TMI Tax Updates - e-Newsletter
April 22, 2013

Case Laws in this Newsletter:

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

Articles

1. MORE CARE REQUIRED IN COMPUTATION OF INCOME

   By: DEVKUMAR KOTHARI

Highlights / Catch Notes

Income Tax

• Legal Fiction Deems Assessing Officer's Satisfaction for Penalty u/s 271(1)(c) of Income Tax Act.

  Case-Laws - HC : Penalty u/s 271(1)(c) - the assessment order, by a fiction of law, is deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings - HC
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• CIT(A) Overcomplicates Simple Section 154 Error Correction, Leading to Unnecessary Delays and Confusion.

  Case-Laws - AT : Rectification of mistake u/s 154 - CIT(A) has complicated the issue of a simple rectification to be carried out - AT
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• TDS Not Deducted on Director Fees Before July 1, 2012, Unless Employer-Employee Relationship Existed (Section 194J.

  Case-Laws - AT : Non deduction of TDS on payment for professional fees as towards directors salary - Unless employee employer relationship exists, no TDS u/s 194J before 1.7.2012 - AT
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Corporate Law

• Court Admits Winding Up Petition: Company Must Settle Debts With Petitioner Despite Sister Concern's Claims.

  Case-Laws - HC : Winding up petition - Whether even if claim of company against petitioner's sister concern was accepted, company was indebted to petitioner? - petition admitted - HC
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Service Tax

• IPL Match Sponsorship Exempt from Service Tax Due to Sports Event Sponsorship Provision Exclusion.

  Case-Laws - AT : Sponsorship of the IPL matches - The charging provision clearly excludes from chargeability to service tax, sponsorship in relation to sports events. - AT
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• Service tax penalty waived due to reasonable cause in construction services case u/s 80.

  Case-Laws - AT : Penalty - Commercial and Industrial Construction and Residential Complex Construction Service - there is reasonable cause for not paying service tax short paid by them and benefit of Section 80 - AT
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• ICICI Bank's Sourcing Agent Services for Home Loans Classified as Business Auxiliary Services for Service Tax.

  Case-Laws - AT : Business Auxiliary Service - sourcing agent for ICICI and are sourcing persons to ICICI Bank for purpose of home loans - services are classifiable as Business Auxiliary Services. - AT
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Central Excise

• Cenvat credit covers materials used in repair and maintenance of plant and machinery under Central Excise rules.

  Case-Laws - AT : Eligibility for cenvat credit - repair and maintenance of plant and machinery - any inputs used for repair and maintenance would be eligible for cenvat credit - AT
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• Paint Denied Cenvat Credit Despite Being Defined as "Input" in Rule 2(k) of Cenvat Credit Rules, 2004.

  Case-Laws - AT : Cenvat credit denied - The paint is specifically covered by the definition of input as given in Rule 2(k) of the Cenvat Credit Rules, 2004 - AT
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• Cenvat Credit for Site Installation Services May Be Allowed After Detailed Fact Verification.

  Case-Laws - AT : Cenvat credit for the services obtained at site where undertaking installation works disallowed - credit to be allowed after verification of facts - AT
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• Cenvat Credit Valid with Hand-Written Serial Number on Invoice: Court Confirms Admissibility of Claim.

  Case-Laws - AT : Cenvat credit admissibility on the basis of invoice on which serial number is hand-written - credit allowed - AT
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Case Laws:

• Income Tax

• 2013 (4) TMI 424
  Validity of reassessment notice - Reopening of assessment - writ petion challenging the notice as barred by limitation - Held that:- In response to the reassessment notice, the petitioner had filed returns and proceedings were pending and during the pendency of the reassessment proceedings the Income Tax Officer issued a fresh notice for the assessment years already involved in the reassessment proceedings. In that connection it was held that issuance of second notice is invalid. The Court proceeded when the assessee had already filed the return, for the same period, no assessment has been made on the basis of the said return, reassessment proceedings could not be initiated. The judgment of Tube Company Ltd. Versus Income Tax Officer, [2004 (6) TMI 18 - CALCUTTA High Court] has no application to the facts of the present case in as much as when the impugned notices under section 148 were issued, no proceedings for reassessment was pending. The earlier reassessment proceedings were dropped by the order dated 22.6.2005 and the earlier notice issued under section 148 on 11.3.2004 was cancelled.Writ dismissed.

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• 2013 (4) TMI 423
  Penalty u/s 271(1)(c) on furnishing inaccurate particulars with regard to income - Also penalty u/s 271A for non-maintenance of books of accounts - Charge interest u/s 234A & 234B - Held that:- In view of the insertion of Sub-Section (1B) inserted in Section 271 w.e.f. 1st April, 1989, having regard to the fact that the Assessing Officer added income and disallowed expenditure and depreciation and, at the same time, observed as regards initiation of penalty proceedings under Clause (c) of Sub-Section (1) the said assessment order, by a fiction of law, is deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under Clause (c) of Sub-Section (1) of Section 271 and, accordingly, it is now not possible to contend that, since satisfaction was not recorded in the original assessment order, the penalty proceedings are vitiated. Thus accordingly, interfere and set aside the order of the Tribunal and restore the order of the Assessing Authority, as confirmed by the first Appellate Authority.

