TMI Tax Updates - e-Newsletter
May 13, 2013

Case Laws in this Newsletter:

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

Articles

1. Scholarship / stipend – a case of capital receipt besides being exempt under section 10(16)

   By: DEVKUMAR KOTHARI

Highlights / Catch Notes

Income Tax

• Reopening Assessment Justified by Subsequent Decision, Not Just a Change of Opinion.

  Case-Laws - HC : Reopening of assessee - re-opening of the assessment in the present case on the basis of the subsequent decision cannot be said to be a mere change of opinion. - HC
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• No Penalty Imposed for Estimated Agricultural Income Additions u/s 271(1)(c) Despite Partial Disbelief.

  Case-Laws - AT : Penalty u/s 271(1)(c) -Additions qua agricultural income have been made on estimate basis by disbelieving the agricultural income partly. - no penalty - AT
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• Tax Appeal Reduces Employee Remuneration Expenditure from Rs.4.68 Lakhs to Rs.1.50 Lakhs for Servants and Drivers.

  Case-Laws - AT : Expenditure on remuneration of employees (i.e., four servants and two drivers) - confirmed the addition at Rs.1.50 lakhs as against at Rs.4.68 lakhs by the CIT(A) - AT
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• Mutual Fund Sales Services Exempt from TDS u/s 194H of Income Tax Act.

  Case-Laws - AT : TDS u/s 194H - The services rendered for sale of mutual fund units cannot be covered by the scope of Section 194 H. - AT
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• Taxpayer Penalized u/s 271(1)(c) for Incomplete Disclosure, Leading to Income Estimation Method Use.

  Case-Laws - AT : Penalty u/s 271(1)(c) - estimation of taxable income by way of estimate is one of the established method for computing income as assessee had not disclosed a full fact - penalty confirmed - AT
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Customs

• Eligibility for CHA License: Exam Passers from 1995-2003 Under 1984 Regulations Qualify with Additional Conditions Met.

  Case-Laws - SC : CHA license - who had cleared the examinations held between 1995 and 2003 under the 1984 Regulations would be eligible for grant of licence subject to their fulfilling other conditions of eligibility. - SC
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• Customs Department Cannot Challenge DGFT's Authority on Import Licenses Issued for Specific Appellants.

  Case-Laws - AT : Once the import licence has been issued by DGFT specifically covering the goods imported by the appellant, the customs department cannot challenge the DGFT’s power to issue the licence and hold the licence as invalid- AT
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Corporate Law

• CAG's View on Exploration Activities Beyond Contract Period Not Accepted Under Production Sharing Contract Provisions.

  Case-Laws - SC : The CAG, it is seen, has assumed that any exploration carried out beyond the period was beyond the provision of PSC. - CAG views on that aspect cannot be accepted. - SC
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• Liquidator to Handle Workmen's Claims for Pari Passu Payment in Winding Up, Not Debt Recovery Tribunal.

  Case-Laws - SC : Winding up proceedings - the claims of the workmen who claim to be entitled to payment pari passu have to be considered and adjudicated by the liquidator of the debtor company and not by the DRT. - SC
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Service Tax

• Refund Claim for Service Tax Filed Within One-Year Period Approved; Tax Originally Paid on 24.04.2008, Claim on 17.04.2009.

  Case-Laws - AT : Refund claim - the service tax was paid on 24.04.2008 and the refund claim was filed on 17.04.2009, hence, it was within the period of one year, as prescribed. - refund to be allowed - AT
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Central Excise

• Iron Ore Fines: Waste or By-product? Rule 6(2) Inapplicable, Impacts CENVAT Credit Reversal and Excise Tax Treatment.

  Case-Laws - AT : Emergence of the iron ore fines - unavoidable waste or by-product - reversal of cenvat credit - the provisions of Rule 6 (2) would not be applicable - AT
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• H.R. Plates for Plant Maintenance Eligible for Cenvat Credit Under Central Excise Rules.

  Case-Laws - AT : Eligibility for cenvat credit - H.R. Plates - the inputs used for repair and maintenance of the plant and machinery would be eligible cenvat credit. - AT
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VAT

• Court Rules Form ST-18A's Importance Reduced for Stock Transfers, Irrelevant if Blank or Filled.

