Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 3, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Maintainability of Appeal before the Tribunal against the order passed by the Commissioner passed under Section 119(2)(b) - ITAT has no power to to entertain the appeal - HC
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Setoff of MAT Credit before interest liability - form prescribed under the rules can never have any effect on the interpretation or operation of the parent statute – thus, Mat credit allowed to be set off from advance tax before calculating interest - HC
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Allowability of deduction u/s 54F - it was immaterial that the construction of the new building was started before the sale of the old building - exemption allowed - AT
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Allowability of Exemption u/s 11 - Floor of the premises of the society being occupied by its Executive President does not violate the provisions of Section 13 – Allowing occupation of the premises to Executive President cannot be considered to be unreasonable - AT
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Computation of long term capital gain on sale of shares – Assessee, an employee, justified the sale of shares at higher price and also explained the circumstances in which the foreign company negotiated and paid that amount - taxable as capital gain only - AT
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Deemed dividend u/s 2(22)(e) - shares in the name of the partners, but advances made by the company to the firm has to be treated as deemed dividend u/s 2(22)(e) - AT
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Salary accrue and received in India - in a situation in which the salary has accrued outside India, thereafter, by an arrangement, salary is remitted to India and made available to the employee, it will not constitute receipt of salary in India - AT
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Penalty u/s 271(1)(c) of the Act – Inaccurate particulars furnished - different stands taken before the AO and appellate authority - assessee did not come out clean - penalty confirmed - AT
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Agents incentive expenses - AO has not established that the payments made to the related parties are excessive or unreasonable under the three criterias specified in section 40A(2)(a) - expense allowed - AT
Customs
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Penalty - Mis declaration of goods - ppellant failed to give any satisfactory explanation for use of the sister’s address except disowning the goods and denial the contents of statement of co-noticees - penalty confirmed - AT
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Conversion of Shipping Bills from Drawback and EPCG Scheme to EPCG Drawback and DEEC Scheme - examination by the Central Excise Officer cannot substitute for examination by the Customs officer - not allowed - AT
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Denial of refund claim - Refund of extra duty deposit - Applicability of Section 27 - extra duty deposit appears to be more in the form of a security and not in the nature of duty - refund allowed - AT
Corporate Law
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Winding up of Company - Inability to pay debts - it is a case where the respondent has the ability to pay, but does not choose to pay; in such a case, the court will not come to its defence - HC
Service Tax
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Extension of stay order - Operation of the orders expired in terms of the 2nd and 3rd pvosisos to Section 35C(2A) - it is appropriate to grant extension of the stay orders earlier granted, to operate during the pendency of the appeals - AT
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Cenvat Credit of service tax - The word “business”, is as has often been said, one of the wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense”. The words “relating to” further widen the scope of the expression “activities relating to business”. - AT
Central Excise
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Valuation of goods - assessee entitled to retain 75% of sales tax as incentive - w.e.f 1.7.2000 they shall only be entitled to the benefit of the amount “actually paid” to the Department, i.e., 25%. - SC
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Recovery of refund already allowed - this case hardly involves any legal issue but we feel more concerned about the hard luck of the appellant, a manufacturer of PVC Coal Conveyor Belting made from imported Nylon Yarn - SC
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Principle of natural justice - Delay by the Adjudicating Authority in rendering its order nine months after the conclusion of the hearing has caused prejudice to the Petitioner - HC
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Default in making Central Excise duty payment - penalty could not be levied under Rule 25 of the Rules and for the alleged default, the penalty was restricted to Rs. 5,000/- in each matter under Rule 27 - AT
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Imposition of penalty - Denial of CENVAT Credit - repair of motor vehicles has no nexus between the services and the activity of manufacture - AT
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CENVAT Credit - endorsed invoices - first unit endorsed the invoices of their Unit No.2 - if there is transfer of goods between the same appellant in different units, credit can be taken on the basis of endorsed invoices. - AT
VAT
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Stock transfer or interstate sale - pplicant has to maintain a buffer stock as well as there was no guarantee for purchase of any specific quantity - transport of goods from U.P. to warehouse in Delhi could not be treated as a movement of goods occasioned by any sale or purchase - not liable to CST - HC
Case Laws:
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Income Tax
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2014 (3) TMI 32
Deletion made on account of unexplained deposits – Protective assessment made – Held that:- The contention of the Assessee is accepted that although the reasoning for reopening was very much in the notice of the Income Tax Officer but after considering the explanation and the return of income filed by the brother, the ITO had chosen to accept the returned income - once there was no substantive addition of amount then there ought not to be any question of protective assessment in the hands of the assessee - The Revenue Department has examined the evidences in respect of Sri Kamlesh Kumar Chaudhary and thereupon found them correct – they made no addition in respect of the amount - while deciding the appeal of the assessee, CIT(A) has also noted all of those evidences and held that the said transaction being reflected in the return of Sri Kamlesh Kumar Chaudhary and that return was accepted by the Revenue Department –thus, the assessment of the amount protectively in the hands of the assessee did not survive - the findings of the First Appellate Authority upheld – Decided against Revenue.
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2014 (3) TMI 31
Disallowance of Deduction u/s 80HHB of the Act – Proper evidence or document not filed – Held that:- CIT(A) rightly held that the work is foreign project within the meaning of Section 80HHB(2)(b)(ii)/(iii) is project as it includes planning and designing or doing something and has been executed as a single integral work order - It is technically also a project as it includes man, job design, control system design and design of a method of employing specific technology to do the work - Entire consideration is attributable to such execution of the projects - The AO is satisfied with other requirements for eligibility for entitlement to deduction u/s 80HHB of the Act. The contention of the assessee is accepted that the Tribunal in exercise of appellate power was duty bound to demonstrate infirmity in the finding recorded by the CIT (A), which the Tribunal did not do - The Tribunal by a cryptic order has disallowed the benefit capriciously rather than on the basis of any reason - the question of fact was duly considered by the CIT (A) and the Tribunal unnecessarily and without any reason interfered with the same – Decided in favour of Assessee.
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2014 (3) TMI 30
Maintainability of Appeal before the Tribunal against the order passed by the Commissioner passed under Section 119(2)(b) - Held that:- order passed by the Commissioner passed under Section 119(2)(b) of the I.T. Act is an administrative and non appealable order. - once the appeal is not maintainable against the order passed by the Commissioner under Section 119(2)(b) of the I.T. Act, thereafter it is not open for the Tribunal to pass any order on merits. - Decided in favor of revenue.
