TMI Tax Updates - e-Newsletter
April 26, 2014

Case Laws in this Newsletter:

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

Articles

1. Estimated and adhock disallowances are not proper- must be avoided to avoid un-necessary litigation.

   By: DEVKUMAR KOTHARI

News

1. Minutes of the March 26, 2014 Meeting of the Technical Advisory Committee on Monetary Policy

2. RBI Reference Rate for US $ and Euro

Circulars / Instructions / Orders

FEMA

1. 125 - dated 25-4-2014

Reporting of Cross Border Wire Transfers

2. 126 - dated 25-4-2014

Reporting of Cross Border Wire Transfers

Highlights / Catch Notes

Income Tax

• Court Rules Notice u/s 143(2) of Income Tax Act Properly Served; Assessee's Claim Dismissed as Strategy.

  Case-Laws - HC : Service of notice to proper person – Order u/s 143(2)- the contention of the assessee that there was no proper service on the assessee can only be seen as an afterthought to wriggle out of the assessment proceedings - HC
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• High Court Rules on Income Tax Liability Due to Foreign Exchange Fluctuations, Considers Liability Non-Contingent.

  Case-Laws - HC : Nature of Liability – Contingent or not – Loss of fluctuation of foreign exchange - the restatement had come at the end of the accounting year and that the present liability itself was on account of the exchange fluctuation - claim allowed - HC
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• High Court Denies Tax Deduction for Assessee u/s 80IB(10) for Selling Plots Instead of Building Homes.

  Case-Laws - HC : Claim of deduction u/s 80IB(10) of the Act – assessee have sold the plots instead of constructing the residential houses which was essential for the purpose of claiming deduction, was not entitled to deduction - HC
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• Partnership Business Closure: Closing Stock Valuation Must Reflect Market Value, Not Book Value, for Outsider Transfers.

  Case-Laws - HC : Valuation of stock on discontinuation one business of partnership firm – if the firms were to transfer closing stock especially an item like gold, to an outsider, definitely book value will not be the value at which the stock would be transferred - HC
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• High Court: AO Cannot Add Unexplained Investment u/s 69 Based on Excise Duty Evasion Assessment.

  Case-Laws - HC : Addition u/s 69 of the Act – Unexplained investment – AO could not make any addition of the amount of Excise duty evasion quantified by the Excise authorities - HC
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Customs

• Court Rules No Limitation Period for SAD Refunds Under Notification No. 102/2007-Cus, Amending Notification Not Retroactive.

  Case-Laws - HC : Bar of Limitation – Refund of Special additional customs duty (SAD) - Notification no. 102/2007-Cus – Absence of limitation period in the original Notification - amending notification must be read down to the extent that it imposes a limitation period - HC
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Service Tax

• CESTAT's Authority on Rebate and Refund Matters Unchanged by Section 35EE References Under Central Excise Act Section 86.

  Case-Laws - HC : Jurisdiction - specific reference to Section 35EE of the Central Excise Act, did not make any difference to the nature of jurisdiction exercisable by the CESTAT under Section 86; it continued to possess jurisdiction to decide on matters pertaining to rebate and refund - HC
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• Recovery Orders Issued Prematurely Against Petitioners' Customers Deemed Impermissible After Show Cause Notice.

  Case-Laws - HC : Recovery of service from third party - within two days of issuance of show cause notice, the respondents issued recovery orders against the customers of the petitioners which was not simply permissible - HC
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Central Excise

• Rebate Claim Denied Due to Miscommunication; Case Remanded for Further Review to Address Alleged Errors.

  Case-Laws - HC : Denial of rebate claim - It is unfortunate that even though, the reply was received on 10th September, 2007 but in the impugned order, it is alleged that no reply has been filed and no request has been made for the personal hearing - Matter remanded back - HC
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• Manufacturers' Cenvat Credit on Inputs Protected from Denial Due to Supplier's Assessment Review by Excise Authorities.

  Case-Laws - AT : Cenvat credit to a manufacturer in respect of certain inputs received by him cannot be denied by his Jurisdictional Central Excise Authorities by seeking to review the assessment at the end of the supplier - AT
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VAT

• Court Confirms Electronic Equipment as "Machinery" for VAT and Sales Tax in Telecommunication Sector.

  Case-Laws - HC : Classification - electronic equipment - no hesitation or doubt in holding that these items form “machinery“ used for the purpose of transmission of voice from one place to another and this process is called telecommunication - HC
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• Transporter Can Seek Goods Release u/s 47(7); Appeal to Tribunal Available via Section 57 for Unfavorable Decisions.

  Case-Laws - HC : Representation capacity of transporter - petitioner has a right to make a representation under the proviso to 47(7) for release of the goods, which have been seized by the respondents and if he is still aggrieved to file an appeal u/s 57 in Tribunal - HC
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• High Court Confirms Demand Due to Assessee's Failure to Prove Raw Skins Sale and Transfer Were Paper Transactions Only.

  Case-Laws - HC : Nature of the transaction - sales of raw skins - Transfer of consideration to sister concern - the burden to prove these transactions are paper transaction only, not being discharged by the assessee - demand confirmed - HC
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Case Laws:

• Income Tax

• 2014 (4) TMI 867
  Disallowance u/s 54F - construction of residential property - subsequent change in the usage of the property for non-residential use / commercial use - Held that:- It is evident from the impugned orders of the lower authorities and other material on record that intention of the parties when the development agreement was entered into was to construct a residential property. Municipal permission has also been obtained only for construction of a residential complex. Ultimately, the assessee has received possession of such residential property. It may be true that the said property was put to use subsequently for commercial use. Merely because of change in the use of such property for non-residential purposes, it cannot be said that what was acquired by the assessee was not a residential property, but a commercial one. Subsequent change in the user of the property does not disentitle the assessee to relief under S.54F of the Act. - matter remanded back to AO to consider the assessee’s claim for exemption under S.54F of the Act, subject to fulfillment of other conditions - Decided in favour of assessee.

