Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 30, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Taxability of goodwill - whether sum received by the company from its collaborators on account of goodwill not exigible to tax as held by Tribunal - Held No - it cannot be held that the valuation of goodwill made by the assessee was unreasonable or untenable in law. - HC
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Subsidy received from Government of Gujarat - if payments in nature of subsidy from public funds are made to the assessee to assist him in carrying on his trade or business, they are, therefore, trade receipts. - HC
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Deduction under Section 43B - Either the interest amount has to be allowed for deduction under Section 43B or the sum offered for tax (as waived by the Bank) has to be reduced by the amount of interest paid. - HC
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Jurisdiction of CIT(A) to make a reference to DVO to determine the FMV of the property - The Revenue insists that the power is being exercised only under Section 250(4) alone - reference is invalid and set aside - However reference can be made u/s 55A subject to conditions stipulated therein - HC
Customs
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Seizure of goods - promissory estoppel - appellant instead of addressing the questions culled out by us in the aforesaid order again started arguing the plea of estoppel - The appellant cannot pick a line here and a line there, out of context and impute a motive, which a reading of the whole document does not disclose - HC
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Waiver of pre deposit - where the commencement of the lis was prior to the introduction of the amendment to the Customs Act with effect from August 2014, the assessee's right of appeal, as per the erstwhile provisions of law, would not be effected by the provisions introduced by the amendment of 2014- HC
Corporate Law
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Transfer of shares - What the Company Law Board has omitted to see is the fact that despite the procedure adopted by the Insolvency Court in England being in accordance with the Insolvency Laws of United Kingdom, the transfer was in respect of a property that was subject to the Indian Law. Therefore, the Indian law had to be applied, for the purpose of statutory recognition of such a transfer. - HC
Wealth-tax
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Addition made on account of valuation of cars - AO adopted the insurance value as the value of the motor cars for the purpose of computing the net wealth of the assessee - AO directed to estimate 80 per cent. of the insurance value - AT
Service Tax
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Waiver of pre-deposit - payment of 7.5% of the total tax demand is mandatory and that cannot be reduced by this Court - HC
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Demand of service tax - Jurisdiction error - No service provided - Merely because the petitioner will have to shell out more than 7.5 lakhs, it cannot be a ground to exercise to interfere with under Article 226 of the Constitution of India. - HC
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Competence of the CAG to audit - prayer of the petitioners to grant a stay of further proceedings, pursuant to the show cause notices issued to them by the respondents, is not granted and the petitioners are relegated to the alternate remedy of pursuing the show cause notices before the authorities under the Finance Act, 1994 - HC
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Reimbursements of service tax from the recipient of services - since the contract terms was inclusive of rates and taxes, even though service tax has been levied after the date of entering into the contract, service recipient cannot be made liable to reimburse the amount of service tax - HC
Central Excise
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Issue as to whether the product is marketable or not was not even raised by the respondent in reply to the show cause notice nor was it argued before the Commissioner and therefore on that ground the Tribunal could not have allowed the appeal - SC
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Denial of Cenvat Credit - Charges of availing Cenvat credit merely on the basis of invoices without physical receiving any material - As investigation is deficient and no corroborative evidence have been produced by the Revenue on record, demand set aside - AT
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Cenvat Credit - Utilization of Cenvat Credit lying unutilized in their Cenvat Credit credit availed when goods were dutiable - later goods were exempted - after sometime (about 8 years) exemption was withdrawn - cenvat credit allowed to be utilized even if input is not same - AT
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Denial of CENVAT Credit - manufacture of exempted final product - cenvat credit was not permissible on inputs exclusively used in the manufacture of exempted goods. - AT
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Wrong availment of CENVAT Credit - Credit taken but not utilized till reversal, could not compel the assessee to pay interest. So, the demand of interest on the unutilised cenvat credit cannot be sustained. - AT
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100% EOU - Not owing lease has not debarred the appellant to quarry granite and process the same. If the condition of processing of procured granite from the quarry of the State under an agreement is fulfilled by the 100% EOU appellant, benefit of the notification is undeniable since any denial thereof would defeat the object thereof - AT
VAT
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Classification of goods - levy of VAT @ 4% or taxable @ 12.5% - Handicrafts - no hesitation in concluding that a product in order to qualify as “Handicrafts” for the purposes of application of entry no.128 of the third schedule to DVAT, must have been made “predominantly by hand” and it would be inconsequential if some part of the process involves use of some machinery. - HC
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Classification - Applicable rate of tax -the distinction is that the goods forming parts and accessories of motor vehicle would fall under Entry 43(ii) of Part D of First Schedule, taxable at 8%, in contrast to usual glass and glassware in Entry 11 of Part E of First Schedule of the Tamil Nadu General Sales Tax Act - HC
Case Laws:
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Income Tax
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2015 (4) TMI 949
Applicability of proviso to Rule 10B(4) of the Income Tax Rules, 1962 - fluctuations in the operating profit margins of comparable companies during the relevant financial year under question as compared to earlier years - Selection of comparable - whether comparables can be rejected on the ground that they have exceptionally high profit margins as compared to the assessee in transfer pricing analysis Held that:- This Court proceeds on the basis that there is sufficient guidance and clarity in Rule 10B on the principles applicable for determination of ALP. These include the various factors to be taken into consideration, approach to be adopted (functions performed, taking into account risks borne and assets employed, size of the market, the nature of competition, terms of labour, employment and cost of capital, geographical location etc). The extent of accurate adjustments possible, too, is a factor to be considered. Rule 10B (3) then underlines what the ALP determining exercise entails, if there are dissimilarities which materially affect the price charged etc: the first attempt has to be to eliminate the components which so materially affect the price or cost. In other words, given the data available, if the distorting factor can be severed and the other data used, that course has to be necessarily adopted. The mere fact that an entity makes high/extremely high profits/losses does not, ipso facto, lead to its exclusion from the list of comparables for the purposes of determination of ALP. In such circumstances, an enquiry under Rule 10B(3) ought to be carried out, to determine as to whether the material differences between the assessee and the said entity can be eliminated. Unless such differences cannot be eliminated, the entity should be included as a comparable. While determining the comparability of transactions, multiple year data can only be included in the manner provided in Rule 10B(4). As a general rule, it is not open to the assessee to rely upon previous year's data. In the present case, this Court holds that once Brescon, Keynote and Khandwala Securities are held to be functionally similar to the assessee, they would be included as comparables, notwithstanding their high profit margins, provided that the material difference on account of such high profit margins can be eliminated under the Rule 10B(3) analysis. This Court, on a perusal of the orders of the lower authorities and the assessee's submissions before them which have been placed on record in this appeal, finds that the assessee's contentions with respect to the exclusion of Brescon and Khandwala Securities were