Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 21, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Customs
-
14/2014 - dated
19-3-2014
-
ADD
Seeks to levy provisional anti-dumping duty on imports of 'Sodium Nitrate', originating in, or exported from, the European Union, the People’s Republic of China, Ukraine and Korea RP , for a period of six months.
-
13/2014 - dated
19-3-2014
-
ADD
Seeks to levy definitive anti-dumping duty on imports of 'Red Phosphorous, excluding red phosphorous used in electronic applications', originating in, or exported from, the People’s Republic of China for a period of five years
Highlights / Catch Notes
Income Tax
-
Exemption u/s 10(15) - Mining itself is complex and capital intensive and may require inter play and activities by several persons which may be involved in different parts/aspects of mining and accordingly paid for the part played or activities undertaken by them – thus, the undertaking would be “engaged in mining”. - HC
-
Any income derived from the nature of activity specified in Section 10(29) namely, letting of godowns and warehouses for storage, processing, facilitating the marketing of commodities are qualified for exemption - HC
-
An action that merely facilitates the assessee’s business (making it more profitable), whilst leaving the fixed capital untouched, is revenue in nature - HC
-
In order to make assessment u/s 143(3) r.w.s 158 BC, notice should be issued under Section 143(2) and omission to issue such a notice is not a procedural irregularity and is not curable - HC
-
Nature of Expenses - Provision for warranty is rightly made by the assessee because it has incurred a present obligation as a result of past events - A reliable estimate of the obligation is possible - HC
-
Validity of order of settlement commission – the Settlement Commission had no power of rectification at the relevant time – the order is required to be set aside - HC
-
When the AO dropped the proceedings of reassessment on a substantive ground of the additions not being sustainable, subsequently the same AO or even his successor could not have reviewed such a decision - HC
-
Deduction u/s 80HH and 80I - Whether the conversion of granite boulders into small pieces of different size amount to production or manufacture – Held Yes - HC
-
Capital gains is to be computed at the time when the transfer takes place which has to be during the assessment year when a substantial portion of the amount was received by the assessee - HC
-
Renewal/grant of certificate u/s 80G - Unless the DIT(E) records the reasons of violation of such conditions, the DIT(E) cannot reject the assessee's application - AT
-
Deemed dividend u/s 2(22)(e) - the disallowance of deemed dividend should be restricted to the accumulated profit, brought forward from earlier years and not the current year profit - AT
Customs
-
In view of the absence of any mens rea, the violation concerns the provision of G cards to two individuals and that alone. - Revocation of the CHA license for lifetime is not valid - HC
-
Valuation - addition of technical assistance fees and royalty paid - prima facie these amounts paid by the applicant towards the service received by the related persons are not addable in the assessable value - stay granted - AT
-
Denial of refund claim - Refund of SAD - Notification No. 102/2007-Cus. - capital goods imported by the appellant are not sold ‘as such’ but sold after put into use - no refund - AT
Service Tax
-
Application for bail - the question of bailability and non-bailability almost comes to a point of merger, the benefit of which should be extended to the accused person. - HC
-
CENVAT Credit on GTA services - the expression ‘includes’ cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression ‘means’. - HC
-
Inclusion of Re-imbursement of expenses in the value of taxable services - revenue directed not to proceed further and wait for the decision of Apex Court - HC
Central Excise
-
Waiver of pre-deposit - Stay of recovery - HC has already ruled out any liability for the principal manufacturer to pay duty on the scrap generated at the job workers premises. - AT
-
SSI Exemption - Notification 8/2003-CE contains specific provision that where the specified goods are manufactured in the factory belonging to or maintained by the State Government, then the value of excisable goods cleared from such factory alone shall be taken into account - AT
-
CENVAT Credit - Non maintenance of separate accounts - emergence of by-products - action of the assessee tacitly amounted to acknowledgement of the fact that the said commodities were exempted final products - AT
-
Recovery of CENVAT Credit - Reversal of credit on removal of inputs for job work for setting up factory within same premises - stay granted - AT
VAT
-
Claim of refund - it is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person - HC
Case Laws:
-
Income Tax
-
2014 (3) TMI 588
Exemption u/s 10(15) - Nature of undertaking - Whether the petitioner was an undertaking which was engaged in mining – Held that:- The words “engaged” and “mining” have not been defined in the Act and have to be read and interpreted as they are understood in normal parlance - The word “mining” in common parlance means working on mines for ores, oil and other minerals - extracting mineral oil could be covered within the meaning of mining activities - An industrial undertaking having oil fields and excavating or winning oil from oil fields would be engaged in mining. The expression used in the Explanation is that a person who was “engaged in mining” was treated as an industrial undertaking for the purpose of clause (c) to Section 10(15)(iv) of the Act - It is necessary and important to give wide interpretation while interpreting the expression “engaged in ….. mining” as it would further the legislative intent and the purpose behind enacting Section 10(15)(iv)(c) of the Act - A word or expression used in a legislative provision should be interpreted in the context in which the expression or the word is used to be in consonance and to further the legislative intent - Mining itself is complex and capital intensive and may require inter play and activities by several persons which may be involved in different parts/aspects of mining and accordingly paid for the part played or activities undertaken by them – thus, the undertaking would be “engaged in mining”. Nature of Activity undertaken - whether the activities of the petitioner could be considered to be an integral part of mining – Held that:- The petitioner had purchased or acquired capital equipment in the form of work over rigs and for this purpose had obtained loan from State Bank of India, Singapore in foreign currency and Indian rupees - the expression “engaged in mining” would not only include the actual winning or extraction of minerals or oils but also activities which are an integral part of mining – Decided in favour of Assessee. Relief of TDS – Held that:- Petitioner contended that they have already paid tax at source - The petitioner claims that no certificate for tax deducted in Form 16A was issued to the State Bank of India, Singapore - Petitioner in terms of the interim order has given an undertaking that in case the writ petition stands dismissed they would be liable to pay tax due on subsequent installments with interest as per the Act – revenue is directed to verify the assessments made in the case of State Bank of India, Singapore and in case the Bank has not taken credit of the tax paid at source, the amount will be refunded to the petitioner with interest @ 8% p.a. from the date of filing of the writ petition till payment – Decided partly in favour of Assessee.
