Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 7, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI Short Notes
News
Notifications
Income Tax
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94/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – The Cancer Institute (WIA) Trust, Chennai
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93/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – People Unity Trust, Tamilnadu
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92/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Prayas Juvenile Aid Centre, Delhi
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91/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Gujarat Sarvar Mandal, Ahmedabad
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90/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –National Association for the Blind, Mumbai
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89/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Sri Chaitanya Seva Trust, Maharashtra
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88/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –The Leprosy Mission Trust India, New Delhi
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87/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Maathru Bhoomi Foundation (NGO), Delhi
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86/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Impact India Foundation, Mumbai
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85/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Sri Chaitanya Seva Trust, Maharashtra
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84/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Sankara Eye Hospital, Tamilnadu
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83/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –The National Federation Of The Blind, Maharashtra
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82/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Arogyaseva Medical Academy Of India, Pune
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81/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Empathy Foundation, Mumbai
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80/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Saath Charitable Trust, Ahmedabad
Highlights / Catch Notes
Income Tax
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Amendment to Section 80HHC(3) - Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. - SC
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TDS u/s 195 - FTS u/s 9 - The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services, - HC
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Legality and validity of the notice under section 153C - If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. - HC
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Withdrawal of approval/registration granted u/s 12A -The assessee-society was charitable to only one entity out of the whole planet, i.e., the corporate Max Group of companies. It was not charitable towards the society or public at large but, in fact, it was “uncharitable”. - AT
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Unaccounted income - CIT(A) was merely on the basis of a hypothecation that against 94 plots a proportionate expenditure might have been incurred. Such hypothecation cannot be upheld especially when the Assessee is in a position to demonstrate the year-wise financial position. - AT
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Notional interest charged on receivables outstanding beyond 180 days - If the pricing/ profitability of the assessee are more than the working capital adjusted margin of the comparables, then additional imputation of interest on the outstanding receivables is not warranted. - AT
Customs
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Conversion of shipping bill from DEPB to advance authorization scheme - due to inadvertence committed by the CHA who has filed the shipping bill under DEPB instead of rightly filing under advance licence - conversion allowed - AT
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Seizure of currency - A plea has been taken that since currency is not a prohibited item, an option must be given under Section 125 of the Customs Act to pay fine in lieu of confiscation - appellant does not deserve my discretion to give an option to pay fine in lieu of confiscation. - AT
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Scope of exemption from whole of the additional duty - In absence of any description and nomenclature of additional duty in the notification there cannot be any interpretation otherwise possible to deprive the appellant from exemption of additional duty of customs. - AT
Indian Laws
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Anti competitive practices - genuine spare parts of automobiles manufactured by respondents are not made freely available in the open market - The parties are hereby directed to immediately cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act. - CCI
Service Tax
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Business Auxiliary Services - Mandap Keeper service - The appellant is not acting on behalf of the decorator to provide service to his clients, nor is he acting on behalf of the decorator to provide service to the decorator. - the activity of the appellant is not that of the Commission Agent - demand set aside - AT
Central Excise
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Denial of CENVAT Credit - Non maintenance of separate accounts - the electricity is not an excisable goods under section 2(d) of the Act, hence Rule 6 of the Cenvat Credit Rules is not applicable - AT
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Invocation of extended period of limitation - Suppression of facts - clearing sewing thread without mentioning that it is in the form of hanks - as the declaration and RT 12 returns being vital documents submitted by the respondent (appellant herein) did not mention the vital word "hanks", they suppressed a material fact - SC
VAT
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Whether the Tribunal was justified in giving a finding that the lease rentals received after 1.4.2005 in respect of transfer of right to use KST suffered cars leased out prior to 1.4.2005 is not exigible to tax under the KVAT Act - held Yes - HC
Case Laws:
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Income Tax
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2015 (4) TMI 195
Correct method of computation of deductions under Section 80HHC(3) - in the present case, the domestic income in respect of which benefit is sought is from dividend income, interest income, profit or sale of shares and fees received from arranging finance for the assessee's clients, thus no income from indigenous business which, in no case, be described as "turnover" and be part of "total turnover" as held by revenue Held that:- The mode and mechanics of computing the deduction admissible to an assessee falling under Section 80HHC(3)(b) clearly proceeds on the basis that in trading transactions profit, or, as the case may be, loss is embedded in the gross turnover. The most significant conclusion that flows from the said provision is that when Section 80HHC(3) talks of turnover, it talks of trading receipts and not of receipts which are of the nature of income to start with. It should, therefore, follow that the aggregate sum of dividend income, interest income, profit or sale of shares and fees received from arranging finance for the assessee's clients cannot be regarded as turnover, and that by the same token, it should be left out of reckoning for purposes of computing deduction admissible to the assessee under Section 80HHC. In the first instance, it has to be satisfied that there are profits from the export business. That is the pre-requisite as held in IPCA [2004 (3) TMI 9 - SUPREME Court] and A.M. Moosa [2007 (9) TMI 24 - SUPREME COURT OF INDIA] as well. Sub-section (3) comes into picture only for the purpose of computation of deduction. For such an eventuality, while computing the "total turnover", one may apply the formula stated in clause (b) of sub-section (3) of Section 80HHC. However, that would not mean that even if there are losses in the export business but the profits in respect of business carried out within India are more than the export losses, benefit under Section 80HHC would still be available. In the present case, since there are losses in the export business, question of providing deduction under Section 80HHC does not arise and as a consequence, there is no question of computation of any such deduction in the manner provided under sub-section (3). This would mean that the deduction admissible to the assessee under Section 80HHC would be nil, especially in view of the fact that the export business of the assessee has resulted in a loss. But a manufacturer may not invariably be able to export, in their entirety, the goods or merchandise manufactured. He may export a part of them and sell the rest in India. Given the paramount need to give fillip to exports, Parliament clearly intended that the benefit of Section 80HHC should not be denied in such cases. But the difficulty in such cases is that the profits attributable to exports cannot be ascertain with precision. This is because not only the manufacturing activities but also the selling activities (including the activities connected with exports) from a continuous, integrated whole. Even so, the intention of Parliament, was to extend the benefit of Section 80HHC to the extent of the profits generated by exports. With this end in view, Parliament incorporated a rule of thumb in Section 80HHC(3)(b). As long as the assessee has cleared profits in a particular year of account, export profits are computed by applying to total profits the ratio which export turnover bears to total turnover . We are in agreement with the this view of the Tribunal. Therefore, even otherwise, the formula as sought to be applied by the appellant does not become applicable on the facts of this case. - Decided against assessee.
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2015 (4) TMI 193
Amendment to Section 80HHC(3) - High court quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment (retrospectively) and not in respect of earlier assessment years of the assessees whose export turnover is above ₹ 10 crore - respondents [exporters, belong to the second category] challenging conditions mentioned in third and fourth proviso to Section 80 HHC(3) - Held that:- We find that in essence the High Court has quashed the severable part of third and fourth proviso to Sec.80HHC (3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction: "Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal.
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2015 (4) TMI 192
Registration of firm under u/s 186 (1) cancelled - Genuity of firm questioned - same property belonging to husbands was surreptitiously transferred to their wives through the camouflage of a firm to evade tax - ITAT holding that a genuine firm was in existence - Held that:- Nothing has been brought before us to show that letting out immovable property on rent will never constitute a business and income derived from letting out immovable property i.e. rent would not constitute a business income at all. The learned counsel for Revenue could not disputes that a partnership firm may carry out business of leasing out property on rent and earn income therefrom as a business income. He also could not dispute that existence of firm as such is not doubted and the brood proposition is not correct. As proposition, it cannot be said that there would not be any business activity in leasing out a building and collecting rent therefrom so as to bring the profits within the ambit of income from business in profession. In the present case, the Tribunal as a last court of fact has recorded a specific finding in favour of assessee and in the absence of anything to show that the same is perverse or contrary to record or based on misreading, we do not find any reason to take a different view.Tribunal was justified in law in holding that the assessee firm is entitled to registration. - Decided in favour of assessee.
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2015 (4) TMI 191
Disallowance u/s 40(a)(ia)- Non deduction of TDS on export commission paid by the assessee to the non-resident - ITAT deleted the disallowance - Held that:- The facts of the present case are akin to the facts of the decision in Toshoku Ltd.'s case [1980 (8) TMI 2 - SUPREME Court] wherein held that the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. In the instant case also the assessee engaged the services of non-resident agent to procure export orders and paid commission. That apart, the Commissioner of Income-tax (Appeals) as well as the Tribunal have correctly applied the principle laid down in GE India Technology Centre (P.) Ltd.'s case[2010 (9) TMI 7 - SUPREME COURT OF INDIA] to hold that the assessee is not liable to deduct tax at source when the non-resident agent provides services outside India on payment of commission. The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services, we are the firm view that section 9 of the Act is not applicable to the case on hand and, consequently, section 195 of the Act does not come into play. Also see Faizen Shoes case [2014 (8) TMI 170 - MADRAS HIGH COURT]- Decided in favour of assessee.
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2015 (4) TMI 190
Legality and validity of the notice under section 153C - revenue's assertion that the AO is empowered under the statute to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted and therefore the satisfaction which is recorded in the satisfaction note is enough, is erroneous as held by Tribunal - Held that:- The satisfaction note was very closely examined and the reasons assigned by the Assessing Officer were found to be silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note is not enough. The tribunal has found that with regard to cash and jewellery, the explanation of the assessee was that he had agricultural properties and derived agricultural income. That income was utilised to acquire jewellery that was belonging to him and his family. With regard to cash and stated to be recovered from the students for granting admissions, we do not find that any inquiries were made. There is absolutely nothing to indicate as to in which educational courses, the education is imparted and institutionwise. Whether the admissions are granted to the technical courses merit-wise or on the basis of marks obtained in XIIth standard HSC exam. If any fee structure is approved and cash component is therefore collected over and above the sanctioned fees are matters which ought to have been gone into and there cannot be a general or vague satisfaction as is relied upon. Thus the tribunal's conclusion cannot be termed as perverse - Decided against revenue.