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• 2014 (4) TMI 866
  Dismissal of claim of LTCG – Held that:- The Tribunal was of the view that the income or profits gained were business income, having regard to the normal business activities of the assessee and given the pattern of sale and purchase transactions, especially since no books were separately maintained for the purpose - the purchases were shown as investments in the balance sheets for several years before their sale and claim for long term capital gains - There is nothing on the record to show that these were purchased with borrowed funds - the findings of the ITAT with respect to the amount claimed as long term capital gains are sound and do not call for interference – Decided against Revenue. Allowability of claim of STCG – Held that:- Having regard to the short duration of holding of the shares, and the lack of clarity in the account books, the overall effect would be to reveal that the sale and purchase of shares in respect short term capital gain cannot be sustained – thus, the order of the ITAT is set aside to the that extent - the amount shall be treated as business income and not capital gains – Decided in favour of Revenue.

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• 2014 (4) TMI 865
  Admission of appeal - Nature of income – Income from Business or capital gains - Whether the Tribunal was right in that the sum of Rs.2 crores received by the assessee pursuant to the MOU entered into by it for joint development of its property is assessable under the head income from capital gains and not income from business – Held that:- The AO in adopting the view had not spelt out any material based on which such conclusion was reached - The Revenue does not dispute the fact that the assessee was carrying on business only in insurance, the income returned from business as negative - the assessee had gone for a joint venture agreement for development of the property itself would not lead to the inference that the joint venture was more in the nature of business and that the assessee was engaged in property development - the Revenue had not placed any material to show that the property was to be treated as "business asset" or the assessee converted it into stock-in-trade for the purpose of carrying business with it – thus, there is no ground for admitted the appeal – Decided against Revenue.

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• 2014 (4) TMI 864
  Cessation of liability u/s 41(1) of the Act – Remission to the Tribunal - Held that:- It is not a case where the Tribunal did not refer to facts - Section 41(1) of the Act would apply in a case where there has been remission or cessation of liability subject to the conditions contained in the statute being fulfilled - cessation or remission has to be during the previous year relevant to the assessment year – but, both the elements are missing - there was nothing on record to suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration - there was no cessation or remission of liability – thus, the amount cannot be added back as a deemed income u/s 41(c) of the Act – thus, the remand proceedings to the Tribunal cannot be granted – Decided against Revenue.

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• 2014 (4) TMI 863
  Validity of revisional jurisdiction u/s 263 of the Act – Search u/s 142(1) of the Act – Unaccounted sales – Held that:- The assessee was required to produce the copies of the accounts or confirmation in excess of Rs. 1 lakh which had not been filed, in the opinion of the Court displays grave error in the approach of the Tribunal - the note to the extent it is material cited that since there was pressure of time, the AO would finalize the assessment and invoke the powers to reopen the assessment later, if necessary, and so required - such approach is clearly erroneous and betrays an injudicious approach. Completion of the assessement without obtaining the full and complete information asked for by the AO himself would amount to a serious error in procedure and causes prejudice to the interest of the Revenue - When the CIT directed the AO to get the full information before taking a view, he was certainly not directing a fishing or roving enquiry nor was he directing the AO to follow a particular line of enquiry or investigation - in the final order all that the Commissioner did was to set aside the original assessment order and restored back the matter for reconsideration by the AO after granting opportunity of hearing to the assessee - The final order balanced the interest of the Revenue with the rights of the assessee who was afforded an opportunity to back its claim that such loans, deposits etc. were legitimate and genuine – Decided in favour of Revenue.

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• 2014 (4) TMI 862
  Validity of notice u/s 148(1) of the Act – Mere-change of opinion - Bar of limitation – Deduction on interest income - u/s 36(1)(viii) of the Act – Held that:- The words “interest income received” can only be the gross interest received – it is not fit to disallow the deduction claimed u/s 36 (1) (viii) - there was no failure on the part of the assessee to disclose fully and truly all material facts as contemplated under the 1st proviso to section 147 of the Act - the initiation of reassessment proceedings u/s 147 of the Act was only based on a “change of opinion” which is impermissible in law - there was no failure on the part of the assessee to disclose fully and truly all material facts in relation to the A.Y. 2005 -2006 - Even in the scrutiny proceedings u/s 143 (3), all disclosures were made by the assessee regarding its claim for a deduction u/s 36 (1) (viii) of the Act – Thus, the reassessment proceedings were initiated only on the basis of a “change of opinion” and had no jurisdiction to reopen the assessment proceedings – Decided in favour of Assessee.

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• 2014 (4) TMI 861
  Notice of final disposal by the Tribunal – Held that:- The contention of the assessee would be raising submissions and contentions before the Tribunal on the basis of materials already on the record - it would be appropriate for the Tribunal to decide the issue arising in the appeal on the basis of law applicable - When necessary material is already on record, remanding the proceedings to the AO would needlessly add new stages to the proceeding, which could be avoided – Decided in favour of Assessee.

