TMI Tax Updates - e-Newsletter
February 3, 2014

Case Laws in this Newsletter:

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

TMI SMS

• Disallowance u/s 40A(3)-Cash payment made for purchase of recharge vouchers from Tata Teleservices- payments were genuine- rigors of Rule 6DD must be lifted -HC

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Articles

1. Definition of Governmental Authority amended for exemption from Service Tax

   By: Bimal jain

2. ROLES AND RESPONSIBILITES OF DIRECTORS UNDER THE NEW REGIME

   By: SREEPATHI DHANAPAL

News

1. Index of Eight Core Industries (Base: 2004-05=100), December, 2013

Notifications

Customs

1. 08/2014 - dated 31-1-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Income Tax

2. 73/2013 - S.O. 3696(E) - dated 18-12-2013 - IT

Notification u/s 35AC - Notifies the various institutions Approved by the National Committee.

3. 17-A/2013 - S.O. 3643(E) - dated 11-12-2013 - IT

CORRIGENDUM – Notification No. 33/2013 – S.O. No. 3135(E) dated 17-10-2013.

Highlights / Catch Notes

Income Tax

• Reimbursements Are Part of Income Calculation Under Income Tax Act Section 44BB for Presumptive Taxation.

  Case-Laws - AT : Presumptive determination u/s 44BB - Reimbursement of actual expenses – has to be considered as a part of the receipt for the purposes of computation of income u/s 44B of the Act - AT
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• Assessee Denied Section 10B Exemption for Exporting Snacks Due to Lack of Own Manufacturing Activities.

  Case-Laws - HC : Exemption u/s 10B - The assessee was mainly exporting snacks items which were manufactured by the suppliers of the assessee - No manufacturing activity was done by the assessee till the stage of preparation of such items - HC
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• High Court Rules Company's Expenditure on Third-Party Asset as Revenue Expenditure, Affirms Business Benefit Gained.

  Case-Laws - HC : The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount - The expenditure should be looked upon as revenue expenditure - HC
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• High Court Rules Genuine Payments for Recharge Vouchers from Tata Teleservices Don't Require Strict Section 40A(3) Compliance.

  Case-Laws - HC : Disallowance u/s 40A(3) - payment in case for purchase of recharge vouchers from Tata Teleservices Limited - payments were genuine - rigors of section 40A(3) / Rule 6DD must be lifted - HC
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• ITAT Reverses Decision, Dismisses Petitioner's Stay Petition Despite Initial Prima Facie Case Determination.

  Case-Laws - HC : Stay of demand - ITAT having once held that the petitioner has a prima facie case while disposing of its stay petition, has taken opposite view when it later dismissed the stay petition - HC
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• High Court Quashes Re-assessment Notice Due to Invalid "Reasons to Believe" Recorded After Commissioner (Appeals) Order.

  Case-Laws - HC : Validity of re-assessment notice - The reasons to believe were recorded after the order passed by the Commissioner (Appeals) - revenue is in appeal against the order - Notice quashed - HC
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• Section 80P Provisions Exclude Co-operative Banks, Only Apply to Primary Agriculture Credit Societies and Rural Development Banks.

  Case-Laws - HC : The provisions of Section 80P were made inapplicable in relation to any Co-operative Bank other than the Primary Agriculture Credit Society or Primary Co-operative Agriculture and Rural Development Bank - HC
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• Court Presumes Criminal Intent in Tax Return Failures u/s 276CC; Accused Must Prove Otherwise Beyond Reasonable Doubt.

  Case-Laws - SC : Failure to file returns - For offences u/s 276CC the court has to presume the existence of mens rea and it is for the accused to prove the contrary and that too beyond reasonable doubt - The appellants have to prove the circumstances which prevented them from filing the returns - SC
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Customs

• Assistant Commissioner of Customs Named 'Proper Officer' for IGM Amendments u/s 30(3) of Customs Act, 1962.

  Case-Laws - AT : The ‘proper officer’ in the present case is the Assistant Commissioner of Customs under Section 30(3) of the Customs Act, 1962, for disposal of the representations of the Appellant relating to amendment of the IGM - AT
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Corporate Law

• Court Emphasizes Commercial Morality Over Solvency in Winding Up Case Due to Unpaid Dues Under Guarantee.

  Case-Laws - HC : Winding up of company - Dues not cleared under a letter of guarantee - Commercial solvency of the Company is not a stand alone ground. Commercial morality and the need to instill confidence in the mind of international investors, are also matters of public interest - HC
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Indian Laws

• Government Servant's Date of Birth Cannot Be Changed Based on Horoscope; Primary Evidence Required for Correction.

  Case-Laws - HC : Alteration of date of birth - horoscope is a secondary evidence, which cannot be taken as a primary evidence to establish the date of birth of the Government servant. For correction of date of birth, unimpeachable evidence must be shown - HC
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Service Tax

• Appellant must pre-deposit service tax for storage, warehousing, and GTA services; penalty u/s 78 imposed.

  Case-Laws - AT : Waiver of pre-deposit of service tax - Penalty imposed u/s 78 - Storage and warehousing services - GTA Services - liability rests on the consignee who are liable to pay the freight charges - Appellant directed to make pre deposit - AT
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Central Excise

• Refund Claim Approved: No Unjust Enrichment as Duty Incidence Not Passed to Buyers in Credit Note Case.

  Case-Laws - AT : Refund - negative price variation - assessee issued the credit notes to their customers - duty incidence does not stand passed on to the buyers, and as such are not hit by the provisions of unjust enrichment - AT
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• Appellant Not Recognized as Manufacturer for Goods Made by Job Worker; Cannot Register as Manufacturer.

  Case-Laws - AT : Merely because the goods are being manufactured by the job worker at the instance of the appellant, will not automatically confer the status of manufacturer on the appellant and he cannot be registered as a manufacturer - AT
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• CENVAT Credit Denial: Assessees Not Required to Investigate Beyond Suppliers to Verify Input Origins or Duty Payments.

  Case-Laws - AT : Denial of CENVAT Credit - reasonable steps - An assessee cannot be expected to go beyond the supplier of the goods to find out as to from where he has received the inputs or as to whether the inputs supplied to the dealer have actually been cleared on payment of duty or not by the manufacturer. - AT
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• Assessee's CENVAT Credit Denial Contested Due to Storage Outside Factory; Bona Fide Intentions Proven Valid by Facts.

  Case-Laws - AT : Denial of CENVAT Credit - facts itself leads the bona fide of the assessee and strengthens their stand that the storing of modvatable goods outside the factory gate was on account of paucity of space in the factory and cannot be held to be an effort on their part to remove the goods clandestinely - AT
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• Duty Demand Unenforceable on Successor for Land, Building Transfer Under Central Excise Act, 1944, Section 11.

  Case-Laws - AT : Duty demand - Recovery from successor – mere transfer of land and building, one could not be considered as successor and Section 11 of Central Excise Act, 1944 cannot be pressed into service to include several generation of successor. - AT
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VAT

• Tax Applicable on Contract Work Involving Customer-Provided Copper Wire Insulation Under K.V.A.T. Act, 2005 Entry 4(1)(b.

