Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 26, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Revenue recognition - Applicability of AS-9 - Accrual basis of accounting - The argument based on accountancy practice has little merit if such practice cannot be justified by any provision of the Statute or is contrary to it - AT
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Head of Income - assesseewas not having any land of its own - any income derived from such sublease of land can only be taxed under the head profit and gains of business or profession - AT
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Tenancy rights - no time gap - there is no evidence to infer that the house is in vacant possession of the assessee even after the alleged end of the tenancy - taxable as Income from other source - AT
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Deemed income u/s 41(1) - merely relying upon the expression ‘principal’ used in the letter, one cannot conclude that the amount contains only the principal component of loan, and no element of interest is embedded therein. - AT
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Penalty u/s 271(1)(c) - mere entries in the books not enough, if not disclosed in the return of income - penalty confirmed. - AT
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Claim of Bed Debts in the revised return - the assessee has failed to even satisfy the first precondition envisaged in S.36(1)(vii) of writing off of the debt in its books of account. - AT
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Revision u/s 263 - phrase ‘prejudicial to the interest of the revenue’ - every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interest of revenue - AT
Service Tax
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ST- 3 for the period between the 1st day of July 2012 to the 30th day of September 2012, to be submitted by the 25th day of March, 2013 - Notification
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Refund - SEZ units - authorized operations - even if the appellant was not eligible for refund under Notification No.09/2009-ST dated 3.3.2009, the appellants were certainly eligible for refund under Section 11B of the Central Excise Act, 1944 - AT
Case Laws:
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Income Tax
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2013 (2) TMI 558
Revenue recognition - Applicability of AS-9 - Accrual basis of accounting - held that:- profits for the purpose of taxation have to be determined as per commercial principles, subject to specific provisions of the Act. Accounting practices and standards, which are widely accepted and adopted, would be a good guide to the determination of commercial profits. However, though accounting standards and practices are relevant, they cannot override specific provisions of the Act. The Supreme Court in Challapali Sugars Ltd. V. CIT, [1974 (10) TMI 3 - SUPREME COURT] had laid down that pronouncements of accounting bodies are relevant in determining commercial profits. In Tuticorin Alkali Chemicals & Fertilizers Ld., V. CIT, [1997 (7) TMI 4 - SUPREME COURT], it was held that : ‘The argument based on accountancy practice has little merit if such practice cannot be justified by any provision of the Statute or is contrary to it’. CIT Vs. Bokaro Steel Ltd., [1998 (12) TMI 4 - SUPREME COURT] the subsequent decision in case of reiterated the same principle. The case of Hindustan Housing and Land Development Trust Ltd. [1986 (7) TMI 10 - SUPREME COURT] has been distinguished by the Hon’ble AP High Court in the case of CIT Vs. KCP Ltd., [1994 (12) TMI 21 - ANDHRA PRADESH HIGH COURT] wherein it was held that the assessee’s collection was acceptable as a trading receipt in the relevant year. The Hon’ble Supreme Court at [ 2000 (8) TMI 3 - SUPREME COURT] affirmed the decision of the AP High Court [1994 (12) TMI 21 - ANDHRA PRADESH HIGH COURT]. Therefore, the amount of Rs. 95,40,000/- which is due from M/s Param Power Projects Pvt. Ltd. is to be treated as income of the assessee company. - Decided in favor of revenue.
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2013 (2) TMI 557
Head of Income - Whether subleasing of land is business activity of the assessee company - held that:- as the assessee company was not having any land of its own, therefore it could only sublease the land which has been made available to the assessee-company by MIDC on lease basis. - any income derived from such sublease of land can only be taxed under the head profit and gains of business or profession. Decision of of the Hon’ble High Court of Andhra Pradesh in the case of Sponge Iron India Ltd. (1992 (10) TMI 67 - ANDHRA PRADESH HIGH COURT) distinguished. It has been accepted by the Revenue that business was set up during financial year 2004-05 relevant to A.Y. 2005-06 in the assessment made u/s. 143(3) of the Act by the JCIT who allowed the benefit of carry forward of business loss and depreciation allowance to the next assessment year i.e. year under consideration. Therefore, on these facts, it can be safely concluded that the business of the assessee has been started in F.Y. 2004-05 relevant to A.Y. 2005-06. - Taxable as business income - Decided in favor of assessee.