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• 2014 (4) TMI 860
  Addition u/s 69B of the Act – Unexplained investment in house property – Reference made to DVO - Held that:- The Tribunal rightly deleted the entire addition primarily on the ground that the AO could not have made reference to the DVO without reference to the books of accounts and such reliance on the DVO's books of accounts was not justified – GOODLUCK AUTOMOBILES PVT LTD Versus ASSTT COMMISSIONER OF INCOME TAX [2012 (9) TMI 157 - Gujarat High Court] - there was no material, what to say an incriminating material, in the possession of the Revenue Department - the entire addition being merely based upon the estimation of DVO was baseless is set aside – thus, there is no need to interfere in the findings arrived at by the authorities – Decided against Revenue.

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• 2014 (4) TMI 859
  Restriction of addition of excess stock of silver – Investment in excess stock of gold jewellery – Held that:- As regards the gold jewellery item, the Tribunal pointed out that the degree of error found in the weighing scales, warranting a reasonable deduction of 5% - the weighing of jewellery along with tax was also held to be not bad - the tax could not be included in the stock - as regards the stone studded jewellery 20% rebate as against 10% was allowed – as against the Silver articles the Tribunal pointed out that there was an incorrect weighment of silver articles - The available scales could weigh articles only up to 6kgs at a time, whereas the serial numbers of the inventory list of the silver articles indicated the weight of items far exceeding the said upper limit - The order of the Tribunal shows a detailed discussion on the various aspects on the stock seized and the variations worked out by the AO - the appellate authority recorded its findings based on materials and this was considered and confirmed in toto by the Tribunal - the factual finding by the Tribunal is based on material and no exception could be taken to that – thus, the question is a pure question of law – Decided against Revenue.

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• 2014 (4) TMI 858
  Service of notice to proper person – Order u/s 143(2) of the Act – Onus to prove - Held that:- Sashi Prakash Khemka had been consistently representing the case of the assessee and he had also acknowledged the receipt of the notices, photocopy of the acknowledgement for the service of notice and there being no denial by the assessee that the Sashi Prakash Khemka was representing the interests of the assessee before the Income Tax Authorities - it is too late in the day for the assessee to state that the service of notice was not on a proper person. The burden is on the assessee to show that the person who received the notice was not an authorised representative - even in the absence of a written authorisation, when in all the earlier proceedings, the assessee was represented by a particular person and all action had been taken based on the representation of the said person and the said person alone was representing the interest of the assessee, it is not open to the assessee in future to contend that there was no authorisation on such person to represent the case of the assessee. Non-production of original files – Held that:- Inspite of earnest efforts made by the revenue, they could not get the original records and only photocopy of the acknowledgement was produced before the Tribunal - the acknowledgement in photocopy produced before the Tribunal was not denied by the assessee as not pertaining to the assessee - the photocopy could only be of the secondary evidence on the service of notice, yet when there was no denial from the assessee as regards the photo copy of the acknowledgement as relatable to the assessee's case and that in subsequent communication between the assessee and the Revenue, the notice sent by the Revenue was also acknowledged by the said Sashi Prakash Khemka, the contention of the assessee that there was no proper service on the assessee can only be seen as an afterthought to wriggle out of the assessment proceedings – thus, the order of the Tribunal is set aside – Decided in favour of Revenue.

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• 2014 (4) TMI 857
  Penalty u/s 271(1)(c) of the Act – LTCG – Non-furnishing of information – Denial of exemption u/s 54F of the Act - Held that:- The AO quoted wrong provision of law viz., Section 54 when, the exemption was claimed u/s 54F of the Act - The assessee had not deposited the long term capital gain in the capital gain account, and he had deposited the amount in his savings account with Vijaya Bank - he paid Rs.26,70,000/- to the owner of the property from the said account - the AO ought to have exercised the discretionary powers, while considering to impose penalty u/s 271(1)(c) - the assessee in response to the notice u/s 148 of the Act had paid LTCG tax and interest - the AO ought not to have imposed any penalty in exercise of the discretion vested in him – Decided in favuor of Assessee.

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• 2014 (4) TMI 856
  Nature of Liability – Contingent or not – Loss of fluctuation of foreign exchange - Whether the Tribunal was right in holding that loss arising out of fluctuation in foreign exchange for restatement liabilities is not the contingent liability is valid in law – Held that:- The decision in Oil and Natural Gas Corporation Ltd., vs. Commissioner of Income Tax [2010 (3) TMI 81 - SUPREME COURT] followed - the assessee was entitled to adjust the actual cost of imported assets claimed in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance-sheet dates, pending actual payment of the liability u/s 43A - the loss claimed on revenue account was allowable u/s 37(1) and the assessee was entitled to adjust the actual cost acquired in foreign exchange in terms of Section 43A - the restatement of the liability itself came at the end of the accounting year on account of the foreign exchange rate fluctuation and thereby the assessee was stated to have been saddled with the loss arising out of the restatement of the liability - the restatement had come at the end of the accounting year and that the present liability itself was on account of the exchange fluctuation – Decided against Revenue.

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• 2014 (4) TMI 855
  Appeal u/s 260A of the Act - Assessment of individual income - Civil construction work – Production of adequate evidences - Held that:- Tribunal was rightly of the view that it would be appropriate and reasonable to assess the income by estimating net profit of 10% of the gross contract - the Tribunal have exercised their discretion and jurisdiction in the matter of permitting the assessee to adduce additional evidence in accordance to the requirement to the statutory rules i.e. under rule 46(A) of the Act and have adopted the reasonable approach and based on the documents and additional evidence filed particularly work order and the payments after deduction of TDS came to the conclusion – thus, the findings are neither perverse, illegal nor contrary to law warranting reconsideration now in this proceedings u/s 260A of the Act – there is no need to interfere in the order of the Tribunal – Decided against Revenue.

