not commenced Held that:- The business would commence when the activity which is first in point of time and which must necessarily precedes the other activities is started - Relying upon CIT Vs. Saurashtra Cement and Chemical Industries ltd. [1972 (8) TMI 19 - GUJARAT High Court ] - one of the essential activity namely license/ right to explore the blocks has been granted and exploration of blocks has already been started without which no production can take place - business had commenced at the stage when licence to explore the respective blocks was granted by the Govt. of India to assessee company. The CIT(A) has rightly made a finding that the assessee have commenced its business, when the appellant has carried the first activity being assignment of the right to explore the block awarded in the New Exploration and Licensing Policy (NELP) and commencement of exploration activities thereafter incurred an expense of more than Rs. 258 crores - None of the expenses mentioned are of personal in nature and the expenses are of revenue in nature - the assessee has capitalized all the exploration cost and the same have been reflected as capital work for progress in the balance-sheet - The assessee has only claimed deduction of the expenses which have been incurred for day to day operation of the business which are eligible for deduction u/s 37(1) of the Act thus, there is no infirmity in the order of the CIT(A) Decided against Revenue. Deletion made u/s 35D of the Act - Expenses incurred for increasing the authorized share capital Held that:- The assessee company has commenced its business and already commenced exploration activities on the blocks awarded to it in the relevant Assessment Year as in the preceding years too the said claim of the assessee company was allowed by the Assessing Officer - there is no material on record to suggest or support any change in the character or nature of the said expense incurred by the assessee company there is no infirmity in the order of the CIT(A) directing the Assessing Officer to allow the deduction u/s 35D of the Act in respect of expenses incurred for increasing the authorized share capital Decided against Revenue.
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2014 (2) TMI 891
Transfer Pricing Adjustment - Determination of ALP - Method for benchmarking the transaction for payment of management cost contributions Held that:- The record shows that the issue before the TPO and the DRP as far as the assessee is concerned has been contested in the light of the stand taken that TNMM was the most appropriate method - assailing the TPO's stand before the DRP that CUP is the most appropriate method the assessee did lead evidence and arguments and documentation in order to justify that no adjustment was required to be done even if CUP is taken as the most appropriate method - the relevant documentation Agreements etc. for deciding the issue have not been considered either by the TPO or by the DRP as the focus of the department's attention necessarily has remained assailing the assessee's stand that TNMM is the most appropriate method - The department justifying its stand and assailing the stand of the assessee has accordingly remained focused on the position that CUP is the most appropriate method. The decision in CIT Versus EKL APPLIANCES LTD [2012 (4) TMI 346 - DELHI HIGH COURT] followed - The departmental stand cannot be approved when the issue is considered from the aspect of appropriateness of the expendituring - the need and necessity for the assessee to incur the expendituring also cannot be held to be an acceptable criteria - Nor can the necessity of the expenditure from the benefit accrued to the assessee point of view has been approved as a relevant criteria - the finding given by the Co-ordinate Bench, is based on a peculiar set of facts namely that the assessee in the facts of that case consistently failed to provide a cost allocation key not only before the TPO/DRP but even before the Tribunal - the issue pertained to direct expenses which admittedly are easier to demonstrate and verify - the expenses are not direct expenses however the order of the Co-ordinate Bench in Dresser Rand's has considered indirect expenses which position apparently has not been upset by any Higher Forum - in the absence of any serious discussion on facts specifically addressing the detailed documentation placed on record by the assessee, it would be appropriate to restore the issue back to the TPO Thus, the matter remitted back to the TPO for fresh adjudication Decided in favour of Assessee.
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2014 (2) TMI 890
Nature of Surplus - Whether the surplus arising to the assessee on account of purchases and sales of Mutual Fund Units is to be considered under the head income from capital gains or income from business Held that:- The assessee had all along shown the units purchased by it under the head investment - Assessee was engaged in the business of manufacturing and exporting of leather goods the CIT(Appeals) finding that assessee held the Mutual Fund units as investments has not been effectively rebutted by the Revenue - When the intention of the assessee was only to make investment, sale thereof would only result in capital gains - There is no case for the Revenue that assessee's main business was trading in Mutual Fund Units or shares - the surplus arising to the assessee was rightly considered as income from capital gains there is no reason to interfere in the findings of the CIT(Appeals). Deletion of addition Differences in purchase of Mutual Funds Held that:- Revenue has not been able to bring out anything to show that any of the explanations were erroneous or wrong - the Assessing Officer found that the differences in purchases highlighted by him in the assessment order stood explained - CIT(Appeals) has given a finding that discrepancies pointed out by the Assessing Officer were on account of non-application of mind while preparing remand report - Assessee had clearly explained it as Units of Prudential ICICI Floating Rate Fund there is no reason to disbelieve it thus, none of the discrepancies alleged by the Assessing Officer existed the CIT(Appeals) was justified in holding that there was no difference in purchase of units or closing stock of investment in Mutual Fund Units and the additions deleted by the CIT(A) also upheld Decided against Revenue.
