Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 8, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Supreme Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the “notorious practice” prevailing in trade circles - HC
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Sale consideration - sale of shops held as stock in trade - Section 50C does not apply to the present case as it applies only to a case of capital gains - HC
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Period of limitation for revision u/s 263 - held that:- limitation would be counted from the reassessment order passed u/s 143(3) r.w.s 147 being the first regular assessment. - AT
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Revision u/s 263 - power of CIT to revise - return processes u/s 143(1) is not subjected to revision - AT
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Uniform expenses - Merely because the stitching charges are more than the cost of the cloths, the same, in our opinion, cannot be a ground for disallowing the expenditure. - AT
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MAT - Adjustment of book profit - When the asset has been discarded and dismantled, then in the absence of physical existence of the useful assets, mere retention of the assets in the books of account would not entitled for any depreciation even under the provisions of Companies Act. - AT
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Advances written off - Bad debts - Unless loss arose in the course of business, the same cannot be allowed under section 28. Prima facie it is clear to us that the amount is not allowable as loss. - AT
Service Tax
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Service tax return (ST-3) filing date extended to 15-4-2013 for the period July, 12 To Sept, 12
Central Excise
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Cenvat Credit - Exempted and dutiable goods - by product - provisions of Rule 6(2) and Rule 6(3) read together will cover the case of the assessee inasmuch as they have reversed an amount as indicated in the provisions of Rule 6(3) - AT
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Cenvat credit denied as not availed immediately on receipt of the inputs - The word ‘may’ in sub-rule (1) of Rule 4 cannot be read as ‘shall’. - AT
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Cenvat Credit - if the Department holds that the manufacturer is required to pay duty at a certain rate, it cannot in the same breath contend that the manufacturer would not be entitled to avail CENVAT credit on the inputs used in manufacturing such goods. - HC
Case Laws:
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Income Tax
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2013 (3) TMI 138
Transfer of Petitioner's case from DCIT-8(1) Mumbai to DCIT, Delhi - validity of notice u/s 127(2) - Assessee against non providing of intimation of transfer - Held that:- The order of transfer was passed on 5 January 2012. As the endorsement by the registry in the present case in respect of the date of filing is 23 October 2012. Though the assessee had by its letters dated 7 February 2012, 20 April 2012 and 7 May 2012 requested the AO to hold proceedings in abeyance since a Petition was being filed before this Court, no Petition was filed until the last week of October 2012. The Petition was moved before the Court for the first time on 2 January 2013. The assessment proceedings for A.Y. 2010-11 would become time barred by 31 March 2013 in view of the mandate of Section 153(1)(a). The present case does not fall within the ambit of the provisions of Section 153 (3) including clause (ii). The assessee has waited for nearly ten months before instituting the proceedings. Having regard to the fact that the assessment would otherwise become time barred, the ends of justice would require that the final order that the Court would pass should be so modulated to balance the need to comply with the principles of natural justice on the one hand with the necessity of protecting the Revenue on the other. No interference with the order dated 5 January 2012 to the extent that the case file stands transferred to New Delhi in relation to the assessment proceedings for A.Y. 2010-11 on the ground of the delay on the part of the assessee in moving this Court in relation to the transfer pertaining to proceedings for A.Y. 2010-11 which, would become time barred on 31 March 2013.
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2013 (3) TMI 128
Proceedings under Sec. 148 - notice to only one of the legal representatives [LRs] of deceased Mangi Lal Bhatia & not to other LRs - whether a valid initiation of proceedings ? - review application - Revenue sought review of the order whereby co-ordinate Bench proceeded to dismiss the appeal considering it to have abated for failure on the part of the appellant to bring the legal representatives of the sole respondent on record - Held that:- A bare look at the impugned order dated 16.09.2011 makes it clear that the co-ordinate Bench proceeded to consider the appeal as having abated for the legal representatives of the sole respondent having not been brought on record. The observations have been made even to the effect that the appellant Revenue had not moved any application seeking substitution of the legal representatives of the sole respondent. It is but clear that while passing the aforesaid order dated 16.09.2011, the facts got overlooked that the appellant Revenue had indeed moved an application seeking substitution of the legal representatives of respondent Badri Prasad way back on 22.11.2005 and that the matter was being processed upon the said application only, and the notices were ordered to be issued on 22.11.2005 to the proposed legal representatives. The observations in the order dated 16.09.2011 are also indicative that the said Badri Prasad Bhatia was himself taken to be the sole assessee though he was on record only as the legal representative of the original assessee Mangi Lal. In any case, the appeal, in the given status of record, could not have been considered as having abated and hence, the order impugned dated 16.09.2011 is required to be recalled. Of course, it is noticed that there had been defaults on the part of the appellant where the requisites for service of notice to the proposed legal representatives were not put in, it might have been considered the effect of this aspect of the matter but now, when the counsel Mr. Vipul Singhvi has put in appearance on behalf of the proposed legal representatives, of course, in this review petition, there does not appear any reason to enter into this aspect of the matter any more. However, it is considered appropriate and hence observed that so far the prayer seeking substitution of the legal representatives of the sole respondent Badri Prasad Bhatia is concerned, it remains to be examined and considered in appeal. The appearance on behalf of the non-petitioners in this petition could only be considered as made on behalf of the proposed legal representatives. Needless to add that further processing of the appeal shall also depend on the order to be passed on the application seeking substitution of the legal representatives. The proposed legal representatives in the appeal shall be considered as having been served with appearance of the learned counsel Mr. Vipul Singhvi on their behalf.