based only on their exceptionally high profit margins for the assessment year in question and not on the grounds of functional dissimilarities. Indeed, the assessee did not contend the latter before the lower authorities. The assessee has sought to highlight differences in the risk profiles of the assessee and Brescon in the present appeal. However, this Court holds that such a contention cannot be raised for the first time at this stage. Therefore, Brescon and Khandwala Securities are held to be functionally similar, and the matter is remitted to the DRP for the purposes of examination under Rule 10B(3) of the Rules. In the event that the material differences arising out of the extremely high profits cannot be eliminated as per Rule 10B(3), these two entities will have to be discarded as comparables. As far as Keynote is concerned, this Court notices that the assessee had challenged its inclusion as a comparable on two grounds: a) differences in the activities of Keynote and the assessee; and b) exceptionally high profit margins. The TPO rejected the first ground relying on the fact that the assessee had used it as a comparable for previous years and in the subject assessment year as well, it qualified as a comparable based on the assessee‟s search process. Further, the TPO held that Keynote was engaged in financial consultancy and would therefore be considered as a comparable. The ITAT, for reasons unknown, did not examine this issue. This Court notes that the assessee is engaged in the business of rendering financial research and advisory services. It is responsible for investigation and advice to some of its group companies on structuring potential investments and exit opportunities; advising the group companies of investment and disposition opportunities; collection and dissemination of financial information of prospective entities; and other related services. On the other hand, Keynote, as per its Directors‟ Report for FY 2007-08, is involved in “Lead Managing IPOs, Rights Offers, Buybacks and Takeovers. [It] also expanded its reach in Corporate Finance & M&A Advisory.” The services provided by Keynote also include managing public issue of securities, underwriting, project appraisal, equity research, capital restructuring, loan and lease syndication, placement services, portfolio management, debenture trustee, managing/advising on international offerings of debt/equity, private placement of securities, etc. Evidently, the assessee does not provide any of these services enumerated above. Given such functional differences and the mandate of Rule 10B(2)(b), there could be merit in the argument that Keynote cannot be considered a comparable for determining the ALP. The fact that the assessee had included it in the previous assessment years does not have any bearing on its inclusion for the subject assessment year. In this regard, this Court relies on the Supreme Court's decision in Commissioner of Income Tax v. C. Parakh & Co (India) Ltd, [1956 (3) TMI 1 - SUPREME Court] and CIT v. Bharat General Reinsurance, [1970 (12) TMI 5 - DELHI High Court] has also held that there is no estoppel against law under the Act. Thus this Court remits the matter for consideration to the DRP to properly apply the test indicated in this judgment and analyse the functional similarity of Keynote with the assessee. In the event that the DRP finds them to be functionally comparable, it would proceed to carry out the Rule 10B(3) analysis as in the case of Khandwala Securities and Brescon. Deduction under Section 36(1)(ii) in respect of the bonus paid by it to its two shareholders - lower authorities denied such claim, holding that the bonus was paid to the shareholders in lieu of dividend with the objective of avoiding tax - Held that:- perusal of an excerpt from the DRP‟s order dated 21.09.2012 quoted by the AO in his order dated 19.10.2012 contradicts both these facts: a) bonus was not paid in the ratio of 2:1 and b) the assessee had declared interim dividend of ₹ 5,47,47,000/-. Further, the bonuses paid to the two shareholder-directors in the preceding two financial years were in the ratio of 60-65%:40-35%, even though their shareholding was 1:1. The balance sheet of the assessee placed on record also indicates that the two shareholders also hold directorial positions in the assessee. Therefore, the assessee‟s contention that the bonus was paid to the shareholders in their managerial capacity, like in the case of other managers, cannot be questioned merely on the basis of a speculation by the revenue that such payment was to avoid tax. In such circumstances, the deduction under Section 36(1)(ii) in respect of payment of bonus to the two shareholder-directors is allowed. - Decided in favour of assessee.
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2015 (4) TMI 948
Transactional Net Margin Method (“TNMM”) - Transfer pricing adjustment - whether TNMM was the most appropriate method for transfer pricing determination in arriving at the arm’s length price (ALP) to bench mark the assessee/respondent’s international transaction regarding “provision of agency and marketing support services” for AY 2008-09? - Held that:- TPO discarded TNMM as the most appropriate method, holding that the assessee assumed significant risks, and relied on unique intangibles thus resulting in higher profits of the AE which should be attributed to it. In a given case, concededly this can be argued if the facts can logically support such a conclusion. However, the revenue cannot merely state that significant risks, such as credit, operational, manpower and other risks were borne or that the assessee’s business was subjected to fluctuations. It merely mediated between the AEs and customers/vendors in India. Furthermore, it only supplied information to the AEs and mediated between them and Indian enterprises in the transactions arranged independently between them. The observations that the AE’s decisions were taken by the assessee is a general one, unsupported by any independent material; it is anecdotal and based on the TPO’s belief, rather than objective fact based analysis. There was, as a result, no question of its assuming higher risk or using its highly valued intangibles. This court also concurs with the ITAT’s finding that the assessee’s risk was limited and minimal with least capital employed, and that the TPO’s findings that it (the assessee) performed all the crucial functions on behalf of the AEs was not proved. The TPO did not dispute the facts given by the assessee and held without foundation that it undertook all the critical functions of its AEs. This finding was unsubstantiated and generally made; the TPO never elaborated any critical function or decision of the assessee inuring to the AEs except saying that the assessee was engaged in arranging for feasibility studies, industry analysis, and project evaluation for potential projects identified by its AEs. It is quite evident that the TPO based his findings and conclusions on the decision of the ITAT in Li Fung (2011 (9) TMI 204 - ITAT, New Delhi), which was subsequently reversed by this Court. Resultantly, we hold that the ITAT’s conclusion that the TNMM was the most appropriate method and that the TPO had to make a fresh determination of the ALP of the disputed international transactions of `Provision of Agency and marketing support services' amounting to ₹ 32.18 crores based on the TNMM is reasonable, not calling for interference - no substantial question of law arises . - Decided against revenue.
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2015 (4) TMI 947
Fulfillment of primary condition for claim of deduction under Section 801B(10) - whether ITAT failed to consider the fact that the area of the plot for Vidhi Complex is below 1 acre and as such the primary condition for claim of deduction under Section 801B(10) of the Income Tax Act, 1961 has not been fulfilled? - whether ITAT erred in coming to a conclusion that the exclusion of DP Road does not reduce the size of the plot, while on the contrary accepting the fact that the plot in question was originally a larger plot which was bifurcated with passing of two DP roads and thus, treating one of the 3 plots i.e. the plot in question being an independent plot with net area of 3461.68 sq.mtrs.? - Held that:- Orders passed by the Tribunal cannot be faulted. In the present case, we find that the assessee has complied with all the requirement of provisions of Section 80IB(10) of the Act since he has undertaken to commence the development project on 1st October, 1998 and completed the project on or before 31st March, 2008. Furthermore, it is seen that the project completion has been complied by by virtue of section 80IB(10)(d) on a plot of land which is 1.33 acres. The criteria of minimum area of 1 acre required under section 80IB(10)(a) had been met. It also complied with section 80IB(10) (c) of the Act since the area was situated within 25 kms. from the limits of Mumbai city and, therefore, the eligible for exemption of the flat of the size of 1,500 sq. ft. approximately. The Commissioner and the Tribunal also found that the commercial establishment in the present project was less than 2,000 sq. ft. Hence we are of the view that the no fault can be found with the order of the Tribunal. No substantial questions of law arise in the present case. - Decided in favour of assessee.