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2013 (2) TMI 556
Income from transfer of tenancy rights - taxable as capital gain or income from other sources - held that:- the consideration paid by the new tenant is consent of the landlord for the transfer of tenancy rights between the new and old tenants. Thus, in our opinion, the amount of Rs 7.26 lakhs is the ‘consideration for consent’. Generally, in matters of the tenancy rights disputes, it is the tenant who gets the financial benefit and the same flows from the pockets of the Landlord in lieu of the surrender of the said tenancy rights by the tenant and certainly the land lords does not receive, which is the case in the instant appeal. Therefore the taxation principles relating to the tenancy rights should not apply in this case. It cannot be inferred that the new tenant received merely rental rights and there is no transfer of any capital rights to the new tenant by the land lord. Therefore Rs 7.26 lakhs is neither a capital receipt nor a rental receipt. In that sense, the argument of the Ld Counsel that some of the capital rights, out of the bundle of rights relating to the immovable property, are transferred to the new tenant does not hold water. There is no time gap between the vacation of the property by the old tenant and grant of rental rights to the new tenant. - there is no evidence to infer that the house is in vacant possession of the assessee even after the alleged end of the tenancy - Therefore, the views of the AO as well as the CIT(A) on this issue require to be sustained as the amount of Rs 7.26 lakhs, the consideration for consent, does not involve any transfer of capital rights attached to the property on the facts of this case and the amount constitutes a windfall gain to the assessee. Amount is taxable as Income from other sources - decided against the assessee.
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2013 (2) TMI 555
Deemed income u/s 41(1) - interest liability from the remission of loan liability - loan was taken from ING Vysya Bank in the year 2001 was for financing capital assets like buildings, plant and machinery, etc. - assessee submitted that the amount of Rs.8,41,00,728 waived by the bank under the OTS is also only principal component and there is no interest component therein, which could be disallowed u/s. 41(1) of the Act. - Revenue submitted that the facts are not clear as to whether the loan given by the bank was a term loan or working capital loan. - held that:- Mahindra & Mahindra Ltd. (2003 (1) TMI 71 - BOMBAY HIGH COURT), the Hon’ble Bombay High Court, while considering the loan agreement, which was for import of plant and machinery, held that since the loan was for purchase of capital asset, the amount waived cannot be treated as income of the assessee either under S.28(iv) or under S.41(1) of the Act. - merely relying upon the expression ‘principal’ used in the said letter, one cannot conclude that the amount of Rs.8,41,00,728 contains only the principal component of loan, and no element of interest is embedded therein. - AO to verify the facts. Disallowance of expenses u/s 14A - Dividend income exempted u/s 10(34) - held that:- to warrant disallowance in terms S.14A of the Act, there has to be in the first place, certain ‘income which does not form part of the total income’ and certain expenditure should be found by the Revenue authorities, to have been incurred by the assessee in relation to such income. In the present case, what is disallowed by invoking the provisions of S.14A of the Act, is the interest attributable to the investments made in shares by the assessee in M/s. Nagarjuna Oil Corporation Ltd. and the reason for the disallowance of such interest is that the return in the form of dividend, earned if any, from such investments would be exempt from tax. The reasoning given for the impugned disallowance is not correct, since what is liable to be disallowed in terms of S.14A is only the expenditure, if any incurred, by the assessee in relation to the dividends, if any earned, by the assessee from such investments - Matter set aside and remanded back to AO for verification. Disallowance towards interest free advances - held that:- when the assessee itself is having huge interest-bearing debt liability as at the end of the previous year, proportionate interest attributable to interest free advance made to the sister concern has to be disallowed. - The plea of the assessee that the advance was out of internal accruals and not from borrowed money is also not acceptable - Decided against the assessee. Commercial expediency involved to justify the expenditure in question. It has to be borne in mind that if there is mutual benefit in a transaction or mutuality of transactions between the assessee and its sister concern, then only the expenditure can be allowed on grounds of commercial expediency. Then, again the mandate of commercial expediency has to be weighed, taking into account the financial well being of the assessee at the given time.