-
2014 (3) TMI 587
Eligibility for exemption u/s 10(29) of the Act – Held that:- The functions of the State Corporation are almost on similar lines as that of the Central Warehousing Corporation - the assessee is an authority constituted under law to satisfy one of the requirements of Section 10(29) of the Act - Relying upon Rajasthan State Warehousing Corporation Versus Commissioner of Income-Tax [1999 (4) TMI 3 - SUPREME Court] - the exemption under Section 10(29) is categorical in its language and the exemption is applicable only by the circumstances as envisaged in the Section - If the letting of godowns or warehouses was for any other purpose other than the stated purpose or the income is derived from any other source, then, the income could not possibly come within the ambit of Section 10(29) of the Income Tax Act and interest income on fixed deposits would not qualify for relief under Section 10(29) of the Income Tax Act - Claim of exemption on income from house property, from bank receipts, income on loans and advances made to the members of the staff are concerned - as the income not being derived from the activities enumerated in Section 10(29) of the Income Tax Act, no exemption would be granted. Any income derived from the nature of activity specified in Section 10(29) of the Income Tax Act, namely, letting of godowns and warehouses for storage, processing, facilitating the marketing of commodities are qualified for exemption under Section 10(29) of the Income Tax Act – Decided partly in favor of assessee.
-
2014 (3) TMI 586
Rejection of books of accounts – Violation of section 145 of the Act – Low G.P. Ratio – Held that:- The GP addition was made by the AO after examining all the aspects very carefully, but the CIT(A) has deleted the addition on simple basis that since there is decrease in average sale price, fall in GP is explained – thus, there is no reasonable basis in the order of the CIT(A) for deleting the addition. The issue is based on evidence on record and thus purely factual in nature - It is not the case where the books of accounts are rejected, merely on the basis of deviation in GP rate as recorded by the Assessing Officer and reiterated by the Tribunal - Not only there was a considerable deviation in the GP rate, the consumption of various raw materials also shown unusual pattern of deviation compared to the previous years - the assessee gave no explanation for extraordinary deviation in consumption of certain raw materials – as such no question of law arises for consideration – Decided against Assessee.
-
2014 (3) TMI 585
Nature of Expenses - Whether the Tribunal was justified in holding that the sum was capital in nature and was not revenue expenditure that could properly be deducted – Held that:- The ITAT has not adequately dealt with the reasoning of the CIT(A) who had carried out the site inspection after which he held that the entire expenses had to be treated as revenue expenditure - the ITAT does not clearly point to the creation of any new asset - Rather, it is only the sitting capacity of the existing bar that was increased with the renovation carried out – Relying upon Empire Jute Company Limited Versus Commissioner of Income-Tax [1980 (5) TMI 1 - SUPREME Court] - an action that merely facilitates the assessee’s business (making it more profitable), whilst leaving the fixed capital untouched, is revenue in nature – Decided in favour of Assessee. 100% claim of depreciation on temporary constructions – Held that:- The materials on record show that the construction was not authorised and appears to have been put up only for the convenience of workers who were engaged by the assessee - The record also indicates that the constructions were subsequently demolished – although after the Commissioner’s order – thus, the depreciation claimed to the tune of 100% cannot be termed so unreasonable as to warrant reversal of the CIT(A)’s view – Decided in favour of Assessee.
-
2014 (3) TMI 584
Violation of mandatory requirement of serving notice u/s 143(2) - Whether the Tribunal erred in not setting aside the assessment order for the block period on the ground of violation of mandatory requirement of Sec. 143(2) of the Act – Held that:- In order to make assessment u/s 143(3) r.w.s 158 BC, notice should be issued under Section 143(2) and omission to issue such a notice is not a procedural irregularity and is not curable - the decision in Assistant Commissioner of Income-tax & another v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] followed - no notice was issued under Section 143 (2) of the Income Tax Act to the assessee – thus, the order passed by the Tribunal is set aside – Decided in favour of Assessee.
-
2014 (3) TMI 583
Claim of deduction u/s 80IB(10) of the Act – Works contractor - Revenue was of the view that since neither the land nor the development permission was in the name of the builder, he cannot be stated to have developed the housing project and at best can be treated as works contractor - Held that:-The decision in Commissioner of Income-tax Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] followed - the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners - It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations - Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little the assessee had total and doubt that the complete control over the land in question - By no stretch of imagination can it be said that the assessee acted only as a works contractor. It is true that the title in the land had not yet passed on to the assessee - It is equally true that such title would pass only upon execution of a duly registered sale deed - For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition of ownership also – thus, the Tribunal had committed no error in holding that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners – Decided against Revenue.