  Case-Laws - HC : When there was no requirement of carrying such declaration form No. ST-18A in the case of stock transfer, then whether it was blank or filled looses significance. - HC
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Case Laws:

• Income Tax

• 2013 (5) TMI 284
  Reopening of assessee - commission paid to the three working directors was in lieu of dividend and the same is not allowable - assessee contested that re-opening was made on the ground that the facts for AY 2006-07 were similar to the relevant AY 2008-09, which is not correct as in AY 2006-07 no dividend was declared - Held that:- Assessment in the instant case was re-opened on the ground that the Special Bench of the Tribunal [2011 (6) TMI 251 - ITAT, Mumbai] in the assessee's own case for AY 2006-07 had reversed the earlier decision of the Tribunal in the assessee's case for AY 2005-06 whereby the Special Bench held that the commission to the three Directors was in lieu of dividend and the same was not allowable as deduction under Section 36(1)(ii). The Special Bench [2011 (6) TMI 251 - ITAT, Mumbai] confirmed the treatment of the commission under Section 36(1)(ii) and held that the provisions of Section 37(1) are not applicable. In the circumstances, considering the principles enunciated in the judgments referred to above, the re-opening of the assessment in the present case on the basis of the subsequent decision cannot be said to be a mere change of opinion. Contention of the Petitioner that the succeeding AO could not have issued the notice dated 1 October 2012 u/s 148, as it was his predecessor who has recorded the reasons for reopening is completely misconceived. The reasons recorded for re-opening and the notice dated 1 June 2012 which has been issued u/s 148 for reopening are as a matter of fact by the same AO. The notice dated 1 October 2012 issued by the succeeding AO was merely a notice fixing the hearing. Section 129 envisages such a situation and lays down that whenever in respect of any proceeding under the Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor - reopening was valid - against assessee.

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• 2013 (5) TMI 283
  Advance rent written off as not recoverable - ITAT deleted the addition - Held that:- It is not disputed that the assessee had paid a sum as advance which was to be adjusted against lease rents. The assessee had been carrying on business even prior to the lease agreement with respect to which advance had been made & had come to a conclusion that chances of recovery, of the amounts claimed from the lessors, in the near future were remote and had therefore written off the amount as irrecoverable in the previous year relevant to the assessment year 2004-2005. For an assessee to claim deduction in relation to the bad debts it is now no longer necessary for the assessee to establish that the debt had become irrecoverable and it is sufficient if the assessee forms such an opinion and writes off the debt as irrecoverable in its accounts. as decided in T.R.F Ltd. (2010 (2) TMI 211 - SUPREME COURT ) - In favour of assessee.

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• 2013 (5) TMI 282
  Undisclosed bank account - adoption of peak theory for the purpose of making an addition to the returned income by CIT(A) - Held that:- Assessee has been filing returns of the commission income in various years and has been enclosing various statements of accounts to the returns filed in earlier years. Just because the assessee has claimed benefit of provisions of Sec.44AD in some years as " no Accounts case", it does not mean that the assessee's transactions are outside the purview of statements already filed. Since the assessee's transactions in the same bank were reflected in earlier years, AO's finding that the transactions in Warna Sahakari Bank Ltd. is unaccounted cannot be accepted. The assessee explained some of the cash deposits were recoveries of outstanding amounts and some transactions were from the co-purchaser as well as advance from the sale agreement holder even though the said explanation neither AO nor CIT(A) applied their mind in examining truthfulness of the transactions. As seen from the show cause notices issued by the CIT(A) even the Peak credit working varied from the show cause notice to the final amount determined. How this amount has been arrived at could not be verified. Thus there seems to be an error committed by the CIT(A) in arriving that figure. Enhancement of purchase and sale of land - Held that:- Not in agreement with the enhancement so made by the CIT(A) as the sale did not takes place in this year and the assessee has not acted as a broker, two of the findings given by the CIT(A) thus are erroneous. However it cannot be ignored the transactions which happened during the year for purchase of property and various receipts. There are substantial cash withdrawals/ transfers also from the assessee account and Ms Swetha account, more than the cost of land stated. Since AO started the inquiry process on the basis of credits in the Bank account and CIT(A) also partly confirmed the same, even though arrived at the incorrect amount, in the interest of justice the orders of the CIT(A) and also of the AO set-aside and restore the issue to the file of the AO to examine the credits and debits in the Bank Account along with the nature of amounts transacted in the said account. In favour of assessee for statistical purposes.