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2015 (4) TMI 946
Taxability of goodwill - whether sum received by the company from its collaborators on account of goodwill not exigible to tax as held by Tribunal - Held that:- Basis for valuation of goodwill in this case was three fold: (a) the assessee, though established in 1984 in a sense was continually engaged in business since 1975, when Sehgal Cables started functioning (that concern’s business was assimilated by the assessee); (b) the assessee had unexecuted orders worth ₹ 4.87 crores in hand, when the collaboration agreement was signed; its profit for one year offset the loss for the previous year; (c) the assessee held a manufacturing monopoly over one product, i.e wireless harness. As is evident from the Supreme Court’s ruling in S. C. Cambatta, there is no stipulated matrix of factors which are to be taken into consideration. Whilst the length of time for which a business might operate, its profitability, etc. are relevant, equally whether, and to what extent it has competition in respect of the business activities it undertakes, the market acceptability and demand for the product or services in question, capital employed, unique expertise developed, etc. too are all relevant. The ITAT’s view therefore has some basis in law. It is worthwhile to recollect that the Supreme Court, in Commissioiner of Income Tax v. Srinivasa Setty [1981 (2) TMI 1 - SUPREME Court] held that since goodwill is a self-generating asset, its transfer would not give rise to a capital gain. The weight attached by the ITAT to the monopoly enjoyed by the assessee in respect of the product manufactured, the continuous functioning - since the business of Sehgal Cables had been taken over by the assessee (thus „the probability that the old customers would resort to the old places‟ adverted to in Srinivasa Setty [supra]); the large volume of orders at hand when the collaboration transaction took place, were sufficient basis for valuation. This Court also notices that the AO and CIT (A) did not advert to the report of M/s R. K. Khanna nor cared to call that firm. In the circumstances, it cannot be held that the valuation of goodwill made by the assessee was unreasonable or untenable in law. - Decided in favour of assessee.
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2015 (4) TMI 945
Disallowance under section 40(c) - Whether the commission on sales paid by the assessee constituted “the provisions of any remuneration or benefit or amenity” within the meaning of Section 40(c)(iii)? - Held that:- In order to attract ceiling under Section 40[c] of the Act, the payment in dispute must be shown to be a periodical payment. A lumpsum payment or one time payment does not fall in it. Here the fact that commission was payable only if annual turn over exceeded ₹ 2 Crores, is not in dispute. Facts show that payment was thus contingent upon turn over and also not periodical. Hence, following this law, we find that the commission on sales paid by the assessee could not have been subject to provisions of Section 40[c][iii] of the Income Tax Act, 1961. Here, we have to also take note of the finding reached by the CIT (Appeals), in paragraph no.4 that the commission paid was not excessive or unreasonable. Infact CIT (Appeals) has held that first limb of the counsel is arguments before it had succeeded. We therefore, find its disallowance under Section 40[c] not permissible. - Decided in favour of the assessee
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2015 (4) TMI 944
Subsidy received from Government of Gujarat - capital receipts OR revenue receipts (Trade Receipts) - Held that:- The learned Tribunal has materially erred in not following and/or distinguishing the decision of the Hon'ble Supreme Court in the case of Sahney Steel and Press works Ltd. (1997 (9) TMI 3 - SUPREME Court) wherein held that if payments in nature of subsidy from public funds are made to the assessee to assist him in carrying on his trade or business, they are, therefore, trade receipts. We are of the opinion that the substantial question of law raised/involved in the present tax appeal is squarely covered against the assessee and in favour of the Revenue in view of the decision of Sahney Steel & Press works Ltd. (supra). Under the circumstances, the learned Tribunal has materially erred in treating the amount of subsidy of ₹ 19,82,600/- as capital in nature and has materially erred in quashing and setting aside the order passed by the Assessing Officer confirmed by the learned CIT(A). - Decided in favour of revenue.
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2015 (4) TMI 943
Deduction under Section 43B - Tribunal held that principal sum waived, is offered to tax, and as such, the disallowance is to be subsumed into offer on waiver of Principal, which is against the sum and substance of the scheme of allowing deduction under Section 43B which is based on actual payment of interest and recorded perverse finding - Held that:- If out of the total sum of ₹ 257.08 Lakhs which has been offered and subjected to tax by the assessee in its return, the amount of unpaid interest of ₹ 193.96 Lakhs is deducted then the waived principal sum would come to ₹ 62.58 Lakhs (i.e., 441.30 minus 378.72). Either it is the interest which is to be waived, and if the same is not to be waived, then the waived principal amount of ₹ 257.08 Lakhs has to be reduced by the amount of interest of ₹ 193.96 Lakhs which is not permitted for deduction under Section 43B of the Act. In either case, the amount of deduction, as well as the amount which is subjected to tax, would come to the same. If we accept the argument of learned counsel for the appellant - revenue, then it would amount to the department having the cake as well as eating it, which would mean subjecting the assessee to double jeopardy. This cannot be permitted. Either the interest amount has to be allowed for deduction under Section 43B or the sum offered for tax (as waived by the Bank) has to be reduced by the amount of interest paid. Thus we do not find that any infirmity with the order of the Tribunal of allowing the disallowance of interest under Section 43B of the Act to be subsumed into the offer of waiver of principal amount.
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2015 (4) TMI 942
Reopening of assessment - deferred revenue concealed - notice issued under section 148 challenged on the ground of jurisdictional error - Held that:- In the instant case, the deferred revenue for the assessment year 2009-10 according to the Assessing Officer ought to have been admitted or included by the assessee in the assessment year 2010-11 and on account of same having not been offered, has given rise for reopening of the assessment. Nothing prevented the petitioner to place such material to establish that such deferred revenue totaling ₹ 216,89,00,773/- has been actually included as its income in the subsequent assessment year/s and if so, the details thereof with the break up, which the Assessing Officer had called for at the first instance. In that view of the matter, it cannot be held that the reasons assigned by the Assessing Officer by communication dated 25.04.2014 vide Annexure-M for reopening the assessment for the year 2009-10 suffers from any jurisdictional error. It has also been specifically made clear thereunder by 1st respondent that deferment of revenue has not been accepted even by the DRP and what has been stated in the said communication is that reply submitted by petitioner does not demonstrate or establish that total amount of ₹ 216,89,00,773/- had been offered to tax in the assessment year 2010-11. The issue involved is the escapement of income to tax for the assessment year 2009-10. As such, the burden is on the assessee to demonstrate that said deferred revenue totaling to ₹ 216,89,00,773/- has been offered to tax in the assessment year 2010-2011 or in any subsequent year/s. In that view of the matter, do not find any jurisdictional error having been committed by the Assessing Officer to reopen the assessment for the assessment year 2009-10 by issue of impugned notice and also over-ruling of objections raised by the petitioner assessee to such notice. - As decided in WHIRLPOOL CORPORATION VS. REGISTRAR TRADE MARKS, MUMBAI AND OTHERS [1998 (10) TMI 510 - SUPREME COURT] & T.T. PVT. LTD. Vs. INCOME TAX OFFICER, COMPANY CIRCLE-III, BANGALORE reported in (1978 (9) TMI 23 - KARNATAKA High Court) has held that availability of alternate remedy under the Act would not be a bar for this Court to examine the notice issued under section 148 of the Income Tax Act, 1961, if it is challenged on the ground of jurisdictional error. - Decided against assessee.