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2015 (4) TMI 189
Scope of Section 153C - exemptions u/s 11 denied - Revenue sought to rely on a search and seizure which revealed that certain documents were seized from the premises - Held that:- On mere seizure of these documents it was not established that the assessment proceedings could have been reopened. There are similar questions and which were raised in relation to an associate trust. Those questions were not termed as substantial questions of law by this Court. The Tribunal examined the scope of Section 153C of the Income Tax Act, 1961 and observed that the provision cannot be resorted unless the Authorities find any material which is incriminating in nature. In the facts of this case, there was no justification in proceeding under Section 153C of the Income Tax Act, 1961 and, therefore, we find that the Tribunal's view was justified in the facts and circumstances peculiar to the Assessee. A similar issue was decided in by this Court in the case of the same Assessee [2014 (7) TMI 94 - BOMBAY HIGH COURT ] - Decided against revenue.
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2015 (4) TMI 188
Prayer for adjournment - applications for grant of stay having been found to be defective, opportunity was granted by the Tribunal, to remove the defects. Advocate for the petitioner sent a communication and sought time/adjournment - Stay applications rejected - Held that:- There is lack of application of mind. Non-consideration of the prayer for adjournment sought on medical ground by the advocate on record is apparent. There is denial of reasonable opportunity. In the circumstances of the case, the impugned order being irrational, is liable to be interfered with. In the result, these writ petitions are allowed and the impugned order is quashed. Petitioner is permitted to file fresh applications for grant of stay, if so advised, within a period of two weeks from today. Petitioner shall not seek unnecessary adjournment and shall extend ready co-operation to decide the stay applications and also the main appeals with expedition
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2015 (4) TMI 187
Scope of Section 153C - exemptions u/s 12A denied on various grounds including allegations of collection of cash from students for admissions, etc - Held that:- The Tribunal examined the scope of Section 153C of the Income Tax Act, 1961 and observed that the provision cannot be resorted unless the Authorities find any material which is incriminating in nature. In the facts of this case, there was no justification in proceeding under Section 153C of the Income Tax Act, 1961 and, therefore, we find that the Tribunal's view was justified in the facts and circumstances peculiar to the Assessee. A similar issue was decided in by this Court in the case of the same Assessee [2014 (7) TMI 94 - BOMBAY HIGH COURT ] - Decided against revenue.
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2015 (4) TMI 186
Withdrawal of approval/registration granted u/s 12A - Appellant Society was not a charitable organization, as the property/hospital of the Appellant- Society were taken over by Max Group, by creating various financial and legal obligations on the Appellant Society and the Max Group was running the hospital with a profit motive as held by DIT(E) - Held that:- DIT(E) has passed a well-reasoned speaking order on the issue. He has recorded a finding that the assessee’s foundation has not been in operation as a charitable institution as the trustees allowed the property as to be taken over by the Max group by creating various financial and legal obligations as detailed in the foregoing paragraphs of his order. He has further recorded that the hospital is virtually run by the Max Group of concerns which are corporate bodies established with the clear intention of profit motive and this is against the basic principles of the charitable organization. Imparting education and health services to the weaker sections of the society was one of the main charities in good old times. However, in recent times, imparting of education and running a hospital have become one of the main commercial activities. Under the guise of charity, the people are exploiting the charitable institutionally commercially. Although in this case of the assessee, there is no conclusive evidence or material on record to conclude that the hospital itself has been given away by the trustees of the assesseesociety to Max group of companies to exploit the hospital commercially, but, the facts of this case do raise a reasonable suspicion that the hospital itself has been given out by the assesseesociety to Max group of companies to exploit the same commercially and, in a non-charitable manner for reasons best known to the trustees of the assessee-society only. The assessee-society was charitable to only one entity out of the whole planet, i.e., the corporate Max Group of companies. It was not charitable towards the society or public at large but, in fact, it was “uncharitable”. It conducted its affairs in such a way that inspite of charging the most exorbitant fees etc. from its patients in the capital city of the country, if not the highest rates so charged, siphoned off its receipts to commercial corporate companies by entering into a number of agreements with them, to make itself liable to the entire amount of its excess of income over expenditure and even more and after deducting allowable expenditure, the net income was negative i.e. a “loss”, year after year. The reason for such modusoperandi is best known to the assessee-society itself or to be investigated by the concerned agencies or the government allotting the prime land to the assessee-society on certain conditions, never fulfilled by the assessee-society. Thus no hesitation in holding that the assessee has conducted its activities in a non-charitable manner and not in accordance with its object as detailed in its memorandum of association. - Decided against assessee.
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2015 (4) TMI 185
Addition to income - difference in closing stock - AO observed that the assessee had raised loan from Punjab National Bank, Bathinda and closing stock of the firm as on March 31, 2009 as per audited balance sheet was ₹ 17,50,000 but the same was reported to the bank at ₹ 1,69,17,000 in the stock statement submitted to the bank on March 30/31, 2009 - Held that:- Stock declared before the bank is for the purpose of raising the loan. The assessee has submitted his stock statement as on March 30, 2009 at ₹ 1,69,17,000 whereas as on March 31, 2009 it was ₹ 17,50,000 and the difference of ₹ 1,66,13,401 was booked as sales on March 31, 2009. The assessee submitted the stock statement as on March 31, 2009 showing stock at ₹ 17,50,000. The assessee also submitted an additional evidence and the explanation under rule 46A before the CIT (Appeals) which was rejected since the same was not furnished before the Assessing Officer. The reconciliation statement has not been accepted by the CIT(Appeals) for the reason since the same was not produced before the Assessing Officer. At the outset, this is not the cogent reason as mentioned by the CIT(Appeals) that something has been not produced before the Assessing Officer that cannot be produced before the learned Commissioner of Income-tax (Appeals). Therefore, the CIT(Appeals) has not acted strictly in accordance with the provisions of rule 46A of the Income-tax Rules, 1962. Even if the reconciliation statement has not been accepted, can any statement on account of, i.e., balance-sheet or profit and loss can be read in part, the answer is "no" . Since any document or statement has to be read in toto in settled ratio. The assessee's explanation submitted before the learned Commissioner of Income-tax (Appeals) as an additional evidence which in fact is on record that the assessee has transferred ₹ 1,66,13,401 to sales account out of the stock as on March 31, 2009. The learned Commissioner of Income-tax (Appeals) without any reason has rejected the said explanation. Something must remain, i.e., either the closing stock at the close of the year and if it is not there then there has to be the sales as claimed by the assessee. If the closing stock of ₹ 1,69,17,000 is accepted by the CIT (Appeals) then accordingly the sales to the extent of ₹ 1,66,13,401 has to be reduced which the CIT(Appeals) has not taken care of. Whereas, on the other hand, the sales are not in doubt before any of the authorities below as they have been accepted by both the authorities below. Once the sales have been accepted which includes the sales of ₹ 1,66,13,401 booked on March 31, 2009 by the CIT(Appeals), there is no possibility of the stock to be at ₹ 1,69,17,000 as at March 31, 2009. It has to be ₹ 17,50,000 which is there as per audited accounts. This is a simple accounting, which the CIT(Appeals) could not understand. No addition on this account could be made by the Assessing Officer and accordingly, we reverse the order of the CIT(Appeals). In this respect, we rely upon the decision of CIT v. Punjab Rice and General Mills [2003 (4) TMI 52 - PUNJAB AND HARYANA High Court] where it has been held that the assessee has submitted satisfactory explanation for the discrepancies between the stock statement to the bank and to the Income-tax Department, the Tribunal is justified in deleting the addition. - Decided in favour of assessee.
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2015 (4) TMI 184
Revenue receipt v/s capital receipt - amount received at the time of execution of the sub lease - booking advances - Held that:- If a receipt is having a direct nexus with the acquisition of capital asset then the expenditure is capital in nature. Even if an amount is received against that capital asset then naturally such receipt is a capital receipt. A general Rule is that the amount received in lieu of a capital asset is a capital receipt and if an amount is received in lieu of circulating capital/stock-in-trade then it is a Revenue receipt. A compensation in lieu of a profit is a Revenue receipt but if the source of the profit is completely parted then such a gain is a capital receipt. Likewise if a receipt is towards a loss of earning or business or relinquishment of rights, prima facie, it takes a character of a capital receipt. As far as present appeal is concerned the amount received at the time of execution of the sub lease is concerned, the same is definitely in the nature of capital receipt. Specially when the Assessee has incurred a huge amount of ₹ 38.5 crore for acquiring the lease rights from GIDC. The said lease amount was to be recovered from the members joining the scheme by sub leasing the land to them. Upto this extent, we hereby hold that the Assessee was required to demonstrate by a separate account in its books to “earmark” the amount received against the sub lease from the members of the scheme. This fact still can be verified by perusing the sub lease agreements. Otherwise also the admitted factual position is that the Assessee was receiving ₹ 8 lac from each member on granting sub lease to them. Therefore there should not be any defect in ascertaining the year-wise sub lease amount received by this Assessee. Whether the “principle of mutuality” shall apply on the present set of facts - Held that:- We are not in agreement with the contentions of learned A.R. because of the simple reason that the principle of mutuality is based upon the concept of sharing the expenditure as well as sharing the profits. In the present case, nowhere it was demonstrated that the surplus, if any generated from the running of the scheme, shall be distributed amongst the members of the scheme. In the absence of such evidence we hereby hold that the principle of mutuality shall not apply on this Assessee. The basic principle is that the unaccounted income should be taxed in the hands of the Assessee on the basis of the incriminating material unearthed at the time of search or survey. However, in this case no lease was executed during the assessment year 2010-11, but the AO has taxed ₹ 11.27 crore. If we apply the principle of natural justice then the unaccounted income should be taxed on the basis of the incriminating material found. Because of this reason, we hereby direct the AO to restrict the assessment only to the extent the incriminating material found as per survey and not to extrapolate. Therefore, the part relief granted by learned CIT(A) was merely on the basis of a hypothecation that against 94 plots a proportionate expenditure might have been incurred. Such hypothecation cannot be upheld especially when the Assessee is in a position to demonstrate the year-wise financial position. Resultantly, grounds raised against the part relief by both the sides are hereby set aside back to the stage of the AO to be decided de novo as per the directions.- Decided in favour of Assessee and the Revenue allowed for statistical purpose.