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• 2013 (4) TMI 422
  Re opening of assessment - as per AO the assessee company has received subsidy from Assam Govt. which was not included in the total income of the assessee during year 1996-1997 - Tribunal quashed the reassessment order passed by the AO u/s.l43(3)/147 on the ground that the reassessment proceeding initiated was barred by limitation - Held that:- The reason, so assigned by AO shows that the information, regarding transport subsidy, was available in the audited accounts and statements furnished by the assessee to the AO along with the assessee's return. These details being available before the AO cannot say that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year. In fact, there is not even a particle of accusation in the re-assessment order to show that the escapement of income, in the present case, was because of the omission or failure, on the part of the assessee, to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year. A finding to the effect that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year, is sine qua non for assumption of jurisdiction by AO for re-assessment of income, which escaped disclosure. See Dulichand Singhania v. ACIT [2003 (12) TMI 23 - PUNJAB AND HARYANA High Court (P&H).] In the present case since the present case did not suffer from non-disclosure or omission to disclose 'fully and truly' the facts by the assessee, the Assessing Officer could not have been held, and was rightly not held by the learned Tribunal, to have had the jurisdiction to re-open the assessment and make assessment as in the present case. Re-opening of the assessment and making of the re-assessment were bad in law and the learned Tribunal committed no error, either in fact or in law, in allowing the assessee's appeal. Against revenue.

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• 2013 (4) TMI 421
  Applicability of provisions of section 14A - assessee earned exempt income from interest income - whether the expenses relatable to these two cheques will not be at high as Rs. 3,75,867/- as disallowed by the AO or Rs. 50,020/- as decided by the CIT (A)? - Held that:- The instant AY relates to the period prior to the amendment to section Rule 8D of the I T Rules, 1962. Reasonable basis is the mantra to be followed by the AO after rejecting the basis adopted by the assessee. As making disallowances based on a fixed percentage of the dividend income is not fair as such percentage is very wild and inappropriate to the present case which is with the case of merely with two dividend cheques. Also examining the reasoning given by the CIT(A) for arriving at the figure of Rs 50,020/- and find the same arrived at with some basis the grounds raised by the Revenue need to be dismissed. The disallowance of Rs. 50,020/- in respect of Rs. 21, 223/- appears to be fair and reasonable - against revenue. Disallowance of interest u/s 36(1)(iii) - CIT(A) deleted the addition - Held that:- Contentions of the DR that the funds available should be taken on day to day basis and not on the basis of closing balance at the end of the year is not well. It has to be taken into consideration that what is the amount available with the assessee on the first day of the accounting year and what is the amount has been given to its sister concern and thereafter what is the closing balance at the end of the year. Therefore, confirm the finds of the CIT (A) on this issue. Taxability of interest income - income from other sources v/s business income - computation of deduction u/s 80-HHC - Held that:- The funds were required for business purposes and as per pre-conditions of the Bank margin money was deposited in the shape of FDRs for availing overdraft facility and therefore, it has direct nexus with business activity and accordingly, it has to be treated as income from business and since there is a direct nexus between the earning of interest and expenditure of interest then netting of interest has also to be allowed in view of the decision of the Special Bench in the case Lalsons Enterprises [2004 (2) TMI 294 - ITAT DELHI-E]. Therefore, these grounds of the assessee are allowed and the AO is directed to recalculate the deduction u/s 80-HHC accordingly. Considering the binding judgment of M/s ACG Associated Capsules Pvt. Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA] the AO is directed to give effect to the same while granting deduction u/s 80- IA in respect of the interest income. Accordingly, for this limited purpose, relevant grounds are remitted to the files of the AO for necessary action. Applicability of provisions of section 94(7) - Held that:- There is no dividend stripping in this case, where day-to-day investment of dividend is involved in the said transactions. The losses result on the basis of prevailing NAV on the date of purchase of the units and the date of withdrawal from the scheme will not attract the provisions of section 94(7). CIT(A) granted relief to the assessee after giving detailed reasoning in the impugned order. Against revenue. Claim of balances written back not considered as part of the business profits for the purpose of the computation of deduction u/s 80-HHC - Held that:- CIT (A) found that more than 95% of this amount relates to write back of sundry creditors which are the business liabilities of the assessee as at the time of creation of these sundry creditors, the income of the assessee went down since these credits represents purchases. Therefore, the income arisen to the assessee from writing back of these balance should form part of the profits of the assessee as these are intimately connected with the business of the assessee. The findings of the CIT (A) neither could be controverted nor any other material was brought on record to establish otherwise. Recalculation of deduction u/s 80-HHC in respect of DEPB licenses - Held that:- The said issue is covered in favour of the assessee by the judgment of Topman Exports Ltd [2012 (2) TMI 100 - SUPREME COURT OF INDIA] wherein held that DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB – Decided in favor of assessee. Denial of deduction u/s 80-IB - AO concluded that assessee could not have started this manufacturing before 31.3.2004 considering the requirements or approvals from the Pollution Control Committee (PCC) - Held that:- It is evident that the assessee belongs to 'green category' and the Notification dated 9th June 2011 does not apply to the AY 2004-05. Notwithstanding the above, it is noticed that the assessee finally obtained requisite approvals of PCC to establish or operate the unit during the year itself. So long as, the approvals are obtained before the end of the year, the delay noticed, being a procedural incursion, should not be used to deny the benefits of the beneficial provisions of section 80-IB. As requisite approvals are finally obtained and the State Government has not charged the assessee with any violations of any provisions under Air and Water Acts. Objections on the SSI-Registration issue - Held that:- The assessee is provisionally registered before setting up of factory and start of commercial production, which is a sufficient compliance and there is no breach of any law. Employees number engaged in the manufacturing unit of the assessee - Held that:- As it is the case of the assessee that the said workers do not have to continuously work for full year, contract or contingent workers also qualify to meet the requirements of the provisions of section 80-IB(2)(iv) merits acceptance but are covered by the additional evidences filed for the first time, thus require the attention of the AO. Invoice bearing the name of Jindal Photo Industries - Held that:- Argument of the assessee that the same constitutes an inadvertent mistake also confirmed from page 125 of the paper book the confirmation of the said "Om Borewell". Thus AO is directed to not to rely on this for denial of deduction. Quantity of consumption of electricity - Held that:- Considering the undisputed fact relating to expenditure on purchase of diesel, which constitutes supplementary expenditure on power sources. Considering the volume of production, consumption of diesel and electricity bills for the month of March and also subsequent months, the arguments of the assessee merits acceptance. Description on packing material ie the Drums - Held that:- In favour of the assessee's argument that why should assessee show purchase of packing material when he has reconcilable packing material, if accepted by the AO in the set aside proceedings. Doubt on the source of the stocks sold to the parties - Held that:- Sales of the product is undisputed as the AO has taxed the profits earned on sale of the product to parties - the contents of these confirmation are met by the AO, the claim of the assessee cannot be denied merely based on fringe issues. AO needs to weigh between the uncontroverted fact of sale of the product qua the fringe issues before coming to the conclusion when comes to the applicability of the beneficial provisions such as section 80IB. AO is directed to make use of the additional evidences filed by both the parties and pass a speaking order.