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• 2013 (5) TMI 281
  Penalty u/s 271(1)(c) - claim of long term capital gain - CIT(A) deleted the penalty observing that AO has not disbelieved the investment in the shares in the earlier years - AO has observed that there was no availability of cash for the purchases of shares & as shares were not routed through stock exchange therefore, the payment of STT is out of question and no exemption can be claimed under sec. 10(38) - Held that:- The investment was duly disclosed in the balance sheet. Once the investment was accepted, it will amount to acceptance of genuineness of the transaction partly. According to CIT(A), the shares were purchased through account payee cheques which indicate that funds were available in the accounts of the assessee. Assessee before the CIT(Appeals) submitted that AO himself accepted in his report that the transactions in shares were conducted through the broker against whom either inquiry proceedings were in progress or who were suspended by the SEBI. Thus AO has clearly recognized the existence of the broker and if brokers were duping their clients or the brokers were not passing the tax collected from the clients to the government then how the assessee can be penalized. Thus, AO has adopted two contradictory versions as one treated the transaction as bogus and yet also reported that the transactions were conducted through the brokers. Thus CIT(Appeals) on an analysis of all these material arrived at a conclusion that assessee has given an explanation which, they might have failed to substantiate but their explanation was not proved to be false. It was also contended that if STT was not paid then exemption under sec. 10(38) can be denied to the assessee but Assessing officer cannot change the head of income i.e. from long term capital gain to unexplained receipts. Unaccounted gifts - Held that:- With regard to the gifts the assessee has submitted all necessary documents i.e. disclosing the identity of the donor, disclosing the manner how gifts have been received. The addition was made on the ground that it is against the human probability. Additions qua agricultural income have been made on estimate basis by disbelieving the agricultural income partly. These amounts do not qualify for visiting the assessee with the penalty because AO has not proved that claim made by the assessee was false. In favour of assessee.

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• 2013 (5) TMI 280
  Sales made outside the books of accounts - penalty u/s 271AAA - disclosure of Rs.20 crores by the Group in the statement recorded u/s 132(4)during the search operation - Held that:- The taxes had been paid along with the interest in all these individual hands. Since a statement was given during the course of search u/s 132 admitting the undisclosed income of Rs.20 crores of the Group, the quantum of disclosure of income was affirmed by an affidavit by other person of the Group. The manner was also stated in the statement by which sun income was earned. Thus the Group has also substantiated the manner in which this undisclosed income was derived. In the statement recorded u/s 132(4) and in an affidavit dated 15.05.2009, the disclosure was maintained. The assessees of the Group have also paid the taxes applicable along with interest. In such a situation, the CIT (A) was not justified in sustaining the penalty u/s 271(1)(c) levied by the Assessing Officer. Considering all these facts and circumstances, we set aside the orders of the authorities below and direct to delete the penalty u/s 271AAA. In favour of assessee.

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• 2013 (5) TMI 279
  Expenditure on remuneration of employees (i.e., four servants and two drivers) - additions confirmed by the FAA - Held that:- The tribunal per its orders for the succeeding two years, passed subsequently, has deleted the addition without making any endeavor to assess the same, on the basis that the Revenue has not placed any cogent material on record, but only made an ad hoc addition. The tribunal having found as a fact that the assessee would have spent not less than Rs.2.50 lakhs on the salary of the personal staff for A.Y. 2005-06, it was incumbent on it to examine the assessee case with regard to the sufficiency of his withdrawals with reference to the relevant expenditure, allowing in fact for the normal increase therein. The assessee having not furnished any details of his cash withdrawals for Rs.5.40 lakhs, it is not possible to state as to how much thereof can be applied to meet the other house-hold expenses and personal cash expenses. The matter is hardly one which merits being litigated, much less time and again. It is neither a fit case for being restored to the file of the assessing authority, nor do we think to allow any credit to the assessee for his cash withdrawals toward the relevant expenditure - thus without bringing any contrary material on record, adopted the salary figure for servants in disregard to the tribunal's finding thereon per its order for A.Y. 2005-06, therefore, so as to give a quietus to the matter, as well as meet the ends of justice, confirm the addition at Rs.1.50 lakhs as against at Rs.4.68 lakhs by the CIT(A) - partly in favour of assessee.