  Case-Laws - HC : Whether in respect of contract work of insulation in respect of copper wire furnished by the customer, tax could be levied under residuary entry 4(1)(b) of the K.V.A.T. Act, 2005 - Held yes - HC
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Case Laws:

• Income Tax

• 2014 (2) TMI 53
  Disallowance out of preceding year expenses – Held that:- The assessee company is having many divisions all across the country and there can be instances and cases, where bills for expenses are received at much later dated or beyond the financial year and expenses could not be booked when they are incurred – Relying upon the decision in Nagri Mills Co. Ltd. [1957 (9) TMI 30 - Bombay High Court ] - The expenses were incurred wholly and exclusively for the purpose of business - The bonafide and genuineness of expenses is not doubted - Assessee claims that expenses to the tune of Rs.75,51,613/- were to be disallowed u/s 43B of the Act for the reason that these were not paid during the relevant period and these expenses can be allowed only on actual payments – Such expenses shall be allowed in the year of actual payment – Partly allowed in favour of Revenue. Repair expenses – Held that:- The Assessing Officer has asked only general details and no specific bills were called for - The Assessing Officer must have applied his mind with the details submitted by the assessee and must have pinpointed the discrepancies and omissions - Ad hoc disallowance cannot be resorted to in the absence of any specific discrepancy noted in the details submitted by the assessee – Relying upon the decision in National Industrial Corporation [2002 (8) TMI 93 - DELHI High Court] - The order of CIT(A) is upheld. Commission paid to managing director – Held that:- The Assessing Officer has made an ad hoc disallowance without appreciating the facts of the case that the turnover and profit of the company has been increased during the year - The payment has been made in accordance with Schedule-XIII of the Companies Act, 1956 and this payment has also been approved by the Board of Directors and shareholders of the company – The order of CIT(A) is upheld. Commission expenses – Held that:- The assessee has furnished complete details of expenses along with evidences - The Assessing Officer without making specific inquiry about the expenses made adhoc disallowance out of commission expenses - The Assessing Officer was free to examine further the commission agents to whom the payments were made by the assessee - The assessee has submitted explanation for making the payments which the Assessing Officer has not found false - The assessee is having large number branches and the commission agents procure orders, facilitate in collection of payment from the customers and, therefore, the payments were made for the work carried out by the agents for the smooth running of the business of the assessee – Decided against Revenue. Depreciation on machinery and wind electric generators – Held that:- The firm from whom the machines were purchased were non-existent but the facts show that the wind electric generators were installed at the premises of TNEB which has been confirmed by the TNEB which is a Government Undertaking - Merely not finding M/s. Airo Energy Ltd. that too without summoning the same at the premises cannot be made a basis to draw the conclusion that firm was non-existent - The evidence in the form of certificate from TNEB assumes a credence and deserves to be considered for allowing the depreciation on the assets - The confirmation filed from TNEC did not constitute additional evidence and the same was filed before the Assessing Officer – The CIT(A) was correct in deleting disallowance – Decided against Revenue. Disallowance of depreciation on machinery – Held that:- The Assessing Officer made a presumption that wind electric generators purchased from M/s. Ashish Engineering Works was not genuine – He made the disallowance to cover up the possible leakage towards the bogus purchase on which assessee was entitled 100% depreciation other than the wind electric generators division - The AO has failed to establish that no assets have been purchased or installed and in that circumstances, he can resort to disallow the depreciation - No efforts have been made to establish that the details submitted by the assessee were not correct – Decided against Revenue. Lease rent paid – Held that:- The assets were in existence as per the spot verification report dated 08.03.2001 of the chartered engineer appointed by the Income-tax Department - The lease rent paid is in respect of the assets purchased in the earlier years also deserve to be allowed in this year also - All the assets which have been acquired/ purchased by lessors from the five parties – The order of CIT(A) upheld – The lease rent was genuine and should be allowed. Lease rent on machinery, lease management fee and lease rent of building – Held that:- The lease rent has been paid by banking channels - The assets had been found by the Chartered Engineer on the spot verification and the same was reported by him in his report dated 08.03.2001 - The suppliers of the machinery/equipments were well know like Tata Iron & Steel Co. etc. including Government organization BHEL - The lease rent paid on the assets in the subsequent years has never been disallowed by the revenue authorities nor the genuineness has been doubted - The lessors have confirmed having given the machinery on lease, the machinery was existed on the spot and being used - Decided against Revenue. Interest paid on utilization of funds for non-business purpose – Held that:- The CIT(A) has proved the genuineness of the lease rent paid, then the interest paid cannot be said to for non-business purpose – Decided against Revenue. Transactions with certain parties genuine or bogus – Held that:- Most of the payments made to these parties have been received back during the year, under consideration - The transactions relating to four parties shows there is a peak debit in the books of the assessee rather than the peak credit - There can be no addition on account of peak debit because it represents amount advanced through books of account to a particular party - The credit in the accounts represents the advance during the year under consideration - Once the advance made to a party and the same amount was received back then there cannot be any addition for escapement of income - The Assessing Officer has failed to discharge the onus with regard to establishing the fact regarding the benami of these sources of the assessee - The Assessing Officer could have enquired regarding the person who has introduced the accounts from the account opening form and the necessary enquiries could have been made from the banks but nothing of such type has been done by the Assessing Officer - Merely stating that the cheques have been issued to the parties and received back during the year under consideration cannot be a basis for making such huge addition of Rs.20 crores – Decided against Revenue. Staff welfare and sales promotion expenses – Held that:- The assessee has failed to furnish complete details of the expenses incurred - The Assessing Officer has restricted the disallowance to 10% on account of staff welfare and sales promotion expenses - Keeping in view of the nature of expenses, CIT (A) was justified in sustaining the addition being 10% of these expenses being treated as not allowable in view of the provisions of section 37(2) of the Act – Decided against assessee. Foreign traveling expenses – Held that:- Assessing Officer had disallowed this amount out of foreign traveling expenses as details submitted were not sufficient to explain the expenditure to justify - Such disallowances are being made in past years – Decided against assessee. Amount paid in cash in excess of Rs.10,000 – Held that:- The expenditure incurred in cash is covered by Rule 6DD(h) – Decided in favour of assessee.

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• 2014 (2) TMI 45
  Deduction u/s 80HHC - Held that:- Relying upon the decision in ACG Associated Capsules Pvt. Ltd vs. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - 90% of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads "Profits and gains of business or profession" is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of business - Decided against Revenue.

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• 2014 (2) TMI 38
  Interest for the preconstruction period claimed – Claim of deduction u/s 24 of the Act – Held that:- For both the years under reference, while the income stood initially reduced by an amount, the same stood assessed at the returned income, on the ground that the assessed income could not fall below the returned income - the income as assessed is in terms of and in accordance with the law and, therefore, there is no basis for restricting the income to that returned; the assessee having claimed the entire interest for the preconstruction period in the year of completion of the relevant construction - Doing so would be in effect denying it the deduction u/s. 24(b) for the relevant years, to which it is entitled in law. The interest on the borrowed capital utilized for, construction for the preconstruction period is to be allowed in five equal installments beginning the year of the completion of construction – thus, the interest is allowable @ 1/5th as per the clear mandate of law - The assessee's claim for A.Y. 2006-07 in its respect is thus not maintainable in law – the matter has not been properly discussed - the disallowance of this interest is subject to the necessary confirmation by the AO while giving effect to this order – Decided partly in favour of Assessee.

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• 2014 (2) TMI 37
  Presumptive determination u/s 44BB of the Act - Reimbursement of actual expenses – Expenses incurred on behalf of customers to be included in gross receipts u/s 44BB of the Act or not – Held that:- The decision in Commissioner of Income Tax Vs. Halliburton Offshore Services Inc. [2007 (9) TMI 230 - UTTARAKHAND HIGH COURT] followed - all the amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or outside India) are mutually inclusive - This amount is the basis of determination of deemed profits and gains of the assessee @ 10 per cent - The scheme of presumptive determination u/s 44BB of the Act has been considered and the section is a complete code in itself and provides for taxation of all receipts whether arising in India or outside - Thus, for the purpose of presumptive determination of assessee's profits, quantum of amount received by it from its customers against its reimbursement of fuel and material recharge, which are intricately linked to the services were rendered by the assessee and incurred by it, has to be considered as a part of the receipt for the purposes of computation of income u/s 44B of the Act – Decided against Assessee.