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• 2013 (4) TMI 420
  Unexplained expenditure - Held that:- It is true that an amount of Rs.1 lac was given to M/s. Pal Regency (P) Ltd. by the appellant by cheque on dt.1.9.2006 through the drawings account in M/s. Pal Constructions. M/s. Pal Regency (P) Ltd. has also paid Rs.1 lac which was shown as unsecured loan and appears in the books of M/s. Pal Constructions as on 31.3.2008. Accordingly, the books of M/S. Pal Constructions show liability of Rs.1 lac against MIs. Pal Regency (P) Ltd. and also show asset of Rs.1 lac through drawings account. The bank ledger in the books of M/s. Pal Regency (P) Ltd. shows that an amount of Rs.1 lac paid to M/s. Pal Constructions by cheque No.830072 on dt.12.10.2007 towards a refund of loan. Accordingly, there is no doubt that the loan given earlier by the appellant from his proprietorship concern to M/s. Pal Regency (P) Ltd. has been repaid, even though the receipts & payments have not been set off against each other and both appear in the accounts. This does not make the transactions unexplained expenditure. Thus addition made by the AO is deleted. Prior period expenses - Held that:- No infirmity in the order of the CIT(A) insofar as the addition of Rs.2 lakhs was factually incorrect when the amount owed and due were combined by the AO for holding the same as unexplained expenditure in the case of the assessee is a mere absurdity and not computation of real income. Similarly, the assessee had returned income of Rs.23,79,787 which included receipt of Rs.16,62,705 was rendered to tax by the assessee could not be considered for finding as no expenditure had been incurred on the same to be taxed again. This again is an absurdity noted by the Assessing Officer which has been properly dealt with by the CIT(A) - appeal of the Revenue dismissed.

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• 2013 (4) TMI 419
  Rectification of mistake u/s 154 - petition was made that the deductors wrong mention or non-mention of the PAN could not be held against the assessee - full credit claimed on the very income being the lease rent received from the tenant who were to deduct tax at source u/s.194-I - Held that:- The mistake which was sought to be rectified was apparent insofar as income had been brought to tax by the AO not on the basis of TDS certificate to be subjected to the provisions of Chapter XVIIB was not probed at the time of passing of the order, the assessee being the recipient. The assessee has claimed the tax deduction which the AO refused to acknowledge by holding that the PAN given by the deductor was with respect to the Karta of the HUF and therefore, it was a wrong mentioning of the PAN by the deductor which cannot be rectified at the Assessing Officer's end. Thus AO knew that the Karta has not been given credit of the tax paid in view of the deductor not claiming deduction on account of rent paid to the Karta but to the HUF. It was a simple mistake apparent on record and in fact was rectified by the AO as per the order u/s.154 by AO for the immediately preceding AY. CIT(A) has complicated the issue of a simple rectification to be carried out when the AO had carried out the same in the immediately preceding AY by holding a view that the ball was neither in the court of the assessee nor the AO therefore becomes an issue beyond the provisions of Section 154. It was a self declaration in the form of a petition u/s.154 was complied by the assessee as pointed out by the DR otherwise. The Assessing Officer was to take cognizance of these and because he had already rectified the same in the immediately preceding Assessment Year was a mistake apparent from record was to be carried out in the impugned Assessment Year as well. AO directed to give credit as petitioned by the assessee u/s.154 - appeal of the assessee allowed.