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2013 (2) TMI 554
Deduction u/s 80IA - Rectification u/s 154 - held that:- even though AO correctly stated that the deduction under section 80IB has to be restricted to the gross total income while allowing the set off, he wrongly restricted it to profits and gains of the business. As against the eligible amount under section 80IB, assessee gross total income (including the income from house property) was at Rs.9,14,13,162/-. Instead of allowing the deduction under section 80IB invoking the provisions of section 80A(2), AO restricted the amount to Rs.8,33,80,662/- ie. Income from business only. Therefore, the computation made by AO is factually not correct. Assessee is entitled for deduction under section 80IB on the gross total income which should include income from house property and income from business and other incomes under other heads before allowing the deduction under Chapter VIA. Hon'ble Bombay High Court in the case of Synco Industries Ltd vs. AO, [2001 (7) TMI 45 - BOMBAY HIGH COURT] has held that, The provisions of 80IA and 80IB are pari materia and the principles will apply equally. Expenditure towards sponsoring the Indian Science Congress - held that:- The expenditure is in the nature of advertisement of assessee business and is laid out and expended wholly and exclusively for the purpose of the business. - Expenditure allowed. Nature of exchange difference - held that:- Following the principles laid down by the Hon'ble Supreme Court in the case of Liberty India Vs Commissioner of Income-tax, [2009 (8) TMI 63 - SUPREME COURT] the income from premium relating to import license cannot be considered as income derived from the undertaking. - Decided in favor of revenue.
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2013 (2) TMI 553
Interest expenses - whether the action of the assessee of providing 6% interest on the unspent amount of grant is allowable whether u/s.36(1)(iii) of IT Act or u/s.37(1) of IT Act. - held that:- since the amount in question was not in the nature of borrowings or loans, therefore the provisions of section 36(1)(iii) do not apply on these facts. Regarding deduction u/s 37(1) - held that:- On one hand the assessee has earned interest income on investment of the surplus fund and on the other hand made the provisions of interest, hence such a claim does fall under the provisions of section 37(1) of IT Act. We have been informed that the unspent surplus funds have been invested as per the guidelines and thereupon interest was earned by the assessee. On the other hand, the assessee has to pay interest that too as per the directions of the Government, hence the provisions made by the assessee is, therefore, meant for the purpose of the business, hence qualify for claim u/s.37(1) of the IT Act. - Decided in favor of assessee.
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2013 (2) TMI 552
Penalty u/s 271(1)(c) - whether the assessee has properly disclosed all material facts relating to the taxability of the compensation in its return of income filed for the relevant assessment years - held that:- When the assessee has been so specific in respect of one item, which he has treated as capital receipt and also given the reason why it has treated the amount as capital receipt, the assessee could have also included the compensation so received in its computation of income and then could have claimed exemption from tax. It is also not known on what basis the assessee has claimed the compensation so received as exempt from tax because the Auditors have given a simple Note that the company is advised that such compensation being in the nature of capital receipt can be directly brought to the capital reserve, without giving any basis for such opinion. Assuming, yet denying, that this is the proper disclosure, then every assessee will credit income/ Receipts directly to its capital account and claim that it has properly disclosed the income. Whereas the requirement is that there should be a proper disclosure in the return of income. - As the assessee has failed to disclose the compensation received from DBA, it is a fit case for the levy of penalty for concealment of income and also for filing of inaccurate particulars of its income. Relying upon the decision of Supreme Court in CIT v. Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] held that, the return of income is the only document where the assessee can furnish his particulars of income, whereas in the instant appeal, the appellant company has not disclosed the receipt of compensation received from DBA in its return of income nor in the computation of income accompanied with the return of income. - Penalty confirmed.
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2013 (2) TMI 551
Claim of Bed Debts in the revised return - The assessee’s claim of bad debts written off was rejected since the assessee did not produce necessary evidence to prove the fact that the bad debts were actually written off in its books of account - held that:- no material was produced by the assessee which could prove that the debts were actually written off in the books of account. - the assessee has failed to even satisfy the first precondition envisaged in S.36(1)(vii) of writing off of the debt in its books of account. - None of the ledger account copies submitted in the paper-book show ‘nil’ balance, which should have been the case, in the event of the actual write off of the debt. - Claim disallowed - Decided against the assessee. Addition on account of increase in unsecured creditors - held that:- Ongoing through the confirmation letters, it is seen that in many of the cases, the address of the creditors alongwith their Permanent Account Number is mentioned therein. Thus, in these cases, since the persons are income-tax assessees, necessary enquiry could have been conducted for finding out the credit-worthiness of the creditors and the genuineness of the claim made by the assessee with regard to the unsecured loans shown against these persons. - no enquiry has been made to find out as to whether the creditors whose details were furnished actually had advanced the monies to the assessee - matter remanded back to AO.