-
2014 (3) TMI 582
Nature of Expenses - Provision for warranty liability - Whether the Tribunal was correct in holding that the sum being a provision made for warranty liability in respect of products sold is not a contingent liability but should be allowed as a revenue expense – Held that:- The decision in ROTORK CONTROLS INDIA (P) LIMITED v/s COMMISSIONER OF INCOME-TAX, CHENNAI [2009 (5) TMI 16 - SUPREME COURT OF INDIA] and COMMISSIONER OF INCOME-TAX AND ANOTHER v/s M/s. IBM INDIA LIMITED [2013 (10) TMI 1225 - KARNATAKA HIGH COURT] followed - A provision is a liability which can be measured only by using a substantial degree of estimation – the company should scrutinize the historical trend of warranty provisions made and the actual expenses incurred against it - On this basis a sensible estimate should be made - The warranty provision for the products should be based on the estimate at year end of future warranty expenses. Provision for warranty is rightly made by the assessee because it has incurred a present obligation as a result of past events - There is also an outflow of resources - A reliable estimate of the obligation was also possible - the appellant has incurred a liability during the relevant assessment year which was entitled to deduction under Section 37 of the 1961 Act - all the three conditions for recognizing a liability for the purposes of provisioning stand satisfied – thus, no substantial question of law is involved in the appeal and the appeal for consideration – Decided against Revenue.
-
2014 (3) TMI 581
Validity of order of settlement commission – Power of the settlement commission for rectification - Held that:- The Commission Settlement modified its direction with respect to charging of interest exercising powers of rectification – The decision in Brij Lal and others v. Commissioner of Income tax [2010 (10) TMI 8 - SUPREME COURT] followed - the Settlement Commission had no power of rectification – the order is required to be set aside - In any case, application for rectification was not maintainable as the statute stood at the relevant time - Decided in favour of Assessee.
-
2014 (3) TMI 580
Validity of Notice u/s 148 of the Act – Held that:- In technical terms the order dated March 11, 2002, dropping the proceedings u/s 148 of the Act may not amount to an assessment u/s 143(3) of the Act – but, it would not be open for the AO to reopen the assessment on the same ground all over again - Though no reasons were recorded for dropping the proceedings under section 148 of the Act by the Assessing Officer, from the attendant facts and circumstances, it can be safely culled out that he was convinced that no addition under the said disputed item could be made - He himself in the assessment year 1996-97 made no addition in a scrutiny assessment. When the Assessing Officer dropped the proceedings of reassessment on a substantive ground of the additions not being sustainable, subsequently the same Assessing Officer or even his successor in office could not have reviewed such a decision and come to a different conclusion to be able to issue a notice for reassessment on the same ground - Any other view would lead to anomalous situation – thus, the second notice for reopening of assessment on the same ground on which the previous notice was issued for the same purpose, but later on dropped not on technical but substantive grounds, was wholly impermissible – the notice is set aside – decided in favour of Assessee.
-
2014 (3) TMI 579
Nature of Income - Income from letting out – Business income or Income from property u/s 11 of the Act –Held that:- The Tribunal itself has pointed out that the question as to whether the assessee was earning this income as incidental to the objects of the Society for the purpose of determining this case and in the event of the Assessing Officer was to hold the view that it is incidental to the object of the assessee, the consequence flowing thereon would be in terms of the order of the Commissioner as the Commissioner of Income Tax (Appeals) himself has felt that this is an income from house property – the order of the Tribunal is confirmed for remanding the matter back to the AO for fresh adjudication - the AO shall consider the nature of receipts keeping in mind the objects of the institution to find out as to whether the income earned is incidental to the objects of the association and hence income from the house property or whether the income could only be treated as a separate business carried on by the assessee – Decided against Assessee.
-
2014 (3) TMI 578
Coercive recovery by the Revenue – Held that:- The court directed that the recovery of the amount covered under the assessment order shall be kept in abeyance till instructions are received from the respondents - there is no necessity of keeping the writ petition pending, especially, in the light of the fact that there was no representation for the petitioner when the matter was called up - the writ petition is closed, without examining the merits - Decided in favour of Assessee.
-
2014 (3) TMI 577
Time-barred order u/s 144 r.w.s. 251 of the Act – Cancellation of assessment order - Whether the Tribunal was correct in upholding that the assessment order for the year 1977-78 passed u/s 144 r.w. Section 251 of the Act on 30.03.1987 was time-barred and cancelling the same – Held that:-Tribunal was of the view that no notice under Section 143(2) was ever issued to the assessee - Issuance of a notice under Section 143(2) is mandatory - Even the requirement of notice of hearing before making the best judgment assessment under Section 144 of the Act has not been complied with - both the appellate Commissioner as well as the Tribunal came to the conclusion that the assessment order dated 30.03.1987 was really not made on that day and obviously the same has been made subsequent to that date - One also should not lose sight of the fact that the order dated 30.03.1987 came to be dispatched on 08.05.1987 and received by the assessee on 10.09.1987, after the assessee filed the letter before the Tribunal pointing out the time for passing assessment order expired - there is no error apparent on the face of the record and the Tribunal came to the right conclusion that the assessment order was not really made 30.03.1987 and the same was made subsequent to that date – thus, there is no question of law which arises from the order of the Tribunal as conclusions reached by the Tribunal are based on appreciation of pure questions of fact – thus, there is no reason to interfere in the findings of the Tribunal – Decided against Revenue.