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• 2013 (4) TMI 418
  Taxation of net income instead of gross receipt and Hundi Collection - As per revenue assessee society was not registered u/s.12A thus the provisions of section 11 are not applicable - Held that:- As the assessee has not preferred registration u/s.12A for the impugned AY and was therefore considered by the CIT(A) that the activities carried out by the assessee whether charitable or not were to be allowed expenditure on the basis of nature of expenditure claimed as per the financial statements produced before the authorities below. It was not the case of the CIT(A) to grant exemption u/s.11 insofar as the assessee had not been granted registration u/s.12A. But the CIT(A) in his turn had considered the total receipts which were not part of the business income directing the AO to allow the expenses carried out by the assessee from such receipts which we are inclined to uphold. The assessee respondent's objection to tax NIL income thereafter is unjustified insofar as he had filed the NIL return in the first place holding a view that the receipts should not be taxed alone. The CIT(A) therefore, rightly directed the AO to tax the excess of income over expenditure amounting which we are inclined to uphold. The assessee respondent has supported the order of the CIT(A) in this respect therefore requires no further adjudication. Appeal of the Revenue dismissed.

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• 2013 (4) TMI 417
  Non Deduction of TDS on payment for professional fees as towards directors salary - Disallowance u/s 40(a)(ia) invoking the provisions of Section 194-J - Held that:- The statute has clarified that the remuneration to director cannot be termed as salary till such time the employee employer relationship exists which was not to be insofar as the Directors on the approval of the share holders cannot be said to be for the professional or technical services to the assessee when the disallowance of payments to them cannot be after invoking the provisions of Chapter XVIIB. The assessee had claimed these payments as expenditure and therefore, it was not the AO to verify the nature of payments to be subjected to the provisions of Chapter XVIIB insofar as the payments authorised to self cannot be termed as payment of salary. Therefore, there was no confusion insofar as the assessee had not deducted tax at source under the provisions of Chapter XVIIB but claimed the payment by whatsoever name called but has been disallowed u/s.40(a)(ia) has to be specifically now considered w.e.f. 1.7.2012 as per the clarification as pointed out by the assessee. Disallowance made u/s.40(a)(ia) for the impugned AY is directed to be deleted - in favour of assessee.

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• Customs

• 2013 (4) TMI 416
  Refund rejected as time barred under 27(1)(b) of the customs Act 1962 - the ground for refund as Appellant have already completed the export obligations against its aforesaid advance licenses and all relevant documents inclusive EODC submitted with Assistant Commissioner of Customs, Refund - Held that:- After going through the impugned order of Commissioner (Appeals) as also the appeal filed by the revenue the appellant authority has relied upon Tribunal decisions Grasim Industries Ltd [2005 (6) TMI 131 - CESTAT, MUMBAI] & Aristo Spinners Pvt. Ltd [2007 (3) TMI 18 - CESTAT, CHENNAI] laying down that such an Encashemnet of bank guarantee, which was not against any confirmed demand was not justified. Further such Enchashem by the Revenue was on account of non-fulfillment of export obligation. The export obligation having been subsequently fulfilled, the refund of amount so encashed is available to the assessee and the same is not subject to the provisions of limitation under section 27 of the Customs Act. The Revenue has not shown any decision to the contrary. As such in terms of the declaration of law by the Tribunal, Revenue’s contention is not justified. Their appeal is accordingly rejected.

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• Corporate Laws

• 2013 (4) TMI 414
  Winding up petition - when can a winding up petition be admitted? - Petitioner had delivered goods and rendered services as a sub-contractor to company when it was undertaking work for railways - Company had admitted that it owed a sum to petitioner - Company contested that it had a substantial claim against sister concern of petitioner - Whether even if claim of company against petitioner's sister concern was accepted, company was indebted to petitioner? - Held that:- From the tenor of the letter of September 5, 2009, it would be evident that the petitioner had authority to deal with the issues between the petitioner's associate concern and the company. In the light of such letter and the contents, the company's defence cannot be rejected out of hand that the two transactions were linked and the part of it cannot be seen in isolation. Nevertheless, it appears from the company's admission that it asserted that it owed the petitioner a sum of Rs. 26,08,858 and it had a claim against the petitioner's associate concern in the sum of Rs. 22,80,646.05. Even if the letter is taken on face value and the veracity of the assertions therein are not questioned, it appears that there is an unequivocal admission by the company of it being indebted to the petitioner in the sum of Rs. 3,28,211.95 if the two figures of Rs. 26,08,858 and Rs. 22,80,646.05 are reconciled. It is the same sentiment which is reflected in the company's affidavit, whereof the figures are repeated and the company has questioned the petitioner's claim only to the extent of the same exceeding Rs. 26,08,858. Thus the petition is admitted for the principal sum of Rs. 3,28,211.95 together with interest thereon at the rate of 6% per annum from August 1, 2012 since the statutory notice was issued on July 31, 2012. On payment of such amount within four weeks from date, the petition will remain permanently stayed else petition will be advertised once in The Statesman and once in Bartaman indicating that the matter will appear before Court on the first available working day after the expiry of four weeks from the date of the publications being made. Publication in the Official Gazette will stand dispensed with.