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2013 (2) TMI 550
Receipt of money in addition of the registered value for sale of land - held that:- in respect of 39.19 acres of land, the transaction is complete and the assessees have received full consideration from Sri N.K. Mohta, as per the MOU. For the remaining extent of land, N.K. Mohta has filed a suit and contended that he has paid some amount in respect of the remaining extent of land. The transaction is not yet completed. Hence, we hold that the transaction in respect of 39.19 acres is completed and each of the assessees have got the income of Rs. 25,07,508/- in the said transaction. Hence, the said amount has to be treated as income from the real estate and liable to be brought under tax. - Decided in favor of revenue. Receipt of extra unaccounted money - held that:- No document has been produced to show that has paid Rs. 90,00,000/- to the assessees in respect of remaining extent of land. The stray and inconsistent statement made by N.K. Mohta cannot be accepted. In the absence of any document, the statement of N.K. Mohta that he has paid a sum of Rs. 90,00,000/- to the assessees in cash cannot be accepted. Accordingly, we hold the second substantial question of law in favour of the assessees.
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2013 (2) TMI 549
TDS on Transportation - held that:- the payments made by assessee are in the nature of purchase account and not transportation charges in respect to above four parties and once this is the position, the assessee is not liable to deduct any TDS under any of the provisions of Chapter XVIIB of the Act. Once assessee is not liable or not under obligation to deduct TDS, no disallowance u/s. 40(a)(ia) - Decided in favor of assessee. TDS on Testing & Certification - held that:- Assessee has deducted TDS in the last month of the previous year and paid on 31.10.2006 and hence assessee has complied with the provision of section 40(a)(ia) of the Act and qua this amount no disallowance is required. - In favor of assessee. TDS on Loading and unloading charges - a sum of Rs.5,97,500/- was capitalized and the balance amount was on account of payment of labour charges etc - held that:- the amount capitalized at Rs.5,97,500/- cannot be subject matter of TDS. Hence, the same should not be disallowed by invoking the provisions of section 40(a)(ia) of the Act. With respect to balance, the Assessing Officer will confirm the disallowance. - partly in favor of assessee. TDS on Agency charges, supervision documentation - held that:- no doubt no written contract is there, but the assessee has made payment on account of commission, service charges for documentation, custom clearance and supervision of loading, operation of vessels to clearing and forwarding agents. This clearly falls under the provisions of section 194C of the Act and liable to TDS u/s. 194C of the Act. - Decided against the assessee. Deemed dividend - shareholder - held that:- clause (e) of section 2(22) of the Act as it existed provided that if the loan is received by the shareholder, it is only then that the loan can be deemed to be dividend in his hands. The assessee firm was not the shareholder of the company and the partners of the firm were the shareholders in the books of the company. Therefore, the loan advanced by the company to the assessee firm could not be deemed to be dividend inasmuch as the loan was not to the shareholder but to the assessee who was not the shareholder in the books of the company. - Decision in ACIT, Circle-33 vs. Bhaumik Colour (P) Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] and CIT vs. Rajkumar Singh & Co. [2005 (7) TMI 91 - ALLAHABAD HIGH COURT] followed. - Decided in favor of assessee.