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• 2014 (4) TMI 854
  Order u/s 127 – Validity of the transfer of the case to different jurisdiction – Opportunity of being heard - Held that:- The assesseee had filed an affidavit - The affidavit was forwarded under cover of the assessee’s Chartered Accountant s letter - The MOU referred to in the order was between the assessee and one Gill for the sale of the assessee s property - There is not even an attempt to explain the relevance or significance of the MOU - He was faced with it for the first time only in the order - The reasons in support of the order were not mentioned in the show cause notice - The assessee ever had an opportunity of responding to the MOU – assessee rightly contended that the impugned order is clearly in breach of the principles of natural justice, contrary to the provisions of section 127 and the judgments of Shikshana Prasaraka Mandali Sharda Sabhagruha Versus The Commissioner of Income Tax ] (Central) and others [2013 (3) TMI 153 - BOMBAY HIGH COURT] - the entire proceeding transferring the case from Pune to Mumbai is in breach of principles of natural justice – Decided in favour of Assessee.

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• 2014 (4) TMI 853
  Review of the order u/s 260A of the Act - Claim of deduction u/s 80IB(10) of the Act – Presence of substantial question of law – Held that:- All Courts in India are bound to follow the decision of the Supreme Court and the law laid down by the Supreme Court is binding on all Courts and Tribunals - When some principle of law has been laid down by the Supreme Court, it is the duty of the High Court or Subordinate Courts to follow the decision of the Supreme Court and to ignore the well settled law by a judicial pronouncement of the Supreme Court and to pass order contrary to it would be gross impropriety - It amounts to 'judicial adventurism' as has in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. [1997 (5) TMI 421 - SUPREME COURT]. The contention of the assessee that even raising infrastructural development entitled them to deduction u/s 80IB(10) of the Act is not sustainable - assessee have not constructed residential flats and as such barely raising infrastructural facilities would not raise any substantial question of law requiring adjudication by the Court – the assessee have sold the plots instead of constructing the residential houses which was essential for the purpose of claiming deduction, was not entitled to deduction - appeal before the High Court is maintainable with respect to any judgment where the High Court is satisfied that the case involves the substantial question of law – section 260A(3) of the Act leaves no room for doubt that if the appeal before the HC does not involve any substantial question of law or that High Court is not satisfied that the appeal involves any substantial question of law, then there is no necessity for the High Court to frame substantial question of law and to answer the same thereafter - the entire controversy raised by the assessee was factual in nature and does not contain any legal issue – Decided against Assessee.

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• 2014 (4) TMI 852
  Validity of order u/s 147 of the Act - reassessment – Held that:- The Explanation-3 to Section 147 of the Income Tax Act does not apply - Explanation-3 will be applicable in case where live issue, which was subsisting at the time of original assessment and if such issue has escaped the determination of the AO0, can be a ground for reopening - any new issue that has cropped up subsequently on new set of facts, the Explanation has no application - the Explanation-3 has not really diluted cardinal object of Section 147 of the Income Tax Act for reopening - The Explanation-3 has been given a retrospective effect with an idea there are so many assessment orders, which were passed earlier without deciding the issue subsisting at the time of original assessment – Decided against Revenue.

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• 2014 (4) TMI 851
  Claim of deduction u/s 80HHC of the Act – Excess deduction to interest income – Held that:- The Tribunal was of the view that once the income is assessed as income from other sources, the profits of the business to be calculated for the purpose of deduction u/s 80HHC (3) will automatically get reduced by the amount of the interest and the benefit of Section 80 HHC was applicable only in the case in which the interest income is assessed under the head “income from profit and gains of the business” – following Pandian Chemicals Vs. CIT [2003 (4) TMI 3 - SUPREME Court] – the interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction u/s 80HH - the decision of the ITAT is based on the judgment of the SC – thus, no substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (4) TMI 850
  Waiver of Interest u/s 234B of the Act – Entitlement to claim unabsorbed depreciation – Held that:- The decision in Garden Silk Weaving Factory Versus Commissioner of Income-Tax [1991 (3) TMI 1 - SUPREME Court] followed - Depreciation of a firm cannot be allocated to the benefit of partners personally and it shall revert back to the firm, the assessees should have been careful enough to file their returns without claiming such unabsorbed depreciation - though 1989-90 assessment of the firm did allocate such unabsorbed depreciation, law of the land declared such allocation as bad - the returns ought to have been filed showing the correct income - the advance tax was not paid, therefore, automatically they are liable to pay interest chargeable u/s 234B of the Act – Decided in favour of Revenue.

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• 2014 (4) TMI 849
  Validity of order u/s 263 - valuation of stock on discontinuation one business of partnership firm – Book value or market value - Held that:- The entire discussion of A.L.A Firm case refers to different situations depending upon continuance of business or discontinuance of business - Though all partners are members of one family, so far as their tax liability, as an individual or as partners will not depend upon their relationship with each other, but depends upon the income they derive as their individual income whether through partnership or through other sources - if the firms were to transfer closing stock especially an item like gold, to an outsider, definitely book value will not be the value at which the stock would be transferred - partners are members of the same family, their liabilities and assets would depend upon their share capital etc.- it is not open to them to say that one of the partners being head of the family is continuing Dona Gold business as a proprietary concern at their choice, at what value they transfer the entire closing stock they have transferred - there is no justification in the stand of the assessee in contending that only the book value of closing stock has to be taken into consideration - the Tribunal was justified in rejecting the appeals – Decided against Assessee.