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2015 (4) TMI 182
Revision u/s 263 - certain interest to financial institutions claimed by assessee should have been disallowed u/s.43B - Held that:- As can be seen from the replies given by assessee during the course of scrutiny, the claim of allowance u/s.43B the amounts stated to have been converted to equity was examined by the Assessing Officer and allowed. The reliance of Ld.CIT on the Board circular is not correct as the Board circular refers to conversion of outstanding interest payable into loans or borrowings, but not to equity. The explanation 3C to Section 43B also refers conversion to loans and borrowings but not to equity. In view of this, the CIT's reliance on the Board circular so as to reject assessee's claims of constructive payment of above amounts cannot be approved. Since this issue was also examined by the Assessing Officer in the course of assessment proceedings and having accepted as a constructive payment, the opinion of the CIT can only be considered as change of opinion. Therefore, to that extent of direction of the CIT given to Assessing Officer for disallowing the amounts of ₹ 5,84,80,000/- on amount of interest payable to IDBI and on ₹ 985.39 Lakhs on amounts payable to IFCI, which were indeed converted into equity cannot be approved. Addition of liquidated damages - CIT gave a finding that an amount of ₹ 194.63 Lakhs representing liquidated damages were allowed in earlier years as a deduction and hence provisions of Section 41(1) applies to the above amount - Held that:- we are unable to understand how Ld. CIT could give a finding that liquidated damages were allowed. Provisions of I.T.Act do not permit payment of interest or any penalty thereon in the form of liquidated damages, unless they are paid under the provisions of Section 43B. As seen from the computation of earlier years, out of total claim payable by assessee, assessee charged part amounts in the P&L A/c under the head 'Financial Expenses' and part of it was deferred. The amounts were disallowed in the computation of Income Tax as ‘the amounts not paid’. As seen from the order of CIT, he has not given any finding that the interest was allowed in earlier years. Therefore, we are of the opinion that his finding of ‘liquidated damages were allowed’ is without any merit. However, we could not give any clear finding on this issue as assessee converted part interests into deferred revenue expenditure and claimed only part in the P&L A/c and disallowed the amounts. These amounts require reconciliation year-wise and as more than three years are involved, we cannot delete the same outrightly. Therefore, we modify the order of the CIT i.e., the direction to Assessing Officer to disallow the amount outright to a direction to the Assessing Officer to examine the amounts and to consider the amounts which were allowed as deduction earlier years as income u/s.41(1) in this year. Assessing Officer is directed to examine the amounts claimed in the P&L A/c and disallowed in the computation of income, then only arrive at any addition u/s.41(1) to the extent of amounts allowed in earlier years. To that extent, CIT's direction is modified and assessee's ground is allowed for statistical purposes Inclusion of prior period income under the provisions of Sec.115JB - Held that:- Having approved the principles to be adopted while computing the book profits u/s.115JB, we however, could not understand the directions of the CIT in directing the Assessing Officer to adopt the amount at ₹ 37,78,82,427/-. Ld.Counsel also expressed surprise how this amount was arrived at by Ld.CIT. If one were to consider that amount of ₹ 28,28,29,474/- i.e., prior period income was added to the base figure of ₹ 17,05,76,352/-, the amount should come to ₹ 45,34,05,826/-. Surprisingly, CIT determined the amount at ₹ 37,78,82,427/- without any explanation. Even the Assessing Officer in consequential order has blindly followed the same. Since this amount is also not correct as per the provisions of law, we consequently modify the direction of the CIT and direct the Assessing Officer to recompute the book profits of the assessee-company, by following the provisions of 115JB, strictly after giving due opportunity to assessee. To that extent, CIT's order u/s.263 was upheld on the principle of computation of 115JB, but not the direction on computation which stands modified. Assessing Officer is directed to recompute the entire working as per the provisions of law. Assessee should be given due opportunity to make submissions, which should be examined and properly considered - Appeal decided party in favour of assessee for statistical purposes.
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2015 (4) TMI 181
Unexplained cash credit and expenditure - accommodation entries - entry operators - CIT(A) deleted the addition - Held that:- All the shareholders are incorporated and registered with the concerned registar of companies under the Companies Act, 1956 and are allotted company identification number by the ROC, Ministry of Corporate Affairs, Government of India after they having completed necessary formalities and their status shown is active. He noted further that all the shareholders are income-tax assessees and are assessed to tax under jurisdiction of different Assessing Officers. The genuineness of the share subscription transaction is verifiable from I.T. Records, bank statements of the subscribers and all the share holders share application form, board’s resulation etc. Besides, the shareholders have confirmed the share money transaction which were produced before the Assessing Officer. At the conclusion of the paragraph, the Learned CIT(Appeals) has directed the Assessing Officer to delete the addition on the basis that the assessee has established the identity of the 16 share-subscribers, their creditworthiness and genuineness of the share transactions with documentary evidence as per law. Also that the assessee explained and substantiated the nature and source of credits found credited in the books of account during the relevant financial year. In absence of rebuttal of these material findings of the Learned CIT(Appeals) by the Revenue, we do not find reason to interfere with the First Appellate Order in this regard. - Decided in favour of assessee. For addition as unexplained expenditure being commission @ 25 paise per 100 rupees paid for arranging entries of ₹ 3,85,00,000/-. Since this addition is consequential to the addition of ₹ 3,85,00,000/- being the accommodation entry, same is directed to be deleted as the main addition of ₹ 3,85,00,000/- has already been directed to be deleted - Decided in favour of assessee.
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2015 (4) TMI 180
TPA - Notional interest charged on receivables outstanding beyond 180 days - AO/DRP enhancing the income of the assessee - Held that:- A working adjustment appropriately takes into account the outstanding receivable. Therefore, the assessee has undertaken a working capital adjustment to reflect these differences by adjusting for differences in working capital and thereby, profitability of each comparable company. Accordingly, while calculating the working capital adjusted, operating margin on costs of the comparable companies, the impact of outstanding receivables on the profitability has been taken into account. If the pricing/ profitability of the assessee are more than the working capital adjusted margin of the comparables, then additional imputation of interest on the outstanding receivables is not warranted. The differential impact of working capital of the vis-a-vis its comparables has already been factored in the pricing/profitability of the assessee which is more than that working capital adjusted margin of the comparables. Hence, any further adjustment to the margins of the assessee on the pretext of outstanding receivables is unwarranted and wholly unjustified. It is clear that assessee had earned significantly higher margin than the comparable companies (which have been accepted by the TPO) which more than compensates for the credit period extended to the AEs. Thus, the approach by the assessee of aggregating the international transactions pertaining to sale of goods to AE and receivables arising from such transactions which is undoubtedly inextricable connected is in accordance with established TP principles as well as ratio laid down by the Hon’ble jurisdictional High Court in the case of Sony Ericson Mobile Communication India Pvt. Ltd. (2015 (3) TMI 580 - DELHI HIGH COURT). - Decided in favour of assessee.
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2015 (4) TMI 179
Depreciation on the WDV of technical support service fees paid - CIT(A) allowed part claim - assessee is a 50/50 joint venture, therefore, there was overaseas AE relationship with Fedders International Air Conditioning and Fedders International INC, USA - Held that:- Ld. CIT(A) has given a categorical finding that the expenditure being capitalized and thereupon the deprecation was allowed in the past, therefore, on the same lines, assessee was held as entitled for the deprecation. Thus, under the totality of the facts and circumstances of the case as discussed hereinabove, we are of the considered opinion that there was no fallacy in the direction of Ld. CIT(A) to re-compute the depreciation and allow the same as per law. Since part relief granted by Ld. CIT(A) is not disturbed hence this ground of the revenue is hereby dismissed.- Decided against revenue. Disallowance of belated payment of PF in respect of employees’ contribution - CIT(A) deleted the disallowance - Held that:- Considering the dates of payment, due dates and the date on which the payment was made and to conclude that the payment was made as per the extended grace period of due date as discussed by the Ld. CIT(A),we hereby confirm the said factual findings and uphold the deletion - Decided against revenue. Transfer pricing adjustment - CIT(A) deleted the addition - selection of most appropriate method - Held that:- The certain points were not dealt with by learned CIT(A). If the Assessee is insisting upon CUP method then the procedure prescribed to verify the correctness of that method was required to be followed by learned CIT(A). The comparable instances have not been discussed so as to arrive at the correct Arms Length Price. It is also not on record that whether the units which were purchased from non AE were identical with the units purchased from AE. Since, the order of learned CIT(A) is silent on those points and the procedure as prescribed under Rule 10B(1)(a) has not been discussed; therefore, we deem it proper to restore this issue back to him to be decided needless to say after providing adequate opportunity of hearing to both the sides. - Decided in favour of revenue for statistical purposes.