-
2014 (3) TMI 576
Deduction u/s 80HH and 80I - Whether the conversion of granite boulders into small pieces of different size amount to production or manufacture – Held that:- The process carried on in different units of the respondent/assessee clearly indicated that the commercial identity of the boulder which is used as raw-material to bring into existence altogether a different product, i.e. rubbles (crushed metal granite) and also 'M Sand' of different sizes - The products manufactured by the assessee have distinct and different utility - If boulder could be used for the purpose of foundation, M Sand and crushed metal granite, cannot be used for the same purpose for which boulders are used - In that sense all the products are different though come from same raw-material - Relying upon CIT v. Mysore Minerals Ltd. [1999 (9) TMI 10 - KARNATAKA High Court] - In the light of the process being undertaken which ultimately results in a different marketing product, in the units of the assessee, both processes are present, i.e. manufacture and also production – thus, the Tribunal was justified in confirming the orders of CIT(A). Deduction u/s 80HH and 80I of the Act – Applicability of Commissioner of Income-Tax Versus Gem India Manufacturing Co. [2000 (12) TMI 7 - SUPREME Court] – Held that:- The decision in Joint Commissioner of Income-tax Versus Mandideep Engineering And Packing India P. Limited [2006 (4) TMI 75 - SUPREME Court] followed - if various deductions are independent in nature available to an assessee under different circumstances, they all have to be allowed if they come within the application of a particular provision of law – in terms of Sections 80HH, 80I and 80IB, if claims are made for deductions by assessee in the same year at the same time, if it is found relevant for the purpose of giving deductions, all are to be extended - It does not depend upon existence of other provision - if the benefit is extended under one provision, the assessee cannot be denied the benefit of other provision which is altogether for a different purpose – Decided against Revenue.
-
2014 (3) TMI 575
Assessment of capital gains - Whether in the light of section 2(47)(v) read with section 45, the Tribunal is right in holding that the capital gains assessment made for the assessment year is not sustainable in law – Held that:- The Tribunal did not correctly appreciated the question on hand - When transfer is defined under the Income Tax Act and it includes a transaction involving possession to be handed over in part performance of a contract in the nature referred to in Section 53A of Transfer of Property Act, it amounts to transfer. The terms and conditions of the agreement clearly indicates that the intention of the parties is to sell the property as such to the buyer, or their nominees and a power of attorney is given to enable the buyer to sell the undivided share of land in favour of purchasers of apartments to be constructed by the buyer of the land - the assessee themselves executes the sale deed after several years on the request of the builder - the actual transfer takes place between the assessee and the builder and it is thereafter the builder transfers possession to the purchaser of the apartments - Capital gains is to be computed at the time when the transfer takes place which has to be during the assessment year when a substantial portion of the amount was received by the assessee, that is when Rs.3.81 crores was received by the assessee during the assessment year 2004-05 – thus, the order of the Tribunal set aside - Decided in favour of Revenue. Entitlement for exemption u/s 11(1A) of the Act – Held that:- The Assessing Officer granted exemption u/s 11(1A) of the Act for the investment made under Section 11(1A)(a)(ii) - It is contented that in subsequent years also, depending upon the amount received, appropriate investments have been made by the assessee - the order passed by the Assessing Officer has to be confirmed - The AO is directed to pass appropriate orders after considering whether the assessee is entitled for any further benefit with reference to the claim of the assessee under Section 11A of the Act.
-
2014 (3) TMI 574
Cancellation of application u/s 80G – Renewal/grant of certificate – Assessee contended that the DIT(E) did not examine the information filed with regard to the entire donation receipts with its corpus details and confirmations by the appellant during the course of proceedings – Held that:- The DIT(E) has not culled out in his order as to which are the conditions laid down u/s 80G(5)(v), have not been fulfilled by the assessee trust - If the DIT(E) is satisfied that one or more of the conditions laid down in the clauses have not been fulfilled, he can reject the application for approval after recording his reasons - it has not been brought on record by the Revenue as to which of the requirement has not been fulfilled by the assessee as prescribed under rule 11AA and which of the conditions mentioned u/s 80G(5)(v) has been violated or not fulfilled by the assessee - Unless the DIT(E) records the reasons of violation of such conditions, the DIT(E) cannot reject the assessee's application – thus, the matter remitted back to the DIT(E) for examination whether the assessee trust fulfills the conditions laid down in section 80G or not and whether the DIT(E) can grant approval or reject the application for grant of certificate u/s 80G – Decided in favour of Assessee.
-
2014 (3) TMI 573
Penalty u/s 271(1)(c) of the Act – Held that:- The CIT(A) has deleted the penalty on a different ground on merits - The date of receipt of the order by the CCIT or CIT is not on record - the order of the CIT(A) is dated 13/03/2008 and subsequent thereto, the show cause notice was issued in February, 2009 - Six months from February, 2009 would expire in Aug., 2009 but no penalty order has been passed pursuant to the show cause notice dated February, 2009 - It is a clear case of estimation of cost of construction and as rightly pointed by the CIT(A) there was no material found during the course of search on the basis of which such addition has been made – there is no reason to interfere with the order of the CIT(A) deleting penalty – Relying upon COMMISSIONER OF INCOME TAX Versus AERO TRADERS (P) LTD. [2010 (1) TMI 32 - DELHI HIGH COURT] - every addition will not automatically attract penalty – thus, penalty is not leviable on estimated income. - Decided against the revenue. Bar of limitation of time u/s 275 of the Act – Time-barred penalty orders – Held that:- The ITAT had passed the order on 26/03/2009 while the AO has given effect to the ITAT’s order on 31/12/2010 and the penalty order is passed on 29/06/2011 i.e. within six months from the date of the order giving effect to the ITAT’s order - the date of receipt of ITAT’s order by CCIT or CIT is not on record – thus, no adjudication is required as the relief is already granted to the assessee – Decided against Assessee.