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2014 (3) TMI 29
Deduction u/s 80HHC of the Act - Whether the Tribunal is justified in holding that the "total turnover" for the purpose of deduction u/s 80HHC will not include Sales Tax and Excise Duty even after insertion of Section 145A – Held that:- The decision in CIT v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] and CIT v. Shiva Tex Yarn Ltd. [2012 (9) TMI 658 - SUPREME COURT] followed – amendments to section 80HHC(3) indicate exclusion of book profits but reasoning in this judgment is confined to the workability of the formula in section 80HHC(3) as it stood at the material time. Sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc - excise duty and sales tax are indirect taxes - They are recovered by the assessee on behalf of the Government - Therefore, if they are made relatable to exports, the formula under Section 80HHC would become unworkable - The view which we have taken is in the light of amendments made to Section 80HHC from time to time - the learned Tribunal has not committed any error in holding that the excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC – Decided against Revenue. Setoff of MAT Credit before interest liability - Whether the Tribunal is justified in holding that interest u/s 234B of the Act is to be charged on the tax payable after reducing the credit available u/s 115JAA of the Act for A.Y. 2000-01 ignoring the fact that Explanation 1 below Section 234B of the Act has been introduced with effect from 01.04.2007 and therefore, cannot be applied retrospectively – Held that:- The decision in CIT v. Tulsyan Nec Ltd. [2010 (12) TMI 23 - Supreme Court of India] followed - There is no provision under Section 115JAA which postpones the right of the assessee to claim set off to the determination of the total income by the A.O. in the first assessment year - Entitlement/right to claim set off is different from the quantum/quantification of that right - Entitlement of MAT credit is not dependent upon any action taken by the Department - the right to set off arises as a result of the payment of tax under Section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year - It is immaterial that the relevant form prescribed under Income Tax Rules, at the relevant time provided for set off of MAT credit balance against the amount of tax plus interest i.e. after the computation of interest under Section 234B - This was directly contrary to a plain reading of Section 115JAA(4) - form prescribed under the rules can never have any effect on the interpretation or operation of the parent statute – thus, Mat credit allowed to be set off from advance tax before calculating interest – Decided against Revenue.
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2014 (3) TMI 28
Validity of Notice u/s 148 of the Act – Reassessment of income after four years - Claim of deduction u/s 80IB and 80JJA of the Act allowed by the AO - Held that:- The assessee specifically claimed the deduction under section 80JJA of the Act which has been allowed by the AO on due application of mind - Even with respect to claim under section 80IB of the Act, the claim was made by the petitioner - Relying upon Sri Krishna(P.) Ltd. v. ITO 1996 (7) TMI 2 - SUPREME Court] and Sowdagar Ahmed Khan v. ITO [1967 (11) TMI 10 - SUPREME Court] - assessee and the same has been dealt with and considered by the AO and thereafter, after due application of mind, the AO has allowed the said claims – thus, it cannot be said that there was any concealment and/or non-disclosure of true and correct facts by the assessee - the original assessment is sought to be reopened in exercise of powers under section 147/148 of the Act on change of opinion by the AO, which is not permissible more particularly when the original assessment is sought to be reopened after a period of four years from the end of the assessment year - the conditions stipulated under first proviso to section 147 are not satisfied – thus, the notice deserved to be set aside – Decided in favour of Assessee.
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2014 (3) TMI 27
Partial allowability of deduction u/s 80HHC(3) of the Act - Whether the Tribunal has committed any error in restoring the issue to the file of the Assessing Officer for allowance of relief under section 80HHC(3) of the Income Tax Act by reducing only profit and not entire sale proceeds arising out of the DEPB – Held that:- The decision in M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] followed - for allowance of relief under section 80HHC(3)of the Act only the profit and not entire sales proceeds arising out of the DEPB is required to be reduced/considered – Decided against Revenue.
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2014 (3) TMI 26
Allowability of deduction u/s 54F of the Act – Held that:- The CIT(A) while allowing this deduction has given a finding that Assessee had executed sale deed for sale of land at Jayendra Park Housing Society on 26.03.2007 for Rs. 60 lacs and the transfer as per definition u/s. 2(47) and Section 45 of the Act was 26.03.2007 - the payments aggregating Rs. 17.50 lacs made during the period 27.03.2006 to 13.10.2006 is also eligible for deduction u/s 54F as the condition of one year before and two years after the sale is duly complied with - the investment during the period 26.03.2006 to 26.03.2009 is eligible for deduction u/s. 54F - Relying upon CIT vs. J.R. Subramanya Bhat [1986 (6) TMI 7 - KARNATAKA High Court] - it was immaterial that the construction of the new building was started before the sale of the old building - Revenue could not bring any contrary material on record to controvert the findings of CIT(A) – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue.
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2014 (3) TMI 25
Deletion made on commission expenses - Held that:- CIT(A) held that the payment made by the appellant to the various specific persons be called as commission or rebate or incentive, was for the purpose of business and in accordance with the prevalent business trends in this trade - in the assessee’s business, it is a common practice to provide rebate or commission or incentive to various persons with whom the assessee has brokered the deal – thus, the commission has been paid for the business purpose of the assessee – Decided against Revenue. Deletion made on account of STCG – Held that:- CIT(A) was of the view that the payment paid to the builder directly was only one form of payment of installment by the appellant either the same should have been added in the cost of acquisition and also in the sale proceeds or should have been eliminated from both as was done by the appellant - The assessee has sold property for a sale consideration - The CIT (A) deleted the addition by holding that direct payment to M/s. DLF Universal Ltd. was only one form of payment of installment to builder, M/s. DLF Universal Ltd - In one way, it has to be added to the cost of acquisition if this added to the sale proceeds for working out the taxability, income has no impact – the order of the CIT(A) upheld – Decided against Revenue.