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2015 (4) TMI 941
Application for notification under section 801A(4)(iii) rejected - application for approval of the Information Technology Park under the Industrial Park Scheme, 2008 - Non fulfillment of conditions - revenue contended that it is apparent that they have included the area of common facility and infrastructure facility and it is at variance with the conditions set out in the Industrial Park Scheme, 2008 - Held that:- That there is difference between the commencing of a work or grant of such certificates enabling the commencing of development and provided in section 347. Thus, the development permission is sought under section 44 of the Maharashtra Regional Town Planning Act, 1966. Accordingly, it may be granted as contained in the certificate conditionally or unconditionally. Once such certificates are issued by a Competent Authority and certifying the work has having been completed or the premises being fit to be occupied on the same being completed, then, it is not for anybody else to question the contents. They shall be under such circumstances taken as conclusive evidence of the commencement and completion of the work. Unless these certificates are obtained by perpetuating a fraud or they can be termed as suspicious, we do not see how the authorities like the Central Board of Direct Taxes or the Commissioner can question the contents and moreso by exhibiting their ignorance completely. If they have a doubt about the genuineness or authenticity of such certificates, nothing prevents them from seeking clarifications from the Municipal or Planning Authorities. Therefore, when the Architect has issued a certificate, based on which the project is undertaken and completed, then, we do not see what more is needed. The Board should have been aware of the fact that no project or construction for development can be undertaken or completed unless the plans for the same are furnished in advance and approval and sanction thereof is obtained from the Municipal Corporation. They have a full set of engineers and experts who apply their mind and sanction and approve the building construction plans and in terms of the Development Control Rules, 1991 which are in place. In such circumstances, we do not see what discrepancy can be found with the Architect's certificate. However, in relation to that as well, we do not find any application of common area for use as industrial park. There is further stipulation that no industrial unit, along with the units of an associated enterprise shall occupy more than twenty-five per cent of the allocable area for industrial activity or commercial activity. Thus, what has to be understood with reference to the definition of term allocable as above in sub-para (2A) of para 2 of the Scheme takes care and disentitles a person from a notification if the industrial park is not owned by only one undertaking and industrial unit did not undertake activity defined in para 2(j) of the Scheme. To facilitate industrial activity that these conditions are incorporated or inserted. In such circumstances, we do not understand as to how para 4(2a) and 4(6) of the Scheme have been violated. As a result of the above discussion, we set aside the order dated 21st November, 2014. The application of the petitioners dated 22nd February, 2011 together with all further details and specifications provided by them shall be considered afresh and requisite order in accordance with law be passed as expeditiously as possible and within a period of four weeks from the date of receipt of a copy of this order. - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 940
Jurisdiction of CIT(A) to make a reference to DVO to determine the FMV of the property - The Revenue insists on the fact that the power is being exercised only under Section 250(4) of the Act alone. - Held that:- Power to make further enquiry under Section 250(4) of the Act can only be in respect of issues which arise under the Act and for which specific provision have been made and the Assessing Officer has failed to do what he ought to have done. Thus, this power of enquiry though very wide has to find its source in one of the substantive provisions of the Act. It is in the context of substantive provisions that the CIT(A) has to examine whether Assessing Officer either did no enquiry at all or made insufficient enquiry. This power cannot be exercised dehors the substantive provisions of the Act. We find that the only provisions then existing to make reference to the DVO for the purposes of determining the FMV to compute the capital gains was found in Section 55A of the Act. It is undisputed that the power of a CIT(A) is coterminus with that of the Assessing Officer. In fact, the CIT(A) can do what the Assessing Officer can do and has failed to do as held by the Apex Court in Commissioner of Income Tax v/s. Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME Court]. Thus, in this case, even according to the Petitioner, the Assessing Officer could make a reference to the DVO but he failed to do so during the assessment proceedings. it is undisputed that during the assessment proceedings before him, the Assessing Officer could have made a reference to the DVO and yet he choose not do or failed to do. This failure or conscious decision of not referring to the DVO could be a subject matter of examination by the CIT(A), in an appeal before him. In this case, the issue of the FMV as on 1st April, 1981 was admittedly raised by the Petitioner in its appeal before the CIT(A). Thus the CIT(A) during the appellate proceedings before him can exercise powers under Section 55A of the Act and can make such enquiry in terms of Section 250(4) of the Act, either himself or direct the Assessing Officer to do so and report in terms of Section 250(4) of the Act. Thus, the CIT(A) can make further enquiries into FMV as on 1st April, 1981 in view of the Assessing Officer failing to make such enquiry under Section 55A of the Act while passing the Assessment Order. The only other provision to make a reference to a Valuation Officer is Section 142A of the Act introduced by Finance (No.2) Act 2004 with retrospective effect 15th November, 1972. Section 142A of the Act deals with determination of the FMV of investments referred to in Section 69 or 69B of the Act or to the value of bullion, jewellery or other valuable articles referred to Section 69A or 69B of the Act or in respect of FMV of any property referred to in Section 56(2) of the Act. In this case, the reference which had to be made by Assessing Officer to the DVO is under Chapter IV - part (E) of the Act while the reference which is to be made under Section 142A of the Act is in respect of Chapter IV - part (F) and Chapter VI of the Act. Therefore, Section 142A of the Act would have no application to the present facts. It is a settled position that the provisions of Section 55A of the Act which were amended in 2012 by substituting the following words “as it variance with its FMV” for “is less than its FMV” is clarifactory and not retrospective as held by this Court in CIT v/s. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT ]. Therefore, the Revenue did not contend that the provisions of Section 55A of the Act is retrospective. It, therefore, follows that where admittedly the value arrived at by the Registered Valuer of the land is more than its FMV, no jurisdiction is acquired by the authorities to invoke Section 55A of the Act. We, therefore, find that the impugned notices dated 26th December, 2006 and 2nd February, 2007 of the DVO not having been issued under Section 55A of the Act according to the Revenue, are quashed and set aside. However, the CIT(A) is at liberty to exercise powers under Section 250(4) read with Section 55A of the Act, if he is of the opinion that the conditions for its invocation are satisfied after hearing the Petitioner's on the above aspect.