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2013 (3) TMI 127
Lease rent of the machinery said to have been taken on hire disallowed - as per AO the lease agreement was of financing and not of operational work hence the lease rent was not that of business expenditure - ITAT affirmed the order of CIT (A)deleted the addition - Held that:- As decided in CIT Vs. Shaan Finance (P.) Ltd (1998 (3) TMI 8 - SUPREME COURT) and Rajshree Roadways Vs. Union of India & Ors (2003 (3) TMI 50 - RAJASTHAN HIGH COURT) the findings of the CIT (A) and the Tribunal, allowing lease rental as business expenditure, not calling for any interference - in favour of assessee.
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2013 (3) TMI 126
Search u/s 132 - 1004.8 gms of gold ornaments seized - demanding the bank guarantee for the entire value of the jewellery seized - Held that:- A bare perusal of the Circular issued by CBDT(Annex.8) dated 21st January, 2009 indicates that detention of the assets has been provided and permitted only so long as there is some outstanding demand of tax and penalty against an assessee or expected liability of such tax or penalty, obviously to safeguard the interest of Revenue for the realization or recovery of such demand of tax, interest and penalty. But, in the present case, admittedly there is no demand of tax, interest and penalty outstanding against the petitioner for the period in question, for which the assessment orders were passed, there is no justification for detention of seized assets particularly jewellery, which includes her personal 'Stridhan' for which more than five years have lapsed by now. At the same time, the demand of bank guarantee to the extent of full value of said jewellery vide the impugned communication dated 16.04.2012 also does not appear to be justified in these circumstances. The continued detention and retention of these Gold ornaments and jewellery of petitioner - assessee by the respondent- Income-tax Department is without any valid reason - in favour of assessee.
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2013 (3) TMI 125
Addition u/s 40A(2)(b) - ITAT deleted the addition - assessee Hindu Undivided Family is a proprietor of M/s Essma Woolen Mills - ITAT set aside the findings recorded by the AO - Held that:- Section 40A(2) authorizes the authorities under the Act to disallow the deduction, if it is found that such expenditure is excessive or unreasonable. It will be a question of fact in each case whether the expenditure claimed as a deduction is excessive or unreasonable. Though the Assessing Officer has found the expenditure as excessive but not only the CIT (A), Amritsar, but also the Tribunal did not found part of such expenditure as excessive or unreasonable. No substantial question of law for consideration by this Court.
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2013 (3) TMI 124
Assessment of rental income - whether be assessed under the head “income from business” or “income from house property” - Held that:- Substantial question of law is to be answered in the negative in favour of the Revenue and against the assessee in view of the judgment of CIT Vs. M/s Ansal Housing Finance and Leasing Co. Ltd. & Ors. [2012 (11) TMI 323 - DELHI HIGH COURT] wherein held that the rental income should not be assessed under the head “income from business” but under the head “income from house property”. Whether the sale consideration disclosed by the assessee on sale of shops should be accepted ? - assessee is engaged in the business of construction of commercial complexes - Held that:- It is not correct to say that the assessee did not satisfactorily answer the queries raised by the AO on noticing the absence of registered sale documents, variations in sale prices of shops in the same floor, sale of shops to sister concerns, etc. They have all been answered by the assessees accordingly. Neither the CIT (Appeals) nor the Tribunal found anything amiss in those replies/ submissions. The power of the AO to raise valid queries on the basis of the facts or unusual features noticed by him must be conceded. The features noticed by him in the assessees’ business certainly constitute a starting point of inquiry. They are, however, not to be taken as evidence or material showing any suppression or understatement of the sale price. If on further probe, AO was able to unearth any evidence or material on the basis of which actual suppression of the sale price could be found, then the additions made on that basis would be valid. It is not open to AO merely on the basis of what he perceives to be the market conditions, to make additions to the sale price or the profits, without any evidence of understatement. These principles have been kept in mind by the Tribunal and, therefore, its order cannot be faulted or branded as perverse in holding that the sale consideration disclosed by the assessee on sale of shops should be accepted. Also there is no other provision in the Act permitting the AO to enhance the profits or the sale price except section 50C and section 92BA. Section 50C does not apply to the present case as it applies only to a case of capital gains. Section 92BA also does not apply as it came into force only from the assessment year 2012-13. Moreover, it applies only to such domestic transactions as may be prescribed by the competent authority. Addition on the basis of “notorious practice” prevailing in real estate circles that in all property transactions there is non-disclosure of the full consideration - Held that:- This cannot per se constitute the basis of the addition as in Lalchand Bhagat Ambica Ram vs. CIT (1959 (5) TMI 12 - SUPREME COURT) the Supreme Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the “notorious practice” prevailing in trade circles - in favour of the assessee - appeals filed by the revenue are partly allowed.