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2015 (4) TMI 178
Unexplained investment in building - difference in the cost of construction shown by the assessee and that determined by the D.V.O. on the basis of reference made u/s 142A - CIT(A) deleted the addition - Held that:- No defect in the books of accounts has been pointed out by the department. The fact of assessee incurring expense of ₹ 10,35,797/- during the period 2007-08 & 2008-09 assessment years has not been factored in by the DVO. The finding on record in regard thereto has not been upset by the Revenue in any manner before us. The application of rate by way of applying CPWD rates which are applicable to First class godowns as opposed to the quality of construction supervised by the assessee being entirely different stand unassailed on record. Whereas the specific difference in regard to the quality of construction, number of bays, quality of rate proof platforms etc. which are considered in the case of godowns were found not applicable to the quality of construction of the assessee also remains unassailed - Decided in favour of assessee. Fall in G.P. rate - failure to furnish evidence for claim of production of chhilka and driage, fall in production of rice and under valuation of closing stock of bardana - CIT(A) deleted the addition - Held that:- No good reason to interfere to the order of the CIT(A) where evidently books of accounts had not been rejected and no defect in the books of accounts maintained has been pointed out either by the AO or the Sr. DR in the present proceedings. In the afore-mentioned peculiar facts and circumstances, in the absence of any specific argument in the facts as they stand we dismiss the departmental ground. - Decided in favour of assessee. Non deduction of TDS as required u/s 194C - CIT(A) deleted part disallowance u/s 40(a)(ia) - Held that:- CIT(A) correctly upheld the disallowance of the payment of ₹ 45,000/- as it was a payment against a single builty. However qua the payment of ₹ 36,000/- claimed by the assessee he found that it consisted of payment against three freight vouchers of ₹ 12,000/- each and hence consisted of three independent contracts consequently he concluded that TDS was not required to be deducted. - Decided in favour of assessee in part.
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2015 (4) TMI 177
Validity of assessment framed u/s 153A - Held that:- Decide the issue of validity of initiation of proceedings u/s 153A of the Act and the assessment framed there under in furtherance to the said notice in favour of the assessee. In result we hold that the notice issued u/s 153A in absence of incriminating material was invalid and accordingly the assessment framed in furtherance thereto is held null and void and is quashed. - Decided in favour of assessee.
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2015 (4) TMI 176
Transfer pricing adjustment - Dis-allowance of foreign exchange gain - said amount was not claimed as deduction while making the computation as a result, the loss of the year was lesser to that extent - Held that:- The Hon'ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] after considering the judgments of Goetze India Ltd. (2006 (3) TMI 75 - SUPREME Court) and National Thermal Power Co. Ltd. v. CIT [ 1996 (12) TMI 7 - SUPREME Court] has held that the appellant authorities can exercise their jurisdiction to consider the claim of the assessee not raised in return. We are of the considered opinion that, since the deduction claimed by the assessee which has been left out at the time of filing return has not been considered at all, in the interest of justice, it would be just and proper if the issue is remitted back to the Assessing Officer to consider the claim of assessee and allow the same, if the assessee is entitled to it. - Decided in favour of assessee for statistical purposes. Adjustment of TP - international transactions do not satisfy the arm's length principle envisaged under the Act - Held that:- Under-utilization of production capacity in the initial years is a vital factor which has been ignored by the authorities below while determining the ALP cost. The TPO should have made allowance for the higher overhead expenditure during the initial period of production. In view of the above, we deem it appropriate to remit this issue back to the Assessing Officer with a direction to consider the claim of the assessee with respect to idle capacity adjustment during the relevant period while determining the ALP cost. The assessee is also directed to produce relevant documents in comparable units for the necessary analysis. - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (4) TMI 203
Conversion of shipping bill from DEPB to advance authorization scheme - denial of the request of the exporter for conversion of shipping bill from DEPB to DEEC scheme - Held that:- Present shipping bill has been duly exported under advance authorization scheme before export of the goods. As per section 149 read with Board's circular dt. 16.1.2004 amendment between one scheme to another scheme should be allowed by the field where the documentary evidence which was in existence at the time of goods were cleared for export. So in the present case, all these facts are clearly confirmed that these facts are duly exported under the advance licence covered under shipping bill which is supported by invoice, ARE-1 and the certificate from the Superintendent who examined the goods and allowed for export. - due to inadvertence committed by the CHA who has filed the shipping bill under DEPB instead of rightly filing under advance licence. We also find that the exporter has filed the declaration before the authority that they will not claim any DEPB benefit against the said shipping bill. By relying on case law (2006 (5) TMI 36 - CESTAT, CHENNAI), we hold that the appellants are eligible for conversion of shipping bill dt. 19.2.2007 from DEPB scheme to advance licence scheme. Accordingly, we set aside the impugned order - Decided in favour of assessee.
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2015 (4) TMI 201
Confiscation of goods - Imposition of redemption fine - Undervaluation - Import of old and used CRT monitors - requirement of licence under foreign trade policy 2004-2009 - Difference of opinion - Majority order - Held that:- There is no dispute that the import of the second hand capital goods required an import license and this import is without any import licence and, thus, in violation of EXIM policy. The goods, therefore, have been correctly confiscated under section 111 (d) of Customs Act, 1962 - appellant have placed on record a detailed calculation regarding the landed cost of the imported goods, their sale price and margin of profit according to which the margin of profit after taking into account the detention charges would be 2.5% of the value. In these circumstances, I am of the view that the redemption fine of 10% of the value and penalty of 5% of the value as ordered by Hon'ble Member( Judicial) would be correct. Whether declared transaction value of Rs . 5,81,005/-is acceptable or whether the same should be enhances to Rs . 6,91,711/-based on the Chartered Engineer's report - Held that:- goods imported are of assorted brands and of different country origin and year of manufacture of goods is from 1999-2004. The goods thus are 4 to 8 year old and may be even obsolete models. There is no evidence of contemporaneous import of identical goods imported from the same suppliers at higher price. There is also no evidence placed on record to indicate that the appellant had paid any amount over and above the declared invoice value to the foreign suppliers. It is also not the allegation of the department that any of the conditions mentioned In proviso to Rule 3(2) of the customs valuation rule 2007 are present. In this situation merely on the basis of Chartered Engineer's report, which is based on the enquiry conducted behind the appellant's back and which had not even been supplied to the appellant, the declared transaction value cannot be rejected. - Decided partly in favour of assessee.
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2015 (4) TMI 200
Redemption fine - Seizure of currency - A plea has been taken that since currency is not a prohibited item, an option must be given under Section 125 of the Customs Act to pay fine in lieu of confiscation. - discovery of foreign currency which was not declared - He illegally took foreign currency and smuggled into India goods such as textile needless and pharmaceuticals etc. without declaring them to Customs at Ahmedabad Air Port and without paying duty on them. - Penalty u/s 114(i) - Held that:- In the present case, the act of smuggling is not established through statements only. It is established through a series of facts and events namely non declaration, detection of currency in a packet contained in a suitcase already checked in, repeated statements of appellant, the circumstantial evidence in the form of statement of M/s. Arcadia etc. The Section 125 states that where the importation or exportation is prohibited under the Act or any other law, the officer adjudicating the case may give to owner of the goods an option to pay fine in lieu of confiscation. The para 6 of Foreign Exchange Regulations only permit an amount of 5000$ which is attempted to be taken out of India has to be possessed in accordance with para 7 (3) (i) and 3(ii) of FEMA Regulations. It has not even been proved by the appellant that he was in legal position of 5000$ what to talk about 70000$. Thus, the possession of such huge amount of foreign currency is prohibited under FEMA Regulations and the option to redeem the same under Section 125 is not there. Even if one extends the argument that the verdict of the larger bench related to a case of Indian currency, I find that in the present case the appellant does not deserve my discretion to give an option to pay fine in lieu of confiscation. In view of the totality of circumstances and the evidentiary value of facts, the appellant does not deserve an option to release the goods on payment of redemption fine. His clear active role in the act of smuggling also does not deserve mitigation of the penalty imposed. - Decided against assessee.
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2015 (4) TMI 199
Confiscation of goods - Clearance of prohibited goods - Held that:- The goods in question is made of Sea shell known as "Troches Nilotius" which is listed in schedule IV of Wildlife (P) Act 1972 and import of these shells is prohibited as per provisions of EXIM Policy. - No infirmity in the order as regards the confiscation of the goods. However, the valuation of the goods of ₹ 3,11,800/- and penalty imposed is ₹ 1 lakh which appears to be higher side. Considering the value of the goods and considering overall facts and circumstances of the case, I am of the view that the appellant deserves reduction in the penalty and therefore I reduce the penalty from ₹ 1 lakh to ₹ 50,000 - Decided partly in favour of assessee.
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2015 (4) TMI 198
Exemption of additional customs duty - Notification No. 51/96-Cus. dated 23.7.1996 - Held that:- There is no description of different types of additional duty of customs in the notification. The notification categorically states that exemption from whole of the additional duty of customs leviable on the goods under Section 3 of the Customs Tariff Act, 1975 is allowed. In absence of any description and nomenclature of additional duty in the notification there cannot be any interpretation otherwise possible to deprive the appellant from exemption of additional duty of customs. - In view of the clear mandate of the notification to exempt additional duty of customs, the goods imported are eligible to the exemption from additional duty of customs thereon - Decided in favour of assessee.