-
2014 (3) TMI 572
Deemed dividend u/s 2(22)(e) of the Act – Quantum of disallowance - Whether the profit earned by the company during the year in which the loans were advanced can be considered to be included within the “accumulated profits’ of the company – Held that:- The decision in Commissioner of Income-Tax, Kerala Versus V. Damodaran And Another [1979 (10) TMI 5 - SUPREME Court] followed - the word “accumulated profit”, cannot mean to construe to include current profit for the purpose of deemed dividend - The contention of the assessee is accepted that the accumulated profits should not include the current profit - the disallowance of deemed dividend should be restricted to the accumulated profit, brought forward from earlier years and not the current year profit - Thus, the disallowance on account of deemed dividend u/s.2(22)(e), will be restricted in this ad-hoc and the balance disallowance will get deleted – Decided partly in favour of Assessee. Confirmation of ad-hoc addition of various expenses – Held that:- The AO has made the ad-hoc disallowances on the ground that some of these expenses have been incurred in cash and necessary evidences required in respect of the said claim are not properly vouched - Some personal element of expenses also cannot be ruled out - This finding of the AO has not been rebutted - looking to the nature of expenses as incorporated, as far as conveyance expenses and telephone charges are concerned, personal element cannot be ruled out as the assessee is an individual - The other expenses also, though are for the business purposes, but due to lack of proper evidences, entire claim cannot be said to be fully verifiable – thus, the disallowance is restricted to 5% - Decided partly in favour of Assessee.
-
2014 (3) TMI 571
Disallowance of purchase amount - Genuineness of the suppliers was not proved - Claim of receipt of goods by the assessee was not proved – Held that:- The CIT(A) was satisfied with the genuineness of the suppliers on the basis of various documents furnished by the assessee and accordingly deleted the disallowance – the CIT(A) has not examined the second reason at all viz., the claim of receipt of goods by the assessee – thus, the action of the CIT(A) is not correct - CIT(A) should have considered both the reasons before coming to a conclusion - the second reason cited by the assessing officer is more relevant than the first reason - even if the assessee is able to prove the genuineness of the suppliers, still the disallowance is possible if the assessee is not able to prove that it has actually received the goods – thus, the second reason cited by the assessing officer and the explanations given by the assessee needs to be examined at the end of the CIT(A) – the order of the CIT(A) set aside and the matter remitted back for examination – Decided in favour of Revenue. Disallowance u/s 40(a)(ia) of the Act – TDS not deducted on payment made to C& F agents - Held that:- The C & F agent is seeking reimbursement of expenditure incurred on Customs Duty, Clearing and Forwarding, Port dues, Transporting charges etc. on actual basis - the payments relating to the above said expenses is made on behalf of the assessee - the assessee is authorizing the C & F agent to incur the expenses on its behalf - the break up details given in the single consolidated bill raised by the C & F agents should be considered as separate bills relating to (a) reimbursement of expenses and (b) charges for clearing quoted by the Agent - the applicability of TDS provisions on "reimbursement of expenses" should be considered separately in respect of each of the item and it cannot be clubbed with the charges levied by the C & F agent – CIT(A) did not examine the break-up details of the bills raised by the C & F agents – thus, the matter is remitted back to the CIT(A) for fresh examination of the applicability of TDS provisions on the charges paid to C & F agents and also on the expenses reimbursed – Decided in favour of Assessee.
-
Customs
-
2014 (3) TMI 562
Revocation of the CHA license - Misuse of G-Cards - Difference in opinion between minority and majority members of CESTAT bench - Held that:- the only proved infraction on record is of the issuance of G cards to non-employees, as opposed to the active facilitation of any infraction, or any other violation of the CHA Regulations, whether gross or otherwise. Neither have any such allegations been raised as to the past conduct of the appellant, from the time the license was granted in January, 1996. Equally, it is important to note that the appellant has – as of today – been unable to work the license for 8 years, and thus been penalized in this manner. This is not to say that the trust operating between the Customs Authorities and the CHA is to be taken lightly, or that violations of the CHA Regulations should not be dealt with sternly. A penalty must be imposed. At the same time, the penalty must – as in any ordered system – be proportional to the violation. Just as the law abhors impunity for infractions, it cautions against a disproportionate penalty. Neither extreme is to be encouraged. In view of the absence of any mens rea, the violation concerns the provision of G cards to two individuals and that alone. A penalty of revocation of license for this contravention of the CHA Regulations unjustly restricts the appellant’s ability to engage in the business of the CHA for his entire lifetime. The minority Opinion of the CESTAT, delivered by the Judicial Member, correctly appreciates the balance of relevant factors, i.e. knowledge/mens rea, gravity of the infraction, the stringency of the penalty of revocation, the fact that the appellant has already been unable to work his license for a period of 6 years (now 8 years), and accordingly sets aside the order of the Commissioner dated 24.01.2005 - The Minority Opinion of the Judicial Member, Ms. Archana Wadhwa, restored, - Decided in favour of appellant.
-
2014 (3) TMI 561
Valuation of goods - Stay application - addition of technical assistance fees and royalty paid - additions on the ground that applicant (importer) and the foreign suppliers are related persons - Held that:- Prima facie technical assistance and the administrative assistance service obtained by the applicant for the manufacture/administrative control of the business in India is not related to the transactional value of the imported goods. Moreover, the royalty paid by the applicant to the foreign related person is on the manufactured goods in India not on the imported goods. These payments are not the condition of sale of the imported goods. Therefore, prima facie these amounts paid by the applicant towards the service received by the related persons are not addable in the assessable value - Accordingly, the applicant has made out a case for stay of operation of the impugned order. Therefore, we stay of operation of the impugned order till final disposal of the appeal - Stay granted.
-
2014 (3) TMI 560
Denial of refund claim - Refund claim of SAD - Notification No. 102/2007-Cus., dated 14-9-2007 - sale of used capital goods - Held that:- capital goods imported by the appellant are not sold ‘as such’ but sold after put into use. Therefore, as discussed above, the appellant is not entitled for refund of SAD @ 4% as they have failed to discharge their entitlement for the benefit of Notification No. 102/2007 - Decided against assessee.