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2013 (3) TMI 123
Revision u/s 263 - whether the return of income processed u/s 143(1) and intimation u/s 143(1)(a) amounts to an order passed by the Assessing Officer or not and whether it is subjected to revision u/s 263. - held that:- In view of the decisions and as the issue understood by the Hon’ble Punjab & Haryna High Court in Kartar Singh & Co P Ltd (2007 (12) TMI 132 - PUNJAB AND HARYANA HIGH COURT) after considering the decision of the Hon’ble jurisdictional High Court in the case of Anderson Marine &Sons P Ltd (2003 (12) TMI 47 - BOMBAY HIGH COURT) as well as the decision of the Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd (2007 (5) TMI 197 - SUPREME COURT), it is clear that the return processes u/s 143(1) is not subjected to revision. - in favor of assessee. Revision u/s 263 in respect of order u/s 147 r.w.s. 143(3) - held that:- Once the assessment has been reopened, the Assessing Officer was expected to follow all the relevant general provisions for framing the assessing as in the case of regular assessment and find out whether any income chargeable to tax has escaped assessment or not. - n a case where the Assessing Officer allowed a claim without examining the records but there is possibility of taking a view in favour of the assessee, then it may be said that the Assessing Officer has taken a possible view. But when the claim of the assessee is not allowable and there is no possibility of two views, then allowing the claim by the Assessing Officer without examining and application of mind would definitely render the assessment order erroneous so far as prejudicial to the interest of revenue and Commissioner has the power to exercise the jurisdictional u/s 263. The Full Bench of the Hon’ble Kerala High Court in CIT vs Best Wood Industries & Saw Mills [2010 (12) TMI 748 - KERALA HIGH COURT] has held that there is no difference between the income escaping assessment and regular assessment so far as the proceedings to be followed by the Assessing Officer. It is observed by the Full Bench of the Hon’ble High Court that taking all evidences etc., which are the same for the regular assessment and the income escaping assessment. The Hon’ble High Court has thus, overruled the decision in the case of Travancore Cements Ltd. (2006 (9) TMI 174 - KERALA HIGH COURT). Non address of the issue resulting allowance of impossible claim establishes the non application of mind on the part of the Assessing Officer during the reassessment proceedings and consequently render the order passed u/s 147 r.w.s 143(3) as erroneous and prejudicial to the interest of revenue. - Decided in favor of revenue. Period of limitation for revision u/s 263 - held that:- limitation as stipulated under sub sec. (2) of sec. 263 would be counted from the reassessment order passed u/s 143(3) r.w.s 147 being the first regular assessment. - Decided in favor of revenue.
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2013 (3) TMI 122
Disallowance of notional interest - AO noted that the assessee had borrowed heavy loans on which substantial interest running into crores had been paid. However, it was also noted by him that the assessee had given loans/deposits to certain parties on which no interest was charged. - It has been submitted by the assessee that loans and deposits had been given out of own funds and therefore, even if there was no connection with business, no disallowance could be made out of interest paid on borrowings. - held that:- three is no dispute that loans/deposits had been given from own funds as AO himself in para 4.3 of the order has noted that the assessee had used surplus funds for non business purposes. Once the loans/deposits have been given out of own funds, disallowance of interest paid on borrowings will not be justified. - Decided in favor of assessee. Deduction u/s 80IB - industrial undertaking - held that:- deduction under section 80IB will be allowable in respect of sales tax set off and excise duty rebate but not in relation to the rental and interest income. - partly in favor of assessee. Penalty u/s 271(1)(c) - held that:- Considering the smallness of the amount and this being the first year of amended provisions, in our view the claim of depreciation at a higher rate has to be considered due to bonafide mistake. Therefore, in our view it is not a fit case for levy of penalty for concealment of income when all necessary details had been filed with the return of income. - Penalty deleted.
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2013 (3) TMI 121
Expenditure on furniture and fixture - current repairs - capital or revenue in nature - assessee has to create and maintain the cabins to be given on rent to tenants as business centre. - held that:- The A.O. has basically gone on the presumption that the amount incurred being huge is capital in nature and is not current repair and in the previous year such expenses have even capitalised by the assessee. We find the ld. CIT(A) while allowing the claim of the assessee merely relied on the arguments of the assessee that the incurrence of the expenses and the genuineness of payments to various parties are not doubted. According to the ld. CIT(A) the property belongs to MMTC and the assessee has to make some changes in the existing furniture as per the need of the tenant and no new asset has come into existence. - matter remanded back for fresh consideration. Uniform expenses - A.O. doubted the requirement of so many pieces of safari suits. According to him the bills dtd. 2.3.2005 & 21.03.2005 appear to have been prepared on one date at the fag end of the year so as to inflate the expenses. Further the assessee has also failed to deduct the TDS from such payments as stitching charges come under works contract. - held that:- The various staff in the business centre are usually provided with uniform. Merely because the stitching charges are more than the cost of the cloths, the same, in our opinion, cannot be a ground for disallowing the expenditure. - Decided in favor of assessee.