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Corporate Laws
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2015 (4) TMI 197
Winding up application of company under section 433(e) & (f) - Default in payment of creditors - Held that:- This Court while considering the petition for admission on 25.03.2014 had in fact referred to the statement of objections and in that light, having taken note of the position that the respondents had failed to pay the amount despite the admission made, had thought it fit to admit the petition and had directed advertisement. Despite the order of admission and the advertisement being carried out, the respondent has neither paid the amount due to the petitioner nor has any other material been brought on record. In that light, what is also necessary to be noticed is that the respondents in their objection statement have admitted that apart from the petitioner, they are due to several creditors and since they are not in a position to settle with all creditors, the amount due to the petitioner also has not been paid. This would clearly indicate that the respondent is unable to pay its debts and they are liable to be wound up. - Application for winding up allowed.
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Service Tax
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2015 (4) TMI 219
Business Auxiliary Services - Mandap Keeper service - Commission agent service - Held that:- Commission Agent must act on behalf of another person for provision of service. In his order, Commissioner (Appeals) has simply reproduced the definition of ‘Commission Agent' and not explained as to why this definition is applicable in the present case. He has not established that the appellant while acting as a Commission Agent was actually acting on behalf of the decorator for providing or receiving service. The appellant himself is providing the services of Mandap Keeper independently to his clients. And the decorator provides the service of decoration to some clients. The two services are independent of each other. The appellant is not acting on behalf of the decorator to provide service to his clients, nor is he acting on behalf of the decorator to provide service to the decorator. Therefore, the activity of the appellant is not that of the Commission Agent falling under the definition of Business Auxiliary Services. When the Mandap Keeper accords monopoly right of a caterer for providing catering or decorator service to client who hired the Mandap Keepers' premises, no services are provided to the hirer by the Mandap Keeper and service is only provided to the hirer by the decorator. The conclusion arrived at by the Commissioner (Appeals) is not based on any reasoning with reference to the definition of Commission Agent and the definition of Business Auxiliary Services, and is rejected. We set aside the demand duty. Consequently, the question of imposing interest and penalty does not arise. - Decided against Revenue.
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2015 (4) TMI 218
Waiver of pre deposit - 'site formation' or 'works contract' service - Held that:- prima facie case in favour of the appellant, as natural component in 'site formation' or 'works contract' cannot be taxed, further service tax being destination based, there is no scope of double collection from the main contractor & sub-contractor. - Stay granted. As regards admitted liability on GTA Services or other services - tax liability admitted by the appellants - appellant directed to deposit ₹ 10,00,000, within a period of six weeks - Partial stay granted.
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2015 (4) TMI 217
Exemption under Notification No.59/98-S.T., dated 16.10.1998 - Management Consultancy, Man-power Recruitment Agency Service - whether the appellants, the Practicing Chartered Accountants are eligible for benefit of the said notification from rendering service covered under the "Management Consultancy Services" - held that:- A benefit available on a plain reading of the notification cannot be denied retrospectively by issuing a notification. The Explanation introduced under Notification No.15/2002-S.T., dated 01.08.2002, therefore, takes effect only from the date of its issue. Therefore, ‘Man-power Recruitment Agent' it rendered during the period 16.10.1998 to 31.07.2002 confirmed in the impugned order cannot be sustained. - decision in the of M/s Deloitte Haskins & Sells Versus The Commissioner, C&ST, Ahmedabad [2014 (12) TMI 43 - CESTAT AHMEDABAD] followed - Decided in favour of assessee.
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2015 (4) TMI 216
Business Support Service or Telecom Service - Overseas company providing dedicated leased lines - Classification controversy involving interpretation of law - Appellant for the material period April 2009 to March 2010 discharged tax liability in respect of Telecom service - Held that:- It is clearly mentioned therein that for the period April 2009 to March 2010, the service tax payable has been calculated in respect of Telecom service and paid. Even though the dispute is about 'business support service', in the order as well as in the documents, it comes out clearly that 'telecom service' has been considered as 'business support service' and therefore, the payment can be related to the adjudication order. Accordingly, we agree with the appellant that the amount paid by them can be considered towards the dues in this case - Partial stay granted.
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Central Excise
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2015 (4) TMI 215
Denial of CENVAT Credit - Non maintenance of separate accounts - Held that:- Only bagasse, a byproduct, on which no duty is payable, is used in generation of electricity as fuel. Bagasse is put into the boiler and steam generates and by the pressure of steam, turbine generates electricity but no steam is being used in manufacture of electricity. - Facts of the case of Gularia Chini Mills (2013 (7) TMI 159 - ALLAHABAD HIGH COURT) are relevant to the facts of this case, wherein the Hon'ble High Court has held that the electrical energy generated from bagasse is not covered under Chapter 27. Therefore, electrical energy is not an excisable goods nor is it exempted as defined in Section 2(d) of the Act. It was further held that the electricity is not an excisable goods under section 2(d) of the Act, hence Rule 6 of the Cenvat Credit Rules is not applicable as held by the Hon'ble Supreme Court in the case of Solaris Chemtech Ltd. Therefore, relying on the decision of the Hon'ble Allahabad High Court, we hold that the respondents are not required to reverse an amount of 10% of the value of electricity sold by the respondents to MSEDCL. Therefore, we do not find any infirmity in the impugned order and the same is upheld - Decided against Revenue.
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2015 (4) TMI 209
Invocation of extended period of limitation - Suppression of facts - Assessee only disclosed that they would be clearing sewing thread without mentioning that it is in the form of hanks - Held that:- Appellant has argued that the extended period could not be availed on the facts of this case, but has fairly stated that if the notes to Heading No. 55.08 are to be read, considering the fact that there was no support to the sewing thread manufactured by the appellant, it would not be covered by the exemption Notification which would only apply if goods manufactured fall within the particular Heading mentioned. As it is clear that the sewing thread is not put up on a support, CESTAT is clearly right on merits. Equally, we do not think that there is any ground for interference on the extended period of limitation being applicable inasmuch as CESTAT is again correct in saying that as the declaration and RT 12 returns being vital documents submitted by the respondent (appellant herein) did not mention the vital word "hanks", they suppressed a material fact which, to their knowledge, would not bring their sewing thread within the exemption Notification. - No merit in appeal - Decided against assessee.
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2015 (4) TMI 208
Denial of rebate claim - Partial claim sanctioned on the ground that part goods were not exported within six months from the date on which they were cleared for export from the factory of manufacture or within permitted extended period in terms of Notification No.19/04-CE(NT) dated 6.9.2004 - original authority confirmed the demand of erroneously sanctioned rebate - Held that:- In view of previous GOI order confirmation of demand of ₹ 119480/- vide order-in-original dated 4.3.11 cannot sustain. The matter already stands remanded to the original authority. As such the impugned order-in-appeal/original are set aside - Decided in favour of assessee.
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2015 (4) TMI 207
Denial of rebate claim - name and address of Maritime Commissioner was either over written or wrongly mentioned - Held that:- Commissioner (Appeals) has not passed any order w.r.t. rebate claim amount of ₹ 2587266/- as the said amount was sanctioned by ACCE in subsequent order. It is a settled legal position that an authority after passing the order become functus officio and cannot revise its own order. Commissioner (Appeals) has erred is not passing any order with respect to said claims. This legal infirmity is required to be rectified to meet the ends of justice. Therefore case is required to be remanded back for deciding the said claims. Commissioner appeal has already set aside the impugned Order-in-Original and therefore no order exists in r/o the rebate claim of ₹ 2587266. - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 206
Denial of rebate claim - Rebate claim earlier rejected vide GOI order but condition imposed upon assessee - Held that:- Applicant has stated that they have already paid the amount of confirmed demand to the department and these revision applications have become infructuous. - applicant has failed to file copy of impugned order-in-appeal despite two reminders from this office. The facts of the case and decision of Commissioner (Appeals) cannot be known in the absence order-in-appeal. As such the said revision application is liable to be rejected on this ground alone. - Decided against assessee.
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2015 (4) TMI 205
Denial of rebate claim - values declared in ARE-1 form were more than value declared in shipping bills and the value declared in ARE-1 was not correct transaction value in terms of section 4 of Central Excise Act, 1944 - correct transaction value was arrived at after deducting freight and insurance from commercial price (CIF), that the rebate claim was not admissible on free samples - Held that:- Any amount paid in excess of duty liability on one's own volition cannot be treated as duty. But it has to be treated as a voluntary deposit with the Government which is required to be returned in the manner in which it was paid as the same amount cannot be retained by Government without any authority of law. - refund in cash of higher duty paid on export product which was not payable, is not admissible and refund of said excess paid duty/amount in Cenvat Credit is appropriate. As such the excess paid amount/duty may be returned to the respondent in the manner in which it was paid by him initially. - Government directs that excess paid amount of ₹ 1,43,134/- and ₹ 37,484/- which is a voluntary deposit, may be allowed to be re-credited in the Cenvat Credit account from where it was initially paid. - Decided in favour of assessee.
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2015 (4) TMI 204
CENVAT Credit - whether the appellant is eligible to avail cenvat credit on the inputs viz. Cement, steel used in the manufacture of "Silos" during the period from September 2004 to March 2005 - Held that:- decision of Hon'ble Karnataka High Court in the case of CCE Bangalore Vs SLR Steels Ltd. (2012 (9) TMI 169 - KARNATAKA HIGH COURT ) is directly on the present issue in favour of the assessee. - Impugned order is set aside - Decided in favour of assessee.