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• 2014 (4) TMI 848
  Rejection of registration u/s 12A of the Act – Nature of activity – Charitable or not – Held that:- It is not clear as to what exactly is the object and aim of the trust in mentioning minorities and backward classes of Tellicherry Municipality and its suburbs - no material is brought on record which minority groups in Tellicherry Municipality represent religion, language or culture - In the absence of details by referring to minorities living in Tellicherry Municipality and its suburbs, the real intention of using the word minorities in the trust deed, according to the authorities, with reference to a particular religious minority seems to be justified. If it is a charitable and religious trust, especially in the case of charity, having regard to several restrictions under Section 13 (1) of the Act (especially 13(1)(b)) if benefit is restricted to a particular religion or class, exemption benefit will not be attracted - as long as 12A registration is in existence, the assessee can claim the benefit - Without 12A registration, even if the assesee were to spend money on charitable activities, they are not entitled for the benefit - registration u/s 12A is like an entry document to secure exemption - The observation of the authorities with reference to the contents of the trust deed persuaded them to opine that the meaning and import of the word apply , having regard to the denominational character of the trust on the holistic approach to conclude that the intention was not to extend the benefit to all minorities, but to a particular religious minority – Decided against Assessee.

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• 2014 (4) TMI 847
  Addition u/s 69 of the Act – Unexplained investment – Purchase of clothes for processing and bob charges paid – Evasion of excise duty – Held that:- Tribunal rightly held that there is no basis with the AO for drawing adverse conclusions - Though the Excise authorities have quantified the amount of duty evasion, there is no material on record to suggest that the assessee did collect the amount from its customers – assessee submitted that it did not claim the amount as expenditure in its Profit and Loss account - the AO could not make any addition of the amount of Excise duty evasion quantified by the Excise authorities - the tribunal’s view is based on material on record and gives rise to no question of law – Decided against Revenue.

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• Customs

• 2014 (4) TMI 871
  Non-Compliance with Judgment & Direction of Supreme Court – Requisite information w.r.t. 212 unclaimed waste containers - Non-filing of Personal affidavits – Non-incineration of containers – Contempt proceedings - Whether there are containers which are hazardous and are yet to be incinerated - Held That:- Judgment in Research Foundation for Science, Technology and Natural Resource Policy v. Union of India and Ors. [2012 (7) TMI 263 - SUPREME COURT OF INDIA] followed - This Court is informed that 212 containers are lying with damaging contents of waste oil and various other wastes – This Court expressed their distress at the attitude of the Central Government and all related agencies because they did destroy 133 containers after the judgment rendered earlier by this Court in Research Foundation for Science v. Union of India and Anr. - The said judgment also mentioned the existence of other 170 containers with which are presently concerned - For the reasons best known to them nothing has been done by the Government about these containers all these years – SC directed that these affidavits will be filed on or before 17th February, 2014 and the matter to be listed on 18th February, 2014 – Decided in Favour of appellants.

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• 2014 (4) TMI 870
  Bar of Limitation – Refund of Special additional customs duty (SAD) - Notification no. 102/2007-Cus – Absence of limitation period in the original Notification - Can period of limitation for preferring refund claims, specified in the amending notification be made applicable with retrospective effect, in absence of a limitation period in the original Notification in respect of goods imported prior to the issue of the amending notification – Held That:- In the absence of specific provision of Section 27 being made applicable in the said notification, the time-limit prescribed in this section would not be automatically applicable to refunds under the notification - With the introduction of the circular and then amended notification (No. 93), the Customs authorities started insisting that such limitation period which was prescribed w.e.f. 01.08.2008 by notification became applicable - There is a body of law that essential legislative policy aspects period of limitation being one such aspect cannot be formulated or prescribed by subordinate legislation. Relying upon Khemka and Co. Private Ltd. v. State of Maharashtra [1975 (2) TMI 91 - SUPREME COURT OF INDIA] - In matters which deal with substantive rights, such as imposition of penalties and other provisions that adversely affect statutory rights, the parent enactment must clearly impose such obligations; subordinate legislation or rules cannot prevail or be made, in such cases - The imposition of a period of limitation for the first time, without statutory amendment, through a notification, therefore could not prevail - This Court holds that the amending notification must be read down to the extent that it imposes a limitation period - Decided in favour of assesse.

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• 2014 (4) TMI 869
  Validity of Special CJM (Custom) Order - Modification of bail order - Condition of bail - Seeking of permission before leaving country - u/s 482(b) Cr.P.C., u/s 132, 135 (1) (a) & (c) and 104 of the Customs Act, 1962 – Held that:- Without going into controversy as to whether the offences are bailable or not, the petition is finally disposed of with the direction that in case the petitioners applies before the court below for permission to leave country they shall not be required to present before the court below and their application to leave country shall be decided preferably within a period of 15 days - However, it will be necessary that such application will be supported with an affidavit specifying the period of their absence and also the name of the country where they want to visit – Decided partly in favour of appellant.