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2013 (3) TMI 120
Depreciation - Block of assets - assessee discarded the assets in question in pursuance to the International Treaty called “Montreal Protocol” and received the compensation of 15.60 crores. - held that:- It is clear that the provisions of sec. 32(1)(iii) stipulate the depreciation in case of the assets which is sold, discarded, demolished or destroyed is the amount, which is different between the written down value of the asset and scrap value. - the assessee has not claimed that the compensation received by the assessee in lieu of the discarded asset is short of its written down value; therefore, the claim of the assessee for depreciation on the written down value of the discarded assets is not permissible as per provisions of sec. 32 of the I T Act. MAT - Book profit - whether the Assessing Officer while computation book profit u/s 115JB can look into depreciation provided in the books of account on the assets which have already been discarded and not in use because of the activity permanently closed, is permitted as per the AS-6 as well as under the provisions of Companies Act. - held that:- Once the assessee closed the factory then the decision of the assessee to book the depreciation of dismantled assets has to be decided as per the provisions of companies Act as well as AS-6. The fundamental principle for providing deprecation on asset is diminution in the value of the assets due to wear and tear as a result of use or retain for business of the assessee. Thus, underline rule for depreciation is use or retain of assets for the purpose of the business of the assessee. When the asset has been discarded and dismantled, then in the absence of physical existence of the useful assets, mere retention of the assets in the books of account would not entitled for any depreciation even under the provisions of Companies Act. Assessing Officer has power to examine whether the accounts are maintained as per the Accounting Standard and policies as provided under the Companies Act. The Special Bench of the Tribunal in Rain Commodities Ltd. v. Deputy Commissioner of Income-tax [2010 (7) TMI 794 - ITAT HYDERABAD], after considering the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME COURT) as well as the decision of the Hon’ble jurisdictional High Court in the case of Akshay Textiles Trading & Agencies (P.) Ltd. [2007 (10) TMI 251 - BOMBAY HIGH COURT] & the decision of the Bombay High Court in the case of Veekaylal Investment Co. (P.) Ltd. [2001 (2) TMI 117 - BOMBAY HIGH COURT] has taken a view that the decision in the case of Veekaylal Investment Co. P. Ltd. [2001 (2) TMI 117 - BOMBAY HIGH COURT] has not been overruled by the decision in the case of Akshay Textile Trading & Agencies Pvt. [2007 (10) TMI 251 - BOMBAY HIGH COURT] - Decided in favor of revenue.
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2013 (3) TMI 119
Claim of bad debt - provisions of Section 36(1)(vii) r.w.s. 36(2) - The Assessing Officer was of the opinion that these amounts did not pertain to revenue a/c and was more than 5 years old and hence not allowable as business expenses - held that:- matter remanded back for verification of submissions made by the assessee. Advances written off - Bad debts - held that:- Since Perfect Engineering Associates is a sister concern, the need for claiming it as a loss has not been properly explained. Even though it was stated that the loss was crystallized during the year as it was written off during the year, the assessee could not justify how the loss was allowable for the purpose of business. Unless loss arose in the course of business, the same cannot be allowed under section 28. Prima facie it is clear to us that the amount is not allowable as loss. - however matter remanded back for verification.
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Customs
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2013 (3) TMI 118
Non payment of duty - goods imported meant for Nepal and after clearance at the Calcutta Port without payment of duty have been diverted to Mumbai for sale in the local market - Held that:- The counter affidavit/reply filed by the appellant herein (respondent No. 2 before the High Court) has not been placed on record with the Appeal. The High Court in the impugned order has not accepted the bill of entry tendered by the appellant herein in proof of payment of duty and has also commented upon his conduct. There is no dispute that the subject goods are dutiable. The fate of this Appeal depends on answer to the question whether duty has been paid on the subject goods or not.
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Corporate Laws
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2013 (3) TMI 116
Arrears of rent - respondent-company was in occupation of the premises belonging to the petitioner under lease license agreement who failed to vacate the premises and pay the licence fee - During the pendency of the suit filled by petitioner the parties arrived at compromise - respondent filed Civil Revision Petition before the High Court Mumbai who remanded to proceed with the case & Execution came to be closed in which the petitioner was directed to refund Rs. 22,00,000/- to the respondent-company and in turn, the respondent-company had agreed to vacate the vacant possession of the schedule premises & with regard to the Municipal Tax, Telephone charges etc, liberty was reserved to the petitioners to agitate the same before the Appropriate Forum - Held that:- When these are the claims made in Annexure-A, the same has not been supported by any materials like electricity, telephone and municipal ,bills or even of municipal tax receipts etc. By claiming as per Annexure-A, descriptions are not at all supported and the same should have been claimed by producing original receipts, tax receipts etc. and further the same should have been proved by adducing evidence on behalf of the parties. Though Division Bench has specifically made an observation to provide an opportunity to the parties to lead evidence, that has not been complied by the parties. More particularly the petitioner in proving his claims and virtually the claim is made only on the basis of the typed script and no original material is produced and the parties are not at all examined. Under these circumstances, the demand made in the statutory notice dated 12.10.1996 Annexure-O cannot be construed as debt and though liberty was reserved by the Mumbai High Court to the petitioners to agitate in respect of the those points, without referring to any liberty or opportunity, the same mandates to do that and agitation should be on the basis of the materials and evidence - company petition is hereby dismissed.