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2015 (4) TMI 202
Waiver of pre deposit - Clandestine manufacture and clearance of final products - Goods not recorded in RG-1 register - Invoices for goods not issued - Held that:- corroboration tried to be achieved by the Adjudicating Authority from the other records i.e. daily production report, dispatch register, packing slips, all the delivery orders, working sheets etc. maintained by the appellant is not appropriate in as much as we prima facie find that the manufacturing process, as detailed by the appellant in their written submissions filed before us, lead us to conclude that the final product of the appellant being a very fragile and sensitive, results in lot of wastage, for which the appellants have also maintained proper records. The wastage arises at various stages ignoring the set of final cutting of the glass into proper shape and sizes resulting in emergence of cullets i.e. the resultant waste. The said cullets are never cleared by the appellant and are reused in the furnace for the manufacture of their final product, for which proper records are again maintained. Revenue's allegation of clandestine manufacture and clearance are based upon mainly the installed capacity as disclosed by one of the deponent employee, readwith the entries made in various records, resulting in theoretical calculations of production. There is virtually no evidence of procurement of excess raw material, conversion of the same into final product, clearance of the same through transporters and identification of the buyers and the consequent flow of money from the buyers to the appellants. It is well established, by catina of judgment that the allegations of clandestine removal cannot be upheld on the basis of surmises and conjunctures and are required to be established by production of positive and tangible evidence. In the present case, we do not even find, prima facie, preponderance of probabilities to conclude the allegations of clandestine removal against the assessee. - Stay granted.
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CST, VAT & Sales Tax
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2015 (4) TMI 213
Classification of goods - Agro Shed Knitted fabric (i.e. H.D.P.E. Knitted fabric) - Classification under schedule entry "C-I-15-A" or schedule entry "C-II-58" - Revenue neutral position - Held that:- The position and on facts which emerge from reading of the trade circular/notification and the schedule "A" is that there is presently nil or zero rate of duty on the goods in question. - Once there is no revenue impact or effect and which could have been possibly allowed this Court to pass any order on the questions which have been referred for its opinion and finding that there is no such impact as the goods do not presently attract any sales tax that we are of the opinion that the reference and controversy therein is purely academic. We are not called upon in this case to decide the case or dispute of classification. The questions as posed also do not raise such issue and even if they do raise, finding that there is no revenue impact as rate of duty is zero or nil, then the reference can be disposed of as infructuous. - Decided against Revenue.
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2015 (4) TMI 212
Reduction of input tax credit - levy of interest and penalty under Section 12(7) - Validity of Tribunal's order - First appellate authority ordered for pre deposit - On appeal to Tribunal, Tribunal decided appeal on merits - Held that:- Tribunal has committed grave error in deciding the appeal on merits and considering the legality and validity of the adjudication order. It is required to be noted that as such the appeal before the learned Tribunal was against the order passed by the First Appellate Authority dismissing the appeal on non deposit of ₹ 3,60,000/- as pre deposit i.e. on non compliance of the order of pre deposit. It is required to be noted that First Appellate Authority did not decide the appeal on merits and the First Appellate Authority did not go into the legality and validity of the adjudication order. Under the circumstances, as such appeal before the learned Tribunal was confined to the question whether condition of pre deposit of ₹ 3,60,000/- imposed by the First Appellate Authority was legal or not. In such appeal, as such, learned Tribunal could not have entertained question of legality of the adjudication order. From the impugned judgment and order passed by the learned Tribunal, it appears that the learned Tribunal has decided the appeal as if it was hearing the appeal against the judgment and order passed by the learned First Appellate Authority deciding the appeal on merits. Impugned judgment and order passed by the learned Tribunal deserves to be quashed and set aside and the matter is to be remanded to the learned Tribunal to decide the appeal afresh and appeal shall be confined to the legality and validity of the order passed by the learned First Appellate Authority imposing condition of pre deposit of ₹ 3,60,000/- and dismissing the appeal on non deposit of amount of pre deposit. - Decided partly in favour of assessee.
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2015 (4) TMI 211
Imposition of penalty - Wrongful availment of input tax credit - Held that:- on the admitted fact of wrongful availment of input tax credit, the provisions of Section 27 (4) (i) and (ii) squarely mandates levy of penalty. In the backdrop of the above said provision of law, we find that the Tribunal was correct in modifying the order of the Assessing Authority in the matter of levy of penalty as of one falling under Section 27 (4) (i) and further holding that it does not fall under Section 27 (4) (ii), as held by the Assessing Authority. Admittedly, it is the first detection of wrongful availment. We further find that the proviso to Section 27 (4), i.e., to provide for an opportunity to the assessee for showing cause against such imposition of penalty, has also been complied with and the assessee has not chosen to rebut the same. In such view of the matter, we find that there is no error of law warranting interference with the order passed by the Tribunal and this Court concurs with the finding of the Tribunal. - No question of law arises - Decided against assessee.
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2015 (4) TMI 210
Deletion of the levy of tax under the provisions of the Karnataka Value Added Tax Act, 2003 - Whether the Tribunal was justified in giving a finding that the lease rentals received after 1.4.2005 in respect of transfer of right to use KST suffered cars leased out prior to 1.4.2005 is not exigible to tax under the KVAT Act - Held that:- The assessee under a lease agreement leased to its customers KST suffered cars after purchasing them from local registered dealers. The tenure of the Master Lease Agreement were continuous and unbreakable for 5 years though lease rentals were payable by the customers on a monthly basis. Therefore, the assessee had a vested right of giving the cars on hire and receiving the rentals which was not exigible to tax. From 1.4.2005 KVAT Act has come into force. Section 3 is the charging Section. It provides that, the tax shall be levied on every sale of goods in the State by a registered dealer or a dealer liable to be registered, in accordance with the provisions of this Act. Therefore, the incidence of tax under Section 3 of the KVAT Act is the sale of goods. After the coming into force of the new Act, the assessee has not leased any car to his customers. Lease was prior to 1.4.2005. It is for a period of 5 years. Under the terms of the agreement, the customer has to pay lease rents for every month for a period of 5 years. Therefore, though the assessee continued to receive rentals every month after 1.4.2005, it is in pursuance of a sale which took place prior to 1.4.2005. As no sale has taken place after 1.4.2005, the liability to pay tax under Section 3 does not arise. - finding recorded by the Tribunal is just and proper and is in accordance with law. Therefore, the question of law is answered in favour of the assessee and against the revenue. Hence, we do not see any merit in these revisions - Decided against Revenue.
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Indian Laws
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2015 (4) TMI 214
Anti competitive practices - genuine spare parts of automobiles manufactured by respondents are not made freely available in the open market - even the technological information, diagnostic tools and software programs required to maintain, service and repair the technologically advanced automobiles manufactured by each of the aforesaid OPs were not freely available to the independent repair workshops - The OPs and their respective dealers, as a matter of policy, refuse to supply genuine spare parts and technological equipment for providing maintenance and repair services in the open market and in the hands of the independent repairers - restrictive practice carried out by the OPs in conjunction with their respective authorized dealers, amounts to denial of market access to independent repair workshops - OPs charge arbitrary and high prices to the consumers who are forced to avail the services of the authorized dealers of the OPs for repairing and maintaining their automobiles since the genuine spare parts, diagnostic tools and the technological information required to service their cars are not made available by the OPs to independent repair workshops - contravention of sections 3(3)(a) and 3(3)(b) of the Competition act - violation of section 3(4)(d), section 4(2)(a), 4(2)(b) and 4(2)(c) of the Act. Jurisdiction of commission to inquire the conduct of those OPs which were not named specifically in the information filed by the Informant - Held that:- Commission is a statutory body, established under the Act with the legislative mandate inter alia to prevent the practices having adverse effect on competition, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in the markets, in India. To perform the above mentioned functions, under the scheme of the Act, the Commission is vested with inquisitorial, investigative, regulatory, adjudicatory and advisory jurisdiction. The Commission is entitled to evolve its own procedure under section 36(1) of the Act for conducting inquiry as contemplated under the provisions of the Act. Further, the said inquiry is set into motion before the Commission in accordance with the provisions of section 19 of the Act, which is to be conducted by the Commission as per the procedure provided under section 26 of the Act. Under section 26(1) of the Act, the Commission has to form only a prima facie opinion as to the existence of contravention of any provision of the Act and pass a direction to the DG to cause an investigation to be made into the matter and submit its report. The direction under section 26(1) is an administrative direction to the DG for investigation of contravention of provisions of the Act, without entering upon any adjudicatory or determinative process. It does not effectively determine or affect rights or obligation of the parties. Although only 3 OPs were named in the information but the information and additional information disclosed that the allegations were not confined to the named OPs and the Informant had requested the Commission to inquire into alleged anti-competitive conduct of other OEMs also - The direction of the Commission was with respect to alleged anti-competitive conduct by the said industry in general and not specifically qua the car manufacturers named in the information. This is apparent from the order of the Commission dated April 26, 2011 which was passed after considering the request of the DG when he found, at that stage that alleged anti-competitive conduct was not confined to the named entities in the information but was prevalent across the industry. - Commission is of the opinion that the objections taken by the OPs regarding jurisdiction of the Commission are not only contrary to the scheme of that but also do not capture the factual position in the correct perspective. Based on above discussion the contention raised by the OPs has no force and is liable to be rejected. Whether the Opposite Parties have violated the provisions of section 4 of the Act as has been alleged - Determination of Relevant Market - Held that:- DG, during the course of its investigation, considered the nature of the business and conduct of the OEMs and concluded that the product market in the automobile sector can be categorized under the two heads: Primary Market and Secondary Market - DG has concluded that once the primary product has been purchased, consumer choice is confined to those aftermarket products or services compatible with that primary product - 'relevant market' for cars and that of spare parts consists of multiple markets, i.e., a market for primary products and separate markets for the secondary product(s) associated with each primary product (e.g. one market for all cars, individual markets for spare parts and repair and maintenance services. The Commission is of the view that the primary basis for determination of the existence of a 'systems market', as argued by the OEMs, do not exist in the present case. The Commission is of the view that in the current case compatibility between the primary market products and secondary market products are of primary importance. - a 'systems market' does not exist in the present case and that the relevant product market consists of the primary market for the sale of automobiles and the secondary markets for the sale of spare parts and repair and maintenance services. The Commission is of the opinion that for the purpose of this case, in order to correctly determine the relevant product