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2014 (2) TMI 889
Nature of Transaction Investment OR Trading - The CIT(A) has rightly held that the assessee has treated the shares as investment and not Stock in Trade - the volume of transactions, frequency of transaction and period of holding etc., would not alter the nature of transaction from investment to trading - The assessee cannot be held an investor for the shares sold during the year under consideration, as the activities carried out him for the year clearly indicate that he wanted to maximise the profit and not to make long term investments - assessee was carrying out business of shares in a systematic and organised manner - Short holding period, volume of the scrips and frequency of the transactions are measure factors to decide the issue as whether an assessee is an investor or doing a business of shares and securities thus, the order of the FAA does not suffer from any infirmity Decided against Assessee. Long Term Capital Gain Held that:- Neither the AO nor the FAA had analysed the pattern of holding period of shares that were held for more than one year - Assessee had a specific claim that some of the shares were held since FY. 2002-03 - FAA has completely ignored the submissions made by the assessee in this regard - Without assigning any reasons for treating the income of LTCG as business income, he has confirmed the order of the AO the matter needs further verification thus, the matter remitted back to the FAA for adjudication Decided partly in favour of Assessee.
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2014 (2) TMI 888
Requirement for Depositing taxes u/s 249(4) of the Act - Whether the CIT(A) is correct in dismissing the appeal quoting the provisions of section 249(4) of the Act Held that:- At the time of filing of the appeal before the CIT(A) the tax due on the income returned was not paid - The objective of section 249(4) is to ensure payment of tax on income returned before the admission of the appeal - CIT(A) cannot be faulted with in not treating the appeal as admitted - if the appeal is filed without payment of tax on returned income but subsequently the required amount of tax is paid, the appeal should be treated as admitted on payment of tax and taken up for hearing on merits - The payment of tax after the filling of appeal before it is taken up for disposal, would be sufficient to validate the defective appeal - the requirement of the payment of prescribed tax at the stage of filing of the appeal before the First Appellate is only directory and not mandatory - thus, the order of the CIT(A) is set aside and the matter is remitted back to the CIT(A) for adjudication Decided in favour of Assessee.
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2014 (2) TMI 887
Eligibility for exemption u/s 11 - Approval u/s 10(23C) of the Act not granted - Educational institution Charitable purpose - Held that:- The decision in Ass. DIT Versus Sri Chaitanya Memorial Education Society [2014 (2) TMI 670 - ITAT HYDERABAD] followed - The appellant would be eligible for the claim of exemption u/s 11, even if the conditions u/s 10(23C)(vi) had not been complied with, subject to the fulfilment of the conditions u/s 11 to 13 there is no finding of any charging of donation etc. in the case of the appellant by the Assessing Officer, the Assessing Officer is directed to verify this aspect while giving effect to this order - The institutions falling u/s. 10(23C)(vi) are eligible for exemption u/s. 11 also - Merely because section 10(23C)(vi) of the Act provides for exemption of the income of an educational institution it does not follow that such institution cannot avail exemption u/s. 11 subject to fulfilment of the conditions laid down. Whether the approval under sub-section (vi) to section 10(23C) is distinct from registration u/s 12A of the IT Act Held that:- It is mandatory on the part of the assessee in terms of section 11(4A) of the Act to maintain separate set of books of account for letting out of function hall - The assessee taken a plea that the assessee has maintained separate books of account - if the assessee maintained separate books of account for letting out the function hall it has to be produced before the Assessing Officer. Assessee had collected money over and above prescribed by concerned authority for admission of student, such an amount was to be classified as capitation fee and it could be said that assessee's case was a clear case of sale of education by assessee thus, it could not be considered as charitable institution under section 2(15) of the Act because the purpose of the organisation as a whole was to make profit - The issue remitted back to the AO to consider the entire facts and verify the records whether the assessee collected capitation fees from students for the purpose of giving admission Decided partly in favour of Revenue.