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2013 (2) TMI 548
Revision u/s 263 - erroneous and prejudicial to revenue order - Revised return - assessment proceedings - Receipt of report of DVO u/s 55A after after the completion of assessment u/s 143(3) - held that:- where a regular assessment proceedings having been commenced u/s. 143(2) of the Act, there is no need for a summary assessment u/s. 143(1)(a) of the Act. Hon’ble Delhi High Court has gone further in the case of CIT Vs. Punjab National Bank [2001 (2) TMI 126 - DELHI HIGH COURT] wherein it is held that where an intimation was sent to the assessee u/s. 143(1)(a) of the Act and, thereafter, the AO has issued notice u/s. 143(2) of the Act, any change in the said intimation, if permissible, has to be effected in the assessment order u/s. 143(3) of the Act and not by exercising power u/s. 154 of the Act to rectify such intimation issued u/s. 143(1)(a) of the Act. - It means once action u/s. 143(2) of the Act is initiated, no proceedings u/s. 143(1)(a) of the Act or 154 of the Act can be taken up till 143(3) of the Act is passed. Regarding revised return - held that:- assessee while filing revised return has substantially changed/reduced its losses from Rs.1,20,25,795/- to Rs.6,81,683/- on the basis of registered valuer’s report, which was filed along with the revised return of income. Hence, we treat the revised return of income filed by assessee as a valid revised return filed within the prescribed time of section 139(5) of the Act. Reference of DVO - held that:- the fair market value adopted by DVO at Rs.4,72,370/- is lower than the fair market value adopted by assessee, on the basis of registered valuer’s report, at Rs.77,47,750/- and in our view, as held by Hon’ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra) cl. (a) of s. 55A of the Act cannot be made applicable because the estimate value proposed by DVO is less than the fair market value disclosed by assessee as on 1.4.1981. Similarly, clause (b) of s. 55A of the Act also cannot be invoked because for invoking cl. (b) of this section is possible only when value claimed by assessee is not supported by an estimate made by registered valuer. Income from House property - held that:- complete information before the AO was available at the time of framing of assessment in respect to 11 units of house property at 65, Hari Ram Goenka St., and assessee has disclosed notional value u/s. 23(2) of the Act at NIL in its computation of income and AO while adjudicating this issue has accepted the notional value at NIL from these units. Once the entire information is before the AO, and AO has formed opinion, no revision is possible in respect to assessment framed u/s. 143(3) of the Act. Regarding revision u/s 263 - held that:- Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT [2000 (2) TMI 10 - SUPREME COURT], which is applicable to the facts of this case. Hon’ble Supreme Court has considered the phrase ‘prejudicial to the interest of the revenue’, and interpreted that it has to be read in conjunction with an erroneous order passed by the AO and every loss of revenue as a consequence of an order of AO, it cannot be treated as prejudicial to the interest of revenue. CIT has erred in exercising jurisdiction u/s. 263 of the Act for revising the assessment framed by AO u/s. 143(3) of the Act as the assessment is neither erroneous nor prejudicial to the interest of revenue. - Decided in favor of assessee.
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Customs
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2013 (2) TMI 547
Penalties u/s 112 and 114AA - import of consignments by misusing the IEC of M/s Samarth Corporation - Held that:- As decided in Atul D. Sonpal vs. Commissioner of Customs (ACC & Import), Mumbai (2011 (4) TMI 1141 - CESTAT, MUMBAI) relying on the decision of Hamid Fahim Ansari (2009 (5) TMI 84 - BOMBAY HIGH COURT) that use of IEC is not an offence under Customs Law. Thus the applicant has made out a case for 100% waiver of pre-deposit of the penalties confirmed against them and stay recovery thereof during the pendency of the appeals.
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Corporate Laws
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2013 (2) TMI 546
Vicarious liability – Whether director of a company would be liable for the offence of company – Company violated the provisions of the Bihar Finance Act in submitting their sales tax returns – FIR was lodged against the directors who are the petitioners – Held that:- From bare perusal of section 49 of the Bihar Finance Act it is apparent that it does not provide for any vicarious liability of a person against whom no role is assigned in commission of any offence under this section. No role is assigned against the petitioners in the entire FIR and the allegation is only against the companies specifically – No offence can be said to survive against the petitioners and the prosecution of the petitioners is fit to be quashed on this score as well. Further the case of Maharashtra State Electricity Distribution Co. Ltd. [2010 (10) TMI 83 - SUPREME COURT OF INDIA] is relevant here, wherein it was decided that it is trite law that wherever by a legal fiction the principle of vicarious liability is attracted and a person who is otherwise not personally involved in the commission of an offence is made liable for the same, it has to be specifically provided in the statute concerned – As even on the plain reading of the FIR, there is no role assigned to the directors, the continuance of the criminal proceeding against them cannot be sustained in the eyes of law - prosecution of the petitioners pursuant to the FIR quashed - writ application allowed.
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Service Tax
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2013 (2) TMI 563
Non payment of Service Tax on transport charges - Goods Transport Agencies (GTA) - assessee claimed to exemption from payment of Service Tax as per Notification No. 34/2004-ST Dated 03/12/2004 - Held that:- Appellant had availed the services of GTA and also individual truck owners during the period 2004-05 to 2009-10. But it is also true that they could not substantiate their claim that they were entitled to the benefit of Notification No. 34/2004-ST Dated- 03.12.2004 as the freight amount paid by them in most of the cases were below Rs.750/- per single trip and Rs.1500/- for double consignment. This claim of the Appellant needs verification by the lower authorities. Both sides agree that the case be remanded to the original adjudicating authority for verification of these facts.