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2014 (3) TMI 24
Allowability of Exemption u/s 11 of the Act – Violation of provision of section 13(1)(b) of the Act - Held that:- The AO has not appreciated the functioning of the society and the requirement of the law in the right perspective - There is no provision, either under the Societies Registration Act, or under the Income Tax Act prohibiting persons related through blood to be functionaries of the society - this cannot be a ground for denying exemption under Section 11 of the Act - There is no prohibition or condition prescribed under Section 12A or under Section 11 regarding operation of the bank account - so long as its objects come within the meaning of 'charitable purpose' under Section 2 (15), and the income has been applied to such purposes – thus, the observation of the CIT(A) is upheld that exemption under Section 11 is available on compliance of the conditions as prescribed in Sections 11 and Section 12 of the Act. The functioning of the institution cannot be considered to be undemocratic, if two relatives are occupying the position in the management - Section 13 itself provides for payment of salary, and allowance to the persons in the management, in case such payment does not exceed what may be reasonably paid for such services - there is no such restriction in Section 13 regarding relatives holding position in the charitable society or institution. Misuse of facilities of society – Held that:- The vehicles are being used for the purposes of the society - during the course of the survey nothing adverse on this account has been found - In the absence of any evidence the allegation of the AO cannot be sustained - Floor of the premises of the society being occupied by its Executive President does not violate the provisions of Section 13 – Allowing occupation of the premises to Executive President cannot be considered to be unreasonable - The AO has just made the allegation and has not even bothered to examine the same in the context of section 13(2)(c) of the Act - Revenue could not point out any error or defect in the finding given by the CIT(A) – the findings of the CIT(A) is upheld that the objects of the assessee Society are educational in nature and hence, they fall within the meaning of 'charitable purpose' under Section 2(15) of the Act - The assessee is a Society registered under Section 12A of the Act – thus, the assessee is eligible for exemption under Section 11 of the Act – Decided against Revenue. Allowability of depreciation – Revenue was of the view that the society has already claimed the same as deduction of income at the time of addition to the fixed assets – Held that:- The assessee having purchased the fixed assets and the same having been utilized in carrying out its activities, the income arising from the activities is to be computed by applying the normal principle of computation of income, which will include a charge on account of depreciation in respect of the fixed assets used for carrying out such activities - depreciation is allowed while computing income of the year under consideration - It cannot be said that the fixed assets acquired had already been claimed as deduction - Depreciation is a normal expenditure incurred in the course of the activities and hence, the same need to be deducted while computing the income- This Decision in Director of Income Tax vs. Vishwa Jagriti Mission 2012 (4) TMI 289 - DELHI HIGH COURT] followed – the order of the CIT(A) upheld – Decided against Revenue. Allowability of expenditure - Purchase of 260 laptops – Held that:- The CIT(A) has clearly held that in case it is to be considered as expenditure, it will be an application of income, and if, the same is to be considered as fixed assets, it will still be an application of income and either way, the society is eligible to claim the amount as application of its income - Revenue could not substantiate their allegation – the findings of the CIT(A) upheld – Decided against Revenue. Allowability of deduction on expenses – Held that:- There is no material or evidence that the society has any link directly or indirect with any of these enterprises - the AO is not correct in making an allegation that the appellant- society is not eligible for exemption under section 11 of the Income Tax Act – Revenue could not successfully contradict the above findings of the CIT(A) - The assessee has actually purchased these items, or has in fact taken services from these suppliers/service providers - The payments have been made by account payee cheques - nothing adverse was found during the course of the survey- the expenses are routine expenditure for repair and maintenance – the assessee had submitted complete details during the course of the assessment proceedings – there is no reason to interfere in the findings of the CIT(A) – Decided against Revenue.
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2014 (3) TMI 23
Transfer pricing adjustment – Services to Associated Enterprise – Rejection of analysis for determination of ALP of International transaction - Held that:- All that is necessary for the purpose of computing arm’s length price, under TNMM on the basis of internal comparables, is computation of net profit margin, subject to comparability adjustments affecting net profit margin of uncontrolled transactions, on the same parameters for the transactions with AEs as well as Non AEs, i.e. independent enterprises, and as long as the net profits earned from the controlled transactions are the same or higher than the net profits earned on uncontrolled transactions, no ALP adjustments are warranted - It is not at all necessary that a computation should be based on segmental accounts in the books of accounts regularly maintained by the assessee and subjected to audit - the authorities below in error in rejecting the segmental results on the ground that the segmental accounts were not audited and that these segmental accounts were not maintained in the normal course of business. The allocation of expense is on the man hour basis, which is quite fair and reasonable, and that every person has to punch in hours on a specific project - We have also noted that all these details and expense allocation basis were also before the TPO and even then, no specific defects were pointed out by the TPO - the TPO indeed erred in rejecting the segmental accounts and thus declining to accept the internal comparable - the size of the uncontrolled transaction or transactions being smaller, by itself, does not make these transactions incomparable with the transactions in controlled conditions - Size of the comparable does matter in entity level comparison because scale of operations substantially vary and so does the underlying profitability factor, but in a transaction level comparison within the same entity, mere difference in size of the uncontrolled transactions does not render the transaction incomparable – thus, the authorities were clearly in error in rejecting the internal comparable, i.e. profitability of assessee’s transactions with non AEs, on the ground that the volume of business with non AEs was too small vis-à-vis business with AEs - the assessee was quite justified in adopting internal TNMM and comparing the profit earned on its transactions with AEs with profit earned with non -AEs – Decided in favour of Assessee. Addition on sales/services rendered by Head Office – Held that:- In the absence of assessee’s cooperation by submission of requisite information, the Assessing Officer had no option except to resort to the addition on estimate basis – Following the decision as decided in assessee’s own case for the previous year, the same has been decided in favour of Assessee – thus, the addition made is set aside – Decided in favour of Assessee.
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2014 (3) TMI 22
Computation of long term capital gain on sale of shares – Benefit u/s 28(iv) of the Act - Whether the CIT(A) was right in holding that the entire sale consideration received by assessee on sale of shares be treated as capital gains, as against part of the amount treated as benefit under section 28(iv) by A.O – Held that:- The appellant brought on record evidence to show that the foreign company intended to acquire the total share holdings and the appellant was in a position to quote the rate per share - the appellant could get a substantial rate - The appellant also brought on record evidence to show that one Government Wing accepted the rate and permitted the foreign investor to bring in the foreign currency for purchase of the shares - the entire sale consideration received by him is relatable to the transfer of shares and is assessable only as a long term capital gain. There was no reason to differ from the findings of the CIT(A) - Assessee justified the sale of shares at higher price and also explained the circumstances in which the foreign company negotiated and paid that amount - assessee is employed on salary basis and he has no business activity so as to invoke provisions of section 28(iv) - Unless there is a business activity, benefit in the business does not arise - As rightly noticed by the CIT(A), even the transfer of management rights is also transfer of capital asset which again results in capital gain - Looking at it in any way, the gain can only taxed under the head ‘Capital Gain’. Learned Counsel also placed on record the order of the other shareholder wherein A.O. did not disturb the capital gains offered on sale of shares in similar manner – the order of the CIT(A) upheld – Decided against Revenue.