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2014 (2) TMI 886
Reopening of Assessment u/s 148 of the Act Requirement to issue notice Held that:-The decision in CIT Vs. Usha International Ltd.[ 2012 (9) TMI 767 - DELHI HIGH COURT] followed - The reasons recorded or the documents available must show nexus that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income - The final ascertainment takes place when the final or reassessment order is passed - It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment - The aspects and questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the entry, claim or deduction etc. - It may be apparent and obvious to hold that the Assessing Officer would not have gone into the said question or applied his mind - The CIT(A) has rightly quashed the reopening of assessment made by the Assessing Officer u/s 147 of the Act by observing that there was absolutely no fresh information provided or collected thus, the order of the CIT(A) upheld Decided against Revenue.
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2014 (2) TMI 885
Receipt of unsecured loan - Cash credit Held that:- The Assessee has demonstrated before the lower authorities and even before us the identity and creditworthiness of the creditors and genuineness of the transaction as the transaction done through banking channel - There is also no incriminating material found in the search proceedings Thus, the addition made by the AO and confirmed by the CIT(A) set aside Decided in favour of Assessee. Disallowance of transport expenditure Held that:- Out of the claim of transportation charges, the AO disallowed 10% on the ground that the claim is on higher side and vouchers maintained by Assessee for the same are not verifiable - The CIT(A) restricted the disallowance on the ground that the disallowance made by the AO is on higher side - there is unaccounted turnover in the case of asessee unearthed in the search - Once addition was made on the basis of GP disallowance of various expenditures should not arise thus, the addition made by CIT(A) aside Decided in favour of Assessee. Disallowance of interest Held that:- Assessee contended that he has not received any additional interest nor there was any claim in the hands of the firm - The decision in G. Venkat Rao & Others Versus Asstt. Commissioner of Income-tax, Circle 8(1), Hyderabad [2012 (10) TMI 530 - ITAT HYDERABAD] followed - Interest paid to partners, which has been disallowed in the hands of the partnership firms cannot be assessed in the hands of the partners the order set aside and the matter remitted back to the AO for determination of correct amount Decided in favour of Assessee.
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2014 (2) TMI 884
Claim of deduction u/s 10B - Alternative deduction u/s 10A - Assessee is running the business of software development and export is a 100% Exported Oriented Unit Held that:- The assessee has not been approved as a 100% EOU by the Board appointed in this behalf by the Central Government in exercise of powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and rules made there under - The assessee having not fulfilled this pre-condition as provided under explanation-2 (iv) of section 10B, it is not entitled to avail deduction u/s 10B of the Act. Deduction u/s 10A of the Act Held that:- For the entitlement for deduction u/s 10A as such no approval of the Board is necessary - The only requirement for claiming exemption u/s 10A of the Act is the assessee is required to submit a certificate from the auditor in form 56F as per section 10A(5) of the IT Act read with Rule 16D of Income-tax Rules - the contention of the assessee is accepted that there was no occasion on his part to submit the auditors certificate in Form 56F before the CIT (A) - Form 56F submitted is allowed as an additional evidence the matter remitted back to the AO for fresh adjudication Decided in favour of Revenue.
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Customs
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2014 (2) TMI 882
Rejection of refund claim - Refund of SAD under notification no.16/2008-Cus dated 13.10.2008 - Claim denied due to non appearance before adjudicating authority - and non submission of deficiency memo within the stipulated period - Ex parte order passed - Held that:- when the sales invoices showed the amount of SAD as zero, the same is sufficient compliance with the condition of endorsement of invoices to reflect that SAD has not been passed on to the buyers and in such a situation , the refund claim of SAD cannot be rejected on the ground that declaration regarding non-admissibility of Cenvat Credit of SAD was not made. The other ground on which the refund claim of SAD has been rejected is that the original documents regarding payment of VAT/CST and correlation of VAT/CST challans with the import documents has not been given. The appellant's contention is that they can satisfy the original adjudicating authority in respect of all the points but they were not given the opportunity. In view of this, the impugned order has to be set aside and the matter has to be remanded back to the original adjudicating authority, who shall decide the matter after hearing the appellants. The impugned order is, therefore, set aside and the matter is remanded to the original adjudicating authority for de novo decision after hearing the appellants on all the points raised in the deficiency memo - Decided in favour of assessee.