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2013 (2) TMI 562
Refund of service tax paid on services used in SEZ - denial of refund on Event Management, CHA Services, Management Consultancy, Commercial Training & Coaching Services, Testing, Management and Business Consultancy Service by overseas service provider, Maintenance & Repair Service as they were not in the approved list of services - Held that:- The Approval Committee which has examined this issue has issued a specific certificate to the appellant indicating the various services received by the appellant and justification for use of such services in relation to authorized operations and the jurisdictional Commissioner of Central Excise is also a member of this Approval Committee. Once the Approval Committee has given the nexus and the justification, it was totally unwarranted on the part of the adjudicating authority and the appellate authority to go into this question and come lo their own findings in the matter. Therefore, rejection by the lower authorities of the refund claims of the service tax paid on various services on this grounds is bad in law and is accordingly set aside. Whether the appellants can be granted refund under Notification No.09/2009-ST dated 3.3.2009 as amended by Notification No.15/2009-ST dated 20.5.2009 - Held that:- Notification No.09/2009-ST exempts the taxable services specified in Clause (105) of Section 65 of the Finance Act, 1994 provided in relation to the authorized operations in a SEZ and received by a developer or units of a SEZ, whether or not the said taxable services are provided inside the SEZ, from the whole of the service tax leviable thereon under Section 66 of the Finance Act, 1994. The refund procedure for operationalising the exemption applies to services which are procured from outside in respect of which the service tax liability has to be discharged first and the refund claim subsequently. In the case of services which are wholly consumed within the SEZ, there is no necessity to discharge the service tax liability ab initio. That does not mean that in a case where service tax liability has been discharged, the appellant is not eligible or not entitled for refund of the service tax paid under the provisions of Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. If the appellant is eligible for refund under Section 11B, then the same cannot be denied on the ground that the claim was made under Notification No.09/2009-ST. As in the present case there is no dispute that the services were provided in relation to the authorized operations of the appellant within the SEZ & the appellant has filed the refund claim within the tine period provided for in Section 11B and the appellant has borne the incidence of taxation. Services provided to a SEZ or unit in the SEZ is deemed as export as per the provisions of Section 2 (m) (ii) of the SEZ Act, 2005 and as per Rule 31 of the SEZ Rules, 2006, the appellants are entitled for exemption from payment of service tax on the services which are used or provided to a unit in the SEZ. Therefore, even if the appellant was not eligible for refund under Notification No.09/2009-ST dated 3.3.2009, the appellants were certainly eligible for refund under Section 11B of the Central Excise Act, 1944 - rejection of service tax refund is not sustainable in law - in favour of assessee.
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2013 (2) TMI 561
Cenvat credit of service tax paid on the CHA services denied - Held that:- The issue is no more res-integra as stand settled in the case of Meghachem Industries (2011 (4) TMI 221 - CESTAT, AHMEDABAD) and MTR Foods Limited (2011 (1) TMI 143 - CESTAT, BANGALORE) held that service tax paid by the CHA for the export of goods is eligible to be availed as cenvat credit by the assessee - in favour of assessee.
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2013 (2) TMI 560
Construction of Complex service - Whether the construction of residential houses for Pondicherry university and quarters for the Police Department is taxable under “Construction of Complex service” – Held that:- The apartments/houses constructed for PU and the Police Department were not sold out but were used by them. It is the intention of the legislators to tax only the residential complex constructed and sold for consideration. That is the reason there is an exclusion clause. Hence, according to the exclusion clause, complex meant for personal use is not taxable. Therefore, the exclusion clause is rightly available for the appellant - Not taxable under “Construction of Complex” service – In favour of assessee. “Commercial or Industrial construction” Service Vs. “works contract” Service - Whether the appellant’s activity of constructing tower for BSNL is taxable under “Commercial or Industrial construction” Service or “works contract” Service – Held that:- appellant had paid service tax under “works contract” service for such construction to M/s. BSNL w.e.f. 1-6-2007. The Lower Adjudicating Authority had also accepted the amount paid by the appellant under works contract service for their services rendered to M/s. BSNL during the period from 1-6-2007 to 19-12-2009. As the Lower Adjudicating Authority had accepted the service tax paid by the appellant under the category “Works Contract Service” and appropriated the same, I hold that the demand raised by the Lower Adjudicating Authority for the same service rendered to M/s. BSNL w.e.f. Jan 2006 to 31-5-2007 under the category “commercial or industrial construction” service is not sustainable - – In favour of assessee.