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Customs
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2015 (4) TMI 954
Seizure of goods - promissory estoppel - the learned Single Judge dismissed the writ petition by observing that the respondent was entitled to verify the authenticity of the documents submitted by the appellant and on the basis of which the seizure / detention order was vacated; that thus the endeavour of the respondent to verify the documents provided by the appellant cannot be interdicted and rejecting the contention that the respondent is estopped from verifying the documents. Held that:- appellant instead of addressing the questions culled out by us in the aforesaid order again started arguing the plea of estoppel - The appellant cannot pick a line here and a line there, out of context and impute a motive, which a reading of the whole document does not disclose. A reading of the whole of the aforesaid notice dated 21st November, 2014 shows that the purport thereof is to seek information from the appellant qua the doubts entertained by the Customs Authorities and for eliciting the response, the doubts entertained have necessarily to be stated. - Though the senior counsel for the appellant at the beginning of the hearing had also handed over written submissions and insisted on reading the same but in view of having confined the appeal to the aforesaid contention only, need is not felt to refer thereto. We may also record that the counsel for the respondent in his counter affidavit supported by copies of the judgments handed over in the Court today has sought to address the issue highlighted by us in our order dated 2nd February, 2015 supra but again in view of the appeal having been confined as aforesaid, need is not felt to refer thereto also. - Decided against assessee.
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2015 (4) TMI 953
Imposition of redemption fine - short-payment of customs duty on the imported goods on a value lesser than the actual one - whether redemption fine can be imposed without making a proper market survey to find out the market price, as prescribed under the provisions of Section 125 of the Act - Held that:- It is the requirement of law that the amount of redemption fine should not exceed the market price of the goods confiscated and the same can be obtained only on market survey, which, in the instant case, has not been done - Single Judge has already remitted back the matter to the Settlement Commission in respect of imposition of penalty, we are of the considered view that the Settlement Officer, while re-considering the imposition of penalty, shall also examine the imposition of redemption fine, following due process of law, as observed by the Supreme Court in Commissioner of Customs, Mumbai vs. Mansi Impex [2011 (8) TMI 470 - Supreme Court of India] in accordance with Section 125 of the Act. - Decided partly in favour of assessee.
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2015 (4) TMI 952
Waiver of pre deposit - Held that:- Since this Court was relegating the petitioner to the alternate remedy of filing an appeal before the Appellate Tribunal, it was not considered appropriate to deal with the merits of Ext.P8 order, that was passed by the respondent and which was impugned by the petitioner in the appeal before the Appellate Tribunal. I notice, however, that in a later case that came up for consideration before this Court, this Court, after considering a similar contention with regard to the statutory right of appeal being hedged by onerous conditions, took a view that, in cases where the commencement of the lis was prior to the introduction of the amendment to the Customs Act with effect from August 2014, the assessee's right of appeal, as per the erstwhile provisions of law, would not be effected by the provisions introduced by the amendment of 2014. In the case of the petitioner also, it is seen that the commencement of the lis was prior to the introduction of the amendment to the Customs Act with effect from August 2014. - Order recalled.
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Corporate Laws
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2015 (4) TMI 951
Application of Oppression and mismanagement u/s 397,398 & 402 of the Companies Act, 1956 - Shares sold outside India at nominal amount of one pound sterling - Jurisdiction of Company Law Board to test the fairness of the procedure adopted by the Joint Receivers in England for the sale of the shares - Principles of estoppel - Pre-emptive right of purchase of the shares under Articles of Association - Held that:- it is clear that any transfer or even a transmission by law, can take place only in accordance with the procedure prescribed in the Companies Act, 1956. What the Company Law Board has omitted to see is the fact that despite the procedure adopted by the Insolvency Court in England being in accordance with the Insolvency Laws of United Kingdom, the transfer was in respect of a property that was subject to the Indian Law. Therefore, the Indian law had to be applied, for the purpose of statutory recognition of such a transfer. In other words, if the company, by virtue of the Articles of Association and the power conferred thereunder refuses to register the sale ordered by the Insolvency Court in England, the purchaser cannot do anything except to come to India and seek redressal in the manner provided by the Indian Companies Act. The Company Law Board had omitted to see that what was challenged by the appellant was not really the procedure adopted by the Insolvency Court in United Kingdom, in bringing the shares to sale. What was agitated by the appellant was that the second respondent, who was a Director of the first respondent, committed a breach of trust and kept the appellant away from the whole episode and bought all the shares for a token consideration. Suppose any one other than the second respondent had purchased the shares, they would have faced a formidable task in getting the transfer recognized and registered in India. Therefore, the attack of the appellant was not really to be construed as an attack on the procedure adopted by the Insolvency Court in United Kingdom. It was an attack on the conduct of a Director, who held a fiduciary relationship and who was bound by the Articles of Association of the Company. The finding of the Company Law Board that there was acquiescence on the part of the appellant and that the appellant is guilty of laches, does not appear to be correct. In B.L.Sreedhar [2002 (12) TMI 594 - SUPREME COUR], the Supreme Court summarized the doctrine of acquiescence. Merely because estoppel was given an elevated status, along with other equitable principles such as election and family settlement, in S.Shanmugam Pillai [1972 (5) TMI 60 - SUPREME COURT] , the fundamental requirement for invoking this principle of equity cannot be dispensed with. I am actually surprised at the respondents setting up the equitable plea of estoppel, when what the respondents have done cannot fall under the category of equity. The entire shareholding of the third respondent in the first respondent has been sold for just one Pound Sterling, behind the back of the appellant and hence it is not for the respondents to plead estoppel against the appellant. It is out of the scope of the present petition to find out whether the appellant is guilty of any mismanagement or whether the second respondent has suffered a huge loss or not. The Company Law Board was primarily concerned about the validity of the sale of shares of the third respondent company in the first respondent company to the second respondent for a nominal amount of one Pound Sterling. It is this issue that has to be addressed, independent of the other transactions. In the mail dated 13.9.2006, there is a reference to the shares and the shareholding pattern. But there is no reference to the sale or sale consideration. In the mail dated 2.10.2006 also, there is no indication about the share transfer. In the mail dated 5.1.2007, sent by the second respondent to the appellant, there is a reference to the transfer of two properties. But there is no reference to the share transfer. But in a reply sent by the appellant to the second respondent on 5.1.2007, there is a vague reference to share transfer without any further detail. This statement in the mail dated 5.1.2007, cannot be taken to be conclusive. In any case, there is no equity in favour of the second respondent. He is not a person who has bailed out the third respondent when it was in distress, to claim equity in his favour. He has just paid one GBP for the entire shareholding of the third respondent in the first respondent. Therefore, he cannot plead equities. It is true, that in order to maintain a petition under Sections 397 and 398 of the Companies Act, the acts of oppression complained of, should be a series of acts continuing upto the date of filing of the petition. But it does not mean that when the entire holding of a company incorporated in England, in the shares of a company incorporated in India is sold outside India for a consideration of one GBP, shocking the conscious of any court, the same can be rejected as an isolated instance not warranting an action under Sections 397 and 398 of the Companies Act. Therefore, the said argument also deserves to be rejected. - Decided in favour of appellant.