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2014 (3) TMI 21
Scope of FBT u/s 115WC(1)(ba) of the Act - Whether the CIT(A) erred in applying provisions of section 49(2AB) r.w.s. 115WC(1)(ba) of the Act, 1961 and giving relief on the shares that vested on 31/03/2007 on the assessee ignoring the fact that these provisions apply only w.e.f. 01/04/2008 i.e. AY 2008- 09 - Relief with regard to the taxation of capital gains relating to share transactions (ESOPs) – Held that:- The amended provisions of section 115WB are applicable to the facts of the present case - As clarified by the CBDT circular No. 9/2007 dated 20.12.2007, the amended provisions of section 115WB are applicable only when the shares allotted/ transferred on or after the 1st day of April, 2007 - As seen from the letter produced by the Revenue, the shares are vested with the assessee on 31st March, 2007 which is before the 1st day of April, 2007 –thus, the assessee's claim cannot be allowed u/s 115WB(1)(d) of the Act – thus, the order of the CIT(A) set aside – Decided in faovur of Revenue.
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2014 (3) TMI 20
Deemed dividend u/s 2(22)(e) of the Act – Inter corporate deposits received – Held that:- The decision in Commissioner of Income Tax, Versus M/s. Bombay Oil Industries Ltd. [2012 (9) TMI 406 - BOMBAY HIGH COURT] followed - inter corporate deposits cannot be taxed as deemed dividend - it cannot be considered to be in the nature of loans and advances so as to treat it as deemed dividend u/s 2(22)(e) of the Act - Even assuming that the ICDs are loans and advances, still it cannot be treated as deemed dividend u/s 2(22)(e) of the Act - A plain reading of provisions contained u/s 2(22)(e) of the Act makes it clear that any loan or advance made to a shareholder by a company in which the public are not substantially interested would be treated as deemed dividend in the hands of such shareholders. The CIT(A) has correctly reached the conclusion that none of the shareholders of assessee or the assessee itself is a shareholder of Company from whom Loan is taken - neither Company imparting loan nor its shareholders are holding any shares in the assessee - Section 2(22)(e) does not provide that having a common Director in two companies would make Section 2(22)(e) applicable – Thus, Section 2(22)(e) is not applicable in respect of the loan advanced to the assessee – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (3) TMI 19
Deemed dividend u/s 2(22)(e) of the Act – Held that:- The assessee had debit balance as on 01.04.2008 which was continued up to 07.02.2009 - Thereafter, the company was advancing loan to the firm through cheques - CIT(A) has tabulated these advances in his order as annexure in totaling Rs.60,70,000/- which was received by the firm when the balances in the account of M/s Shree Vallabhlaxmi Cotton Pvt. Ltd. was showing credit balance - The payments have not been received against the sale and accordingly, the payments cannot be said to have been received in regular course of business and accordingly these are in the nature of loan and advances and the same are covered by the provisions of section 2 (22) (e) of the Act - The decision in CIT vs. Bharti Overseas Trading Co. [2012 (4) TMI 473 - DELHI HIGH COURT] followed - shares in the name of the partners, but advances made by the company to the firm has to be treated as deemed dividend u/s 2(22)(e) of the Act - As per section 2 (22) (e), any payment even to any concern in which such shareholder is a member or a partner in which he has substantial interest or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits is deemed dividend - The Assessee firm is not shareholder of M/s Shree Vallabhlaxmi Cotton Pvt. Ltd. but partner of the assessee firm who has substantial share in firm, is shareholder in M/s Shree Vallabhlaxmi Cotton Pvt. Ltd. – thus, the order of the CIT(A) upheld - Decided against Assessee. Deletion made on account of interest chargeable on loans given to sister concern – Held that:- The assessee has debit opening balance at Rs.1.04 crore which pertained to purchase made by the company from the assessee - the company also sold goods to assessee - All the transactions with company are mixed transactions –thus, there is no reason to charge interest notionally on debit balance - The income is to be assessed on the basis of real income not notionally – the order of the CIT(A) upheld. Deletion made on account of bogus purchase – Held that:- The AO worked out creditors erroneously by reducing the cheque payment for credit balance of entry as to be constructed which has been certified by the counsel of the assessee that there is no difference on account of creditor of M/s. Shree Vallabhalaxmi Cotton Pvt. Ltd – thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.
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2014 (3) TMI 18
Addition made - Salary accrue and received in India - Whether the authorities have erred in making and upholding the addition on account of salary considering it as accrued and received in India – Held that:- If an assessee acquires a right to receive an income, the income is said to have accrued to him even though it may be received later, on it's being ascertained, but this proposition will be relevant only when assessee gets a right to receive the income - the assessee gets his right to receive salary income when he renders the services and not when he simply receives the appointment letter. The assessee had to be regarded as having received the income outside India and the pension had been remitted or transmitted to the place where the assessee was living, as a matter of convenience and that would not constitute receipt of pension in India by the assessee, falling within s. 5(1)(a) of the Act - once an income is received outside India, whether in reality or on constructive basis, the mere fact that it has been remitted to India would not be decisive on the question as to income is to be treated as having been received in India - The connotation of an income having been received and an amount having being received are qualitatively different - The salary amount is received in India but the salary income is received outside India - It is elementary that an income cannot be taxed more than once but if, at each point of receipt, the income is to be taxed, it may have to be taxed on multiple occasions – thus, in a situation in which the salary has accrued outside India, thereafter, by an arrangement, salary is remitted to India and made available to the employee, it will not constitute receipt of salary in India by the assessee so as to trigger taxability under section 5(2)(a) of the Act – thus, the addition made is liable to be set aside – Decided in favour of Assessee. Addition on account of bank interest - Whether the authorities below have erred in making and upholding the addition on account of bank interest earned and credited in NRE account – Held that:- The HSBC has categorically indicated that the account is an NRE account - When this was pointed out to the Revenue, he did not have much to say except for placing his rather dutiful reliance on the orders of the authorities below – it is a specific mandate of Section 10(4)(ii) which exempts interest on NRE accounts from income tax – thus, the addition made is liable to be set aside – Decided in favour of Assessee.