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2013 (2) TMI 559
Activity of supply of floating rigs - whether the activity of supply of floating rigs by M/s. Aban Offshore Ltd. is covered under the category “Supply of tangible goods” service as contended by the appellant or under the category “Mining service” – Held that:- ‘Mine’ has been very widely defined to include infrastructure created for mining of minerals, oil or gas. Thus, the meaning of mining has to be restricted to process of extracting metallic or non-metallic mineral deposits. In short, the word ‘mining’ must be understood as the process of taking minerals, gas or oil from underneath the surface of the earth. Pocess of actual extraction of mineral, oil or gas from beneath the earth is taxable under this category. In the instant case the floating rigs supplied by M/s. Aban is used by the appellant for purifying the extracted oil which is an activity subsequent to the extraction of oil. As the activity to be taxed under “Mining Service” is restricted to actual extraction of oil, the process carried out by the appellant after extraction of oil by using the floating rigs supplied by M/s. Aban is definitely not covered under this category. Hence the activity of supply of floating rigs to the appellant by M/s. Aban is not covered under “Mining Service”. The taxability of ‘supply of tangible goods services’ would get attracted when a supply of tangible goods including machinery, equipment and appliances is made for the use of service recipient. The taxable service covers where tangible goods are supplied without transferring possession and effective control thereof though the goods are made available to the service recipient for use. In the instant case, M/s. Aban had supplied floating rigs to the appellant for post extraction activity without transferring possession and effective control. As per Section 65A of the Finance Act, if a service is classifiable under two or more sub-clauses of clause (105) of Section 65, Classification shall be effected to the sub-clause which provides the most specific description to sub-clauses providing a more general description. Activity of supply of floating rigs by M/s. Aban Offshore Ltd. to the appellant is more specifically covered under the category “Supply of tangible goods service” – Therefore supply of floating rigs covered under “Supply of tangible goods” service, appellant has erroneously paid the service tax for the disputed period and the appellant is right in claiming the refund. Further judgement in the case of Indian National Shipowners’ Association v. Union of India[2009 (3) TMI 29 – BOMBAY HIGH COURT] which was later affirmed by the Hon’ble Supreme Court[2010 (12) TMI 12 - SUPREME COURT OF INDIA] is relevant to this case where it was held that a service not covered by any entry prior to insertion of entry is not liable to Service tax till entry was introduced covering them – Service tax on supply of rig is taxable only w.e.f. 16-5-2008 under the category “Supply of tangible goods” service and that they had been erroneously charged by M/s. Aban Offshore Ltd. under “Mining Service” and the same was paid by them erroneously for the period 1-6-2007 to 15-5-2008 under the said category; and hence they are eligible for the refund – Refund claim is not hit by limitation inasmuch as the time prescribed under Section 11B is applicable only to those tax which is collected as permitted by the statute and in the instant case the tax was collected without authority of law and hence time limit is not applicable – Appellant is eligible for the refund claimed by them – Appeal allowed, refund claim sanctioned – In favour of assessee.