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Service Tax
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2015 (4) TMI 971
Waiver of pre-deposit - Out-door catering services - benefit of Notification No.12/2003-ST - Held that:- whether the petitioner is eligible for the benefit of Notification No.12/2003-ST and whether the extended period of time under proviso to Section 73(1) of the Finance Act, 1994 is invokable to the petitioner's case are disputed questions of fact and the same could be raised before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), as the petitioner has remedy of filing appeal against the order-in-original. This Court is of further view that there is no violation of principles of natural justice in passing the order impugned and the procedures stipulated in Finance Act, 1994 has been thoroughly followed. Thus, the petitioner is bound to pay 7.5% of the total service tax demand of ₹ 63,79,561/- at the time of filing of appeal before the CESTAT. However, it is the case of the petitioner that the levy itself is unwarranted and as such the mandatory payment will cause undue hardship to them. In my considered view, in terms of the provisions of the Act, payment of 7.5% of the total tax demand is mandatory and that cannot be reduced by this Court and further, the petitioner could raise all the points raised before this Court before the CESTAT to substantiate its case. - Decided against assessee.
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2015 (4) TMI 970
Demand of service tax - Jurisdiction error - No service provided - Held that:- The authority, after taking note of the submissions of the petitioner, and taking into account the commission received, in para 25 of the order and after verifying the invoices, came to the conclusion that DLF is the customer and the invoices raised by the noticee also confirm that the noticee received commission from the nominees of DLF - Since a finding rendered by the authority cannot be stated that it is a jurisdictional aspect to be interfered by this court and it is based on the facts of the case, the authority has rendered a finding, merely because the petitioner will have to shell out more than 7.5 lakhs, it cannot be a ground to exercise to interfere with under Article 226 of the Constitution of India. Only in rarest of the rare cases, the court will have to interfere with the decision quoted by the petitioner and the relevant portion is reflected in para 8 of the decision of the Apex Court. Since in this case, the decision taken by the respondent cannot be said to be against the provision of law and there is an arbitrary action without sanction of law - Decided against assessee.
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2015 (4) TMI 969
Availment of wrongful CENVAT Credit - After being informed assessee reversed the credit - Non maintenance of separate books of accounts - whether the petitioner would have to deposit the amount of 7.5% of the tax confirmed against him, as a condition for pursuing the appellate remedy before the Tribunal - Held that:- petitioner, in whose case also the lis commenced in 2013, would not be required to deposit the amount of 7.5%, as required pursuant to the 2014 amendment, and in that respect, he would have an efficacious alternate remedy before the Tribunal where he can file an appeal, together with an application for waiver of pre-deposit and stay of recovery of the amounts confirmed against him by Ext.P6 order. At the time of filing the appeal, he will not be required to make any payment as a pre-condition for the hearing of the waiver application by the Tribunal. I, therefore, relegate the petitioner to the alternate remedy available under the Finance Act, 1994, as amended, of approaching the Appellate Tribunal by way of an appeal against Ext.P6 order. It is made clear that the appeal to be filed by the petitioner would be governed by the statutory provisions, as they stood prior to the amendment introduced with effect from 16.08.2014. - Decided in favour of assessee.
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2015 (4) TMI 968
Competence of the Controller and Auditor General of India [CAG] / Departmental Audit Committee to look into the accounts of a private assessee - Validity of Rule 5A - Held that:- CAG has a duty to examine and satisfy itself that all the Rules and procedures, in respect of Telecom Service Providers in revenue sharing contracts with the State, are being met by the service providers as a whole. - although in the context of cases involving natural resources, a right was recognized in the CAG to audit the accounts of private persons who were obliged to make payments to the Central Government pursuant to contracts entered into with the Central Government. In the light of the said judgment, I am not inclined to stay the operation of Rule 5A of the Service Tax Rules, for the time being. However, as the petitioners want to have the said issue examined before this Court, the writ petitions are admitted solely for the purposes of examining, in detail, the contentions regarding the validity of Rule 5A of the Service Tax Rules. - prayer of the petitioners to grant a stay of further proceedings, pursuant to the show cause notices issued to them by the respondents, is not granted and the petitioners are relegated to the alternate remedy of pursuing the show cause notices before the authorities under the Finance Act, 1994, as amended. The writ petitions are admitted only for the purpose of examining the issue of validity of Rule 5A of the Service Tax Rules - Decided partly in favour of assessee.
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2015 (4) TMI 967
Reimbursements of service tax from the recipient of services - terms of the contract agreement - service recipient refused to reimburse by letter dated 21.10.2010 - Held that:- True, it is that the service provider has the right to collect the said tax from the person to whom service is provided but so far as the Excise and Service Tax Department is concerned, it holds the provider of service as liable to pay the service tax. There is no provision in the said Act for recovery or reimbursement of any service tax by the service tax provider from the person to whom the service is provided. Thus, it is the liability of service provider to pay the service tax arising in the course of the provision of service and to provide for its collection in the contract which it enters into with the person who is recipient of the service. Provisions of Section 64A of the Sale of Goods Act, 1930 cannot be applied to the provision of any service and the liability for tax thereupon as the said provision is specifically confined to the payment of tax in respect to any taxable events in relation to goods and not with regard to services. The taxes, in fact, have been specified as duty of Customs or Excise and any tax on the sale or purchase of goods. The service tax evidently is not upon any contract for sale of goods. It is purely leviable on a contract for provision of service. - More over even in Section 64A of the Sale of Goods Act, 1930 liability of benefit of imposition of new tax or increase or decrease in taxes is subject to there being a different intention appearing from the terms of the contract and the same is not absolute. It is only when the contract is silent on the point that the benefit of liability for increase or decrease on the price of goods on account of such taxes will have to go to the respective party. Service tax was not leviable at the relevant time on works contract (when the contract was excuted) but the same would also be deemed to have been included in view of the clear provision that the rate should be inclusive of direct or indirect elements. Thus, the said provision can only be interpreted to mean that any future increase or decrease of tax or levy of a new tax with regard to item of the contract would be entirely to the benefit or be the liability of the contractor and the same would not have any effect on the rates and service. There does not appear to be any ambiguity in the said provisions. The provisions, in fact, go further to show that it was the tenderer's duty to get it clarified before submitting the tender and thereafter there would be no scope for any doubt or ambiguity regarding non-inclusion of any ingredient of work in the rate. Since service tax had become leviable from 1.6.2007, for the period after 1.6.2007 the liability for the same would fall upon the petitioners and it is not open to the petitioners to claim any such refund from the respondent-Board in the absence of any agreement to the contrary or any provision in the Finance Act, 1994 with respect to the same. - Decided against assessee.
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Central Excise
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2015 (4) TMI 962
Restoration of appeal - Non deposit pre deposit ordered - Held that:- if we direct the Tribunal to accept the "pre-deposit amount" as deposited by the appellants and hear the appeal on merits, it will not cause any prejudice to either side - Tribunal directed to accept the "pre-deposit amount" paid by the appellants, which is in compliance with its earlier order and then decide the appeal on merits, in accordance with law and without reference to the period of limitation. - Decided in favour of assessee.