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• 2013 (4) TMI 413
  Arbitration and Conciliation - petitioners seeks to challenge the awards made by the learned arbitrator under section 84 of the Multi State Cooperative Societies Act, 2002 allowing the claims made by the first respondent - first petitioner in Arbitration Petition is a private limited company. One of the Director of first petitioner Mr. Abdul Latif Mahmood Dadan expired leaving petitioner no. 3 to 6 as his legal heirs - It was the case of the first respondent that the first petitioner committed default in making payment of the various amounts towards the term loan, cash credit, over draft and over drawn/adjustment accounts. According to the first respondent, guarantors were also jointly and severally liable to the first respondent in respect of the said facilities - whether the learned arbitrator did not have jurisdiction to entertain the dispute in view of the position that section 91 of the Maharashtra Cooperative Societies Act was applicable to respondent no.1 bank when the dispute was filed by the first respondent before the cooperative court - Held that:- On perusal of the award as well as interim order passed by the learned arbitrator it is clear that though the plea of the legal heirs claiming the property in question to be self acquired property and not having been inherited the same from the borrowers and/or guarantors and though such plea not having been controverted by the applicant, the learned arbitrator could not have overlooked these facts and could not have confirmed the order of warrant of attachment on the properties of the legal heirs. The award shows patent illegality committed by the learned arbitrator in the impugned award on this issue. The learned arbitrator ought to have clarified in the impugned award that the legal heirs were liable only to the extent they had inherited any property from the estate of the deceased borrowers and/or guarantors. Not be accepted the submission made by the learned counsel appearing for the bank that the issue as to whether the properties in question which were attached by an order passed by the learned arbitrator were inherited by the legal heirs or not from the borrowers and/or guarantors has to be decided only in the execution proceedings and were not to be decided by the learned arbitrator. The learned arbitrator ought to have considered section 96 of the Multi State Act, 2002 with sections 35 and 36 of the Arbitration and Conciliation Act, 1996 and section 52 of the Code of Civil Procedure, 1908 in the impugned award while attaching the properties. Section 96 of the Multi State Cooperative Societies Act, 2002 cannot be read in isolation. A legal heirs and representatives are entitled to raise an issue that the deceased has left no assets, or that they were not in a possession of any property left by the deceased or the same was not available to them in the arbitration proceedings itself. In my view, the learned arbitrator is bound to decide the said issue in the impugned award itself after considering the material facts and documents into consideration. Perusal of the impugned award indicates that the learned arbitrator has considered all other aspects in the matter on merits and have rendered a finding of fact against the borrowers and the guarantors which findings are not perverse and thus no interference is warranted with such finding of facts. The learned arbitrator was right in passing a decree against the borrowers and the guarantors and was right in directing the legal heirs to pay the amount directed to be paid by the borrower/guarantor whose legal heirs they were. The learned arbitrator however was bound to decide the issue whether properties sought to be attached were inherited by the legal heirs from the debtors or not. The award by which the personal properties of the legal heirs are attached and the attachment order having been allowed to continue till recovery of the entire amount by the bank from the parties is perverse and patently illegal and that part of the award deserves to be set aside. Resultantly part of the award and order of warrant of attachment directing that the attachment of the properties described in schedule of the properties is set aside. The order of attachment of the properties passed by the learned arbitrator attaching the properties is set aside and remitted back to the learned arbitrator for disposal in accordance with law. Arbitrator shall decide whether properties in question were inherited by the legal heirs of the deceased debtors/guarantors and to what extent they are liable expeditiously and not later than six months from today. During the pendency of the proceedings before the learned arbitrator, petitioners shall not sell, alienate, encumber, part with possession or create any third party rights in respect of the properties which were subject matter of attachment.

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• 2013 (4) TMI 412
  Arbitration and Conciliation - Petitioner filed a petition under section 9 of the Arbitration Act 1996 in this Court seeking injunction against the 2nd respondent from initiating recoveries pursuant to the letters/circulars dated 31.10.2000 and 3.11.2000. This court by an order dated 2.4.2001 dismissed the said petitions - whether any parties have consented for enlargement of time before the arbitrator - dispute raised by the petitioner about the contents of the minutes of meeting recorded by the learned arbitrator held on 4.4.2011 or that same was not received by the petitioner or his Advocate, the learned arbitrator filed his personal affidavit on 19.1.2013 - Held that:- Perusal of the records indicates that the petitioner had raised objection of jurisdiction from beginning by filing application under section 12 and 13 even before expiry of the two years period. Petitioners had also filed application for discovery and inspection. In view of such applications filed by the petitioner raising issue of jurisdiction of the arbitrator, the petitioner cannot be allowed to raise a plea that the arbitrator became functus officio on expiry of two years period or that his mandate stood terminated due to delay on the part of arbitrator. Perusal of the record also indicates that the learne arbitrator had fixed convenient date to accommodate the Advocate representing the petitioner who was also appearing in large number of other matters before the same arbitrator. It is clear that parties did not want to proceed with this arbitration in view of the pendency of various matters on similar issue in this court. The petitioner therefore could not have raised such plea of delay on the part of the learned arbitrator in completing the proceedings within time. As far as reliance placed by learned Counsel on the provisions of Micro, Small, Medium Enterprises Development Act, 2006 that the petitioner having registered under the provisions of the said Act and thus dispute, if any, between the parties is required to be resolved by the Council appointed under the provisions of the said Act is concerned, reference to the judgment of the Division bench of this court in case of M/s Steel Authority of India Ltd., would be useful wherein held that it cannot be said that because Section 18 which provides for a forum of arbitration, an independent arbitration agreement entered into between the parties will cease to have effect. It is held that there is no question of an independent arbitration agreement ceasing to have any effect because the overriding clause only overrides things inconsistent therewith and there is no inconsistency between an arbitration conducted by the Council under Section 18 and arbitration conducted under an individual clause since both are governed by the provision of the Arbitration Act, 1996. It is held that there is no provision in that Act which negates or renders an arbitration agreement entered into between the parties ineffective. Thus there is no substance in the submissions made by Mr. Mehta appearing on behalf of the petitioner that after petitioner having registered itself under the provisions of the said Act of 2006, the present proceedings could not be proceeded with under the arbitration agreement entered into between the parties or that dispute could by Council appointed under the provisions of the said Act of 2006. The proceedings under the existing arbitration agreement between the parties would not be affected by enactment of the said Act and would continued to be governed by the provisions of the existing agreement between the parties and would be governed by the provisions of the Arbitration and Conciliation Act, 1996. There is no merit in the submissions made by Mr. Mehta, learned Counsel appearing for the petitioner.