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• 2013 (5) TMI 278
  Unexplained cash credit/ceased liability u/s 28(iv) - CIT(A) directed the AO to re-open the A.Y. 2002-03 as the addition was not sustainable - Held that:- As can be seen from the chart of credit received only an amount of Rs.3,84,000/- has been received in the financial year relevant for A.Y. 2002-03. Balance of the amount has been received in later years. So, issuing direction for the A.Y. 2002-03 for the entire amount is not factually correct. Secondly, the assessee furnished confirmation from the party. This additional evidence has been rejected but the confirmation of credit could have been examined in the year itself when the party confirms the credit how a finding can be given for reopening in earlier year is not explained. Thirdly, the AO can not reopen the A.Y. 2002-03 by the time be finalized the proceeding. He is aware of the credit in that year. Since the law prohibits the reopening u/s 147 beyond six years, the direction of CIT(A) to reopen A.Y.2002- 03 in financial year 2012 in the order is against the provisions of law and principles on the issue. There is no finding that the amount was undisclosed. Even the AO order indicates that it is received through banking channel. That itself may not affirm the genuineness of the credit but confirmation filed by assessee prima facie indicate that the amount can not be treated as unexplained cash credit.Reopening order is to be quashed - In favour of assessee.

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• 2013 (5) TMI 277
  Manner of computation of profit level indicator - Transfer pricing adjustment - Tribunal held that installation/commissioning and maintenance services were not part of the international transactions & since the profit level indicator shown by the assessee was 18.98% inasmuch as the profit level indicator of the comparables determined by the TPO was at 16.34%, which was lower there was no need for any adjustment in the arm’s length prices Held that:- It is evident that the transactions pertaining to the installation/commissioning and maintenance services were not international transactions as contemplated under section 92B(1)& 92B(2) because none of the conditions stipulated therein of a prior agreement existing between the customers of the respondent/assessee and the associated enterparises have been established as a fact. Moreover, there is no finding that the terms of the transaction of installation/commissining as well as maintenance had been determined in substance between the customers and the respondent/assessee by the associated enterprise. In the absence of such findings, it cannot be deemed that the transaction of installation/commissioning as well as provision of maintenance services by the respondent to its domestic customers in India were international transactions falling within section 92B(2) of the said Act. No substantial question of law arises for the consideration of this court.

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• 2013 (5) TMI 276
  Disallowance u/s 40(a)(ia) - non deduction of tax at sources u/s 194H - assessee is engaged in distribution of mutual funds of various companies and is earning commission for the same from various mutual funds - case of the assessee was selected for scrutiny under CASS - Held that:- The expression commission or brokerage includes payment for services for services rendered for, or in the course of, buying and selling of goods, or in relation to any transaction relating to any asset, valuable article or thing, not being securities. The payment in the preset case has been made for sale of mutual fund units and the mutual fund units are covered by the scope of definition of 'securities'. The services rendered for sale of mutual fund units, therefore, cannot be covered by the scope of Section 194 H. The definition has to be read in entirety and not in fragments, as suggested by the DR. The provisions of law are clear and admit no ambiguity. In any event, it was not even the case by any of the authorities below therefore to hold that the assessee did not have any tax withholding requirements so far as impugned payments for commission on sale of mutual fund units are concerned. In favour of assessee.

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• 2013 (5) TMI 275
  Addition u/s 14A - CIT(A) deleted the addition - Held that:- On one hand assessee claims that no expenditure was incurred for earning dividend income and on the other hand, disallows suo moto Rs.1 lac towards earning such income. AO has to reject the claim of assessee and apportion the expenditure on reasonable and acceptable method. Thus this issue required to be restored to the file of the Assessing Officer to decide afresh - revenue’s appeal is allowed for statistical purposes. Provision for warranty expenses - CIT(A) deleted the addition - Held that:- The assessee company is doing the business of computer software and trading of bought out products. The company also produces softwares to its customers as per their specifications. Thus, the assessee has to provide performance guarantee and for the same, the clauses for warranty is provided. Thus, the sales and warranty were inextricably related to each other. The assessee company is maintaining the accounts on the mercantile system. The liability for warranty expenses is a committed liability at the very initial stage of the sales. The amount of provision based on past experience exhibits a direct nexus between the claim for provision and obligation arising under the warranty clause. Thus it can be said that it is a liability which has arisen in the relevant year though its actual quantification and discharge is deferred to a future date. The facts on the record also do not show that such provision has been made for evading the tax - no fault in the order of CIT (A) - Against revenue.