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2015 (4) TMI 961
Classification of manufacturing of floating pontoons which it describes as 'Pantoon with spuds' - Classification under 8905.00 or 8907.00 - Held that:- Tribunal was not agreeing with the order of the Commissioner, the order of the Tribunal should have been a speaking order dealing with the reasoning given by the Commissioner and stating as to why the said reasoning was faulty. - issue as to whether the product is marketable or not was not even raised by the respondent in reply to the show cause notice nor was it argued before the Commissioner and therefore on that ground the Tribunal could not have allowed the appeal. - matter remanded back - Decided in favour of Revenue.
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2015 (4) TMI 960
Denial of Cenvat Credit - Charges of availing Cenvat credit merely on the basis of invoices without physical receiving any material - Denial on the basis of statement of supplier - Held that:- From the statement of supplier, it is not coming out that during the period November, 2004 to April, 2005, the manufacturer supplier was not manufacturing the goods. The statement of supplier is vague. Moreover, the appellant was having supporting evidence in the form of check post endorsement, proof of sales tax payment and towards the goods, payment was made through account payee cheque. I also find that at the time of visit of the factory of the appellant, nothing incriminating have been found. If same would have been found, it would have been brought on record, as there is nothing on record, the question arises from where the goods were procured from the appellant for manufacturing excisable goods. When Revenue has alleged that they have not received the goods then duty cast on the revenue to brought on record from where the goods were procured. The allegation leveled against the appellant are only on the basis of statement of supplier. No cross examination of the supplier was afforded to the appellant for fair trial. As investigation is deficient and no corroborative evidence have been produced by the Revenue on record, the same is the observation of this Tribunal, in the case of Rajan Engineering Works [2011 (7) TMI 626 - CESTAT, DELHI],therefore, I hold that appellant has rightly availed the Cenvat credit on the inputs on the strength of the invoices issued by KPIL. - Decided in favour of appellant.
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2015 (4) TMI 959
Cenvat Credit - Utilization of Cenvat Credit lying unutilized in their Cenvat Credit credit availed when goods were dutiable - later goods were exempted - after sometime (about 8 years) exemption was withdrawn - Held that:- The contention of the Ld. AR is that in the clearance of May 2004 the inputs were not same which was used in clearance of May 2004. Therefore, Cenvat Credit cannot be utilized is not acceptable at all as if anybody has procured input for say in the month of April and availed Cenvat Credit thereon. Thereafter, the said inputs are lying in their factory but inputs which were procured in the month of March have been used for the manufacturing of final product and same product has been cleared in the month of April itself, is the contention of the Ld. AR is accepted then the Cenvat Credit is not available for payment of duty by the assessee. This is not the scheme of the Government for availment of Cenvat Credit. Therefore, the argument is not acceptable. Further, I find that the issue whether the Cenvat Credit lying unutilized as on 22.07.1996 when the Vanaspati Oil was exempted from duty can be utilized for the payment of duty on Vanaspati Oil in the month of May 2004 when the duty was introduced is entitled or not, has examined by the Hon’ble High Court of Calcutta in the case of Rasoi Ltd.[2004 (6) TMI 46 - HIGH COURT AT CALCUTTA] in positive manner. Also the facts of case of Agarwal Industries Pvt. Ltd. [2005 (8) TMI 662 - CESTAT BANGALORE] are identical to this case. Therefore, relying on the various decisions cited by the Ld. Counsel particularly in the case of Agarwal Industries Pvt. Ltd. [2005 (8) TMI 662 - CESTAT BANGALORE], I hold that appellant has correctly utilized Cenvat Credit lying unutilized as on 22.07.1996 for the clearance of May 2004. - Decided in favour of appellant.
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2015 (4) TMI 958
Denial of CENVAT Credit - manufacture of exempted final product - Held that:- Tribunal in the case of Ratnamani Metals & Tubes Limited (2012 (5) TMI 529 - CESTAT, AHMEDABAD) has held that cenvat credit was not permissible on inputs exclusively used in the manufacture of exempted goods. - Commissioner (Appeals) has set-aside the adjudication order on merits and therefore, the alternative submissions of Revenue neutrality and limitation were not considered. In my considered view, the impugned order is not sustainable on merits. But, the respondent should be given an opportunity to place their submissions on limitation and Revenue neutrality before the Commissioner (Appeals). - Matter remanded back - Decided in favour of Revenue.
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2015 (4) TMI 957
Confiscation of seized goods - Imposition of redemption fine and penalty - Held that:- On physical verification of the goods, they were contained 52 pallets and 85 cardboard cartons (duly packed containing Tractor parts and forgings etc.) which were lying unaccounted in the factory premises of the appellant and were in fully finished condition. The contention of the appellant that merely non accountal of the goods in the statutory records does not lead for confiscation of the goods, unless there is malafide intention on the part of the appellant is proved. In this case, if the preventive staff did not visit the factory premises of the appellant, these fully finished goods would have been cleared by the appellant clandestinely. Therefore, this clearly shows that these seized goods are ready to clear clandestinely without payment of duty. In these circumstances, I hold that the goods are liable for confiscation and consequently redemption fine and penalty are imposable. Further, I find that the goods were meant for export. In that situation, redemption fine and penalty are excessive and are harsh, therefore, reduced - Decided partly in favour of assessee.
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2015 (4) TMI 956
Wrong availment of CENVAT Credit - Capital goods - Demand of interest and penalty - Held that:- Appellant reversed the credit on being pointed out by the audit party. It is further seen from the show cause notice that the appellant by letter dtd 17.1.2005 informed that they have inadvertently due to human/accounting mistake taken the credit and reversed the credit prior to utilising the same towards payment of central excise duty and therefore interest on reversal of excess credit is not sustainable. It is noticed that the Adjudicating authority had not disputed the fact of non-utilization of credit by the appellant. Credit taken but not utilized till reversal, could not compel the assessee to pay interest. So, the demand of interest on the unutilised cenvat credit cannot be sustained. Amount of ₹ 74,00,000/- was availed by the appellant in a number of cases, while the input cenvat credit should have been taken only on the duty on the goods as mentioned in the invoice but instead of this, the credit was taken on the full value of the goods. In some cases, credit taken on the basis of Central Excise invoices or bills of entry is more than the amount of Central Excise duty/CVD mentioned in the Central Excise Invoices/bills of entry. Further, cenvat credit amounting to ₹ 28,00,000/- has been taken on cenvated capital goods/input some job work under Rule 4 of the cenvat credit rules, which had not sent back within the stipulated period, but still the cenvat credit had not been reversed. - amount ₹ 74,00,000/- and ₹ 28,00,000/- cannot be treated as a mere erroneous availment of credit. Hence imposition of penalty is warranted. However, considering the facts and circumstance of the case the quantum of penalty should be reduced. - Decided partly in favour of assessee.