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2014 (3) TMI 17
Penalty u/s 271(1)(c) of the Act – Inaccurate particulars furnished - Held that:- The conduct of the assessee demonstrates conscious disregard to his obligation - Payment of resultant taxes, consequent to survey and detection by the Department of the tax liability, does not absolve the assessee from the penal consequences u/s 271(1)(c) of the Act - Assessee has not been filing returns of income since 2002-03, and consequent upon on the survey action on the business premises of the assessee, when the development agreement in question was found, notice u/s 148 was issued to the assessee - assessee has not disclosed the capital gains arising on the transfer of the undivided share of land belong to the assessee - though the exemption u/s 54F has been claimed - the contentions of the assessee as to the debatable nature of taxability of the capital gains in respect of undivided share of land in the year under appeal, as also debatable nature of the computation of exemption under S.54F of the Act, has to be considered as mere afterthoughts. The plea of bona fide view nursed by the assessee about the non-taxability in the year of signing the development agreement also stands defeated in view of the contention as to the existence of two views on these issues - the assessee during the penalty proceedings before the assessing officer has given entirely different reason for the default committed by him, clearly shows that did not come out clean with all the facts and particulars of the income even in the return filed in response to notice u/s 148 of the Income-tax Act, or in the assessment proceedings thereafter, which shows that the assessee has deliberately tried to evade tax on capital gains - It was a clear cut case of concealment by the assessee to evade tax – the penalty levied by the CIT(A) is upheld – Decided against Assessee.
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2014 (3) TMI 16
Reduction of disallowance made from salary expenses – Held that:- The Assessing Officer did not express any doubt about the genuineness of expenses claimed –The contention of the assessee is accepted that the branches were spread mostly in Tamilnadu, the assessee had to employ persons hailing from Tamilnadu - the Assessing Officer has not doubt about the genuineness of the salary payment, even though he made certain observations about the nativity of the employees - there is no finding that the salaries were paid to related persons - the Assessing Officer has pointed out the deficiencies in the vouchers, yet the Assessing Officer did not take any step to prove that the vouchers were bogus - the issue under consideration is only that of an estimate for possible deficiencies – thus, there is no reason to interfere in the decision of CIT(A) – Decided against Revenue. Disallowance of "agents incentive" expenses u/s 40A(2)(b) of the Act – Held that:- The section does not provide for automatic disallowance of the claim for deduction of payments made to the persons specified in section 40A(2)(b) of the Act, as assumed by the Assessing Officer - The Assessing Officer is required to form an opinion that the said expenditure is excessive or unreasonable - the Assessing Officer has failed to prove that the concerns M/s. Systematic Associates and M/s. Image Associates are related parries as defined under section 40A(2)(b) of the Act - the view entertained by the Assessing Officer that the payments made to related parties and claimed as expenditure is required to be disallowed under section 40A(2)(a) is not the correct view - the Assessing Officer has not established that the payments made to the related parties are excessive or unreasonable under the three criterias specified in section 40A(2)(a) of the Act - there is no case for making disallowance of "agents incentive" expenses by invoking the provisions of section 40A(2)(a) of the Act – Decided against Revenue.
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2014 (3) TMI 15
Stay application - Transfer pricing adjustment u/s 92 of the Act – Assignment of call option on shares - Call centre business – Held that:- As made abundantly clear during the course of the hearing, it is not inclined to dwell on the merits of the case at any length, and the objective in the instant hearing was to have a snap shot of the case - This is purview at the stage of the proceedings is only to balance the conflicting interests of the opposite sides - even as explained there expressing a view either way may cause prejudice to either or even both the parties – besides also raise jurisdictional issues inasmuch as here the decision in regarding the stay application – thus, prima facie view, the assessee appears to have a good case - Though no case of financial hardship stands made out, the tax demand raised is itself at 22600% of the returned income of ₹ 10.65 crores, assessee directed to deposit ₹ 200 crores in two installments - stay granted partly.
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Customs
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2014 (3) TMI 14
Penalty under Section 114(i) and 114AA - Mis declaration of goods - export of fertilizer grade Potassium Chloride (Muriate of Potash - MOP) by declaring it as industrial salt, chemical grade (sodium chloride) - Held that:- all the persons on several occasions had stated the appellant’s name and there is a material evidence like invoice and shipping bill, where the appellant’s sister’s address is mentioned. The appellant failed to give any satisfactory explanation for use of the sister’s address except disowning the goods and denial the contents of statement of co-noticees. In my considered view the material evidence available in this case are sufficient for imposition of penalty on the appellant. Section 114AA provides penalty for use of false and incorrect material. It is evident that M/s. Sharmi Export Co. signed or used the declaration of export of goods. The charge in this case is mainly that the appellant does or omits to do any act which act or omission would render such goods liable to confiscation under Section 113 of the Customs Act, 1962. Therefore, the penalty imposed under Section 114(i) is justified - I set aside the penalty imposed under Section 114AA of the Customs Act, 1962 and uphold the penalty imposed under Section 114(i) of the Customs Act, 1962 - Decided partly in favour of assessee.
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2014 (3) TMI 13
Conversion of Shipping Bills from Drawback and EPCG Scheme to EPCG Drawback and DEEC Scheme - Whether conversion without any proof for rejection of their request for allowing the benefit on export promotion scheme by DGFT, is appropriate in terms of Circular No.4/2004 dated 16.01.2004 - Held that:- examination by the Central Excise Officer cannot substitute for examination by the Customs officer. - for enabling an exporter to draw the benefit of any scheme, not only physical verification of documents would be required, but also verification of the goods of export and their examination by the customs was necessarily required to be done - Following decision of The Commissioner of Customs (Seaport-Export) Versus M/s. Suzlon Energy Limited [2013 (3) TMI 506 - MADRAS HIGH COURT] - Decided against assessee.