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Service Tax
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2013 (3) TMI 134
Rectification of mistake - wrong order got issued - held that:- At the stage of dictating order on 5-6-2012, no objection regarding the facts or the arguments dictated was raised by either side. Therefore, our inference is that order was dictated correctly. Though the transcription which got signed relate to a different matter. Therefore, it is very obviously a mistake apparent on record and needs correction at any rate and therefore, we decided to dictate the appropriate order afresh. The order dictated separately would be held as the correct order passed in the appeal of M/s. Paramount Communication Wire and Cables Ltd. [2013 (3) TMI 38 - CESTAT NEW DELHI]. - Earlier order is withdrawn & ROM is allowed.
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2013 (3) TMI 133
Refund of Cenvat Credit - Rule 5 of CCR - Export of services - rejection on the ground of nexus between input and output services - rejection on the ground that services are not directly exported from the premises of the appellant but were routed through telecom service provider - rejection on the ground that IT services were not taxable prior to 16.03.2008 and therefore CENVAT credit could not be taken. held that:- Allowing the cenvat credit matter remanded back in to verify the facts in view of decisions WNS GLOBAL SERVICES (P) LTD Versus COMMISSIONER OF CENTRAL EXCIE, MUMBAI [2008 (1) TMI 64 - CESTAT, MUMBAI] and Repro India Ltd. v. Union of India 2007 (12) TMI 209 - BOMBAY HIGH COURT] and CCE v. Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT].
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2013 (3) TMI 132
CENVAT credit on capital goods denied - interest and equivalent amount of penalty u/s 78 of the Finance Act, 1994 read with CENVAT credit Rules, 2004 levied - assessee contested against demand as barred by limitation - Held that:- As the appellant did not intimate regarding the installation of two units therefore CENVAT credit on capital goods on these two units prima facie is not available to the applicant. Under these circumstances the applicants have failed to make out a case for 100% waiver of pre-deposit, thus directed to make pre-deposit of 50% of the impugned demand on account of denial of CENVAT credit within 12 weeks and report compliance on 18.02.2013.
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2013 (3) TMI 130
Recalling of final order - held that:- An order cited by the learned Superintendent (AR) in favour of the department was passed by a learned Single Member. We note that the said order [2011 (5) TMI 545 - CESTAT, CHENNAI] did not consider the relevant provisions of the General Clauses Act which are being invoked by the learned counsel for the present appellant. In this scenario, we are inclined to recall Final Order [2012 (9) TMI 596 - CESTAT, BANGALORE] and direct that the appeal and stay application be listed on 21-3-2012 for being heard with other similar matters.
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Central Excise
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2013 (3) TMI 117
Cenvat Credit - Exempted and dutiable goods - by product are to be considered or not - Reversal of Credit - Rule 6 of Cenvat Credit - held that:- the adjudicating authority in Para 18, had categorically come to the conclusion that the some of the products like Peppermint Oil, etc. were excisable and dutiable. The only question that has been incorrectly construed by adjudicating authority is that according to him, the Menthol Crystals (BP/USP Grade) is the main product and other products were not produced independently, through a separate process of manufacture and were only unintended byproducts obtained from residual material left after the manufacture of exempted goods. - this is an incorrect proposition in law. The entire provisions of Rule 6, if read together, would indicate that there has to be an exempted final product and there has to be dutiable final product. - provisions of Rule 6(2) and Rule 6(3) read together will cover the case of the assessee inasmuch as the appellant has claimed that they have reversed an amount as indicated in the provisions of Rule 6(3) of CENVAT Credit Rules, 2004. As regards Revenue’s claim that provisions of Rule 6(1) of CENVAT Credit Rules, 2004, will apply, we find that the said provision very clearly talk about the manufacture of exempted goods and there is no mention or indication that such exempted goods should be only considered as main product and the byproduct if any, cannot be a final product. - impugned order is incorrect and unsustainable - Decided in favor of assessee.