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• 2014 (2) TMI 36
  Entitlement for benefit of proviso to section 92C(2) of the Act - 5% safe harbor range - Determination of Arm’s length nature of international transaction – Transfer pricing adjustment - Benchmarking analysis and comparables disregarded – Requirement to maintain Transfer pricing documents u/s 92D of the Act r.w. Rule 10D of the Rules – Held that:- The decision in IHG IT Services (India) (P.) Ltd. v. [2013 (5) TMI 309 - ITAT DELHI] Followed - The benefit of 5% tolerance margin as prescribed under provisio to Section 92C(2) for the purposes of determining the arm's length price of an international transaction is allowable as a standard deduction in all cases, or is allowable only if the difference is less than 5% - the second proviso to Section 92C(2) was amended by the Finance Act, 2012 with retrospective effect from 1.4.2002 - even after the retrospective amendment by the Finance Act, 2012, it was entitled to the benefit of adjustment of + 5% variation while computing the ALP - if the variation between the arm's length price and the price at which international transaction was actually undertaken does not exceed the specified percentage, then only the price at which the international transaction has actually been undertaken shall be deemed to be arm's length price - Thus, the benefit of tolerance margin would be available only if the variation is within the tolerance margin - Once the variation exceeded the tolerance margin, then there would be no benefit even up to tolerance margin - Then, the ALP as worked out under Section 92C(1) shall be taken as ALP without any benefit of tolerance margin. Adjustments carried out by the TPO were on purchases made from its associate enterprise –It could not be point out as to which were those companies which were excluded and what were the margin levels indicated by such companies - Assessee has indeed filed before the DRP, margins of comparables adjusted for difference in working capital, but at no point of time it had given any reason why such adjustments were required - What were the debtor adjustment and creditor adjustment and how these were relevant have not been demonstrated by the assessee - the assessee has not been able to justify the adjustments that were required to be made on account of negative working capital. Adjustment for Customs duty – Held that:- The higher import content of raw material was a factor to be considered while doing the ALP analysis - higher import content of raw material itself did not warrant an adjustment in operating margins - For getting the benefit of any such adjustment, assessee should be able to demonstrate that higher import content was necessitated by any extraordinary circumstance beyond its control - Assessee had endeavoured to make a 5% adjustment to its total cost for off-setting the leverage derived on account of negative working capital and for taking care of underutilization of capacity - there was no empirical data ever provided by the assessee to support the figure of 5% arrived by it. Addition made inspite of invoices raised – Held that:- Irrespective of the method of treatment given in the books of accounts, unless and until the invoice is raised, a customer will not be legally bound to pay - Assessee will get a legal right to claim the sum only after raising the invoice – Relying upon E.D. Sassoon & Co. Ltd. v. CIT [1954 (5) TMI 2 - SUPREME Court] - the point of accrual of income has to be seen from the date on which a legal claim could have been legitimately made on such income – the amount could have been considered as income only for the relevant previous year ending 31st March, 2008 - The addition, made for the relevant previous year thus, deleted. Disallowance u/s 40(a)(i) and 40(a)(ia) of the Act – Non-deduction of TDS on payment made for acquiring software – Held that:- "royalty" mentioned in Section 40(a)(i) and 40(a)(ia) has to be assigned the meaning given in Explanation 2 to clause (vi) of sub- section (1) of Section 9 of the Act - None of the authorities below have verified this issue in the proper perspective - They were also not having the benefit of the elucidation of the law in this regard by higher authorities - The A.O. had held that the tax had to be deducted by the assessee for payment made to software purchase, but, was not done - Neither he, nor the DRP had looked into the aspect whether the payments made were in respect of "Shrink-wrapped" software or towards right to use software and whether Section 40(a)(i) and 40(a)(ia) stood attracted – thus, the matter remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee.

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• 2014 (2) TMI 35
  Permanent establishment – AO held that the assessee had PE in India in the form of Usha Sales and hence, he attributed certain percentage of revenue from sale of tractors as taxable in India, besides holding that certain percentage of sale of trailers was also taxable. - Held that:- There is a consistent non-appearance on the part of the assessee - On the last date, the DR was asked to effect the service of notice of hearing - At the time of present hearing, the AR placed before the Bench proof of service on S.R. Batliboi & Co. (CA), as the address given on all the communications is that of S.R. Batliboi & Co. C.A. firm - the assessee till date has not been able to convince the fact that Usha Sales is not a PE of the assessee and is an independent branch by itself - it is the duty of the assessee to convince, with material and evidence, to the satisfaction of the AO, this exercise, the assessee has failed to commit - Since, in the two rounds, the assessee has not been able to convince the AO, the order of the CIT(A) upheld – Decided in favour of Revenue.

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• 2014 (2) TMI 34
  Validity of search conducted - Held that:- Relying upon the decision in M.B. Lal v. Commissioner of Income Tax [2005 (9) TMI 64 - DELHI High Court] - In hearing an appeal against the order of the assessment, the Tribunal cannot go into the question of validity or otherwise of any decisions for conducting search and seizure. This decision can be challenged in an independent proceedings where the question of validity of order may be gone into - If the petitioner was keen to test the validity of the said proceedings, his remedy lay in a writ petition under article 226 of the Constitution - The issue has been restored for fresh adjudication.

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• 2014 (2) TMI 33
  Whether the appellant is a manufacture within the meaning of section 10B - Held that:- The assessee was mainly exporting snacks items which were manufactured by the suppliers of the assessee - No manufacturing activity was done by the assessee till the stage of preparation of such items - If some follow up action is taken for packing and storing, the same would not partake the character of activity amounting to manufacturing or producing an article or thing - For any food preparation, raw material itself is of great importance - In snack items under consideration, dough, oil, etc. would play a major role in deciding its quality and taste - The assessee did not involve itself even in procuring such basic material - Decided against assessee.

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• 2014 (2) TMI 32
  Registration under Section 12AA - Held that:- Section 12AA (1) contemplates satisfaction of the Commissioner about the objects of the Trust and the genuineness of the activities and make such enquiry as may be necessary for the purpose of grant of registration - The Commissioner is given power to cancel the registration, if he satisfies that the objects of such trust are not genuine or not being carried on in accordance with the objects of the trust – The CIT cannot reject the application for registration merely on the ground that on the date of the application the assessee trust had not commenced its activities - It is not denied by the assessee that on the date of the application under Section 12AA, it was yet to commence its operation - The genuineness of the objects of the trust were not questioned by the Commissioner – Relying upon the decision of the Gujarat High Court in the case of CIT V. Kutchi Dasa Oswal Moto Pariwar Ambama Trust [2012 (12) TMI 876 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2014 (2) TMI 31
  Depreciation on temporary structures of Amul Parlours - Held that:- As per the agreement between the assessee and AUDA - The assessee was given limited rights for the limited period to use the land for putting up its parlours for a period of five years - Relying upon the decision in Commissioner of Incometax v. Madras Auto Service (P) ltd. [1998 (8) TMI 1 - SUPREME Court] - The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount - The expenditure should be looked upon as revenue expenditure - Decided against Revenue.