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2014 (2) TMI 881
Valuation of goods - Delay in conducting research - More than 2 years gap in conducting 2nd research - Imposition of redemption fine - Held that:- After the completion of export in May 2005, Revenue conducted enquiry and as per the report dated 01.09.2005, the value declared by the appellant was more or less equivalent to the value of the goods available in the market. No reasons stands given by the Revenue as to why the said report was not accepted by them & as to why the matter was kept pending for a further period for 2= years. It is seen that even the show cause notice dated 14.12.2007 was issued in terms of the directions of the Honble High Court of Delhi in their order dated 29.11.2007 and the second enquiry was conducted thereafter. After the said directions of the Honble High Court of Delhi, the Revenue hurriedly conducted second market enquiry on 19.11.2007 and thereafter issue show cause notice on 14.12.2007. All the enquiries conducted in 2007 reflect upon the market value of the goods available in the year 2007 inasmuch as the expression used by all these persons is the present market value. Admittedly, the viscose shawls and stoles in question are fashion goods, the value of the same would be time and period related. The enquiry conducted in 2007 reflecting upon the value of the goods at that point of time cannot be held to be correct value for the same very goods in the year 2005. Further, the Revenue has not given any sound reasons for rejection of the market enquiry conducted in 2005 itself immediately after the export of the goods - Impugned order is set aside - Decided in favour of assessee.
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2014 (2) TMI 879
Denial of refund claim - Burden of proof - Refund claim for differential amount of Customs duty paid - Classification of goods determined in favour of assessee - Unjust enrichment - whether in the peculiar facts and circumstances of the case, the refund claim is hit by the doctrine of unjust enrichment or not - Held that:- both price of good supplied by the AVA, US and the price at which the goods are being sold in India are determined by supplier abroad. Respondent has to practically act in all spheres as per the direction of AVA, USA. Again this factor alone cannot lead to a conclusion that burden of duty has not been passed on to the final buyer of the goods - it is clear that cost of import including the import duty etc. is being considered as the cost of material by the respondent. Learned Counsel for the Revenue has also drawn our attention to the balance sheet as on 31 st March 2003, 31 st March 2004 and 31 st March 2005 wherein in the expenditure side respondent has shown the cost of goods old. Further schedule No. 14 of the said Balance Sheet, details how the cost of goods sold is calculated. It is seen from the said calculation that CIF value, Customs duty, Clearing and another incidental charges are considered as cost of goods sold. The disputed duty amount is insignificant in the over all scheme of pricing. In fact, post sale, respondent claims to pay 43% bonus to the distributors above certain level. It is perhaps for such reasons that wholesale prices were not changed and the disputed duty was considered as the cost of material sold. These goods are being sold as multilevel marketing. We also note that the dispute continued for more than three years and no prudent business man/organization would continue to bear incidence of higher duty without passing the same to the buyer of the goods. We are therefore of the view that respondents have failed to prove that incidence of duty disputed has not been passed on to the buyer of such goods - since no separate duty has been indicated in the invoices it has to be assumed that total burden of Customs duty has been passed on to the buyer of goods - In any case, whether the burden of duty has been passed to the buyer of goods is a matter to be examined in facts of each case, and observation in one case will be of little help in other cases until and unless all the facts are exactly same - respondent have not discharged the burden that they have not passed on the full incidence of duty to the buyer of such goods - Decided in favour of Revenue.
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Corporate Laws
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2014 (2) TMI 878
Winding up of company - Whether the defence of the Company is prima-facie bona fide, substantial and cannot be said to be specious or spurious, nor intended to deceive genuine creditor, a winding up petition ought not to be entertained - Held that:- petitioner cannot be said to have established the Companys liability to it in the amount claimed. The suppressions in the petition are many, and they are critical. It is only in the rejoinder that some sort of an explanation is offered. To my mind, there are two determinative factors. The first is the petitioners acceptance of the Companys averment that Jayesh Desai or an entity he substantially controls was MSTCs consignee and that this resulted in a circular routing of money and goods. The second aspect is the Companys case regarding the transmission of funds to the Pen Bank. In the further affidavit dated 29th July 2013, the Company has set in copious details how these transactions were effected. Again, there is no cogent answer from the petitioner. Then there is a matter of the petitioners extraordinary delay in making its claim, despite its contention that its invoices were payable no later than within 120 days. The failure of this petition is inevitable. But it must be accompanied by consequences that are both real and palpable. Received wisdom tells us that Court should be gentle in the award of costs. Indeed they should, when a party earns that clemency. It is not in every case that costs are awarded, and fewer still where the costs imposed are significant. But where the amounts are as high as they are here, where mendacity is writ large in the petition itself, there is no room for leniency - Decided against Petitioner with costs.