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2013 (3) TMI 115
Cenvat credit denied as not availed immediately on receipt of the inputs - appellants are manufacturers of steel and iron have captive mines - Held that:- Sub-rule (1) of Rule 4 of the Cenvat Credit Rules, 2004 prescribes that a manufacturer can avail Cenvat credit in respect of certain inputs immediately on their receipt and there is no time limit period prescribed in these rules in this regard. The word ‘may’ in sub-rule (1) of Rule 4 cannot be read as ‘shall’. The Department’s contention would have been correct if sub-rule (1) of Rule 4 had provided that Cenvat credit in respect of inputs ‘shall’ be taken immediately on receipt of the inputs. See para 10 of the Board’s Circular No. 345/2/2000-TRU, dated 29-8-2000 & Coromandel Fertilizers Ltd. v. CCE (A) (2008 (8) TMI 333 - CESTAT, BANGALORE), Steel Authority of India Ltd. v. CCE (2001 (1) TMI 144 - CEGAT, NEW DELHI) and Tamilnadu Petroproducts Ltd. v. CCE reported in 2003 (160) E.L.T. 199 (2003 (3) TMI 217 - CEGAT, CHENNAI). Moreover in this case there was a valid reason also for not taking the credit during April, 2006 to December 2006 period, as the judgments of the Apex Court and the Tribunal on the issue of eligibility for Cenvat credit of the inputs used in the mines were against the appellant and this issue was ultimately decided in the appellant’s favour sometimes in 2008 - the impugned order is not sustainable. The same is set aside. The appeal is allowed.
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2013 (3) TMI 114
Cenvat Credit disallowed on the quantity of raw material not been received in the factory and not utilized in the manufacture of the finished goods - assessee charged for wilful suppression of the facts - assessee is engaged in the manufacture of Zinc, Lead and Copper Sulphate Solution - Held that:- Lead and zinc concentrates were received by the assessee in its factory whereupon credit had been taken. The assessee had accounted for the shortage in the raw material found during stock taking by writing off these losses. The percentage of shortage found had been about 0.05% during the subject period with explanation given that the loss occurred due to dryage of the moisture content and some likely difference in weighment. The significant aspect of the matter is that it had not been the case of the revenue that any part of the duty paid inputs were diverted from the factory with intent to evade duty. Thus it would be too impracticable and unrealistic to ignore in such a matter the ground realities and the natural causes where the excavated contents were being transported from mines to the factory, and where the contents were susceptible to dryage due to atmospheric conditions apart from the likelihood of some slight error in recording of measurements due to human or mechanical error. Thus, the principles available in the rules and in the law explained by this Court are clear that credit of duty cannot be denied or varied where input has become waste in or in relation to manufacture of final product, and more of practical approach is required to be taken in these matters. Unable to find any evidence on record on the part of the appellant that he had, in any manner, diverted the duty paid inputs with intent to evade duty. Hence, there does not appear any basis to consider it to be a case of “wilful suppression of facts”. The shortage had been of about 0.05% and factors as indicated by the assessee about some difference in the weighing scale or of the human error and of the loss in transit due to drying of moisture contents cannot be ignored altogether - unable to find any basis for the Adjudicating Authority’s observations about pilferage or theft having occurred during transit. The order as passed by the Appellate Authority and approved by the Tribunal appears to be more in conformity with the ground-realities and when a case of wilful suppression and diversion of the goods had not been established, disallowance of credit could not have been considered justified - in favour of assessee.
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2013 (3) TMI 113
Clandestine removal of processed Man Made Fabrics (MMF) - demand of duty with recovery of interest and penalty - assessee submitted that his Company was in the process of revival prayer for waiver of the condition of pre-deposit denied - Held that:- Tribunal appears to have made rather hard an observation as if it were a case of admission regarding clandestine removal by the petitioner. The observations foregoing are to indicate that at the given stage, the Tribunal appears to have over-stepped the aspect of prima facie case and rather made an assumptive and hard observation about the alleged admission of the petitioner. It would be one thing to say that a particular explanation is not accepted and absolutely different to say that there is an admission. Thus hasten to observe that ultimately the matter is to be adjudicated upon and decided in the pending appeals and hence, no final comments on the merits of the case either way have been made. Thus considering the submissions that the petitioner's matter had been before the Board of Industrial and Financial Re-construction ('BIFR') and where the matter was allegedly dropped as the Company could not be revived. It is submitted that despite these odds, the Directors of the petitioner-Company are making all out personal efforts for revival of the Company and they have paid off dues of one of its secured creditors, namely Saraswat Co-operative Bank Ltd. and have also settled the matter of dues as regards Rajasthan Financial Corporation. Thus noticing the fact that the petitioner has indeed deposited the amount of Rs.22,32,781/- as assured before this Court, the petitioner deserves to be given some relaxation in the matter of the condition of pre-deposit - it would serve the cause of justice if the petitioner is directed to make deposit of another sum of Rs.11,16,000/- within a period of four weeks from today and to furnish solvent security before the Tribunal for making payment of the remaining amount, in case so required, as per the final order tobe passed in the appeals.