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2014 (3) TMI 12
Denial of refund claim - Refund of extra duty deposit - Applicability of Section 27 - Held that:- impugned extra duty deposit has been collected as a form of security. Though the department contends that such deposit has to be treated as duty, such a bland contention cannot be accepted to deny refund of the security amount which has been deposited by the appellants at the time of provisional assessment - extra duty deposit appears to be more in the form of a security and not in the nature of duty. Hence the lower appellate authority applying the Board’s circular issued in the case of refund of pre-deposit to a case of refund of extra duty deposit cannot be faulted. Hence the impugned order requires no interference - Decided against Revenue.
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Corporate Laws
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2014 (3) TMI 11
Winding up of Company - Inability to pay debts - Held that:- Indian company (respondent), having received the goods and perhaps also turned them into profit, seeks to wriggle out of the liability to pay the dues to the UK company by taking specious pleas and also by placing an untenable interpretation on the settlement proposal by which the original dues of GBP 87,240 was brought down generously to GBP 32,240. It also appears to me to be a case where the respondent has the ability to pay, but does not choose to pay; in such a case, the court will not come to its defence - Following decision of Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1971 (10) TMI 49 - SUPREME COURT OF INDIA] - Decided in favour of appellant.
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Service Tax
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2014 (3) TMI 38
Extension of stay order - Operation of the orders expired in terms of the 2nd and 3rd pvosisos to Section 35C(2A) of the Central Excise Act, 1944 – Held that:- An order of waiver of pre-deposit granted under provisions of Section 35F does not, either expressly or by any compelling implication, have a legislatively enjoined sunset period. Waiver of pre-deposit granted always operates during pendency of the appeal. Pre-deposit is a threshold requirement for triggering the substantive jurisdiction of the Tribunal. Pendency of the appeals are not on account of any conduct of the appellants but on account of pendency of a large number of older appeals and a critical supply/demand mismatch in the Tribunal - it is appropriate to grant extension of the stay orders earlier granted, to operate during the pendency of the appeals – Following decision of R. Ariyappan and M/s. OPG Metals Pvt. Ltd. and others Versus Commissioner of Central Excise & Service Tax, Tiruchirapalli [2013 (12) TMI 457 - CESTAT CHENNAI] - Stay granted.
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2014 (3) TMI 37
Availment of CENVAT Credit - Whether the appellant liable to pay the service tax on the services received by them from offshore service provider under reverse charge mechanism of Section 66 A of Finance Act, 1994 read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994 by utilizing the cenvat credit - Held that:- issue stands decided in favour of the appellant by the judgements of the three High Courts -judgement of Punjab & Haryana High court in the case of Nahar Industrial Enterprises (2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT), judgement of Delhi High Court in the case of Hero Honda Motors (2012 (12) TMI 734 - DELHI HIGH COURT) and the judgement of Hon’ble High Court of Himachal Pradesh in the case of Auro Spinning Mills (2011 (7) TMI 849 - Himachal Pradesh High Court). In view of this, it is these judgements which have to be followed - Decided in favour of assessee.
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2014 (3) TMI 36
Cenvat Credit of service tax - Brokerage, air travel booking, transportation for employees - Held that:- The word “business”, is as has often been said, one of the wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense”. The words “relating to” further widen the scope of the expression “activities relating to business”. On the aforesaid ruling, the Commissioner (Appeals) found a prima facie strong case in favour of the assessee and accordingly allowed the credit of service tax paid on the input services - there is no infirmity in the orders passed by the Commissioner (Appeals) - Following decision of COCA COLA INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., PUNE-III [2009 (8) TMI 50 - BOMBAY HIGH COURT] - Decided against Revenue.
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2014 (3) TMI 35
Waiver of pre-deposit of tax - Interest u/s 75 - Penalties under Section 77 and 78 - Demand of tax - Construction of Residential Complex Service - Held that:- it appears from the Sale Deed and Construction Agreement that the applicant proposed to develop the property into a multi-storeyed residential complex not for personal use. Prima facie, we find that it is not a case that the applicant constructed the complex for personal use. Hence, the applicant has failed to make out a prima facie case for waiver of pre-deposit of the entire amount of tax and penalty - Conditional stay granted.
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2014 (3) TMI 34
Waiver of pre deposit - Cenvat Credit - Renting of Immovable Property - Input services i.e. Industrial or Commercial Construction Service - Held that:- prima facie, there was no direct nexus between the inputs/input services and the Renting of Immovable Property - Following decision of assessee's own previous case - Conditional stay granted.
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2014 (3) TMI 33
Service tax credit - Windmills maintained outside the factory - Held that:- Since the Tribunal has already granted stay in identical matters pre-deposit of balance dues is waived for admission of appeal in this case. Also its collection stayed during pendency of the appeal - Following decision of Hinduja Foundries Ltd. Vs CCE Chennai [2009 (9) TMI 543 - CESTAT, CHENNAI] - Stay granted.
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Central Excise
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2014 (3) TMI 42
Valuation of goods - Demand of duty - Period of Limitation - Suppression of facts - Inclusion of sales tax collected in the assessable value of goods - Whether the assessee was entitled to claim deduction under Section 4(4)(d)(ii) of the Act in respect of full amount of sales tax payable at the rate of 2% - Held that:- assessee has claimed that there is difference between grant of incentive and extension of benefit of exemption, and the scheme, i.e., the “Rajasthan Sales Tax Incentive Scheme 1989” does not relate to exemption but incentive. To elaborate, the assessee, under the said Scheme, is permitted to retain 75% of the sales tax collected as incentive and is liable to pay 25% to the department. 75% of the amount retained has been treated as incentive by the State Government. It is pointed out that such retention of sales tax is a deemed payment of sales tax to the State exchequer and for the said purpose reliance is placed on Circular No. 378/11/98-CX dated 12.3.1998 issued by C.B.E.C. On perusal of the assessment orders brought on record, it is quite clear that in pursuance of the Scheme 75% of the sales tax amount was credited to the account of the State Government as payment towards sales tax by the manufacturer. On a studied scrutiny of the scheme we have no scintilla of doubt that it is a pure and simple incentive scheme, regard being had to the language employed therein. In fact, by no stretch of imagination, it can be construed as a Scheme pertaining to exemption. Thus, analysed, though 25% of sales tax is paid to the State Government, the State Government instead of giving certain amount towards industrial incentive, grants incentive in the form of retention of 75% sales tax amount by the assessee. In a case of exemption, sales tax is neither collectable nor payable and if still an assessee collects any amount on the head of sales tax, that would become the price of the goods. Therefore, an incentive scheme of the present nature has to be treated on a different footing because the sales tax is collected and a part of it is retained by the assessee towards incentive which is subject to assessment under the local sales tax law and, as a matter of fact, assessments have been accordingly framed. In this factual backdrop, it has to be held that circular entitles an assessee to claim deduction towards sales tax from the assessable value. Unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of “transaction value” under Section 4(4)(d), for it is not excludible. As is seen from the facts, 25% of the sales tax collected has been paid to the State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of “transaction value” as substituted with effect from 1.7.2000. Therefore, the assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book. Assessees in all the appeals are entitled to get the benefit of the circular dated 12.3.1998 which protects the industrial units availing incentive scheme as there is a conceptual book adjustment of the sales tax paid to the Department. But with effect from 1.7.2000 they shall only be entitled to the benefit of the amount “actually paid” to the Department, i.e., 25%. Needless to emphasise, the set off shall operate only in respect of the amount that has been paid on the raw material and inputs on which the sales tax/ purchase tax has been paid. That being the position the adjudication by the tribunal is not sustainable. Similarly the determination by the original adjudicating authority requiring the assessees to deposit or pay the whole amount and the consequential imposition of penalty also cannot be held to be defensible. Therefore, we allow the appeals in part, set aside the orders passed by the tribunal as well as by the original adjudicating authority and remit the matters to the respective tribunals to adjudicate as far as excise duty is concerned in accordance with the principles set out hereinabove - Decided partly in favour of Revenue.