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Central Excise
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2013 (2) TMI 545
Waiver of Pre-deposit - CENVAT credit on inputs written off fully or partially - Rule 3(5B) of CENVAT Credit Rules - Held that:- Making provision in the manner the assessee as done appears to be a first step towards write off of slow moving items and that the step appears to be reversible due to fresh order. The excess inventory noticed at a particular point of time could be tackled by lowering the procurement. Substantial quantities which were moved into the reserve category for which provisions were made were dereserved in the subsequent months. Therefore, prima facie, we cannot treat the inputs and the value of inputs as written off in the books of accounts. Waive pre-deposit - Stay granted
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2013 (2) TMI 544
Difference between value of production and removal of goods in ER-1 returns and value of stock transfer recorded in the trial balance-sheets - Held that:- The defence submission in respect of transfer of materials from KGF complex to Bangalore complex and use of the said material for manufacture of vehicles which were ultimately supplied to defence has not been made with clarity and precision. Now, an attempt is made before us that whatever was sent from KGF has been utilized in the Tatra vehicles and ultimately supplied to defence. For fresh consideration matter remand back to commissioner
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2013 (2) TMI 543
CENVAT Credit on capital goods - Rule 2(a) of the CENVAT Credit Rules, 2004 - National Litigation Policy - Assessee contended that the department cannot prefer an appeal to the CESTAT where the disputed amount is less than Rs.5,00,000/- hence appeal not maintainable - Held that:- when these appeals were filed, there was no embargo based on monetary limits. When the counsel for the respondent all of a sudden wakes up the maintainability issue, the same can hardly be appreciated. The preliminary objection stands overruled. Whether various structural items to be ‘cenvatable' capital goods on the basis of certain photographs produced by the assessee - Held that:- The method adopted by the appellate authority cannot be countenanced inasmuch as a photograph per se has no evidentiary value. Where the assessee claimed to have used the structural items to fabricate "technological structures" which were claimed to be ‘cenvatable' capital goods, the appellate authority ought to have arranged physical inspection of such structures by competent officers of central excise and should have taken a view only after considering the inspection report. Remand back to revenue
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2013 (2) TMI 542
Waiver of pre-deposit - Stay of recovery - Rule 25 of the Central Excise Rules, 2002 - Notification No.21/2002 - Notification No.6/2006 - Mega Power Project - Assessee is a manufacturer of power plant Boilers Auxiliaries - Held that:- All though initially the certificate shows it is an expansion of Mega Power Project but the subsequent certificate issued by the Joint Secretary, Ministry of Power clearly certifying the plant to whom applicants supplied the impugned goods are intended for separate and new Mega Power Projects. Prima facie the applicants are entitled for the exemption claimed by them. Pre-deposit waive
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2013 (2) TMI 541
Annual capacity of production - Whether length of the galleries are taken into consideration while fixing the annual capacity of the stenter - Assessee was engaged in processing of fabrics - Paying duty under - Hot Air Stenter Independent textile Processors Annual Capacity Determination Rules, 1998 - Annual capacity of the stenter - Revenue assessed the duty after taking into consideration the length of galleries Held that:- Following the decision in case of S.P.B.L. LIMITED (2002 (9) TMI 113 - SUPREME COURT OF INDIA)that the length of galleries having no fan or radiator attached to it cannot be taken into consideration while determining the numbers of chambers. In favour of assessee
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2013 (2) TMI 540
Waiver of pre-deposit - Clandestine removal of the goods - Applicants are manufacturers of 'welding electrodes' - Inputs used are 'steel wire rod', 'rutile' and 'flux' - A SCN notice was issued on the basis of excess consumption of steel wire rod - Held that:- Prima facie at the stay stage and it is a case of clandestine removal and it is also submitted by the applicants that if the formula adopted by them is to be followed, the demand will come down to Rs.8 lakhs. There is some substance in the impugned order for asking the applicants to make partial deposit of the impugned demands. Partial waiver
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CST, VAT & Sales Tax
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2013 (2) TMI 565
Penalty u/s 67 of the KVAT Act - assessee contested against non supply of rely upon documents to levy penalty - Held that:- When documents are relied on against a person, that person should be given either the copies of the documents or at least that person should be given an opportunity to peruse the documents relied on. In so far as this case is concerned, Ext.P1 notice shows that several documents were relied on for proposing to levy penalty on the petitioner but despite the request made by the petitioner for giving copies of these documents, without even responding to the request made, the Officer has levied penalty on the petitioner by Ext.P3 order, thus penalty order. need to be set aside directing 2nd respondent to either furnish copies or allow the petitioner to peruse the documents relied on against him in Ext.P1 notice - in favour o0f assessee as directed.
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2013 (2) TMI 564
Petition filed under Section 22(6) of the TNVAT Act, 2006 unheard - Held that:- As the self assessment order for the year 2011-12 has been passed in terms of Section 22 of the TNVAT Act, 2006. Realising certain mistakes in the assessment, petitioner made an application under Section 22(6) of the TNVAT Act, 2006 with enclosures and that was filed on 30.11.2012. Since no fresh assessment order has been passed, the writ petition has been filed for a mandamus as if no order has already been passed, the authority will consider the same in accordance with law. Thus without going into the merits of the petitioner's claim, the respondent is directed to consider the petition filed under Section 22(6) of the TNVAT Act, 2006 if it is in order and no order has already been passed, as expeditiously as possible. 6. The writ petition is disposed of as above. No costs.
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