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2013 (3) TMI 112
Pre-fabricated components of concrete - fabrication at site - held that:- the Tribunal, after taking into account the evidence produced by the manufacturer on record, came to the conclusion that the fabrication did not take place at the site of the Corporation at Mundra. - Entire claim of the manufacturer is based on Exemption Notification No. 3/2005. One of the essential conditions was that the fabrication should take place at the site for construction work. This essential condition was not satisfied. The appeal of the manufacturer, therefore, must fail. - Decided against the assessee. Bonafide belief - Clearance of goods without payment of duty under the guise that it was exempt by virtue of Notification No. 58/2003-C.E. - whether the manufacturer can be said to be under bona fide belief that it was covered under Notification No. 58/2003-C.E. and was therefore not required to pay any excise duty. - held that:- Tribunal gave no specific reasons why it formed the opinion that the manufacturer had bona fide belief of being covered by Notification No. 58/2003. Both the conditions require certain overt acts on the part of the manufacturer. The manufacturer not having taken these steps; not having supplied the documents, cannot be said to have been carrying any bona fide belief that it was protected under Notification No. 58 of 2003. Regarding Cenvat Credit - if the Department holds that the manufacturer is required to pay duty at a certain rate, it cannot in the same breath contend that the manufacturer would not be entitled to avail CENVAT credit on the inputs used in manufacturing such goods. - To that extent decided in favor of assessee. While deciding the issue in favor of revenue, an option given to assessee to pay duty with interest within the stipulated time on which the manufacturer would avail of the option of 25% of the penalty.
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2013 (3) TMI 111
Circular No.967/01/2013-CX dated 01.01.2013 challenged and the consequential notice for recovery - Held that:- An appeal has been filed to the Commissioner (Appeals) on 30.06.2012 along with the stay application and no hearing has been granted so far. In the meanwhile, recovery notice has been issued based on the impugned Circular dated 01.01.2013. despite filing of the stay application. Notices be issued to the respondents to show cause as to why this petition be not admitted and finally disposed at this stage. Notices of the stay application be also issued. Notices be made returnable on 06.02.2013 and be given 'Dasti' to the learned counsel for the petitioner, if so desired. In the meanwhile until the next date in this matter or until disposal of the stay application by the Appellate Authority, whichever is earlier, there shall be stay over recovery of the amount involved.
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CST, VAT & Sales Tax
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2013 (3) TMI 136
Benefit of Incentive Scheme 1987 notified u/s 4 of the Rajasthan Sales Tax Act, 1954 denied - as per department petitioner company had made more than 20% of its production as branch transfers of goods for sales outside the State of Rajasthan, namely thus breached the condition No.4 (e) of the said Incentive Scheme - Held that:- The period during which such restriction could operate is obviously the period of the scheme itself or the period of incentive available to the petitioner unit for which the requisite eligibility certificate has been granted to it. The period for which the petitioner unit has been given EC in the present case is 20.01.1998 to 20.01.2005 whereas the operative period of incentive scheme itself ended on 31.03.1997 as per Clause (1) thereof since it made eligible investment in the State prior to 31.03.1997 or during the operative period of the Incentive Scheme itself. The scheme was in force for approximately ten years from 31.03.1987 to 31.03.1997 and after its initial period ended on 31.03.1995, it was extended for two years up to 31.03.1997. The State also came out with another incentive scheme known as Sales Tax Incentive Scheme, 1989, also the operative period of which was was 05.03.1987 to 3103.1998. The allegation against the petitioner company is that it made branch transfers of goods beyond 20% of its production capacity for the financial year 2005-06. Admittedly and indisputably, the period of eligibility certificate of the petitioner company ended on 20.01.2005. Thus, it was apparently a total misinterpretation and wrong application of Clause (ii) of Clause 4 (e) of the Incentive Scheme of 1987 by the respondent authorities, to initiate proceedings of recovery of the tax from the petitioner denying the benefit of Incentive Scheme for the past period of which it had already availed the exemption of incentive scheme under a validly granted Eligibility Certificate in its favour - in favour of assessee appellant.
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2013 (3) TMI 135
Payment of compounding fee - assessee seeked permission to to revise his return for the month of July, 2009 - as order of request was not communicated to him & in meanwhile, 1st respondent issued Ext.P4 notice u/s 25(1) of the KVAT Act proposing to complete the assessment - Held that:- As per Government Pleader instructions order on rejection of request for filing revised return was not served on assessee thus 1st respondent directed to pass orders on Ext.P2 and communicate the same to the petitioner as expeditiously as possible meanwhile, further proceedings pursuant to Ext.P4 will be kept in abeyance.