market, the delineation of the primary market into separate automobile segments is not necessary. Whole life cost analysis - OEMs themselves do not have the data regarding the future maintenance/service costs of their own brand of vehicles. Even in instances where the OEM does possess such internal estimates, the same is considered confidential and is not shared with the consumers. If the OEMs are themselves not in possession of the basic data, to expect that an average prospective owner of a car will be able to overcome the hurdle of the high cost of information gathering and thereafter successfully engage in analyzing such data, given the various future variables to successfully undertake a whole life cost analysis would be unreasonable. Therefore, the whole life costing theory is not a feasible test for an average unsophisticated consumer in the Indian automobile market. Therefore, the Commission is not in agreement with the submissions of the OEMs that the average car owner undertakes a life cycle cost analysis before purchasing a car in the primary market. Reputation Effects - Commission, believes that reputational effects will not be enough to deter an OEM in the primary market from increasing prices in the secondary market if the consumers of the OEM are "locked-in" the aftermarket. A purchaser of a product in the primary market is to a great extent locked in with the primary product and the feasibility of switching to another primary product to avoid a price increase in the secondary market of spare parts or repair services is greatly limited - The higher is the price of the installed base, i.e., the cost of the primary market equipment, the more difficult it is to switch to another product for incremental rise in the price of the consumable parts in the secondary market. OEMs not only have the incentive, but have in practice, raised prices of the spare parts in the locked-in automobile aftermarket of India. Therefore, it is no longer a theoretical possibility whether consumers may be subjected to exploitative price abuse in the aftermarkets. Given the above mentioned findings of the DG, the submissions of the OEMs that they are disincentivized from charging higher prices in the aftermarket due to reputational concerns in the primary market are moot. Further, the high ratio of locked-in to new customers reduces the penalty in the primary product market of increasing aftermarket prices. Cluster Markets - The concept of cluster markets was applied to spare parts by the U.S. Ninth Circuit court in Image Technical Servs v. Eastman Kodak Co. [1997 (8) TMI 510 - United States Court of Appeals,Ninth Circuit]. The circuit court held that there could be a relevant market for Kodak photocopier replacement parts, notwithstanding lack of substitutability, because both independent service organizations and customers needed "all parts" in order to service or use their image machines. - From the consumer's perspective the technical differentiation between a gear box and an anti-lock system does not necessarily put such spare parts in different relevant product markets; since from the perspective of the consumer; "commercial reality" requires that she focuses on the aggregation of such products in order to service and use her Honda car. Therefore, under section 2(t); such aggregated class of products would be the appropriate relevant product market. The Commission is of the opinion that there exist three separate relevant markets; one for manufacture and sale of cars, another for sale of spare parts and another for 'sale of repair services'; although the market for 'sale of spare parts' and 'sale of repair services' are inter-connected. Further the Commission is of the opinion that a 'clusters market' exists for all the spare parts for each brand of cars, manufactured by the OEMs, in the Indian automobile market. - Commission is of the opinion that there exist two separate relevant markets; one for manufacture and sale of cars and the other for the sale of spare parts and repair services in respect of the automobile market in the entire territory of India. Assessment of Dominance of OEMs - In order to determine if the OEMs are in a dominant position, as per the provisions of Explanation (a) to section 4(2) of the Act, viz., "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, it is necessary to first examine the competitive structure of the said relevant market - Section 19(4) of the Act, provides the factors which the Commission shall take into account by the Commission, to determine if an enterprise is dominant under section 4 of the Act. One such factor is "market share of the enterprise." Market shares provide a useful first indication of the market structure and of the relative importance of the various undertakings active on the market (Hilti v. Commission [1994 (3) TMI 378 - EUROPEAN COURT OF JUSTICE]. Each OEM has a position of strength which enables it to affect its competitors in the secondary market, i.e., independent service providers in its favour, thereby limiting consumer choice and forcing the consumers to react in a manner which is beneficial to each OEM, but detrimental to the interests of the consumers - The perusal of the agreements entered by the OEMs with the local OESs has revealed that invariably there are restrictions on the OES from supplying parts directly to third parties without the prior written consent of the OEMs. The restrictions have been placed upon the OESs ability to sell spare parts directly to third parties, where such spare parts are being manufactured by the OEMs using the drawings/ designs/ specifications/ knowledge/ toolings/ moulds/jigs/ IPRs/ trademarks etc of the OEMs. The DG has observed that none of the OEMs have confirmed even a single instance where the permission has been granted to the OESs in terms of the agreements to sell spare parts to third parties. Denial of market access is specifically aimed at adopting a course of conduct with a view to exclude a competitor from the market by means other than legitimate competition and such exclusionary abusive conduct allows the OEMs to further strengthen their dominant position and abuse it. - It is the opinion of the Commission that in such cases a violation of section 4(2)(c) of the Act is clearly established - OEMs have submitted that the spare parts and diagnostic tools, workshop manuals are their proprietary materials and therefore accessible only to the authorized dealers network of each OEM. The Commission notes that unlike section 3(5) of the Act, there is no exception to section 4(2) of the Act. Therefore, if an enterprise is found to be dominant pursuant to Explanation (a) to section 4(2) and indulges in practices that amount to denial of market access to customers in the relevant market; it is no defence to suggest that such exclusionary conduct is within the scope of intellectual property rights of the OEMs. On the basis of aforesaid, the Commission is of the opinion that the OEMs have denied market access to independent repairers and other multi brand service providers in the aftermarket without any commercial justification. Unfair Price - Fact that the OEMs are the only source of genuine spare parts compatible to its brand of automobiles in the aftermarket allows such OEMs to use the opportunities arising out of its dominant position to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition. - Given the complete dependence of the users on the OEM for their spare parts requirements, the interest of consumers are not safeguarded in form of competitive prices of spare parts in the present scheme of things. The cost benefit, if any, that may arise from the OEM having its own distribution channels also does not seem to be passed onto the customer in the form of low prices of spare parts and there appears no justifiable efficiency factors in the form of any benefits to the consumers. Exploitative pricing conduct by each OEM is a manifestation of lack of competitive structure of the Indian automobile market. The Commission is therefore of the opinion, that structurally modifying the competitive nature of the Indian automobile market will itself induce market self-correcting features, by enhancing consumerchoice and access of independent repairers to effectively compete in the Indian aftermarket. Such remedies, in the opinion of the Commission shall have a rationalizing effect on prices of the products in the Indian automobile aftermarket. Leveraging - owners of various brands of automobiles are completely dependent on the authorized dealer network of the OEMs and are not in a position to exercise option of availing services of independent repairers. In most cases, the users of car wanting to purchase the spare parts have to necessarily avail the services of the authorized dealers of the OEM. It is therefore found that such OEMs use their dominance in the relevant market of supply of spare parts to protect the other relevant market namely; the aftersales service and maintenance thereby violating Section 4(2)(e) of the Act. Even in case of OEMs where the spare parts are available to the independent repairers as well as the owners of cars in the open market, the independent repairers are still foreclosed from the aftermarket for repairs and maintenance of the various brands of automobiles manufactured by the OEMs. This is because none of the OEMs allow their diagnostic tools, repair manuals etc., to be sold in the open market. The submissions of the OEMs and those of the multi-brand service providers appear to be contradictory. If the data submitted by the OEMs is correct, and an increasing number of car owners are using the services of independent service providers in the post-warranty period, then there would have been no reason for the multi-brand service providers to allege their inability to service their customers in the post-warranty period. - Commission finds the OEMs (OPs) to be indulging in anti-competitive practices resulting in contravention of section 4(2)(a)(i), 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Act. Whether the opposite parties have violated the provisions of section 3 as has been alleged - Held that:- The mere selling of spare parts and diagnostic tools in the aftermarket by the OESs does not violate the intellectual property rights in such spare parts. Additionally, the OEMs can through its contractual agreements with the OESs ensure that its intellectual property rights are not compromised and are protected. The OEMs can contractually require the OESs to produce the finished spare parts (which are meant to be sold in the open market) in compliance with the applicable industry standards and other consumer laws of India ensuring that the safety of consumers purchasing such spare parts is not compromised. It is opined that there is a requirement for the creation of a collaborative space between the independent repairers, multi-brand operators, the OEMs and their OESs so that they can play an effective role in curbing the usage of spurious spare parts and providing the automobile consumers of India with competitive and efficient repair and maintenance options. Therefore, the restrictions placed on the OESs adversely affects the competition in the automobile sector and falls within the mischief of section 3(4), read with section 3(1). The argument of the OEMs of putting the restrictions on OESs for sale of their proprietary parts to third parties as reasonable conditions for claiming the exemption under section 3(5)(i) is found to be unacceptable devoid of any merit. - Therefore, since the exception under section 3(5)(i) is not applicable to the agreements between OEMs and OESs, the contravention found by the Commission under section 3(4)(c) & (d), read with section 3(1) stands established. Opposite Parties (OPs) have contravened the provisions of sections 3(4)(b), 3(4)(c), 3(4)(d), 4(2)(a)(i) and (ii), 4(2)(c) and 4(2)(e) of the Act, as applicable. As elucidated in detail in the order, the Commission does not accept the "unified systems market" in this case specifically, and in the Indian market conditions in general. The kind of parameters which have been defined even in other jurisdictions and literature for accepting the systems market approach do not normally exist in the Indian market, including in regard to availability of relevant information (e.g. life-cycle cost) to the consumers, his ability/inability to take a rational/analytical decision based on complex data which may or may not be available, the reputational impact of anti-competitive conduct in the aftermarket on the firm's product in the primary market etc. These factors are aggravated in the Indian market situation due to some globally recognised different characteristics of Indian consumer (including cost-consciousness) and the complex nature of aftermarkets. The parties are hereby directed to immediately cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act. As regards imposition of penalty, the Commission notes that the OPs have violated the provisions of both sections 3 & 4 of the Act. Anti-competitive conduct of the opposite parties has restricted the expansion of spare parts and independent repairers segment of the economy to its full potential, at the cost of the consumers, service providers and dealers. The directions of the Commission will be complied with by the opposite parties in letter and spirit. Each OP is directed to file individual undertakings, within 60 days of the receipt of their order, about compliance to cease and desist from the present anti-competitive conduct, and initiation of action in compliance of other directions. This will be followed by a detailed compliance report on all directions within 180 days of the receipt of the order. The amount of penalty will be paid by the OP within 60 days of the receipt of the order. - Decided in favour of appellant.