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• Corporate Laws

• 2014 (4) TMI 868
  Winding up of company - Breach of contract - Non payment of material supplied - Respondent contends that no amount is due and payable to the petitioner and alleges that all payments have been made to the petitioner except for the material which was found to be defective - whether the defence raised by the respondent is bona fide or a sham defence - Held that:- The statement of account of the petitioner as appearing in the books of the respondent, i.e. the ledger account filed by the respondent, also does not indicate any debit on account of defective material. On the contrary, the books of accounts of the respondent clearly indicate that a sum of Rs. 17,23,236/- was, admittedly, due and payable by the respondent to the petitioner as on 03.07.2012. The debit note which is annexed to the reply is dated 13.09.2011. This debit note does not find any mention in the ledger account as provided by the respondent and is obviously a self-serving document which has been created subsequently, for the purposes of the present petition. It is common accounting knowledge that debit notes are primary documents on the basis of which entries are posted in the ledger. The fact that no entry for the alleged debit note appears in the ledger account furnished by the respondent itself indicates that no such debit note was issued at the material time. Neither the debit note nor the statement of defective material is accepted by the petitioner. There is also no evidence to indicate that the said debit note or any communication as to defective material was ever issued by the respondent to the petitioner. It is thus obvious that the contention that is now raised that the goods supplied by the petitioner were defective has been raised for the first time after the petition has been filed and is, apparently, a sham defence which is liable to be rejected at the threshold - in view of the fact that the respondent has been unable to discharge its debt due to the petitioner, I deem it appropriate that the Official Liquidator be appointed as a Provisional Liquidator to take charge of the assets and books of account of the respondent company - Decided in favour of appellant.

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• Service Tax

• 2014 (4) TMI 884
  Denial of refund claim - Whether appeal u/s 86 lies before the tribunal or revision to be filed before the government - Jurisdiction of tribunal - Revenue contends that a specific reference of Section 35EE (of the Central Excise Act) precluded an appeal under Section 86, and that the remedy available to the assessee was a revision to the Central Government - Held that:- Parliament always intended that an appellate remedy should be available in respect of refund and rebate claims. That power was exercisable by the CESTAT. The amendment of Section 83, in 2012 did not disturb the appellate remedy, i.e Section 86; the amendment did not limit the appellate power in any manner whatsoever. It is a settled position of law that exclusion of jurisdiction of courts and tribunals should be by way of express provisions, or through necessary intendment. - amendment to Section 83 by making a specific reference to Section 35EE of the Central Excise Act, did not make any difference to the nature of jurisdiction exercisable by the CESTAT under Section 86; it continued to possess jurisdiction to decide on matters pertaining to rebate and refund. Since CESTAT did not decide the matter on merits, its decision – holding that it lacked jurisdiction- is set aside. The CESTAT shall consequently decide the merits of the appeal pending before it, after hearing the parties. - Decided in favor of assessee.

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• 2014 (4) TMI 883
  Waiver of pre deposit - Held that:- We have not the slightest doubt that having filed the proceeding before the tribunal, the petitioner ought to have pursue the same with all seriousness. Repeated adjournments were neither justified nor can be found and fault with the tribunal in not adjourning the proceedings time and again. Nevertheless, in facts of the case when it is pointed out to us that at-least on the last occasion the reason pressed was sickness of representative of the petitioner and when by an ex-parte order, pre-deposit of sizeable amount of Rs. 1 crore came to be imposed, in our opinion, the petitioners deserve one last opportunity to argue the petition for waiver of pre-deposit on merits before the tribunal. This however, cannot be done unconditionally. The petitioner must pay reasonable heavy cost for availing such an opportunity. In facts of the case, therefore, orders dated 2.8.2013 and 3.12.2013 passed by the tribunal are set aside, the proceedings are placed back before the tribunal for consideration on merits and disposal in accordance with law. For such purpose, tentatively we fix the date of 21.4.2013 before the tribunal. This is only in order to ensure that no fresh notice shall have to be served to the parties of such proceedings. It is made abundantly clear that if on such date the tribunal wishes to reschedule the hearing, it would be absolutely open for the tribunal to do so - Decided partly against assessee.

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• 2014 (4) TMI 882
  Demand of service tax - recovery of service from third party - barely two days after the show cause notice, the department wrote two separate letters to M/s.Reliance Industries Limited and M/s.Essar Oil Limited, both service recipients from the petitioners calling upon them to make service tax payment - Held that:- The petitioners have raised several disputes including the dispute that some of the services having been provided in the special economic zone areas, service tax is not applicable. We are not judging the validity of such contentions. All that we are suggesting is that when the show cause notice was issued by the department to which the petitioners have raised their objections, recoveries without adjudication of such disputed taxes was simply not permissible in law. We notice that section 73C of the Finance Act 1994 allows the department to make provisional attachment of the properties of the assessee during the pendency of the proceedings under section 73 or 73A of the Act for the purpose of protecting the interest of the Revenue. Such provision cannot be activated for seeking recovery even before adjudication. Recovery of unpaid tax is to be made as per section 87 of the said Act which provides for the power and procedure for such recoveries - within two days of issuance of show cause notice, the respondents issued recovery orders against the customers of the petitioners, which in our opinion, was not simply permissible - However, assessee directed to make service tax payment - Decided partly in favour of assessee.