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2014 (3) TMI 41
Recovery of refund already allowed - duty under protest - Directions given by Central Excise & Gold (Control) Appellate Tribunal and High Court of Bombay to refund the amount along with interest - Captive consumption - Unjust enrichment - Held that:- this case hardly involves any legal issue but we feel more concerned about the hard luck of the appellant, a manufacturer of PVC Coal Conveyor Belting made from imported Nylon Yarn. Apparently, there was no issue of captive consumption in the instant case and yet the appellant was directed to file an undertaking as stated hereinabove in the order. Being in need of money, the appellant filed an undertaking under protest, though, in our opinion, it was not necessary for the Deputy Collector, Central Excise and Customs, Aurangabad to ask for such an undertaking. Be that as it may, the said order was not challenged by anybody and therefore, it attained finality. Amount of duty paid by the appellant had never been passed over to the purchasers and the said fact has been duly recorded by the Deputy Collector, Central Excise and Customs, Aurangabad in his order dated 5th April, 1995. The said order has attained finality as nobody challenged the said order. An undertaking, though strictly not required to be given, was given by the appellant as demanded under the aforestated order dated 5th April, 1995 and ultimately the amount had been refunded to the appellant. In our opinion, there is no question of demanding the said amount again, especially when the facts which had been disputed by the Revenue before the Tribunal had already been admitted in the proceedings which had been initiated by the Deputy Collector, Central Excise and Customs, Aurangabad in his order dated 5th April, 1995 - Decided in favour of assessee with costs.
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2014 (3) TMI 10
Endorsement of gate passes - Whether endorsed gate passes were valid documents in terms of Rule 57G of the Central Excise Rules, 1944 - Held that:- It is evident from the above that the Central Board of Excise and Customs has issued Circular No. 600/37/2001-CX on 19.11.2001 accepting the decisions of Moosa Hazi Patrawala P. Ltd. v. CCE (1996 (1) TMI 220 - CEGAT, BOMBAY) which in turn was decided along with Gujarat Medicraft Pvt. Ltd. (2000 (11) TMI 1210 - GUJARAT HIGH COURT) In view of this development, the reference is answered in favour of the assessee and against the revenue.
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2014 (3) TMI 9
Principle of natural justice - passing an order nine months after the conclusion of hearing - Duty demand under Section 11A(2) - Equivalent penalty has also been imposed under Section 173Q(bb) of the Central Excise Rules, 1944 - Held that:- authorities under the Act are obliged to dispose of proceedings before them as expeditiously as possible after the conclusion of the hearing. This alone would ensure that all the submissions made by a party are considered in the order passed and ensure that the litigant also has a satisfaction of noting that all his submissions have been considered and an appropriate order has been passed. It is most important that the litigant must have complete confidence in the process of litigation and that this confidence would be shaken if there is excessive delay between the conclusion of the hearing and delivery of judgment. Delay by the Adjudicating Authority in rendering its order nine months after the conclusion of the hearing has caused prejudice to the Petitioner as it has not considered the evidence produced in respect of return of goods within 180 days - we set aside the impugned order dated 31 July 2013 and direct the Additional Commissioner of Central Excise and Customs to pass a fresh order after granting the Petitioner an opportunity of personal hearing - Decided in favour of assessee.
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2014 (3) TMI 8
Reversal of CENVAT Credit - removal of goods against CT-3 certificate without payment of duty - High Court relied on decision of MANAKSIA LTD. Versus COMMISSIONER OF C. EX., KOLKATA-IV [2007 (5) TMI 93 - CESTAT, KOLKATA] and has not recorded any reason - Held that:- said order had been overruled by a larger Bench of the Tribunal in "Lakshmi Automatic Loom Works Ltd. Vs. Commissioner of Central Excise, Trichy [2008 (10) TMI 57 - CESTAT CHENNAI] - Unfortunately, the above aspect of the matter had not been brought to the notice of the High Court when the High Court had passed the impugned order - In the above circumstances, we quash and set aside the order passed by the High Court and remand the matter to the High Court with a request to the High Court to decide the matter afresh, preferably within four months from the date of receipt of this order by hearing the concerned advocates afresh, without giving any undue adjournments to either of the parties - Decided in favour of Revenue.
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2014 (3) TMI 7
Default in making Central Excise duty payment - Penalty under Rule 25 of the Central Excise Rules, 2002 - Default under Rule 8 - Held that:- there was no intention on the part of the respondent assessee to evade any payment of duty. It is only because of stringent financial condition, that the duty could not be paid in time and as soon as liquidity was available, duty was paid along with interest. The Tribunal has, therefore, rightly come to the conclusion that penalty could not be levied under Rule 25 of the Rules and for the alleged default, the penalty was restricted to Rs. 5,000/- in each matter under Rule 27 of the Rules - Following decision of Commissioner of Central Excise and Customs Vs. Saurashtra Cement Ltd. [2010 (9) TMI 422 - GUJARAT HIGH COURT] and Siyaram Packaging Pvt. Ltd. Vs. CCE, Daman [2013 (4) TMI 382 - CESTAT AHMEDABAD] - Decided partly in favour of assessee.