-
Service Tax
-
2014 (3) TMI 589
Application for bail - petitioner has been charged for commission of offence punishable under Section 89(1)(d) of the Finance Act, 1994 - Held that:- On query, the learned lawyer of the Union of India could not satisfy me whether strictly custodial detention is necessary for interrogation or not vis-ŕ-vis their prayer as embodied in the petition itself. It is correct that the offence is alive till now but it is not less than correct that when it was originated, the offence was bailable in view of the observation made by the Hon’ble Apex Court [2010 (12) TMI 1085 - SUPREME COURT]. It is also reckoned that the new Act does not have any retrospective effect. If this be so, the question of bailability and non-bailability almost comes to a point of merger, the benefit of which should be extended to the accused person. - Bail granted subject to conditions.
-
2014 (3) TMI 567
CENVAT Credit on GTA services - upto the place of removal - scope of the terms 'means and includes' - Rule 2(l) of CCR - Held that:- main body of the definition of term ‘input service’ is wide and expansive and covers variety of services utilized by the manufacturer. By no stretch of imagination can it be stated that outward transportation service would not be a service used by the manufacturer for clearance of final products from the place of removal. When we hold that outward transportation would be an input service as covered in the expression ‘means’ part of the definition, it would be difficult to exclude such service on the basis of any interpretation that may be offered of the later portion of the definition which is couched in the expression ‘includes’. As already observed, it is held in several decisions that the expression ‘includes’ cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression ‘means’. In other words, the expression ‘includes’ followed by ‘means’ in any definition is generally understood to be expanding the definition of the term to make it exhaustive, but in no manner can the expression ‘includes’ be utilized to limit the scope of definition provided in the main body of the definition. To our mind this was also not the intention of the Legislature in the present case - Following decision of COMMISSIONER OF C. EX. & CUSTOMS Versus PARTH POLY WOOVEN PVT. LTD. [2011 (4) TMI 975 - GUJARAT HIGH COURT] - Decided against Revenue.
-
2014 (3) TMI 566
Inclusion of Re-imbursement of expenses in the value of taxable services for the purposes of levy of service tax - Validity of Rule 5 (1) of the Service Tax (Determination of Value) Rules - Held that:- Court hereby directs the respondents not to proceed further in terms of the impugned show cause notices or draw or enforce any demand against the petitioner. The respondents would, however, be at liberty to initiate proceedings in the event of and having regard to the final orders of the Supreme Court in the pending appeal - Decided in favour of assessee.
-
2014 (3) TMI 565
Waiver of pre deposit - re-consideration of the stay order directing pre-deposit of 25% after the matter remanded by the High Court - Penalty u/s 78 – Work contract service - taxability prior to 1-7-2007 - Abatement of 67% - Waiver of pre-deposit - the main plank of argument advanced on behalf of the applicant that since there is a cross-fall-breach clause specifying that breach of one contract would also constitute breach of other contract, hence, both these contracts should be read together and accordingly the entire project being a turnkey project, the same is taxable as works contract only w.e.f. 1-7-2007 and not prior to that - High Court remanded matter back for fresh consideration - Held that:- it would be just and appropriate to direct the Applicant to deposit the offered amount of Rs.1.00 crore pending disposal of the Appeal. - stay granted partly.
-
2014 (3) TMI 564
Demand of service tax - Business auxiliary service - Held that:- appellants are owner of property and entered into an agreement titled as ‘Franchise Agreement' with M/s. Amalgamated Bean Coffee Trading Co. Ltd. to run café, making and selling coffee and other eatables under the brand name 'Café Coffee Day' - Following the previous decisions of this Tribunal - Decided in favour of assessee.
-
2014 (3) TMI 563
Availment of CENVAT Credit - Overseas commission (BAS), Customs House Agents and Terminal Handling Services - Equivalent penalty under Rule 15 of the Cenvat credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that:- Service tax paid on overseas commission is available to the assessee as Cenvat credit. Similarly, in case of availability of Cenvat credit paid on the Customs House Agents and Shipping Lines, allowed the same by following the Tribunal in the case of M/s. Vidyut Metallies Pvt. Ltd. Vs. CCE, Mumbai - [2012 (6) TMI 486 - CESTAT, MUMBAI] as also the Tribunal decision in the case of M/s. Steel Strips Wheels Ltd. Vs. CCE, Chandigarh-II - [2013 (3) TMI 399 - CESTAT, NEW DELHI] - Decided against Revenue.
-
Central Excise
-
2014 (3) TMI 559
Natural Justice - non consideration of argument by the tribunal - Clandestine clearance - weight of the copper cables recovered from the wooden drums - assessee contended that method of arriving at the weight (core x sq. mtrs.) was fallacious and submitted that this aspect was highlighted as early as the time when the hearing before the Commissioner took place during the show cause notice proceedings. - Revenue resists the submissions and contends that full opportunity was given and that the finding as to the question of true weight or the method adopted is a factual one which do not warrant interference by this Court. Held that:- The Tribunal did not make its order contemporaneously or within a month of the date of hearing; in this case it rendered its order and published it after about five months. In these circumstances, without any explanation as to whether the written submissions were handed over, particularly since they do not bear any date, it would be hazardous for this Court to conclude that the argument on this aspect was made before the Tribunal which failed to apply its mind. We have deemed it appropriate to discuss this aspect since the appellant’s counsel repeatedly submitted that this had a direct bearing on the question of valuation and that the Tribunal ought to have taken care to address the issue. The affidavit in support of the appeal no doubt states that the copies placed on the record are true copies, yet significantly there is no date attributed to the written submissions in any of the pleadings - no substantial question of law arises - Decided against assessee.