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FEMA
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2014 (2) TMI 883
Contravening Section 8 (1) of the Foreign Exchange Regulation Act, 1973 (FERA) - remittance of foreign exchange without prior permission of RBI - Held that:- The question of the Appellants acquiring or otherwise transferring any foreign exchange as a result of the foreign holding company remitting funds to the Appellants for disbursal of the salaries of the employees seconded to them did not arise. Further, the question of the Appellants having to repay the foreign holding company the sum paid abroad also did not arise. Factually, there was no attempt made by any of the Appellants to repay any such amount to the foreign holding company. Also, no reasons have been given in any of the AOs for the penalty imposed in terms of Section 50 FERA. Consequently, in all these cases, the determination of the penalty amount by the AOs is also held to be untenable in law. - order against the appellant set aside - Decided in favor of appellant.
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Service Tax
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2014 (2) TMI 911
Waiver of pre deposit - Demand of service tax - Maintenance or repair service - Held that:- maintenance/repairs of the air-conditioner was undertaken by Kirloskar during the material period and the said company was paying service tax also. This would indicate that the activity in respect of which the impugned demand was raised on the appellant is something other than maintenance or repair of air-conditioner. It is on record that the demand is on the amounts collected by the appellant from the occupants of the premises for the activity of operating/running the air-conditioner on a regular basis under specific agreements. We have perused a specimen agreement available on record and have found nothing therein which indicate that the appellant is collecting money from the occupants of the premises for repairs/maintenance of air conditioner. On these facts, without the need to refer to Rule 5, we hold that the appellant has a prima facie case on merits against the impugned demand - Stay granted.
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2014 (2) TMI 910
Waiver of pre deposit - Demand of service tax - Interest u/s 75 - Penalty u/s 77 & 78 - Business Auxiliary Service - Commission paid to overseas agents for procurement of export orders for textile products - Availment of the benefit of Notification No.14/2004-ST, dated 10.09.2004 - Held that:- applicant had already deposited a sum of Rs.31,06,942/-, we find it sufficient for admission of the appeal and waive of pre-deposit of the balance amount of tax, interest and penalties and stay recovery thereof during the pendency of the appeal - Stay granted.
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2014 (2) TMI 909
Confirmation of service tax demand - Commissioner (appeals) has not given any reasoning for the conclusion he has drawn - Held that:- lower appellate authority has not applied his mind at all. While passing an order in appeal, he has to discuss in detail the various contentions raised by the appellant, the legal position and thereafter, come to a conclusion. Merely because the adjudicating authority has given an elaborate finding, it does not mean that the appellate authority need not discuss the matter and give a finding. Such an approach makes a mockery of the appeal proceedings. - matter remanded back - Decided in favor of assessee.
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2014 (2) TMI 908
Waiver of pre-deposit - Export of services or not - classification of service - taxability of the margin on Letters of Credit retained by the applicant - commission agent services - Held that:- We are prima facie of the view that consideration in question was for services rendered by applicant to the foreign buyers and not to the vendors and since the consideration had been realized in foreign exchange by the applicant. The applicant was engaged in promotion of exporting of goods and since the general policy on taxation is to avoid taxation on export activities calling for pre-deposit to hear this appeal is not justified - stay granted.
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2014 (2) TMI 907
Waiver of pre deposit - Demand of service tax - Manpower Recruitment or Supply Agency Service - Held that:- no prima facie case for the appellant. It was on detailed examination and appreciation of the provisions of the relevant agreements that the Commissioner arrived at the conclusion that Manpower Recruitment or Supply Agency Service was rendered under these agreements by the appellant to the clients - Cleaning or upkeep of premises of the clients was in relation to one of the functions of some of the employees. By and large, these agreements disclosed the real nature of the transaction which appears to be supply of manpower by the appellant to the clients. This service is squarely covered by Section 65(68) of the Finance Act 1994. Prima facie, therefore, the appellant cannot claim a good case against the demand of service tax under the aforesaid head - Conditional stay granted.
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2014 (2) TMI 906
Eligibility for cenvat credit - Service tax paid on the premium for Insurance of the companys vehicles - Nexus between there insurances services availed with the manufacture of final product Waiver of pre-deposit Held that:- For Insurance of the Companys vehicles and group and personal accident insurance of the workers Following Commissioner of Central Excise, Tirunelveli Vs. DCW Ltd. [2011 (1) TMI 45 - CESTAT, CHENNAI] - the cenvat credit of service tax paid on the insurance premium is admissible if the vehicles are used for the companys work here also, the vehicle had been used for the companys work Thus, the appellant have strong prima facie case in their favour pre-deposits waived till the disposal stay granted.