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2014 (3) TMI 6
Availment of CENVAT Credit - Whether the assesee is entitled to take CENVAT credit on the inputs which have been used for trial run/testing of the capital goods - Held that:- Following decision of Flex Engg. Ltd. Versus Commissioner of Central Excise [2012 (1) TMI 17 - Supreme Court of India] - therefore respondents are entitled to take CENVAT credit on the inputs which have been used for trial/testing of the goods - Decided against Revenue.
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2014 (3) TMI 5
Imposition of penalty - Denial of CENVAT Credit - Credit in respect of the service tax paid on CHA services, Telephone charges, Insurance charges and repairs and maintenance of factory, courier services and motor vehicle repair charges - Held that:- The credit in respect of CHA services, Telephone charges, Insurance charges, repair and maintenance of factory and courier services is allowed. In respect of repair of motor vehicles I find no infirmity in the impugned order where the same has been disallowed as there is no nexus between the services and the activity of manufacture - demand denying credit on CHA service, telephone service, insurance charges, repair and maintenance of factory and courier service is set aside and consequently the penalties are also set aside. The demand with interest and consequential penalty in respect of denial of credit on repair of motor vehicles is upheld - Decided partly in favour of assessee.
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2014 (3) TMI 4
Denial of Input service credit - Held that:- As it is a case of availment of input service credit on the services of housekeeping, courier, freight and forwarding service, which have been availed by the appellant and same has been transferred to various division, which actually availed the services in question. Therefore, I hold that the appellant are entitled to availed CENVAT Credit on the input service except the services availed by Emco Energy Ltd. to the tune of Rs. 1134 - appellant are directed to reverse the same and are liable to equal penalty - Decided partly in favour of assessee.
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2014 (3) TMI 3
Valuation of goods - Valuation of physician samples - Valuation u/s 4 as transaction value or u/s 4A as MRP - Held that:- it is admitted fact in the cases in hand that these physician samples were cleared by the appellant on principle to principle basis on a transaction value, which was admissible at the time of clearance of the physician samples, than the transaction value is to be determined as per Section 4 (1) (a) of the Act - Following decision in the case of Themis Laboratories Pvt. Ltd. [2011 (2) TMI 713 - CESTAT, MUMBAI] - Decided in favour of assessee.
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2014 (3) TMI 2
Denial of CENVAT Credit - Credit taken on the endorsed invoices - Held that:- Credit was taken on the basis of invoices endorsed by a whole sale dealer wherein in this case the facts are totally different as invoice has been issued on unit No.1 which is a sister unit and the goods have been transferred to Unit NO. 2 therefore the first unit endorsed the invoices of their Unit No.2. In the case of Coimbatore Murugan Mills (2003 (3) TMI 227 - CEGAT, CHENNAI) this Tribunal held that if there is transfer of goods between the same appellant in different units, credit can be taken on the basis of endorsed invoices. In this term, I hold that the appellants are entitled to take credit - Decided in favour of assessee.
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2014 (3) TMI 1
Demand of interest - Cenvat Credit on capital goods when finished goods exempted later - Interest for the intervening period - Capital Goods cleared later - Held that:- when the capital goods were procured by the appellant they were entitled to take credit and product was dutiable. Although the product became duty free on 09.07.2004 but there was no bar for capital goods to reverse the credit on said date and thus capital goods have been cleared on payment of duty. As there is no duty liability on 09.07.2004, the appellants were not required to pay interest for the intervening period - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (3) TMI 40
Waiver of pre deposit - Adjustment of refund - Held that:- even before the tribunal the appellant’s main request was for reduction of predeposit requirement from 25% to 20% and to grant installments - for such minor adjustment, we would not like to interfere in tax appeals, since no question of law can be stated to have arisen. Having said that we are still prepared to grant some further time to the appellant to fulfill the predeposit condition. Effectively this would cover the period of extension previously prayed by the appellant before the tribunal - Extension of time granted for pre deposit - If such amounts are deposited, the appeals of the appellant before the first appellate authority shall be taken up for hearing on merits. The appellate authority shall endeavour to hear the appeals expeditiously and preferably within four months thereafter - Decided partly in favour of assessee.
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2014 (3) TMI 39
Stock transfer or interstate sale - Whether in view of the agreement with Delhi Administration, a perusal of which clearly shows that the applicant has to maintain a buffer stock as well as there was no guarantee for purchase of any specific quantity of 50 degree up Rum, still the authorities were justified in treating the stock transfer made to Delhi Depot as inter-State sale - Held that:- As is evident from the terms of the agreement, the intention of the parties was to bring about intra-State sales at Delhi from warehouse of the dealer that it was required to establish within the territory of Delhi where the dealer was required to maintain a buffer stock of atleast two trucks without any guarantee of any purchase being actually made by the Delhi Administration. As and when the Delhi Administration would make the purchases, the dealer who was to be a L1-A licensee would supply the goods and replenish the stocks and the things would go on like that during the currency of the agreement. Therefore, as is indicated by the agreement, the movement of the goods to Delhi was not in pursuance of any transaction of sale but in pursuance of the licence under which the dealer was to maintain a warehouse with a minimum stock within the territory of Delhi. The agreement by itself did not bring about any sale or purchase and, therefore, the transport of goods from the distillery in U.P. to warehouse in Delhi could not be treated as a movement of goods occasioned by any sale or purchase. Assessing officer has not probed further into the matter to find out if there was no buffer stock at Delhi and the goods were transported from the distillery only on receipt of the orders. Therefore, there is no evidence to show that the supply of rum to the Delhi Administration in the three years resulted in any inter-State sales taxable in State of U.P. The findings of the authorities below are based on a misconception about the nature of the agreements dated 27th of December, 1984 which, as stated above, did not bring about any sale or purchase. The Tribunal's finding, therefore, that the disputed turnover was taxable as inter-State sales suffers from a legal error and is hereby set aside - Following decision of M/s Central Distillery and Breweries Ltd., Meerut Vs. Commissioner of Trade Tax [1999 (4) TMI 585 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.
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