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• 2014 (2) TMI 30
  Disallowance u/s 40A(3) - payment in case for purchase of recharge vouchers from Tata Teleservices Limited - Held that:- The payments between the assessee and the Tata Teleservices Limited were genuine - The Tata Teleservices Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) of the Act must be lifted. - if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations. Relying upon the decision in Smt. Harshila Chordia vs. Income Tax Officer [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] - The exceptions contained in Rule 6DD are not exhaustive and that the said rule must be interpreted liberally - The guideline laid down in the aforesaid judgement should be applied only to cash payments made by the assessee to the Tata Teleservices Limited and not to the other two agencies viz., Rajvi Enterprise and R.D Infocom - Decided in favour of assessee.

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• 2014 (2) TMI 29
  Validity of assessment u/s 153A - Held that:- The Tribunal came to a factual finding that no search authorization was produced - This was necessary because the Assessing Officer had made contradictory references to the assessee being subjected to search or not - In absence of a search authorization, the Tribunal correctly held that assessment orders under section 153A could not have been passed - Section 124 pertains to jurisdiction of the Assessing Officers which has no relevance in so far as the inherent jurisdiction for passing an order of assessment under section 153A of the Act is concerned - Decided against Revenue.

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• 2014 (2) TMI 28
  Deduction under section 80P(2)(a)(i) - Held that:- As per CBDT Circular No. 133 of 2007 dated 9.5.2007 - Sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank - The respondent assessee is not a credit co-operative bank but a credit co-operative society - Exclusion clause of sub-section(4) of section 80P, would not apply to it - Decided against Revenue.

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• 2014 (2) TMI 27
  Validity of re-opening of assessment u/s 147 - Held that:- The omission to discuss or deal with material furnished in the course of original assessment proceedings, cannot result in formation of “reasons to believe” under Section 147 - In assessee's case, each of the materials in respect of the four firms and the other documents were put to the assessee in the course of original assessment proceedings which culminated in the order of 29.09.1993 - Relying upon the decision in Commissioner of Income Tax Vs. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - The reasons recorded by the AO were merely change of opinion - Decided in favour of petitioner.

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• 2014 (2) TMI 26
  Estimation of income - Held that:- No material was found on which 15% enhancement in profit rate can be said to be justified - The A.O. while making addition on flat rate of 15% in the gross profit did not follow the established guidelines in estimating the income - The AO did not rely on any comparable case in support of his estimation nor gave any justification to reject the comparable cases cited by the assessee - The revenue failed to point any special circumstances for estimation of such high profit particularly when during the course of search no incriminating material was found - No substantial question of law arises - Decided against Revenue.

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• 2014 (2) TMI 25
  Rejection of stay application - Held that:- the Tribunal having once held that the petitioner has a prima facie case while disposing of its stay petition, has taken opposite view when it later dismissed the stay petition - A certain amount of consistency is expected in the working of a statutory tribunal - When the Tribunal had earlier observed that the petitioner had an arguable case, this court deems it appropriate to dispose of the writ petition directing the Tribunal to finally hear and decide the appeal - Decided in favour of petitioner.

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• 2014 (2) TMI 24
  Validity of re-assessment notice - recording of reason to believe - Excess exemption under section 10A - Held that:- CIT(A) has observed that there was no connection between the arbitration award and the receipt/payment - The reasons to believe were recorded on March 28, 2012, which is after the order passed by the Commissioner (Appeals) on March 15, 2011. Questions do arise about the genuineness of the said receipt as the company making the payment was a related party incorporated in the USA. However, on these issues, the reasons to believe are silent and there is no mention thereof or allegation in the grounds recorded by the Assessing Officer. Reassessment notice quashed - Decided in favor of assessee.

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• 2014 (2) TMI 23
  Penalty u/s 271(1)(c) - Deduction under Section 80P(2) - no claim for deduction was made but it was made by filing the revised return - Held that:- Earlier, the deduction in question under Section 80P(2) was being allowed to the assessee, for being a co-operative society engaged in the business of banking and providing credit facilities - By virtue of insertion of Sub-section (4) by Finance Act, 2006 with effect from 01.04.2007 - The provisions of Section 80P were made inapplicable in relation to any Co-operative Bank other than the Primary Agriculture Credit Society or Primary Co-operative Agriculture and Rural Development Bank - The assessee is not entitled to deduction - Relying upon the decision in CIT v. Reliance Petroproducts (P.) Ltd [2010 (3) TMI 80 - SUPREME COURT] - The claim for deduction is not sustainable - It is not a concealment of particulars of income or furnishing of inaccurate particulars of income - Decided against Revenue.

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• 2014 (2) TMI 22
  Rectification of mistake - Held that:- The Tribunal passed the order without taking into consideration the order of the High Court in which Their Lordships held that such fact also can be taken into the ambit of mistake apparent on the face of record which required rectification - Though the decision of the Division Bench of this court was very much in force as on the date of disposal of the appeal before the Tribunal, it was not brought to the notice of the Tribunal but later on an application came to be filed on October 14, 2010 - decided against assessee.

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• 2014 (2) TMI 21
  Penalty u/s 271(1)(c) - Held that:- The addition has been made by AO purely on estimate basis - It is a pure guess work as it was not based on any fact - On such guess work or estimation, no penalty under section 271(1)(c) of the Act is leviable - For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee - The assessee offered an explanation, which could not be termed as not bona fide - In the absence of any corroborative evidence, it cannot be said that there was concealment of income - Relying upon the decision in CIT v. Aero Traders P. Ltd. [2010 (1) TMI 32 - DELHI HIGH COURT] - Penalty is not leviable when income was based on estimated profit and substantially reduced by the Tribunal - Decided against Revenue.

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• 2014 (2) TMI 20
  Applicability of proviso section 115JAA(2) - Revision u/s 263 - Held that:- The said proviso is not applicable as the present appeal relates to the assessment year 2000-01 when section 115JA was applicable - Secondly, the proviso to section 115JAA itself came to be introduced from April 1, 2006 - Decided against Revenue. Allowability of interest under section 244A - Revision u/s 263 - Held that:- As against the tax payable of Rs. 2.46 crores, the tax paid by the assessee amounted to Rs. 4.24 crores after giving due adjustment for MAT credit, TDS, advance tax and self-assessment tax - The assessee was, entitled to a refund of excess tax paid for the assessment year 2000-01 over and above the tax which was computed as being due and payable - Interest under section 244A was allowable - Granting interest by the Assessing Officer under section 244A was not erroneous - When two views are possible even otherwise the provisions of section 263 cannot be invoked - The learned Income-tax Appellate Tribunal had rightly come to the correct conclusion and rightly quashed the order of the Commissioner of Income-tax under section 263 of the Act - Decided in favour of assessee.

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• 2014 (2) TMI 19
  Willful and deliberate failure to file returns - Held that:- Section 276CC applies to situations where an assessee has failed to file a return of income as required under Section 139 of the Act or in response to notices issued to the assessee under Section 142 or Section 148 of the Act - The proviso to Section 276CC gives some relief to genuine assesses who either file the returns belatedly but within the end of the assessment year or those who have paid substantial amounts of their tax dues by pre-paid taxes, from the rigor of the prosecution under Section 276CC of the Act – The appellant has failed to furnish sufficient reasons for not furnishing the return within time and the contention of the assessee that the omission was not wilful cannot be accepted. Section 276CC contemplates that an offence is committed on the non-filing of the return and it is totally unrelated to the pendency of assessment proceedings except for second part of the offence for determination of the sentence of the offence, the department may resort to best judgment assessment or otherwise to past years to determine the extent of the breach – The pendency of the assessment proceedings of the assessee doesnot relieve it from penalty prosecution. “The declaration or statement made in the individual returns by partners that the accounts of the firm are not finalized, hence no return has been filed by the firm”, will not absolve the firm in filing the ‘statutory return under section 139(1) of the Act - The firm is independently required to file the return and merely because there has been a best judgment assessment under Section 144 would not nullify the liability of the firm to file the return as per Section 139(1) of the Act. Further u/s 278E, the presumption as to culpable mental state, which was inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 – For offences u/s 276CC the court has to presume the existence of mens rea and it is for the accused to prove the contrary and that too beyond reasonable doubt - The appellants have to prove the circumstances which prevented them from filing the returns as per Section 139(1) or in response to notices under Sections 142 and 148 of the Act - Decided against petitioner.