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• 2014 (4) TMI 881
  Denial of refund claim - Banking and other Financial Services - appellant had collected this amount from M/s.Tamil Nadu Electricity Board @ 8% for the services rendered during 1.4.2003 to 30.5.2003. Subsequently, they have refunded the amount to TNEB which was originally collected in excess and filed the refund claim - Held that:- it is seen from the adjudication order that the appellant placed copy of the trial balance as on 31st March 2004 wherein they have claimed the amounts sought for refund as 'receivables'. The appellant by their letter dt. 16.2.2005 submitted that they have refunded the amount to the TNEB towards excess collection of service tax for the period from 1.4.2003 to 13.5.2003. On perusal of the adjudication order, it is not clear that as to whether TNEB refunded the amount to the appellant. In my considered view the matter is required to be examined by the original authority afresh in the light of the decision of the Hon'ble Rajasthan High Court in the case of A.K. Spintex Ltd. (2008 (11) TMI 89 - RAJASTHAN HIGH COURT) and the Tribunal's decision in the case of TFL Quinn India Pvt. Ltd. (2011 (8) TMI 989 - CESTAT BANGALORE). Accordingly, the impugned orders are set aside and appeal is allowed by way of remand - Decided in favour of assessee.

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• Central Excise

• 2014 (4) TMI 876
  Denial of rebate claim - Violation of principle of natural justice - Held that:- Impugned order passed is in violation of the Principles of Natural Justice. The notice was issued on 01.09.2007. 7 days' time has been allowed to file the reply. Certain documents had been relied upon in the show cause notice. In paragraph 19 of the writ petition, it is stated that the said show cause notice has been received by the petitioner on 3rd September, 2007, therefore, the petitioner has 7 days' time to file the reply. According to the petitioner, the reply was filed on 10.09.2007. In paragraph 24 of the writ petition, it is stated that the reply of the show cause notice was filed on 10.09.2007. Para 24 of the writ petition has been replied by 24 of counter affidavit, wherein filing of reply on 10.09.2007 has not been disputed. It is unfortunate that even though, the reply was received on 10th September, 2007 but in the impugned order, it is alleged that no reply has been filed and no request has been made for the personal hearing - Matter remanded back - Decided in favour of assessee.

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• 2014 (4) TMI 875
  Review application - Held that:- Court while deciding the appeal vide order dated 02.07.2007 has remanded back the matter to the Tribunal for reconsideration. This Court has not condoned the delay and when the matter came up for consideration before the Tribunal. Tribunal following the decision of the Apex Court in the case of Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur (2007 (12) TMI 11 - SUPREME COURT OF INDIA) has held that Commissioner (Appeals) is empowered only to condone the delay of 30 days and not beyond that, in terms of Section 35 of the Central Excise Act, 1944 and Section 5 of Limitation Act, 1963 does not apply. Therefore, even if it is taken that the decision of this Court is binding upon the parties, it will not help the applicant because no positive view condoning the delay has been taken by this Court and matter has been remanded back for reconsideration. Thus, Tribunal has to decide the appeal in view of the law laid down by the Apex Court - Decided against the assessee.

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• 2014 (4) TMI 874
  Waiver of pre-deposit - Penalty under the provisions of Rule 26 of the Central Excise Rules, 2002 - Held that:- main noticee M/s. Banco Ltd. had settled the issue by paying the duty liability and the interest thereof before the issuance of show cause notice and the excise authorities have accepted such settlement and the adjudicating authority has given the benefit of provisions of Section 11A(2B) of the Central Excise Act, 1944 for non imposition of penalty on the main noticee - proceedings against the main noticee being concluded, and the show cause notice being common to all noticees, the co-noticee need not be charged with any penalty under provisions of Rule 26 of the Central Excise Rules, 2002. I find that the appellant has made out a prima facie case for the waiver of the pre-deposit of the amounts involved. Accordingly, application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Following decision of the case Tikam P. Bhojwani [2011 (3) TMI 893 - CESTAT, AHEMDABAD] - Stay granted.

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• 2014 (4) TMI 873
  Waiver of pre-deposit - Availment of CENVAT Credit - Held that:- as regards the service tax paid on canteen service, housekeeping service and repairing of motor vehicles, prima facie credit seems to be available to the appellant as these are required for the purpose of conducting the business activity. There are various case laws which have decided as to these services are eligible as input services - appellant needs to be put to some condition at least in respect of the input credit availed by him on the commission agents invoices which indicated service tax paid. On specific query from the bench, ld. counsel submits that the service tax credit availed on the services rendered by commission agent comes to approximately Rs.2.50 lakhs - Conditional stay granted.

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• 2014 (4) TMI 872
  Waiver of pre deposit - Availment of CENVAT Credit - Held that:- Prima facie, I find that in this case the only ground on which the department seeks to denying the Cenvat credit to the appellant is that the activity of the supplier M/s Tata Ryersons does not amount to manufacture and as such the amount paid by the supplier to the department in respect of clearances of the cut CR sheets is not central excise duty. Prima facie, I find that there is no evidence that the assessment of duty at the end of M/s Tata Ryersons has been reviewed. It is well settled law that Cenvat credit to a manufacturer in respect of certain inputs received by him cannot be denied by his Jurisdictional Central Excise Authorities by seeking to review the assessment at the end of the supplier [Apex Court’s judgment in the case of CCE vs. MDS Switchgear Ltd. reported in {2008 (8) TMI 37 - SUPREME COURT }]. In view of this, the impugned order does not appear to be correct and, as such, the appellant have a strong prima facie case in their favour. The requirement of pre-deposit of Cenvat credit demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - Stay granted.