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• Service Tax

• 2013 (4) TMI 428
  Sponsorship of the IPL matches - whether the service falls within the exclusionary clause of Section 65 (105) (zzzn) of the Finance Act, 1994 - Held that:- On a true and fair analysis of the sponsorship agreement, that the sponsorship agreement is in relation to cricket tournaments conducted under the auspicious of BCCI/ IPL, that cricket is a sport, and the tournament (league) by the nature of its process is a sporting event, is indisputable. To dissect the generic composition of the sponsorship agreement by reference to a circumstance that payments are made not to the T-20 tournament of cricket matches but to the BCCI/ IPL (which is not a game), is an extravagant and logically misconceived analysis. Surely, it is not anybody’s case that the payments were made to BCCI/ IPL for the latters intrinsic brand image and not for or in relation to the tournament (T-20, which is the subject matter of the sponsorship agreement). The charging provision clearly excludes from chargeability to service tax, sponsorship in relation to sports events. The expression in relation to connotes activities associated with sports events. Sponsorship is not in relation to sports events, but is sponsorship of BCCI / IPL. No justification for the adjudicating authority’s assumption that since there is an underlying commercial element in the IPL events, the sponsorship, which is otherwise in relation to a sports event, is not so. In the absence of any limiting words or phrases in the provision (excluding sponsorship of sports events having a commercial purpose from the benefit of immunity to service tax), the adjudicating authority cannot engraft its own policy choices and preferences to the legislatively conferred immunity.

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• 2013 (4) TMI 427
  Payment of service tax on input services through Cenvat Account instead of cash - Department was of the view that tax through Cenvat Account can be paid on any output service only & since GTA services is not an output service for the assessee, they cannot pay service tax by utilizing Cenvat Credit - Held that:- As decided in Commissioner of Central Excise Vs Nahar Industrial Enterprises Ltd. (2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT) a person who is not a actual service provider, but discharges the service tax liability on the Taxable Services, under Section 68(2) of Finance Act, 1994 as a deemed service provider, is entitled to avail the CENVAT credit on inputs/input services/capital goods for payment of GTA service tax, even if he is not using such inputs/input services/capital goods for providing taxable services by virtue of deeming legal fiction Court can discharge the service tax liability availing Cenvat Credit taken on inputs/input services even if these were not used in providing taxable service. Also see Commissioner of Service Tax Vs Hero Honda Motors Ltd. ( 2012 (12) TMI 734 - DELHI HIGH COURT). Thus assessee can pay the service tax liability on GTA service through Cenvat Account.

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• 2013 (4) TMI 426
  Rejection of Appeal by the Commissioner (Appeals-II) on the ground as barred by limitation, since the appeal was preferred with an abnormal delay of two years after the date of adjudication order - The Appellate Commissioner (Appeals) called for a factual report from the Assistant Commissioner, Chittaurgarh and received a report from the said authority to the effect that the adjudication order dated 17.4.2009 was sent to the appellant vide dispatch order No.3242 dated 17.4.2009 under registered post and the contention of the appellant regarding receipt of the impugned order on 24.3.2011 as pleaded in the appeal grounds was incorrect - Held that:- All process followed by the appellate authority constitutes serious violation of due process and transgresses principles of natural justice. It is axiomatic that a quasi-judicial authority cannot record any conclusion on the basis of material without notice to and behind the back of a party to the lis. The impugned Order in Appeal cannot therefore, be sustained and is quashed. The matter is remitted to the appellate authority for de novo determination and the appellate authority shall proceed to determine the appeal after furnishing a copy of the report received from Assistant Commissioner, Chittaurgarh, to the appellant herein.

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• 2013 (4) TMI 425
  Commercial and Industrial Construction and Residential Complex Construction Service - period 10.9.2004 and 16.6.2005 - penalty imposed u/s 78 was reduced to 25% by Commissioner (Appeals) - Held that:- Assessee was paying service tax under category of Commercial and Industrial Construction and Residential Complex Construction Service prior to 1.5.2006. Service tax on maintenance and repairs was also being paid by them under Section 65(25) of the Finance Act after availing abatement of 67% under Notification No. 1/2006 dated 1.3.2006, Revenue demanded service tax short paid by them under Maintenance and Repair under Section 65(64) of the Finance Act. Thus assessee was under bona fide belief that maintenance and repair of building was covered under Section 65(25)(b) and service tax was being paid by them. Thus there is reasonable cause for not paying service tax short paid by them and benefit of Section 80 of the Finance Act 1994 is available to the assessee. Accordingly, we set aside the penalty confirmed by the Commissioner (Appeals) and consequently reject the Revenue’s appeal.