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• 2013 (5) TMI 274
  Addition towards book value of share purchased - CIT(A) deleted the addition - case of assessee having been selected for scrutiny under CASS - Held that:- No justification for the AO to insist upon the valuation of the shares by the auditors of the M/s Shri Govind Hotels & Health Resort Pvt. Ltd. As per the impugned order, reference has been made by the CIT(A) that notice was issued u/s 133(6) to M/s Krishna Info Media Ltd. i.e the seller of shares to the assessee who has confirmed the transaction at the price and similar notice is stated to have been issued u/s 133(6) to M/s Shri Govind Hotels & Health Resort Pvt. Ltd. who also confirmed the share holding. However no reference in regard to the information sought and received by the AO is found in the assessment order. It is also seen that neither the assessee has cared to address specific reason for the fall in the price of shares nor has the CIT(A) looked into the aspect. Thus where there is a discrepancy on facts qua the impugned order and the AO and the reasons for the drop in share price have not been addressed by the CIT(A) it would be appropriate to restore the issue back to the file of the CIT(A) with the direction to first address the facts and then consider the applicability of the judgements which are relied to pass a speaking order - appeal of the department is allowed for statistical purposes.

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• 2013 (5) TMI 273
  Penalty u/s 271(1)(c) - commission income on the bogus/accommodation entries computed @ 0.50% on the value of bogus transactions was added - Held that:- The assessee is a chartered accountant and it has been conclusively established that he was running various concerns/companies for providing bogus/accommodation entries also admitted by the assessee himself in the statement recorded. The various companies floated by the assessee were used for providing accommodation entries. It is established beyond any doubt that he was engaged in providing bogus/ accommodation entries. Further the order made by the AO clearly shows that AO has recorded satisfaction for initiating penalty u/s 271(1)(c) thus argument of assessee becomes irrelevant in view of the provisions of section 271(1B) wherein the order containing direction for initiating of penalty shall be sufficient to constitute satisfaction of the AO for initiating penalty. Further, assessee's plea that penalty cannot be levied on estimated income has no merits as the estimation of taxable income by way of estimate is one of the established method for computing income as assessee had not disclosed a full fact, therefore, the Assessing Officer, in such a situation, has no alternate but to estimate the income. Against assessee.

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• Customs

• 2013 (5) TMI 272
  CHA license - New v/s old regulations - whether applicants who have already passed in the examinations conducted under Regulation 9 of CHALR 1984 are entitled to be considered for grant of CHA Licenses without having to clear the examination in the additional subjects as required under CHALR, 2004? - Held that:- As decided in Sunil Kohli's case [2012 (10) TMI 638 - SUPREME COURT] examinations held under the 1984 Regulations did not get nullified with the enactment of the 2004 Regulations and the candidates who had qualified the examinations held under the 1984 Regulations are not required to again qualify the examination which may be held under the 2004 Regulations. Thus those who had cleared the examinations held between 1995 and 2003 under the 1984 Regulations would be eligible for grant of licence subject to their fulfilling other conditions of eligibility.

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• 2013 (5) TMI 271
  Validity of import licence - Commissioner held that DGFT has no powers to issue import licence to validate as imports made in past and as such, the import licence is invalid - appellant are engaged in the business of distribution of Satellite channels in India imported de-coders of model CDE 2002 -BMAC not sure as to be freely importable or required licence wrote DGFT for clarification - Held that:- Though in terms of para 4.13 of the relevant foreign trade policy, if any question, or doubt arises in respect of the interpretation of any provision contained in this policy or regarding classification of any item in the ITC (HS) hand book vol. 1 and Handbook (Vol.2), the said question or doubt shall be referred to the DGFT whose decision thereon shall be final and binding. Thus irrespective of the merits of the department’s view point, once the import licence has been issued by DGFT specifically covering the goods imported by the appellant, the customs department cannot challenge the DGFT’s power to issue the licence and hold the licence as invalid, as Exim Policy specifically provides that the goods already shipped or arrived in advance but not cleared from the customs, may also be cleared against import licence issued subsequently. In this case, the goods had been allowed to be cleared against ITC bond and bank guarantee and once import licence has been issued specifically covering the goods imported, the bond and bank guarantee have to be released un-conditionally. The impugned order, therefore, is contrary to the provisions of the law and is absurd. The same is, therefore, set aside. The appeal filed by the appellant is allowed with consequential relief. As regards the Revenue’s appeal, since the confiscation of the goods is not sustainable, there is no merit in the same and hence the same is dismissed.