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Indian Laws
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2013 (3) TMI 137
Admissions criteria of students - whether the College had agreed to admit students placed in the merit list or waiting list of RPMT-2008 into the 85% of 150 seats of the MBBS course approved by the Central Government - Held that:- There is in fact no consensual arrangement between the College and the State or the University that the College will admit students from the merit list or wait list of RPMT-2008. The finding of the Single Judge and the Division Bench of the High Court that there was such a consensual arrangement between the College and the State Government to admit students from the merit list or wait list of RPMT-2008 is, therefore, erroneous. Hence, the direction of the High Court to the College to consider and admit students from the merit list or wait-list of RPMT-2008 will have to be set aside. Whether the admissions of 117 students to the MBBS course of the College were within the fundamental right of the College? - Held that:- While holding that a private unaided non-minority institution has the right to establish and administer an educational institution under Article 19(1)(g) of the Constitution of India also held that such right will include the right to admit students into the institution. Students seeking admission to a professional institution were required to be treated fairly and preferences were not to be shown to less meritorious but more influential students and greater emphasis was required to be laid on the merit of the students seeking admission determined for admission to professional colleges, by either the marks that the student obtains at the qualifying examination, or by a common entrance test conducted by the institution, or in the case of professional colleges, by government agencies. On examining the admission procedure adopted by the College for admitting the students to the MBBS seats for the academic year 2008-2009 the College has admitted 16 students from the list of candidates selected in the PC-PMT 2008 conducted by the Federation of Private Medical and Dental Colleges of Rajasthan who did not call for any applications from candidates for admission to the MBBS course, but only for the BDS course. Moreover, the College had not been included in the brochure published for PC-PMT 2008 conducted by the Federation of Private Medical and Dental Colleges of Rajasthan. Consequently, students, who may be interested not in the BDS course but in the MBBS course, could not have applied to take the PC-PMT 2008 conducted by the Federation of Private Medical and Dental Colleges of Rajasthan. As a result, many meritorious students desirous of taking admission in the MBBS course in the College could not get an opportunity to participate in the PC-PMT 2008 conducted by the Federation of Private Medical and Dental Colleges of Rajasthan. The admission procedure adopted by the College was thus not fair and transparent. Clause (2) of Regulation 5 on which the MCI relied upon clearly states that in States having more than one University/Board/Examining Body conducting the qualifying examination a competitive entrance examination should be held so as to achieve a uniform evaluation as there may be variation of standards at qualifying examinations conducted by different agencies. As noted, it is not the case of the College that all students who applied pursuant to the advertisement had passed 10+2 Examinations conducted by one and the same University/Board/Examining Body. Hence, the merit of the students who had applied pursuant to the advertisement of the College had to be uniformly evaluated by a competitive entrance examination, but no such competitive entrance examination had been held by the College between all the candidates who had applied pursuant to the advertisement. Therefore, there was a clear violation of Clause (2) of Regulation 5 of the MCI Regulations in admitting the 101 students to the MBBS Course for the academic year 2008- 2009 by the College. The 117 students, who were admitted to the MBBS course, may not be at fault if the College did not hold a competitive entrance examination for determining the inter se merit of students who had applied to the College in the MBBS seats of the College, but they are beneficiaries of violation of clause (2) of Regulation 5 of the MCI Regulations by the College. They have got admission into the College without any proper evaluation of their merit vis the other students who had applied but had not been admitted in a competitive entrance examination. We, therefore, hold that each of the 117 students who have been admitted in the MBBS seats in the College will pay Rs.3 lacs to the State Government on account of their admission in violation of clause (2) of Regulation 5 of the MCI Regulations and the total amount received by the State Government from the 117 students will be spent for improvement of infrastructure and laboratories in the Government Medical Colleges of the State and for no other purpose. The directions in rem for strict compliance, without demur and default, by all concerned that the commencement of new courses or increases in seats of existing courses of MBBS/BDS are to be approved/recognised by the Government of India by 15th July of each calendar year for the relevant academic sessions of that year & Medical Council of India shall, immediately thereafter, issue appropriate directions and ensure the implementation and commencement of admission process within one week thereafter. After 15th July of each year, neither the Union of India nor the Medical or Dental Council of India shall issue any recognition or approval for the current academic year. If any such approval is granted after 15th July of any year, it shall only be operative for the next academic year and not in the current academic year. Once the sanction/approval is granted on or before 15th July of the relevant year, the name of that college and all seats shall be included in both the first and the second counseling, in accordance with the Rules. The admission to the medical or dental colleges shall be granted only through the respective entrance tests conducted by the competitive authority in the State or the body of the private colleges. All admissions through any of the stated selection processes have to be effected only after due publicity and in consonance with the directions issued by this Court. If any seats remain vacant or are surrendered from All India Quota, they should positively be allotted and admission granted strictly as per the merit by 15th September of the relevant year and not by holding an extended counseling.
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2013 (3) TMI 129
Non-receipt of information from the CPIO within stipulated period - RTI application to CPIO, CESTAT - Held that:- The Commission is of the view that Shri S.K. Verma, Assistant Registrar & CPIO and Shri S. Chandran, Registrar & deemed CPIO, CESTAT have prima facie failed to comply with the directions of FAA and caused a delay of more than 100 days in providing complete information to the appellant to his RTI-request dated 11-5-2011. A separate show-cause notice u/s 20(1) of the RTI Act would be issued to Assistant Registrar & CPIO and Registrar & deemed CPIO, CESTAT asking them to show cause why a penalty of Rs. 25,000/- should not be imposed upon him. The Commission also hereby directs the CPIO, CESTAT to provide complete requisite information to the appellant within two weeks of receipt of this order.
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