-
2014 (3) TMI 558
Waiver of pre-deposit - Stay of recovery - Scrap generated at the premises of the appellant's job workers - Whether the assessee i.e., the supplier of inputs to be job worker is liable to pay Central Excise Duty on the scrap generated at the job workers end, which is not received back from the job workers within the specified time in terms of Notification No.214/86-C.E., dated 25-3-1986 as amended r/w Rule 4(5)(a) of CENVAT Credit Rules - Held that:- Hon’ble Bombay High Court in Commissioner vs. Rocket Engineering Corporation Ltd. [2006 (6) TMI 66 - HIGH COURT BOMBAY] has ruled out liability for the principal manufacturer to pay duty on the scrap generated at the job workers premises. The ruling of the Hon’ble High Court was rendered with reference, inter alia, to Rule 4(5)(a) of the CCR, 2004, which provision has been debated before me - Stay granted.
-
2014 (3) TMI 557
SSI Exemption - State Government - Benefit of Notification 8/2003-CE dated 1.3.2003 - Held that:- respondent is the department of State Government and in their factory certain excisable goods were manufactured, which were cleared by claiming the benefit of Small Scale Exemption Notification, i.e. 8/2003-CE. The Revenue wants to club the clearance of the goods manufactured in the workshop of Water Resources Department, Government of Maharashtra on the ground that the factories are belonging to one manufacturer. We find that the Notification 8/2003-CE contains specific provision that where the specified goods are manufactured in the factory belonging to or maintained by the State Government, then the value of excisable goods cleared from such factory alone shall be taken into account - Decided against Revenue.
-
2014 (3) TMI 556
Denial of refund claim - Duty under protest - Bar of limitation - Held that:- respondents have made it clear that the duty is paid on provisional basis and reserved the right to make refund claim on determination of the value. Further, while making payment, in the statutory records also the respondents had specifically mentioned that the payment is made under protest. In the monthly returns filed by the respondent also, this fact is mentioned. In these circumstances, we find no infirmity in the impugned order whereby the Commissioner (Appeals) held that the refund is not time barred - Decided against Revenue.
-
2014 (3) TMI 555
Benefit of Cenvat credit of service tax - GTA services used for outward transportation of their final product - Appellant s sales were at the factory gate inasmuch as the invoices issued by them bears an endorsement that the appellant’s responsibility ceases after delivery for any damage of goods at the factory gate - Held that:- some of the invoices bear the endorsement to the effect that our responsibility cease after to carry for any damage/shortage. If that be so, we are prima facie of the view that the sales are not FOR sales - However, in view of the endorsement on the invoices, it can be concluded at the prima facie stage that the appellants do not have a good case so as to allow stay petition unconditionally. We have also seen the balance sheet of the appellant, which does not reflect a very poor financial condition - Conditional stay granted.
-
2014 (3) TMI 554
Availment of CENVAT Credit - Non maintenance of separate accounts - Assessee were manufacturing and clearing both dutiable and exempted products and also availing CENVAT credit on common input services without maintaining separate accounts - appellant submits that products chilly seeds, seed oil and spent chilly are only by-products and not final products to attract the provisions of Rule 6 (3) of the CENVAT Credit Rules - Held that:- On the one hand, it is their case that chilly seeds, seed oil and spent chilly are by-products which should not be considered as final products for purposes of Rule 6 of the CCR 2004. On the other hand, in an endeavour to offset the demand raised in the show-cause notice, they reversed proportionate CENVAT credit on input services used in, or in relation to, the manufacture of the said commodities and also paid interest thereon. They did so to claim the benefit of the decision in Chandrapur Magnetic Wires (1995 (12) TMI 72 - SUPREME COURT OF INDIA). This action of the assessee tacitly amounted to acknowledgement of the fact that the said commodities were exempted final products - However, the above conduct of the assessee (reversal of proportionate CENVAT credit) is certainly inconsistent with their present stand before us as regards the status of the three commodities - Conditional stay granted.
-
2014 (3) TMI 553
Waiver of pre deposit - Recovery of CENVAT Credit - Reversal of credit on removal of inputs for job work for setting up factory within same premises - availing cenvat credit on inputs used for manufacture of goods for others, further used captive in manufacture of finished goods from others - Held that:- It appears to be a case of interpretation of nitty-gritty of the rules involved, which can be examined during the hearing of the appeal. At the prima facie stage and on account of the issues involved, I waive the pre-deposit of the entire amount of dues and stay recovery thereof during the pendency of the appeal - Stay granted.
-
2014 (3) TMI 552
Availment of CENVAT Credit - fraudulent credit - Revenue made out a case against the first applicant that the three other applicants, namely, M/s. Santhosh Kumar Steels, M. Manikandan, M/s. Sri Amman Steels supplied non-duty paid scrap under cover of invoices showing excise duty payment to enable the first applicant to take CENVAT credit - investigation showed that the dealers had obtained duty paid items like MS wires, CR coils, CR sheets etc., and they have also procured non-duty paid iron and steel scrap from the market and they issued invoices to the applicant apportioning the duty paid on such goods received but sent the non-duty paid scrap under the cover of invoices. Held that:- Prima facie, I do not see any reason as to why HR sheets, coils, wires etc., should go for melting in such large quantities. No convincing explanation has been forthcoming from the appellant for such strange practice. If such goods are scrap the normal course of events is that the manufacturer of the goods himself re-melts the goods rather than selling it to a dealer who sells it to some other manufacturer for melting. In such circumstances, there is a strong prima facie case that what was used was non-duty paid scrap and the invoices on which credit was taken related to prime materials which were sold to others. Therefore, I consider it proper to call for a pre-deposit of 50% of the duty demanded from the manufactures, namely, M/s. K.S.G. Castings & Products within six weeks from the date of the order - Conditional stay granted.