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2014 (2) TMI 905
Denial of Cenvat credit Rent a cab service and outdoor catering service Waiver of pre-deposit Held that:- Prima facie, it was found that the denial of CENVAT credit on Rent-a-Cab Service but it was not found against denial of CENVAT credit on the catering service appellant directed to made a pre-deposit an amount of Rs. 24,789 upon such submission rest of the duty to be stayed till the disposal Partial stay granted.
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2014 (2) TMI 904
Transaction amounts to exempted service or not - Separate accounts not maintained as per Rule 6(3) of the CCR, 2004 Waiver of Pre-deposit Held that:- The demand has been worked out at 5% of the value of tubes and flaps sold by the appellant to the dealers - the very basis of the show-cause notice was that the trading activity involved in the transaction between the appellant and the dealers was an exempted service thus, the appellant has made out a strong prima facie case in their favour Pre-deposits waived till the disposal Stay granted.
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Central Excise
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2014 (2) TMI 877
Rejection of refund claim - subsequent fluctuation in the prices - issuance of credit notes - Unjust enrichment under section 11B of the Central Excise Act - Held that:- subsequent reduction in prices by passing on higher discounts to the customers after the clearance of the goods cannot alter the excise duty liability of the appellant M/s Videocon - Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot be a matter of concern to the Central Excise Department as the liability to payment of excise duty was concerned. This is the view which was taken by the Tribunal in the case of Indo Hacks Ltd. v. Collector of Central Excise, Hyderabad - [1985 (2) TMI 137 - CEGAT, NEW DELHI] and it seems to us that the Tribunal's view that the duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. Besides as rightly observed by the Tribunal the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned - Decided against assessee.
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2014 (2) TMI 876
Whether the respondents herein is entitled for the benefit of Notification No.115/75-CE dtd 30.4.1975 as amended for exemption of the product "soap" manufactured by them - respondent herein is the manufacturer and is manufacturing vanaspati and refined edible oil in "a composite mill" and under takes "oil milling and solvent extraction" in their factory prior to refining - Held that:- all the products manufactured by the assessee in one of the industries specified in the schedule of the notification are eligible for exemption. As already recorded herein above, there is no dispute that the respondent falls under the category of "oil mill and solvent extraction industry". If it be so, benefit of the above said notification will be extendable to the respondent herein. We find that the adjudicating authority has correctly done so by relying upon the decisions of this Tribunal. The said decisions are already cited herein above, in the submissions made by the learned advocate. We find that the revenue is not able to bring on record any contrary evidence to indicate that respondent is not an oil milling and solvent extraction unit. The entire exercise of the revenue in this appeal seems to be that the respondents is not "oil milling and solvent extraction unit", they were also manufacturing soap which is not a bye-product but a final product and does not fit into the activity of oil milling or solvent extraction. Notification as reproduced verbatim does not specify the requirement of the final products being related to the industry which are covered in the schedule of the said notification. Another point argued by the revenue is that during the relevant period appellant had not manufactured any item in the oil milling and solvent extraction unit, hence not eligible for the benefit of notification, seems to be flimsy and baseless argument, as said notification does not indicate that the assessee needs to continuously manufacture the goods to avail the benefit of exemption granted by notification No.115/75-CE - Decided against Revenue.
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2014 (2) TMI 875
Denial of CENVAT Credit - Penalty under Rule 15(1) of CENVAT Credit Rules, 2004 and Rule 15(2) of the said Rules read with Section 11AC of the Central Excise Act - Enhancement in penalty - Held that:- appellant issued the purchase order for purchasing the CI scrap. They received the CI scrap accompanied with invoices indicated as CI scrap. Rule 9(3) of the CENVAT Credit Rules as it stood at the material period provides that the manufacturer of excisable goods taking CENVAT credit on inputs shall take reasonable steps to ensure that the input or capital goods in respect of which he has taken the CENVAT credit on which the appropriate duty of excise as indicated in the documents accompanying the goods has been paid. The Explanation to Rule 9(3) of the said Rules provides that the manufacturer shall be deemed to have been taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier as the goods may be showing the documents evidencing payment of excise duty either from his personal knowledge or on the basis of the certificate given by a person. Dealer is registered under Central Excise Rules and they are in existence in their address. There is no material available that the CENVAT invoices accompanied with goods are not genuine. So, in my considered opinion, the appellant had satisfied the conditions as provided under Rule 9(3) of the said Rules. Hence, there is no reason to deny the credit on the appellant. The dispute raised by the Revenue of value of the goods, cannot be reason for denial of CENVAT credit subject to fulfillment of condition of CENVAT Credit Rules. Apart from that, the transaction of the goods at a lower price is within the domain of buyer and seller - impugned order is modified insofar as the demand of duty along with interest and penalty imposed on the appellant are set aside - Decided in favour of assessee.