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• Customs

• 2014 (2) TMI 18
  Recovery of duty, interest and penalties - General Exemption Notification No.21/2002, as amended by Notification No.61/2007 - Import of aircraft - Held that:- Each of the assessees/appellants herein has also furnished a bank guarantee to cover the extent of the adjudicated liability to duty, as assessed. It is also requires to be noticed the DGCA vide letter dated 1.9.2009 had clarified that an operator having a non-scheduled passenger operation clearance from DGCA can conduct non-scheduled charter operations of the Civil Aviation requirements - petitioners/ appellants have made out a strong prima facie case; and we therefore grant waiver of pre-deposit and stay all further proceedings for realization of the respective adjudicated liability, pending disposal of the appeals. The petitioner/appellants shall however keep the bank guarantees alive during pendency of the appeals - Conditional stay grnated.

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• 2014 (2) TMI 17
  Amendment of the IGM - proper officer - Whether appeals are not maintainable under Section 129A of the Customs Act, 1962, since the Order impugned were passed by the Assistant Commissioner of Customs, and appeals against the same are to be filed before the jurisdictional Commissioner (Appeals) - Held that:- the ‘proper officer’ in the present case is the Assistant Commissioner of Customs under Section 30(3) of the Customs Act, 1962, for disposal of the representations of the Appellant relating to amendment of the IGM, as per Notification No.40/2012-Customs(NT) dated 02.05.2012 issued under Section 2(34) of the Customs Act, 1962. In these circumstances, the Appeals filed against the decisions of the Assistant Commissioner of Customs, Paradip, are not maintainable under Section 129A of the Customs Act, and accordingly, the same are dismissed. Miscellaneous Applications are also disposed of.

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• 2014 (2) TMI 16
  Classification of goods - Entitlement of abatement - car MP3 Player versus MP3 player - Held that:- The Heading 8519 deals with all goods other than MP3 player. The appellant claims that it will not come under that expression on the conception that the Car MP3 player is other than MP3 player. - It appears that appellant’s claim is under the Heading 8519 & 8990 which deals with other goods. Whereas MP3 player is specifically dealt by the Headings 8519 & 8590. Once there is clear expression of the heading with the class of the goods there is nothing confusion to hold that the appellant’s goods are different. Therefore, the goods of the appellant shall only enjoy abatement of 30% for which the appeal is dismissed - Decided against the assessee.

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• 2014 (2) TMI 15
  Maintability of appeal - Whether assessee was party on apeeal proceedings or not - Vilation of principal of natural justice - Held that:- he applicant was party to the joint examination carried out by SIB. They were made party in writ petition filed before Hon’ble High Court at Calcutta and Hon’ble High Court at Kolkata directed Adjudicating Authority to expedite the case Commissioner (Appeals) had decided the case without affording the applicant an opportunity of hearing. This is a gross violation of the principles of natural justice in view of the Hon’ble High Court’s decision directing the adjudicating authority to give an opportunity of hearing to the applicant, the direction does not end there but equally applicable to the Appeal proceeding also. Therefore it was incumbent upon learned Commissioner (Appeals) to give a reasonable opportunity of hearing to the applicant before passing any order which adversely affect the interest of the applicant. In these circumstances and following the Hon’ble Kolkata High Court’s decision, we set aside the order-in-appeal and remand the case to the learned Commissioner for deciding the issue afresh, after hearing the applicant - Decided in favour of assessee.

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• 2014 (2) TMI 14
  Import of metal scrap - Pre-shipment inspection certificate not obtained - Imposition of redemption fine and penalty - Held that:- appellants are required to obtain and produce pre-shipment inspection certificate for importing the impugned metal scrap. They have produced a certificate from M/s. Alex Stewart (Assayers) Geo, who are also notified as the authorized agency at S. No. 1, 25 & 61 with address of their branches at Rotterdam, Australia and England. They have not been notified with reference to their branch at Singapore. As such, violation by the appellants is a technical one in the sense they should have gone to M/s. Intertek Testing Services Ltd. at Singapore rather than M/s. Alex Stewart, to obtain the necessary PSI Certificate. Apart from that on examination no explosive material had been found in the consignment - Redemption fine set aside - Decided partly in favour of assessee.

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• Corporate Laws

• 2014 (2) TMI 13
  Winding up of company - Dues not cleared under a letter of guarantee - Basis of Petition - Decree obtained from Foreign Court - Held that:- petition is based on the Patronage Letter and the admissions of the Respondent Company and that facts on record show that grounds for invoking the guarantee have occurred and the Respondent Company has not honored its obligation - petition is not based on the decree of Turin Court but on the Patronage Letter and various admissions given by the Respondent Company. It is the case of the Petitioner that there is a clear admission of liability by the Respondent Company and that the guarantee given by the Respondent Company has come into effect on certain events having been occurred. and that the Respondent Company has not paid the amount in spite of the demand, the petition needs to be admitted. Once, the tenor of the petition show that the petition is filed on the basis of the Patronage Letter and the admissions in several correspondence then the question as regards the applicability of the Private International Law in order to examine the correctness of the decree of Turin Court does not arise. Winding-up proceedings and a suit for recovery of money are not one and the same. It is also established that the right to move a petition for winding-up is a statutory right of a creditor - The position that when a suit is filed for recovery of the amount a petition for winding-up is also simultaneously maintainable is well settled - merely because a decree is obtained the creditor it does not cease to be creditor of a Company - Bare perusal of the Patronage Letter shows that the Respondent had in unequivocal terms guaranteed to pay the amount upon default. The Patronage Letter lists events that will trigger the enforcement of guarantee. Nowhere in the correspondence the Patronage Letter is referred to as a comfort letter. The loan agreement executed between the parties is conditional upon execution of the Patronage Letter cum guarantee. Thus the loan agreement is based on the guarantee given by the Respondent and makes it clear that if there was to be no guarantee by the respondent, the loan agreement would not have been executed. In the reply a stand is taken by the respondent that the Patronage letter violates provisions of FEMA. If it was a mere letter of comfort there was no question of violation of FEMA. The respondent has sought to take contradictory stand in respect of the Patronage Letter in a desperate attempt to wriggle out of the guarantee given under the Patronage Letter. The argument advanced by the Respondent that it was a comfort letter has to be rejected. It is no doubt true that the court will keep in mind the commercial solvency of a company, larger public interest and repercussions of the order of admission. The commercial solvency, however, cannot be a stand alone ground. If that be so, then every Company which is commercially solvent will refuse to pay the admitted debts and then take up the ground of commercial solvency - Merely because the Petitioner has obtained a decree from the Turin court and has instituted a suit for enforcement of the same, the Petitioner cannot be deprived of its right to file a winding up petition. The jurisdiction to entertain a winding up petition is only with this court. No bonafide defence on merits has been raised by the respondent. The events of default contemplated under the Patronage Letter are clearly admitted in the correspondence between the parties. The ad-interim order in the suit instituted in Calcutta by one of the bond holders is not a bar for entertaining the petition. Commercial solvency of the Company is not a stand alone ground. Commercial morality and the need to instill confidence in the mind of international investors, are also matters of public interest - Decided in favour of Petitioner.