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• 2013 (4) TMI 415
  Business Auxiliary Service - confirmation of service tax along with interest and equal amount of penalty u/s 78 - respondents are working as sourcing agent for ICICI and are sourcing persons to ICICI Bank for purpose of home loans - Commissioner (Appeal) allowed the appeal of assessee relying on S.R. Kalyanakrishnan Vs Commissioner of Central Excise Cochin reported in (2007 (8) TMI 198 - CESTAT, BANGALORE) - Held that:- As decided in M/s Bridgestone Financial Services Vs C.S.T Bangalore (2007 (1) TMI 67 - CESTAT, BANGALORE) that promoting or marketing of service comes under Business Auxiliary Services. Also Tribunal in case of Brij Motors Pvt. Ltd. (2011 (11) TMI 410 - CESTAT, NEW DELHI) and S.K. Jalendra & Associates (2012 (5) TMI 444 - CESTAT, DELHI) after considering the decision in Bridgestone Financial Service case held that these services are classifiable as Business Auxiliary Services. Thus activity of sourcing person for the purpose of home loans by ICICI is Business Auxiliary Services. Thus Order in Original restored. In favour of Revenue.

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• Central Excise

• 2013 (4) TMI 411
  Penalty on employee - Held that:- Appellant though reporting directly to the management but was aware of the clandestine activities of the main unit and was also aware that the goods were clandestinely cleared on cash payments. Thus looking to the extent of involvement of the appellant it cannot be said that he was only a paid employee and getting instructions from his superiors on day to day small matters. However, taking into consideration the fact that the main offender in this case has gone away with 25% of penalty payment under Section 11AC, therefore it is felt that a penalty of Rs.25,000/- will meet the ends of justice to be imposed upon the appellant under Rule 26 of the Central Excise Rules. Appeal of the appellant accordingly is allowed.

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• 2013 (4) TMI 410
  Eligibility for cenvat credit - welding electrodes used for repair and maintenance of plant and machinery - Held that:- As decided in Ambuja Cements Eastern Ltd., (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN), CCE, Bangalore-I vs. Alfred Herbert (India) Ltd. [2010 (4) TMI 424 - KARNATAKA HIGH COURT] since without repair and maintenance, manufacturing operations, though theoretically possible, are not commercially feasible, the same has to be treated as an activity having nexus with manufacture and hence any inputs used for repair and maintenance would be eligible for cenvat credit. - order denying the cenvat credit is not sustainable. Rent a cab service availed for transportation of their employees from the residence to the factory and back - Held that:- Decided in favour of the appellant as relying on Stanzen Toyotetsu India Pvt. Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT), CCE, Bangalore vs. Bell Ceramics Ltd. [2011 (9) TMI 792 - KARNATAKA HIGH COURT].

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• 2013 (4) TMI 409
  Cenvat credit denied - paints and thinners - Held that:- Paints and thinners undisputedly have been used for applying on the various machinery. The paint is specifically covered by the definition of input as given in Rule 2(k) of the Cenvat Credit Rules, 2004 and, therefore, the impugned order denying cenvat credit is not sustainable. Welding electrodes - Held that:- The welding electrodes can be used either for fabrication of new machinery or its part or for repair and maintenance. While in the first case, the same would be eligible for cenvat credit as input in the second case the same would be eligible for cenvat credit in the case of Ambuja Cements Eastern Ltd., (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT ) and Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN) - impugned order denying the cenvat credit is not sustainable. H.R. Coil, M.S. Girder, G.C. Sheets, M.S. Channels, shape and section etc. - Held that:- The appellants plea with regard to evidence given in respect of use of these items has not been considered at all and simply a finding has been that these items are generally used for making of supporting structures for machinery and therefore would not be eligible for cenvat credit in view of the judgment of Vandana Global Ltd. vs. CCE, Raipur (2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)). In cases, where the steel items, in question, have been used for fabrication of sugar mill machinery or its part, the same would be eligible for cenvat credit as input. Thus before rejecting the appellant’s claim in this regard this evidence must be carefully examined for which this matter would have to be remanded to the original adjudicating authority.

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• 2013 (4) TMI 408
  Cenvat credit for the services obtained at site where undertaking installation works disallowed - Held that:- It is evident from the Order in Appeal that with respect of certain service tax credit, appellants have been allowed to take credit as per the findings. With respect to remaining entries, appellant could not establish that the contracts include commissioning and installation charges in the contracted value. It is also observed from one contract dated 23/06/2006 entered by the appellant with AKUMS Drugs & Pharmaceuticals Ltd., that freight and transit insurance are required to be paid extra. In view of such contracts entered into by the appellants with their service providers, it cannot be said that in all the situations, installation and erection, transit insurance, freight have been included as a complete package for considering the contracts to be turn-key project. All these details are required to be gone into to establish that the contracts are only on turn-key basis in order to hold that the goods are sold as turn-key project and that sale is extended to the installation site. If all the elements of cost of installation and erection, transit insurance, freight etc. are included in the contracted value, then as per Circular No.97/8/2007-ST dated 23/08/2007 issued by CBEC, the point of sale will be the installation site and service tax credit will be admissible to the appellant for the services obtained from other service providers at the installation site. Thus the order passed by the Commissioner (A) under OIA set aside and the matter is remanded to the original adjudicating authority for deciding the issue afresh after giving a personal hearing to the appellant. The appeal is allowed by way of remand.