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• CST, VAT & Sales Tax

• 2014 (4) TMI 880
  Rate of Tax - Imported "electronic equipments’ – Classification - The "electronic equipment’s imported by Assessee, whether come within the term "machinery" referred to in the schedule of U.P. Tax on Entry of Goods into Local Areas Act, 2007, which has come into force w.e.f. 01.11.1999 – "machinery" – Item 2 of schedule of Act, 2007 - Held that:- In totality the instruments referred to above imported by assessee constitute and satisfy the term "machinery" and its parts (including spare parts) and, therefore, the view taken by authorities below cannot be said to be erroneous – Relying upon Commissioner of Income Tax, Madras Vs. Mir Mohammad Ali, [1964 (4) TMI 12 - SUPREME Court] – SC held that a diesel engine itself is a machinery. The mere fact that such a device is considered to be an "electronic equipment" would not make any difference for the reason that the term "electronic" means that it is operated by flow of electrons - In common parlance the term "electronic" is applied to a system or appliance which is operated by a flow of electron - In McGraw-Hill, Dictionary of Scientific and Technical Terms (Second edition), the term "electronic" has been defined as pertaining to electron devices or to circuits or systems utilizing electron devices, including electron tubes, magnetic amplifiers, transistors, and other devices that do the work of electron tubes - This Court considered the items in question which have been imported by assessee, hence has no hesitation or doubt in holding that these items form "machinery" used for the purpose of transmission of voice from one place to another and this process is called telecommunication – Therefore, items imported by assessee are taxable, since covered by Item 2 of the schedule of Act, 2007 - The order of Tribunal is confirmed - The revision being devoid of merit, is dismissed – Decided against assessee.

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• 2014 (4) TMI 879
  Validity of Revision Order – Evasion of Tax - Whether on the basis of suppression of turnover, the assessee; the second seller of goods taxable at the point of first sale, could be mulcted with the liability to pay tax, since the evasion of tax would be by the first seller – Suppression of turnover - Penalty - Held that:- What the review petitioner seeks is to review the final order passed in Revision on the basis of a penalty order passed by the Intelligence Officer is passed in total disregard to the final order passed in Revision; though the said order was specifically noticed and read by the Intelligence Officer – The matter cannot be covered under jurisdiction conferred u/s 41(7) - The review petitioner contends that he has discovered new and important facts, which were not within the knowledge of the review petitioner and hence could not be produced by him - The orders relied on, being the assessment order and the penalty order passed against the alleged first seller, were even at that point of time (i.e., at the time of filing the review), reversed in appeal and revision. The revisional order is of the year 2007 and the appellate order is of the year 2008, both long before the consideration of STR by this Court - The review petitioner then relied on a subsequent order passed by the Intelligence Officer on remand, wherein the procedure contemplated under the Act was given a complete go-by and attempt was also made to reverse the findings rendered in the final order passed by this Court in STR; which was done on the false pretext of complying with the directions of this Court to re-do the matter afresh - There is absolutely no reason to review the order passed in S.T.Rev.No.11 of 2007 - The review petition is dismissed - Decided against assessee.

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• 2014 (4) TMI 878
  Permission for further transshipment – Representation capacity of transporter - Whether the transporter is person aggrieved and is entitled to release of goods, which have been detained and seized and can file representation and appeals against the orders – Held that:- Section 48(7) does not only refer to dealer, it also refers to the person in-charge of the vehicle and that would include a driver or transporter as well - Section 52 of the Act also uses the same words, namely the person in-charge of the vehicle to carry such documents as may be prescribed failing which it shall be presumed that the goods carried thereby are meant for sale within the State – Section 55 (1) (15) (iv) provides for penalty at 40% of the value of the goods on a person being a transporter or hirer of a vehicle, who prepares a goods receipt by showing false destination of goods outside the State. A transporter may carry the goods of several dealers and may be from States other than the neighbouring States, which may be far away in destination from the State of UP - It will be extremely unjust for owner of the goods to apply for release of the goods in the State of UP - The Legislature has used the words "any person aggrieved" and which would include the driver or the transporter of the vehicle - No need to go into the merit of the seizure inasmuch we find that the petitioner has a right to make a representation under the proviso to 47(7) for release of the goods, which have been seized by the respondents and if he is still aggrieved to file an appeal u/s 57 in Tribunal - The amendment application is allowed - In view of the order proposed to be passed, no reply is required to be given by the State respondents to the amended paragraphs – Decided in favour of Assessee.

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• 2014 (4) TMI 877
  Nature of the transaction - paper transactions - sales of raw skins - Transfer of consideration to sister concern - whether taxable sale or not - Held that:- Decision in State of Karnataka Versus Azad Coach Builders Pvt. Ltd. and another [2010 (9) TMI 879 - SUPREME COURT OF INDIA] followed –Tribunal`s order cannot be accepted solely on the basis that the financial transactions with any finance company would ultimately decide the character of the transaction between the purchaser and the seller - All the dealings that the finance company had would be the arrangement that the dealer had with the finance company for bill discounting - Beyond that, the agreement with the finance company could be taken in as the basis for deciding whether at all there was any transaction of purchase or sale between the parties. The assessee does not deny the fact they had issued invoices in the name of the assessee herein in respect of the sale of dressed skins - The question as to whether there had been a taxable sale or not must be looked at from the facts other than the bill discounting transaction and the purchase ledger extract – This does not supply the necessary proof that the assessee had no transaction at all except as a paper transaction - When the assessee was confronted with the documents, the proper course for the assessee was to place necessary materials to show that these transactions were only paper transactions - In the absence of any such proof and the burden not being discharged by the assessee, we have no hesitation in restoring the assessment – Plea of the assessee that in the matter of calculating penalty, the AO ought not to have taken in the AST liability to work out the penalty at 150% - Decided partly in favour of revenue.

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