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• Service Tax

• 2014 (2) TMI 50
  Waiver of pre-deposit - Business Auxiliary Service - Cargo Handling Service - Held that:- Prima-facie, it would appear that confirmation of the assessment levy in so far as ‘Business Auxiliary Service’ head of tax is concerned is arguable in this appeal; and not so in respect of the tax towards steamer agent and cargo handling services - Conditional stay granted.

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• 2014 (2) TMI 49
  Waiver of pre-deposit of service tax - Penalty imposed u/s 78 - Storage and warehousing services - GTA Services - Held that:- Prima-facie applicants had rendered the services of storage and warehouses of the food grains. Accordingly, the service tax is leviable on the same. However, we find that as per Standard Storages terms and condition, the freight charges were ultimately to be borne by the consignee, namely, FCI and IFFCO, which is evident from the terms and condition of the said Standard Storage terms and conditions circulated by the Applicant. On reading the said condition, it is clear that the applicants are providing the services of storage and warehousing of essential items of food grains and supply the same to the other agencies viz. FCI, IFFCO etc., who support the public distribution system undertaken by the said agencies. As per Rule 2 (d)(v) of Service Tax Rules, 1994, the liability to pay service tax on GTA Service, rests on the person who is liable to pay the freight charges - liability rests on the consignee who are liable to pay the freight charges - Appellant directed to make pre deposit - Conditional stay granted.

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• 2014 (2) TMI 48
  Restoration of appeal - appeal dismissed earlier for non-prosecution as well as non-removal of defects - Held that:- Applicant removed defects from the appeal - Department also did not dispute this fact - Therefore, we recall our order dismissing the appeal earlier and we restore the appeal to its original number - Appeal restored.

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• 2014 (2) TMI 47
  Restoration of appeal - Appeal dismissed for non compliance of pre deposit order - Held that:- on the earlier occasion, the appeal was dismissed as non-maintainable. During the course of hearing before this Tribunal, the interim order was placed and it was taken as a final order, accordingly, the appeal was dismissed under the impression that the same was filed against the interim order. However, as has been pointed out by the ld. Advocate that the appeal is filed against the final order dismissing their appeal by the ld. Commissioner (Appeals) on the ground on non-compliance with the direction of pre-deposit of Rs.3.00 lakhs issued under interim order No. 161/ST/Kol/2011 dated 21.12.2011. In these circumstances, the order dismissing their appeal by this Tribunal on 27.08.2012 as not maintainable, is recalled and the appeal is restored to its original number - Appeal restored.

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• 2014 (2) TMI 46
  Restoration of appeal - Condonation of appeal - Held that:- second application seeking review of rejection of earlier application, even if pending before the Committee of Disputes(COD) as on 17.02.2011,it cannot be construed to be an application pending seeking permission from the COD - Following decision of Burn Standard Co. Ltd. Vs. Commr. of C.E., Kolkota [2013 (1) TMI 441 - CESTAT, KOLKATA] - Decided against assessee.

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• 2014 (2) TMI 44
  Denial of Cenvat credit - Assessee used credit for providing output services for repair and maintenance - excise duty paid on natural gas used as input - Held that:- appellant is engaged in compression of the natural gas, which is amounting to manufacture and is also not in dispute that part of the compressed natural gas is cleared by them on discharge of excise duty. It is also not in dispute that the appellant is distributing the natural gas received from the GAIL to various customers. In our view, if the appellant does not receive natural gas from GAIL, he could not provide any output service nor could he discharge the excise duty on the compression activity undertaken by him - Appellant has made out a prima facie case for the waiver of pre deposit of the amounts involved - Stay granted.

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• 2014 (2) TMI 43
  Availment of benefit of Notification No. 1/2006-ST dated 01.3.2006 - Demand of service tax - Commercial and Industrial Construction Services - Held that:- appellant are availing the Cenvat credit of input/ input services and for some, they are not availing and in respect of those sites, where they are not availing the Cenvat credit, they have claimed the abatement. Prima facie, we find that the said notification has to be applied to the service provider as such and does not indicate anything as to the contract wise application. We find that the issue is debatable one and needs to be gone in detail. Accordingly, we are of the view that appellant has not made out a case for the complete waiver of the amounts involved - Conditional stay granted.

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• 2014 (2) TMI 42
  Eligibility for cenvat credit - Outdoor catering services and tent services – Held that:- Following Commissioner of Central Excise, Bangalore-III, Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] - any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service – merely because the services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit – Decided in favour of Assessee.

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• 2014 (2) TMI 41
  Place of removal at the time of clearance of goods – Port or Factory – Held that:- Following ORIENTAL CONTAINERS LTD Versus COMMISSIONER OF CENTRAL EXCISE. THANE [2012 (12) TMI 177 - CESTAT, MUMBAI] - in case of the goods cleared for export, it is the port of export which is the place of removal and the assessee would be eligible for cenvat credit of the services availed after the removal of the goods from the factory till their export from the port of export - the GTA services and freight forwarding services have been availed in respect of the transportation of the goods from the factory gate to the port of export, the services of Customs House Agent has been availed for clearance of the goods at the port - when the goods cleared from factory are exported on FOB/CIF basis, it is the port of export, which would be the place of removal - the assessee would be eligible for cenvat credit in respect of the services availed up to that place – Decided against Revenue.

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• 2014 (2) TMI 40
  Availment of CENVAT Credit - Waiver of pre deposit - Penalty under Section 76, 77 and 78 - Held that:- it is appropriate to grant waiver of pre-deposit and stay all further proceedings pursuant to the impugned order, on the condition that petitioner remits 50% of the specified liability of tax as assessed, in terms of paragraph (i) and (iii) of the adjudication order namely, the amount of tax relatable to cenvat credit erroneously alleged to have been availed and the interest thereon. Waiver is granted to the extent of penalty imposed under Sections 76, 77, 78 of the Act and 50% of the component of the demand of tax and interest thereon - Conditional stay granted.

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• Central Excise

• 2014 (2) TMI 12
  Rejection of refund claim u/s 11B - Price variation - Unjust enrichment - Held that:- refund can be granted to the assessee in a situation where the assessments were not made provisional but the price of excisable goods was reduced downward after clearance of the goods as per price variation clause which was in existence in the contract under which goods were being cleared and the buyers adjusted the amount. There are sales prices to be paid on the goods subsequently sold - Tribunal further observed that where the buyer had taken the Cenvat credit on the initial excise duty paid, the matter has not been examined but inasmuch as adjudicating authority has granted part refund, it has to be presumed that this aspect has been looked into - appellants have taken a categorical stand that on account of negative price variation, they have issued the credit notes to their customers by crediting the account of the buyers in their books of accounts. This amount includes incidence of duty also - duty incidence does not stand passed on to the buyers, and as such are not hit by the provisions of unjust enrichment - Following decision of CCE, Ghaziabad vs. Mahavir Cylinders [2013 (6) TMI 509 - CESTAT, NEW DELHI] - Decided in favour of assessee.