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• 2013 (4) TMI 407
  Reduction of penalty - Held that:- As the goods clandestinely removed are not available for confiscation, but the appellant had the knowledge of clandestine activity being undertaken. However, looking to the facts and circumstances of the case, a penalty of Rs.30,000/- will meet the ends of justice and accordingly penalty of Rs.60,000/- imposed upon the appellant is reduced to Rs.30,000/-.

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• 2013 (4) TMI 406
  Cenvat credit admissibility on the basis of invoice on which serial number is hand-written - Held that:- There is no dispute that the inputs were duty paid and duly received by the appellant and used in the manufacture of excisable goods. If there was any discrepancy, the same could have been verified from the suppliers end by the jurisdictional Central Excise officers. The appellant has got such a certificate from the supplier of the inputs with a certification of the jurisdictional Superintendent confirming that the invoices stated in the letter dated 10/10/2011 of the supplier are checked from the records. This argument was taken up by the appellant before the original adjudicating authority, but no findings were given by the lower authority as to why verification made by the jurisdictional Central Excise authority of the supplier cannot be accepted. The judgment of the Commissioner, Central Excise vs. Chandra Laxmi Tempered Glass Co. Pvt. Ltd. [2008 (7) TMI 257 - HIMACHAL PRADESH HIGH COURT], relied upon by the A.R. is not applicable because the same was pronounced with respect to Rule 57G of the earlier Central Excise Rules, 1944 when there was a specific obligation under Rules 52A to have serially printed invoices. It is once again emphasized that substantial benefit cannot be denied to the assessee on the basis of procedural irregularity when under the new Central Excise Rule 11, there is no obligation of printed serial number on the invoices. Accordingly, the appeal of the appellant is allowed.

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• CST, VAT & Sales Tax

• 2013 (4) TMI 431
  Assessment of Entry tax on the Kerosene Oil - U.P. Trade Tax Act 1948 - petitioner submitted that the respondent no.1 accepted the contention of the petitioner on first count - Held that:- While passing the order dated 6th August, 2009 the respondent no.1 was satisfied with the reply submitted by the petitioner and refused to grant permission to reopen the matter under Section 21(2) of the Act even though vide order dated 16th April, 2010 ex parte he has granted permission to reopen the matter under Section 21(2) of the Act without affording any reasonable opportunity to the petitioner to file its reply. Since the impugned order dated 16th April, 2010 has been passed without affording opportunity to the petitioner to submit its reply it is against the principles of natural justice, thus the impugned order cannot be sustained. The respondent no.1 is directed to afford opportunity to the petitioner to submit its reply and then pass an appropriate order in accordance with law

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• 2013 (4) TMI 430
  Intra-State sales v/s inter-State - Held that:- As decided in M/s Zunaid Enterprises & Ors. vs. State of M.P.& Ors. (2012 (3) TMI 285 - SUPREME COURT OF INDIA) merely based on certain clauses in the agreement it ought not to have decided and declared that the transactions in question would be purely and simply intra-State sales and not inter-State sales. Whenever a question arises as to whether a sale is inter- State sale or not, it has to be answered with reference to Section 3 and Section 3 alone As the relevant facts were not before the Court nor the finding of the assessing authority to decide whether the transactions in question are intra-State sales or inter-State which are exigible to taxes under the VAT Act or taxes under the provisions of the Central Sales Tax Act the matter is remanded back to the Assessing Officer with the same directions as are contained in M/s Zunaid Enterprises & Ors. vs. State of M.P.& Ors. (supra),

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• 2013 (4) TMI 429
  Liability to register as a dealer under the provisions of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act 1981 - department caused an inspection and based on that notice was issued demanding tax on the rent collected and also on the food and beverage supplied under the provisions of TNVAT Act, 2006 & levy of penalty under Section 16 of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act 1981 - Held that:- The petitioner is held to be liable for tax as well as penalty under the provisions of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981 Section 6(5) of it provides for opportunity of being heard which have to be strictly complied with by giving an opportunity of personal hearing. In all the cases, the petitioners have made a specific request for furnishing documents and for cross examination so as to comply with the principles of natural justice, therefore, the requirement of hearing becomes necessary as a specific request was made for cross examination. In such view of the matter it is incumbent on the respondent department to have granted opportunity of personal hearing before deciding the issue on merits. Since in this case the order adverse to the petitioner has been passed demanding tax and penalty without giving them an opportunity of hearing as contemplated under Section 6(5) of the Act, the impugned proceedings require to be interfered with - the impugned proceedings in all the writ petitions are set aside and the matters are remitted back to the authorities for passing fresh orders after giving personal hearing to the respective petitioners. Insofar as cross examination is concerned it is left to the discretion of the officer to either accept the said plea or decline it by giving sufficient reasons for the same.

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