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2014 (2) TMI 874
Waiver of pre-deposit of duty - Penalty u/s 11AC and Rule 26 of Central Excise Rules, 2002 - Demand of differential duty - Reliability of documents - Held that:- Applicant company is manufacture and clearance of Silico Manganese from their factory for the period from 2005 to November, 2007 clandestinely without payment of appropriate duty - data was maintained in Tally accounting package and de-coded by the officers after getting necessary Password and user I.D. from the computer operator Shri Ajay Kr. Behara. In the said Pendrive, the data related to account information, inventory information, accounting choice, inventory vouchers, profit and loss account, stock scenario, ratio analysis, sales register, purchase register, zonal register were maintained. Directors has meticulously analyzed the data contained in the said Pendrive vis-`-vis the statutory records maintained by the Applicant in the daily stock register and arrived at a finding that the sales which were not reflected in the DSA had been removed without payment of duty from the factory. The Directors cannot absolve themselves totally against such clearances - Applicant has failed to make out a prima facie case for total waiver of pre-deposit of dues adjudged against them - Conditional stay granted.
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2014 (2) TMI 873
Waiver of pre-deposit - Cenvat credit on the service tax paid on the input services - Notification No. 8/2005-ST, dated 1.3.2005- Whether Cenvat Credit of service tax paid by a job-worker on the taxable service received by the respondent is liable to be denied to the latter on the ground that the job worker was not liable to pay the tax by virtue of exemption Notification No. 8/2005-ST, dated 1.3.2005 - Held that:- issue involved in this case is squarely covered by the decision of Federal Mogul TPR India Ltd. vs. CCE Bangalore - [2010 (5) TMI 350 - CESTAT, BANGALORE] and CCE v. Laxmi Metal Pressing Works Pvt. Ltd. - [2009 (10) TMI 181 - CESTAT, MUMBAI] therefore, the assessee has made out a case for 100% waiver of pre-deposit of all dues adjudged against them. Accordingly, I grant waiver of the requirement of pre-deposit of duty, interest and penalty and stay recovery thereof during the pendency of the appeals - Stay granted.
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2014 (2) TMI 872
Availment of CENVAT Credit - Whether the appellant is entitled to take CENVAT credit on welding electrodes which has been used in the repair and maintenance of inputs which has gone into manufacturing of final product - Held that:- Following decision in Supreme Court in thecase of Union of India vs. Hindustan Zinc Ltd. - [2006 (11) TMI 551 - SUPREME COURT OF INDIA] it is held that the assessee is entitled to avail input credit on welding electrodes which has been used for repair and maintenance of plant and machinery - Decided in favour of assessee.
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2014 (2) TMI 871
Disallowance of input credit availed - Fixed Facility Charges - Adjudicating authority concluded and in our prima-facie view erroneously, that facilitation charges are not in respect of any identifiable commodity consumed in the manufacture of the final product - Held that:- This view is prima facie not sustainable. In this view of the matter, we grant waiver of pre-deposit in full and stay all further proceedings pursuant to the impugned adjudication order pending disposal of appeal - Stay granted.
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2014 (2) TMI 870
Availment of CENVAT Credit - appellant had taken cenvat credit of service tax paid on telephone services, courier services and insurance services for insurance of the company's employees & vehicles - Held that:- As regards the mobile telephone services, the same is in respect of the landline phone installed in the factory and phone provided to the appellant company to their employees. Obviously, no manufacturer would provide mobile phones to his employees purely for their personal use. Mobile phones are provided by a company to its employees for the company's work. Therefore, just because some calls may have been made by the employees for their person work, it cannot be presumed that mobile phones have been used by the employers for their personal work only - telephone services availed in respect of the mobile phones supplied to their employees are admissible for cenvat credit. In view of this, the impugned order disallowing the cenvat credit in respect of telephone services is not sustainable - insurance is the requirement of Section 38 of the Employees State Insurance Act, 1948 mandating that all the employees be insured in the manner provided in this Act. In view of this, it has to be held that providing of insurance cover to the employees for compliance with the provisions of Employees State Insurance Act, 1948 has to be treated as service used in or in relation to the manufacture of final product - As regards the insurance of the company's vehicles, since the vehicles have been used for the company's work, the same would also have to be treated as covered by "input service" would be eligible for cenvat credit - Decided in favour of assessee.