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• 2014 (2) TMI 11
  Denial of exemption claim - whether appellant is entitled to exemption under Notification No. 30/2009-CE when credit taken with respect to inputs utilised is reversed later - Held that:- separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. credit account under MODVAT rules may be maintained chapter wise, MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of the final products, provided that credit of duty paid on the inputs used in such exempted products is debited in the credit account before the removal of such exempted final products. This circular deals with a case where the manufacturer produces dutiable final products and also final products which are exempt from duty and it is not reasonably possible to segregate inputs utilised in manufacture of the dutiable final products from the final products which are exempt from duty. In such a case, the manufacturer may take credit of duty paid on all the inputs used in the manufacture of final products on which duty will have to be paid. This can be done only if the credit of duty paid on the inputs used in the exempted products is debited in the credit account before the removal of the exempted final products - Decided against Revenue.

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• 2014 (2) TMI 10
  Confiscation of goods - Imposition of penalty - Commissioner set aside confiscation and penalty - Held that:- confiscation of finished goods is not in consonance with the law, I set aside the order of confiscation of goods valued at Rs. 42,58,607/- and consequentially the redemption fine of Rs. 10,00,000/- (Rs. Ten Lacs only) is dropped. Penalty imposed on the Appellant under Rule 25 is also not warranted and same is also set aside. But at the same time I find that the Appellant had violated the provisions of Rule 10 of Central Excise Rule, 2002 for which they are liable to penalized under Rule 27. The Commissioner (Appeals) has already imposed penalty of Rs. 5000/- on the respondent for non-maintenance of proper records. In the absence of any evidence to show that the goods were not entered in the RG-I register with a mala fide intention to remove the same, I am of the view that the confiscation of the same has rightly been set aside by the appellate authority - Decided against Revenue.

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• 2014 (2) TMI 9
  Cancellation of Central excise registration - Appellant was not having any factory inasmuch as the premises were approximately 200 sq. Ft. and there was no machinery installed in the said premises - Held that:- The registration of manufacturer has to be done in terms of the provision of Rule 9 of Central Excise Rule, 2002 whereas the Notification in question deals with the goods manufactured by a job worker. Even in terms of the said Notification, the raw material and semi finished goods have to be cleared to the job worker, after giving an undertaking to the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner that the intermediate goods being manufactured by the job worker shall be duly received in the factory of the principal and would be used in or in relation to the manufacture of the final product in his factory. In the present case, no manufacturing activity is being carried out in the premises owned by the appellant and the goods are being manufactured in fully manufactured condition in the job worker s factory. Merely because the goods are being manufactured by the job worker at the instance of the appellant, will not automatically confer the status of manufacturer on the appellant and he cannot be registered as a manufacturer - appellant cannot be held to be a manufacturer, in the absence of a factory and machines and as such is not entitled to get himself registered. The registration granted stands correctly cancelled - Decided against assessee.

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• 2014 (2) TMI 8
  Denial of CENVAT Credit - Held that:- in terms of the provision of Rule 7 of Cenvat Credit Rules, a manufacturer receiving the inputs and taking cenvat credit on the same is required to take reasonable steps about the identity and address of the manufacturer or supply. The inputs in the present case were being received by the appellant from M/s Arvind Enterprises, a second stage dealer. It is not the Revenue case that the said second stage dealer was not in existence. An assessee cannot be expected to go beyond the supplier of the goods to find out as to from where he has received the inputs or as to whether the inputs supplied to the dealer have actually been cleared on payment of duty or not by the manufacturer. The requisition of the said rule is to be satisfied about the identity and the address of the immediate supplier i.e. M/s Arvind Enterprises - Decided in favour of assessee.

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• 2014 (2) TMI 7
  Denial of CENVAT CRedit - Reasonable stepts - Imposition of penalty - Commissioner (Appeals) held in favour of the respondents by observing that the only reasons for denial of credit to the Respondent is that the dealer registration of M/s. Gaytri Traders stands revoked vide order in original - Held that:- appellants have taken the Cenvat Credit on the basis of the invoices issued by the M/s. Harsh & Company, 292, Chandpol Bazar, Jaipur, who was registered with the department as second stage dealer as defined under Rule 2 (s) of the Cenvat credit Rules, 2004. As the invoice issued by second stage dealer is a prescribed document under the Rule 9 (1) (a) (iv) Cenvat credit Rules, 2004, therefore, it is clear that the appellants took the Cenvat credit on the basis of the proper documents as prescribed under the law - as assessee have taken all reasonable steps to ensure that the inputs received by them are duty paid and have known their immediate supplier, the modvat credit cannot be denied on the ground that the person supplying the goods to the dealer-supplier was either not in existence or has not paid duty on the final product - Decided against Revenue.

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• 2014 (2) TMI 6
  Denial of CENVAT Credit - Confiscation of goods - storage of modvatable goods in other premises - Held that:- In terms of the Board circular itself, modvatable goods can be stored outside the premises. The only requirement is the permission of the Department. Further the fact that the appellant was storing the said goods outside their walled factory for a longer period was also not being disputed by the Revenue. Merely because, on one fine morning, Revenue has considered the said practice to be wrong cannot be made a reason for seizure and subsequent confiscation of the said goods. Further, Revenue has also not disputed the said premises shown in the registration application filed by the respondent. This fact itself leads the bona fide of the assessee and strengthens their stand that the storing of modvatable goods outside the factory gate was on account of paucity of space in the factory and cannot be held to be an effort on their part to remove the goods clandestinely. The fact that the said goods having been reflected in the accounts of the security agency is also a relevant factor to be considered - Decided against Revenue.

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• 2014 (2) TMI 5
  Duty demand - Recovery from successor – The Memorandum of notice of demand was issued by the Assistant Commissioner in terms of section 142 of custom Act for attaching the goods, land and building belonging to the appellant - Held that:- Respondent is the third successor of the land and building from where M/s. Shri Purohit Steel Rolling Pvt. Ltd. operating. He is manufacturing goods which are entirely different from the goods being manufactured by M/s. Shri Purohit Steel Rolling Pvt. Ltd. As such, they cannot be held to be successor in business of the defaulter - mere transfer of land and building, appellants could not be consider as successor and Section 11 of Central Excise Act, 1944 cannot be pressed into service to include several generation of successor. In as much as in that case, the appellant was the third owner of the land and building, Tribunal held that recovery of dues pending against the first owner cannot be made against the third owner of land and building - assessee is in any way related to M/s. Purohit Steel Rolling Pvt. Ltd. or M/s. Prabhu Steels Ltd. or in any way connected with the cases wherein demand was confirmed against M/s. Purohit Steel Rolling Pvt. Ltd., I find no reason to direct recovery of the dues from the present respondent - Decided against Revenue.

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• 2014 (2) TMI 4
  Waiver of pre deposit - Imposition of penalty - Financial hardship - Held that:- when the stay application was called out for hearing before the Tribunal, none appeared for the petitioner. The Tribunal also records that on four earlier occasions, the petitioner had sought adjournments which is disputed by the Learned Counsel for the petitioner. However, we are not inclined to go into the above controversy. The fact is that on 11 November 2013, when the impugned order was passed, the petitioner was not represented and it is the case of the petitioner that no notice of hearing was received by the petitioner. Thus, the earlier adjournments even if taken by the petitioner does not answer its grievance that no notice for hearing was received by it and it had no knowledge of the hearing when the stay application was heard. Moreover, the impugned order does not deal with the petitioner's stay application with regard to financial difficulties/ hardship. if the notice of hearing has been received by him, he would have appeared before the Tribunal and produced the income tax returns for the Assessment Years 2011-12, 13 and 2013-14 which is produced before us to indicate that his income was approximately Rs. 16,000, Rs. 34,000 and Rs. 24,000 respectively for the last three years. In the above circumstances, it would be in the interests of justice if the petitioner is heard on its stay application and particularly with regard to his submission of financial difficulties/ hardship before an order is passed on his application seeking dispensation with predeposit - Decided in favour of assessee.