-
2014 (3) TMI 551
Reversal of CENVAT Credit - (a) Whether the term "capital goods" can include plant, structures embedded to earth? (b) Whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as 'inputs' in relation to their final products as inputs for capital goods, or none of the above? (c) Whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant? Held that:- Following Tribunal’s Larger Bench decision in Vandana Global Ltd. Vs. CCE, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - there will be waiver of pre-deposit and stay of recovery in respect of the penalty imposed on the appellant while, in the second appeal, there will be a direction to the appellant to reverse the CENVAT credit in question, whereupon there will be waiver of pre-deposit and stay of recovery in respect of the penalty and interest on duty. The appellant shall reverse the said CENVAT credit within six weeks - stay granted partly.
-
2014 (3) TMI 550
Availment of CENVAT Credit where service tax paid on reverse charge basis - Revenue was of the view that these activities happen after the export of the goods and, therefore, these services cannot be considered as "input services" for manufacture of the goods. - Commissioner (Appeals) allowed the credit - Held that:- In the case of Commission Agent, it is already well settled that CENVAT credit of tax of duty paid on reverse charge basis under Section 66A of Finance Act, 1994, on services rendered by a Commission Agent located abroad can be taken. I agree with argument of the learned counsel for the respondent that there is no reason to distinguish the services of Commission Agent falling within the ambit at entry to Section 165(105) (19) of the Finance Act, 1994 on a different footing as compared to other services falling within the scope of the same taxing entry for the purpose of allowing CENVAT credit - Decided against Revenue.
-
2014 (3) TMI 549
Availment of benefit of CENVAT Credit on various input services - Management, Maintenance and Repair Service of Helicopter owned by the company - Rent-a-Cab Service - Management and Consultancy Service - Held that:- Prima facie, the helicopter is shown as an asset in the balance sheet of the company, which is in good condition will suffice for its essentiality. The company would have invested in the helicopter because it is needed for their business activity and it also saves the precious time of its Managing Director, when on official tour. - stay granted. Rent-a-Cab Service, where money has been recovered from the employees, there is no reason to claim CENVAT credit on such amount. - stay granted partly. In the case of Management Consultancy, the relevant invoices have not been brought on records nor is it possible to relate it to a particular activity. Against such documents, it is seen that since the demand for the services has been made by this company, it is to be presumed that it has been for the business of this company only. There is no prima facie evidence brought in the proceedings at lower levels to show that this payment has been made in addition to any other company or in addition to any activity. - stay granted.
-
CST, VAT & Sales Tax
-
2014 (3) TMI 570
Whether the Tribunal was justified in exempting inter-State sales of Rectified Spirit and Denatured Spirit along with export duty? - Held that:- In view of earlier decision in the case of Commissioner of Sales Tax UP. Versus M/s. Upper Doab-Sugar Mills Ltd. [2014 (2) TMI 1003 - ALLAHABAD HIGH COURT] decided in favor of revenue. Whether the export pass fee payable by Ex. U.P. purchaser on purchase of Denatured Spirit from Distillery is liable to be included in the taxable turn over of the Revisionist/Assessee? - Held that:- the amount of export pass fee was paid by the Ex. U.P. purchase for the purchase of denatured spirit and special denatured spirit from the petitioner. Thus the person who is exporting the denatured spirit and special denatured spirit is not liable to pay the export pass fee on denatured spirit and special denatured spirit and the same is to be paid by the persons who purchase the same from the petitioner. - decided in favor of assessee.
-
2014 (3) TMI 569
Taxability of sale of unusable polyester yarn – Whether sale of "unusable Polyester yarn" by assessee was taxable as a waste product under Item 32 of notification no.ST-II-5785/X-10(1)-80-U.P. Act XV/48-Order-81 dated 7.9.1981, or it is taxable under Entry 55 of the Notification dated 7.9.1981 - Held that:- 'Polyester fibre yarn' was not capable of use for the purpose of manufacturing Zippers - the assessee admitted that it was a discarded unserviceable item and was sold as waste product - the revisionist himself having admitted that goods in question was not treated to be a yarn at the time of sale but 'waste product' - the Revenue rightly held that it was taxable on higher rate - despite the fact that initial burden lie upon Revenue but the onus shifted upon assessee to show that item in question, though shown by him as 'waste product' yet for the purpose of tax liability, it will be covered by different entry wherein lessor rate of tax is chargeable - the same has rightly been taxed under item 32 –Decided against assessee.
-
2014 (3) TMI 568
Claim of refund - Condonation of delay - Rejection of appeal by VAT Tribunal – whether ground of similar issue being decided in favour of the assessee gives reason to prefer appeal – condonation of delay of 836 days – sufficiency of reason - Held that:- Constitution Bench judgment in Mafatlal Industries Ltd. v. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA] followed - it is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person - He claim that the decision of the Court/Tribunal in another person’s case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law - Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well established principles of law and leads to grave public mischief. Explanation rendered for condonation of delay is not sufficient - At the relevant time, against the order passed by the AO, appellant carried no further challenge - Merely because much later it was decided in a particular manner by a Court or tribunal would not give reason to the appellant to prefer the appeal - It is true that the Appellate Commissioner had power to condone the delay - It is equally true that the Courts normally adopt a liberal approach in considering the explanation for delay caused in filing the appeals since substantial justice is the primary concern - that does not mean howsoever long, delay should be condoned whether there is sufficient explanation or not - Decided against assessee.
|
9911796707