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2015 (4) TMI 955
Benefit of Notification No. 37/2000-CE dated 8.5.2000 - 100% EOU - Held that:- It appears from record that the owner of the quarry is the Government of Tamilnadu. The appellant was user of the same in accordance with agreement referred to above. Perusal of Rule 8A of Tamilnadu Minor Mineral Concession Rules, 1959 shows that grant of quarry lease is the domain of the State Government. In accordance with such Rule, the State has equal power to permit use thereof under any other arrangement for raising the output from the quarry. Since the quarry belongs to the State and appellant was user thereof, the goods procured without payment of excise duty used in quarrying granite and processing thereof for export is not disentitled to exemption benefit under the notification. Not owing lease has not debarred the appellant to quarry granite and process the same. If the condition of processing of procured granite from the quarry of the State under an agreement is fulfilled by the 100% EOU appellant, benefit of the notification is undeniable since any denial thereof would defeat the object thereof. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (4) TMI 966
Classification of goods - levy of VAT @ 4% or taxable @ 12.5% in terms of Section 4(1)(e) - Held that:- The expression “Handicrafts”, not specially defined for purposes of DVAT Act, cannot take a meaning other than the one explained by the interpretation given to it in the context of another fiscal statute viz. the Central Excise Act. The tests to be applied, for present purposes, must thus be the same as were evolved in the case of Louis Shoppe (1995 (3) TMI 108 - SUPREME COURT OF INDIA). - no hesitation in concluding that a product in order to qualify as “Handicrafts” for the purposes of application of entry no.128 of the third schedule to DVAT, must have been made “predominantly by hand” and it would be inconsequential if some part of the process involves use of some machinery. Needless to add, such product must be one “graced with artistic visual appeal” resultant upon substantial (not a mere pretence) ornamentation or in-lay or some similar work adding to it elements of artistic improvement. Expression “Handicrafts” used in entry no.128 of the third schedule to DVAT Act must be construed in its plain lexical sense, without any colour being added by extraneous factors. - The fact that “Baldi” items are imported from Italy seems to have been considered by both authorities, the Commissioner and the Tribunal, as a factor which clinches the issue. There is nothing in the DVAT Act, or the Rules framed therein or, for that matter, any other instruction, notification etc. to require that a commodity in order to be accepted as “Handicrafts” must be one indigenously made or, to put it conversely, must not be one imported into India. We have concluded earlier that the expression “Handicrafts” has to be construed in the sense it is commonly understood. Since the legislative entry does not qualify it by any other pre-requisites, the restrictive interpretation put on it by the authorities below (based on the fact that it is imported from Italy) cannot be approved. The revenue did not refute, either before the Tribunal or before this Court, the claim that the “Baldi” items, in which the appellant deals, are predominantly made by hand. There is no dispute that they are items graced with visual appeal, on account of ornamentation or inlay work carried out skilfully by expert artisans. For these reasons, they do qualify as “Handicrafts” on the twin tests laid down in the case of Louis Shoppe (1995 (3) TMI 108 - SUPREME COURT OF INDIA) which hold good for the purpose of entry no.128 of the third schedule to DVAT Act. - if the facts cover the case under a specific provision, the residuary clause would not apply. Since, in our judgment, entry no.128 of the third schedule governs the commodity in question, there is no question of invoking the residual category specified under Section 4(1)(e). - goods sold under the brand name of “Baldi”, as described above, fall in the category of “Handicrafts” within the meaning of the expression used in entry no.128 of the third schedule of DVAT Act and, therefore, chargeable to VAT at the rate applicable to the said third schedule. - Decided in favour of assessee.
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2015 (4) TMI 965
Adjustment of carried forward input tax credit - whether the learned Tribunal has committed any error in declaring and holding that an assessee/dealer is entitled to the Input Tax Credit adjustment against its output tax liability under the VAT Act under the current year under consideration and whether the learned Tribunal has committed any error in quashing and setting aside the order passed by the Assessing Officer as well as the first Appellate Authority in directing to carry forward such Input Tax Credit to the next subsequent year - Held that:- Following decision of State of Gujarat Versus Cosmos International Ltd. [2015 (4) TMI 779 - GUJARAT HIGH COURT] - Decided against Revenue.
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2015 (4) TMI 964
Interest charged under Section 47(4)(a) of the Gujarat Sales Tax Act - Penalty u/s 45(6) - Held that:- For the reasons stated in the said order and even otherwise, considering the provisions of Section 47(4)(a), it cannot be said that the learned Tribunal has committed any error in deleting the interest levied for the period between the payment of tax on ad-hoc basis till the order of assessment - once the dealer has made payment before the actual order of assessment, may be on ad-hoc basis, meaning thereby, the amount of tax due and payable as per the assessment order, already paid prior to the assessment order and the State/Department received the said amount of tax, there cannot be any interest levied during the aforesaid period. It cannot be disputed that levy of interest would be on delayed payment of tax due and payable. It is not the case that on finalization of the assessment, any amount more than the amount paid on ad-hoc basis, was assessed and/or required to be paid by the assessee. - No substantial question of law arises in this group of appeals - Decided against Revenue.
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2015 (4) TMI 963
Classification - Applicable rate of tax - whether the windscreen glasses sold by the assessee fall under Entry 11 Part E of the I Schedule, taxable at 12% or under Entry 43(ii) of Part D of I Schedule of the Tamil Nadu General Sales Tax Act, taxable at 8% - Held that:- reasoning of the Appellate Assistant Commissioner appears to be more appropriate in the facts of the present case, who has applied the user theory, more particularly in a case where the goods sold is specifically parts and accessories of motor vehicles - It is to be noted that Entry 43(ii) of Part D of First Schedule includes bulbs, which is also made of glass. Therefore, the distinction is that the goods forming parts and accessories of motor vehicle would fall under Entry 43(ii) of Part D of First Schedule, taxable at 8%, in contrast to usual glass and glassware in Entry 11 of Part E of First Schedule of the Tamil Nadu General Sales Tax Act - In the instant case also, Entry 43(ii) of Part D of I Schedule specifically deals with parts and accessories of motor vehicle, while Entry 11 of Part E of I Schedule deals with general glass and glasswares. When there is a specific entry in the statute, the same should be applied while making the assessment. It is not in dispute that the assessee is a dealer in automobile glasses and has supplied their goods to the automobile manufacturers - Decided in favour of assessee.
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Wealth tax
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2015 (4) TMI 950
Reopening of assessment - addition made on account of valuation of cars - Held that:- Assessee declared the value of motor cars on the basis of the written down value as per the balance sheet, however, the Assessing Officer adopted the insurance value as the value of the motor cars for the purpose of computing the net wealth of the assessee, the Commissioner of Wealth- tax (Appeals) confirmed the action of the Assessing Officer. On second appeal, the Tribunal was also in agreement with the lower authorities in part as the Tribunal confirmed the action of the Assessing Officer in adopting the value adopted on the basis of valuation shown for insurance purposes. However, the Assessing Officer was directed to estimate 80 per cent. of the insurance value. - Following decision of Samrath Knitters P. Ltd. [1996 (11) TMI 99 - ITAT BOMBAY-B] and Thermax Ltd. [2006 (12) TMI 484 - ITAT PUNE] - Decided in favour of assessee.
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