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• 2014 (2) TMI 3
  Maintainability of appeal - Held that:- Court earlier held that the appeal is not maintanable - In view of such order of the Court as also looking at the very controversy which the appellant raised before the Tribunal, it clearly emerges that this appeal would also not be maintainable. The issue has direct relation to the value of goods for the purpose of assessment in terms of Section 35G read with Section 35L of the Central Excise Act, 1944 - Decided against assessee.

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• 2014 (2) TMI 2
  Claim of simultaneous benefits in alternate i.e. export without payment of duty against LUT as well as claim of rebate on payment of duty - Denial of recredit - Denial of duty drawback - Non-following of procedure – export of exempted goods - Notification No. 42/2001-C.E. (N.T.), dated 26-6-2001 - Held that:- respondents have made clearance of the impugned goods to the SEZ Unit under specific UT-1 Bond No. 28/2008, dated 3-4-2008 under Drawback scheme without payment of duty under Notification No. 42/2001-C.E. (N.T.), dated 26-6-2001 issued under Rule 19 of the Central Excise Rules, 2002. The respondents contended that they have subsequently paid the applicable duty of Rs. 487439/- vide debit entry No. 598 dated 31-3-2009 in Cenvat account with disclaimer certificate that they are not claiming Duty Drawback on the said export. There are two export benefit schemes which are stipulated in Rule 18 and Rule 19 of the Central Excise Rules and Notification issued thereunder. According to the Rule 18 when any excisable goods are exported on payment of duty or duty is paid on materials used in manufactured goods which are exported, rebate is granted subject to condition or limitation if any fulfilment of procedure specified in concerned Notification i.e. in Notification 19/2004-C.E. (N.T.), dated 6-9-2004. Whereas as per Rule 19 excisable goods/materials can be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises subject to conditions, safeguard and procedures as specified by Notification by the Board and for this very purpose Notification 42/2001-C.E. (N.T.), dated 26-6-2001 is applicable. The manufacturer/exporter is free to opt one of the Rules, which is more beneficial/suitable to him. Once anyone of the two options is exercised it attains finality and cannot be reverted back subsequently. It is very much clear that the respondents have made clearance of goods under UT-I Bond No. 28/2008, dated 3-4-2008 hence they have exercised the option to export goods under Rule 19 and in no way it was further open for him to pay duty and claim rebate thereupon. In such a situation payment of duty cannot be treated as duty. But it has to be treated simply a voluntary deposit with the Government - refund in cash of higher duty paid on export product which was not payable, is not admissible and refund of said excess paid duty/amount in Cenvat credit is appropriate. As such the excess paid amount/duty is required to be returned to the respondent in the manner in which it was paid by him initially - Following decision of M/s. Nahar Industrial Enterprises Ltd. v. UOI [2008 (9) TMI 176 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of revenue.

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• 2014 (2) TMI 1
  Rejection of rebate claim - As per sub-rule (3) of Rule 30 of Special Economic Zone Rules, 2006 and Board’s Circular No. 29/2006-Customs, dated 27-12-2006, in case where export entitlement are to be availed, the movement of goods from the place of manufacture to the SEZ shall be on the basis of ARE-1 and bill of export - Applicant has not filed bill of export - Held that:- Benefit of rebate can be allowed to supplies made to SEZ unit/Developer/Co- developer/contractor/sub-contractor. In the instant case, the applicants claimed to have supplied goods to two entitles i.e. M/s. DLF Laing ‘O’ Rourke India Ltd., and M/s. Moser Baer Photo Voltaic Ltd., Greater Noida. The applicant in their grounds of revision application has claimed that in the instant case, the supplies were to DLF Laing ‘O’ Rourke India Ltd. for contract with DLF Limited, SEZ Developer vide letter of Approval No. F2/137/05-EPZ, dated 6-12-2006, DLF City, Gurgaon. Under such circumstances supplies made to M/s. DLF Laing ‘O’ Rourke India Ltd., a contractor will be eligible for benefit of rebate claim. Government further notes that original authority did not discuss this issue in either show cause notices or in Order-in-Original. However, the applicant has elaborated the factual issue in respect of said supplies to both the parties in SEZ. Government is of opinion that the original authority may verify this aspect and if the supply in these cases is found to be in terms of provision of Rule 10 of SEZ Rules then, claim rebate may be sanctioned - Matter remanded back - Decided in favour of Appellant.

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• CST, VAT & Sales Tax

• 2014 (2) TMI 52
  Demand of differential duty - Whether on the facts and circumstances of the case, in the light of the categorical findings given by the Appellate Tribunal, the conclusion arrived by it that the petitioner is liable for sales tax on the differential turnover of Rs.19,63,463/- (out of Rs.52,33,463/-) solely based upon the "approximate value" incorporated in Form XX, that accompanied the goods for the purpose of transportation within the State, when there was no sale effected by it - Held that:- Sales Tax Appellate Tribunal found that the journal voucher particulars of the assessee mentioned the amount of Rs.52,33,463/- relating to the foreign supplier sale and it was not reflected in the documents pertaining to the delivery of goods to M/s.Munasser Leather Private Limited and that Form XX reflected the value to the extent of Rs.32,50,000/- only. There being no further material that what was returned as purchase return was to the tune of Rs.52,33,463/-, we do not find any justifiable ground to accept the plea of the assessee that it is entitled to exemption on the entirety of Rs.52,33,463/-. The assessee, did not prove as a matter of fact that it had returned the entire imported item but on the other hand it stated that it used a portion of the imported wet blue skin. In the background of this admitted fact and that there are no materials to support the contention of the assessee that the turnover of Rs.52,33,463/- in entirety was returned as purchase return - Decided against assessee.

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• 2014 (2) TMI 51
  Levy of tax on sale of copper - Whether in respect of contract work of insulation in respect of copper wire furnished by the customer, tax could be levied under residuary entry 4(1)(b) of the K.V.A.T. Act, 2005 - Held that:- If the assessee was in the business of sale of insulated copper wire, then the said notification applies. Admittedly, in the instant case, the assessee is not selling the copper wire. He receives the copper wire from the customers, uses enamel, fiberglass yarn and paper and converts it into insulated copper wire and delivers the finished product to the customer. In the process, what is sold is enamel, fiberglass yarn and paper. These are the three materials which are used in the manufacturing process to convert copper wire into insulated copper wire. There is no separate entry in the Schedule prescribed for the tax leviable for these three items. Thus, residuary clause is invoked and 12.5% is charged. In the facts of this case, we do not find any justification to interfere with the orders passed by the Tribunal - Decided against assessee.

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• Indian Laws

• 2014 (2) TMI 39
  Alteration of date of birth - Rejection of alteration in all service records - Alteration to be applied within 5 years of service - Held that:- horoscope is a secondary evidence, which cannot be taken as a primary evidence to establish the date of birth of the Government servant. For correction of date of birth, unimpeachable evidence must be shown, even if the Government servant applied within five years - horoscope is a very weak piece of material to prove the age of a person, and that heavy onus lies on the person who wants to press into service to prove its authenticity. The time limit mentioned in Sub Rule (a) of Rule 30 of the Tamil Nadu State Judicial Service Rules, 1953 requiring submission of application seeking correction of date of birth to be made to the State Government through High Court, within five years of entry into service, is in pari materia to Fundamental Rules - as the petitioner having not applied for alteration of date of birth within 5 years of entry into service in terms of F.R.56, the decision arrived at by the Central Administrative Tribunal is just and proper and we do not find any reason to interfere with the same - Decided against petitioner.

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