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2014 (2) TMI 869
Waiver of pre deposit - Imposition of interest, penalty under Rule 15(2) of CENVAT Credit Rules, 2002 read with Section 11AC and penalty under Rule 26(2) of CENVAT Credit Rules, 2002 - Held that:- It transpires that though the show cause notice is directing the current appellants to show cause as to why a penalty should not be imposed upon them under Rule 26 (2) of Central Excise Rules, 2002, we find that the adjudicating authority has not imposed any individual penalties on the two appellants before us. Be that as it may, on a specific query from the Bench as to the provision for recovery of interest, penalties which are imposed on a proprietor/ concern, from others, it was informed that there is no such provision for recovery. On the face of it, we find that the amounts which are confirmed against M/s Aaishwarya International as dues, at the utmost, can be recovered from the proprietor of M/s Aaishwarya International and not from individuals who are, prima facie, in no way connected with the activities of such firms. In our view, the appellants herein have made out a prima facie case for waiver of pre-deposit of the amounts attributable to them by the adjudicating authority in his Order-in-Original - Applications for waiver of pre-deposit of amounts involved are allowed and recovery thereof stayed till the disposal of appeals - Stay granted.
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2014 (2) TMI 868
Availment of CENVAT Credit on capital goods - Exemption on export goods - Benefit of Notification No. 30/2004-C.E., dated 9-7-2004 - Held that:- Export goods are not exempted goods. In the present case, the appellant has exported the readymade garments manufactured by them. Only in respect of DTA clearance, the appellant chose to avail the exemption. As regards the export goods, they did not avail of the exemption. Therefore, the availment of capital goods credit cannot be said to be for exclusive manufacture of exempted goods. Therefore, the appellant was rightly entitled to Cenvat credit duty of excise duty paid on the capital goods used in the manufacture of export goods. Coming to the utilization of the said credit, the appellant has utilised said credit for payment of duty on hangers and zippers which were procured duty free in terms of the Notification No. 43/2001. Appellant was liable to discharge duty liability on the zippers and hangers in terms of Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Rule 6 provides two options. One option is to clear the goods on payment of duty. The other option is to clear the goods without payment of duty to the manufacturer of hangers and zippers who shall add the same to his non-duty paid stock and dealt with accordingly. The appellant chose to first option. There is no bar in the said Rules, which bars the appellant in clearing the goods on payment of duty. Therefore, the appellant has discharged the duty on the hangers and zippers in accordance with law. In view of the above, the impugned order is not sustainable in law - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (2) TMI 913
Inclusion of cost of empty bags, stevedoring, clearing, forwarding charges and standardisation, bagging, loading and unloading charges, transport costs in turnover - Exemption under Section 2(p) of the TNGST Act read with Rule 6 of the TNGST Rules - Held that:- Tribunal has not committed any error as a reading of Section 2(p) of the TNGST Act makes it clear that "Taxable turnover" means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed - Rule 6 of the TNGST Rules, clearly provides that the tax or taxes under (section 3 or 4) shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer. Invoice No.5/8.3.93 shows the cost of the cargo DAP separately and other charges separately and that transaction has been effected based on the agreement dated 18.12.1992. This is also not disputed by the authority. Invoice Nos.1 to 4 are only made for other purposes and not for the purpose of filing the form A1 return - Nevertheless, these invoices have not been suppressed and they have been shown to the authority as cancelled and therefore, the question of relying upon those invoices does not arise. Penalty under Section 22(2) of the TNGST Act - Held that:- it is made applicable only if the amount is not remitted to the State by the dealer who collects the excess amount of tax. In this case, there is no dispute that the respondent-assessee has remitted the amount to the State and therefore, placing reliance on the decision of this Court in State of Tamil Nadu v. K.Mohamed Ibrahim Sahib reported in [1991 (7) TMI 301 - MADRAS HIGH COURT], the Tribunal was justified in setting aside the levy of penalty - Decided against Revenue.
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2014 (2) TMI 912
Waiver of pre deposit - Earlier Tribunal suspended the requirement of pre-deposit of the disputed amount in entirety - Whether the appellant is entitled to refund or whether it should be the basis for grant of entire exemption from pre-deposit is not an aspect which can be stated as a position of law - Held that:- Court is conscious of the fact that in the previous order relied upon, the Tribunal had directed suspension of the requirement of pre-deposit in entirety. In these peculiar circumstances, the impugned order is modified; instead of paying 20% of the amount of tax and interest, the appellant shall pay a reduced amount of 10% of tax and interest payable. The requirement of having to deposit 10% of penalty is hereby waived/cancelled - Time for pre deposit extended - Decided partly in favour of assessee.
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