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2015 (4) TMI 196
Challenge to constitutional validity of Rule 4 of the TA Rules, 2003 and Rule 5 of the STA Rules, 2003 - reconstitution of cadres - seniority dispute amongst employees of the Customs and Central Excise Department. - bifurcation, and reamalgamation of cadres. - Held that:- ministerial cadre as it originally existed, comprised of posts of Deputy Office Superintendent (Levels 1 and 2), Upper Division Clerk, Lower Division Clerk, Stenographer (Senior Grade and Ordinary Grade), Draftsman etc. Consequent upon promulgation of the Electronic Data Processing Posts (Group ‘C’ Technical Posts) Recruitment Rules, 1992, a separate cadre of Data Entry Operators came to be created. Appointment thereto, at the time of initial constitution of the cadre of Data Entry Operators, was made out of the original ministerial cadre. The posts under the 1992 Rules, had a different nomenclature, vis-àvis the posts in the ministerial cadre. Their duties and responsibilities were separate and distinct, from that of the ministerial cadre. So were their avenues of promotion. The lowest post in the cadre of Data Entry Operators was designated as Data Entry Operator Grade ‘A’. Onward promotion was to the post of Data Entry Operator Grade ‘B’, and thereafter, to Data Entry Operator Grade ‘C’, and finally, to Data Entry Operator Grade ‘D’. In the above view of the matter, it is not possible for us to accept, that the creation of the cadre of Data Entry Operators, can be described as a mere bifurcation of the original cadre. In the present controversy, it is not possible to conclude, that the original position was ever restored. Consequent upon the promulgation of the TA Rules, 2003 and the STA Rules, 2003, the amalgamation resulted in appointments to the cadres of Tax Assistants and Senior Tax Assistants. Neither of the parties concerned, held either of these posts prior to the promulgation of the abovementioned rules. It is, therefore, that we must conclude, that the judgment rendered in Om Prakash Sharma’s case (1985 (4) TMI 317 - SUPREME COURT) was incorrectly applied, while adjudicating upon the present controversy. It is apparent from a collective perusal of the conclusions recorded in the judgments extracted in the foregoing paragraph, that chances of promotion do not constitute a condition of service. In that view of the matter, it is inevitable to hold, that the High Court erred in recording its eventual determination on the basis of the fact that the promulgation of the TA Rules, 2003 and the STA Rules, 2003 was discriminatory and arbitrary with regard to the fixation of the inter se seniority, since the same seriously prejudiced the chances of promotion of the erstwhile members of the ministerial cadre, namely, those members of the original ministerial cadre, who had not opted for appointment/absorption into the cadre of Data Entry Operators, with reference to and in comparison with, those members of the original ministerial cadre who had opted for appointment/absorption into the cadre of Data Entry Operators. Under Rule 4(1) thereof, Upper Division Clerks and Data Entry Operators Grade ‘A’ had been equated with one another, and members belonging to the aforesaid two cadres had been given the highest position in the seniority list (at the stage of the initial constitution). The inter se seniority amongst the Upper Division Clerks and Data Entry Operators, is mandated to be determined, for purposes of further promotion, with effect from the date on which the concerned incumbent was appointed on regular basis as such. It is not possible to conclude, that members of either of the two cadres (the erstwhile ministerial cadre, and the cadre of Data Entry Operators) can be treated to be superior to one or the other, on account of the pointed deficiency, highlighted by the learned counsel. It clearly emerges from the provisions relied upon, that consequent upon the completion of the process of computerization, in the Customs and Central Excise Department, the erstwhile members of the ministerial cadre needed to be trained in computer applications, and the erstwhile members of the cadre of Data Entry Operators required to be instructed in relevant procedures. Thus viewed, it is not possible for us to accept the contention of learned counsel, that either of the two cadres ought to be treated as superior to the other. The first contention, premised on Rule 4 of the TA Rules, 2003 and Rule 5 of the STA Rules, 2003, respectively, is devoid of any merit, and is accordingly hereby rejected. - The resultant inter se seniority between the posts at the initial constitution of the cadres under reference, was also based exclusively on the pay-scales of the posts sought to be merged. Cadre of Data Entry Operators, was created out of the original ministerial cadre. It is, therefore apparent, that the members of the two cadres were originally discharging similar duties. It is only as a consequence of the administrative decision to computerize the functioning of the Customs and Central Excise Department, that a separate cadre of Data Entry Operators came to be created. The newly created cadre, exclusively functioned towards giving effect to the decision to computerize the functioning of the department. There was thereafter a division of duties discharged by the original members of the ministerial cadre. One cadre of employees exclusively thereafter discharged procedural duties of the department, whereas, the other cadre of employees exclusively thereafter discharged duties aimed at computerization of the functioning of the department. Merger of the cadres, and the determination of the inter se seniority on merger, were justifiably determined, on the basis of the different pay-scales of the cadres merged, under the TA Rules, 2003 and the STA Rules, 2003. By the mandate of the above Rules, all posts in equivalent pay-scales were placed at the same level. Posts in the higher scale of pay, were given superiority on the subject of inter se seniority, with reference to posts in the lower scale of pay. In our considered view, the above determination, at the hands of the rule framing authority, on the issue canvassed before us, cannot be termed either arbitrary or discriminatory. We are, therefore satisfied in concluding, that the provisions of Rule 4 of the TA Rules, 2003 and Rule 5 of the STA Rules, 2003, cannot be faulted on the touchstone of Articles 14 and 16 of the Constitution of India. - the different orders passed by the Administrative Tribunal, and the common order dated 13.4.2007 passed by the High Court, are liable to be set aside. The same are accordingly hereby set aside. The appeals filed by those who moved to the cadre of Data Entry Operators from the ministerial cadre, and were thereupon amalgamated in the cadre of Tax Assistants/Senior Tax Assistants, are allowed - Decided in favour of appellants.
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2015 (4) TMI 194
Entitlement to refund of the cess paid together with interest at 12 per cent p.a. - The West Bengal Rural Employment and Production Act, 1976 and The West Bengal Primary Education Act, 1973 - whether insofar as interest is payable after the Amendment Act is concerned, such interest would only be payable after assessment orders are passed (which on facts here, we are informed, were passed on 27.07.1993 and thereafter)? - Held that:- In our opinion, Mr. C. U. Singh, learned counsel appearing on behalf of the respondents, is right in saying that the interim order dated 16.06.1983 is self operative. In any case, the final order in Buxa Dooars Tea Company Ltd.'s case [1989 (5) TMI 56 - SUPREME Court] did not say anything to the contrary, and when both the judgment 'Buxa Dooars Tea Company Ltd [supra] and Goodricke Group Ltd. [1994 (11) TMI 353 - SUPREME COURT OF INDIA] and the interim order are read together, it is clear that the refund will have to be made together with 12 per cent interest. It is clear from a reading of Section 4B of the West Bengal Rural Employment and Production Act and Section 78C of the West Bengal Primary Education Act that where any sum is paid by or collected from an owner of a tea estate during a period commencing from 01.04.1981 or 14.04.1984, as the case may be, up to the date of the Amendment Act as rural employment cess or as education cess, such portion of the said sum as may become payable under the provisions of the Amendment Act shall, notwithstanding any judgment, decree or order of any court, be deemed to have been validly levied, paid or collected under the Amendment Act. This being the case, it is clear that Section 4B and Section 78C have changed the basis of the law as it existed when Buxa Dooars Tea Company Ltd.'s case was decided and consequentially, the judgment and interim order passed in Buxa Dooars Tea Company Ltd.'s case will cease to have any effect. Also, what would have been payable under the Act as unamended, is now payable only under the 1989 Amendment Act which has come into force with retrospective effect. In the present case, the 1989 amendment Act expressly seeks to remove the basis of Buxa dooars's judgment by retrospectively changing the basis of the levy of the cesses mentioned above. In the present case, what is done away with by the Amending Act of 1989 is a declaratory judgment holding the above cesses to be invalid. On all these grounds also the judgment in Madan Mohan Pathak's case is distinguishable.[1978 (2) TMI 209 - SUPREME COURT] However, insofar as interest is concerned, post Goodricke Group Ltd.'s case [supra], we are of the view that Mr. C. U. Singh is correct in supporting the impugned judgment as the case made it clear that the petitioners shall pay cesses stayed by an order of this Court along with interest at 12 per cent per annum. The expression "cesses stayed" has reference to the interim order dated 25.01.1990 which had stated that there would be no enforcement of demand under the Act or Rules and in the meanwhile, assessment may be made. We have been informed that assessments were made with effect from July, 1993 onwards and consequential demands have been made with effect from 1995 onwards. It is clear, therefore, that the impugned judgment is right in holding that with regard to the payment of interest by the petitioner on the amount of cess payable by virtue of the Goodricke Group Ltd.'s case, interest would only be payable from the respective dates of assessment for the various relevant periods till recovery.
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