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• Corporate Laws

• 2013 (5) TMI 270
  Jurisdiction of this court in interfering with a complex economic decision taken by a State or its instrumentalities in the absence of violation of any statutory provision or proof of mala fide or on extraneous and irrelevant considerations – PIL challenging the approval granted by the GOI for the acquisition of majority stake in Cairn India Limited (CIL) for US $8.48 billion and also for a direction ONGC to exercise its right of pre-emption over sale of shares of CIL on the same terms without causing any loss or profit to the Cairn Energy, and also for a direction to CBI to investigate the reasons for ONGC, a GOI Undertaking, in not exercising their legal rights under the Right of First Refusal (RoFR) and giving clearance to the CAIRN – Vedanta Deal on the basis of the existing right to share the royalty and cess on pro-rata basis and also for the consequential reliefs. Held that:- Decision taken by the ONGC not to exercise its RoFR was taken after an elaborate and due deliberations. The report of SBI Caps, after making a detailed financial analysis also supported the decision taken by the ONGC. The decision to grant no objection to the transfer of shares of CEIL from Cairn to Vedanta was also on the basis that the proposed share price of share was at Rs. 355 per share, was well in excess of its intrinsic value as were evaluated by SBI Caps. SBI Caps report evaluated each share of CEIL at Rs. 291 with the highest production profile under normal circumstances. It was concluded that even considering various other scenario makes possible value at Rs. 331 per share. UOI also endorsed the decision taken by the ONGC after due deliberations. The matter was finally placed before the Cabinet Committee of Economic Affairs, which placed the matter before the Group of Ministers who on 27.5.2011 granted its approval, based on certain conditions. The same was conveyed to the parties and the Vedanta Resources conveyed its acceptance to the conditions imposed by CCEA. Cairn also indicated to ONGC that CEIL Board had also accepted the conditions imposed upon it and that the cess arbitration, which had been initiated by Cairn against ONGC was also withdrawn.Thus ONGC and the GOI have considered various commercial and technical aspects flowing from the PSC and also its advantages that ONGC would derive if the Cairn and Vedanta deal was approved. This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economical factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be a correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be a wrong, that itself is not a ground to hold that the decision was mala fide or done with ulterior motives. ONGC in its wisdom decided not to acquire any shares of CEIL at a high premium of Rs. 335 per share plus Rs. 50 per share as not to compete fee, which would have come to ONGC at a hefty cost of 4.44 billion US $ about Rs. 6,20,600 crores rupees, i.e. even if ONGC had exercised its ROFR it would be a 30% share holder of CEIL and the control of CEIL would have, in any event, remained with Cairn and Vedanta which would have then altogether 50% in CEIL , in other words, with the acquisition of 30% shares in CEIL, State of Rajasthan Block would remain unchanged and hence ONGC could not have got any increase in shares in the profits much-less any increase in profits by 40%. Thus view that on facts, as well as on law, the ONGC and the Government of India have taken a prudent commercial and economic decision in public interest. And the decision is not mala fide or actuated by any extraneous or irrelevant considerations or improper motive. Whether this Court can grant reliefs merely placing reliance on the CAG’s report - Direction sought from CAG/GOI to calculate the alleged losses from payment of 100% royalty and cess by ONGC before the Cairn-Vedanta deal and for a direction to ONGC/Government to recover the excess royalty paid by ONGC from Cairn India - Held that:- Article 2.6 of PSC permits extension of the exploration period for three years from the end of the seven year period prescribed in Article 2.2. The period extended in pursuance to Article 2.6 expired on 14.5.2005. The CAG, it is seen, has assumed that any exploration carried out beyond the period was beyond the provision of PSC. Article 2.6 specifically contemplates extension of the exploration phase pursuant to the terms of the PSC. The last part of Article 2.6 to Article 2.9, however, permits further extension of the exploration period for a period of 30 months, therefore, it is factually and legally incorrect to suggest that any exploration carried out beyond 14.5.2005 was beyond the provision of PSC. CAG views on that aspect cannot be accepted. No merits in the writ petition.

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• 2013 (5) TMI 269
  Winding up proceedings - Claims of the workmen who claimed to be entitled to payment pari passu - whether be considered by the official liquidator or be adjudicated upon by the Debts Recovery Tribunal - Held that:- A cumulative reading of Sections 529A and 529(1)(c) proviso leads to an irresistible conclusion that where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen’s portion in relation to the security held by the secured creditor of the company. The workmen of the company in winding up acquire the standing of secured creditors on and from the date of the winding up order (or where provisional liquidator has been appointed, from the date of such appointment) and they become entitled to distribution of sale proceeds in the ratio as explained in the illustration appended to Section 529(3)(c) of the Companies Act. If the debtor company is not in liquidation nor any provisional liquidator has been appointed and merely winding up proceedings are pending, there is no question of distribution of sale proceeds among secured creditors in the manner prescribed in Section 19(19) of the 1993 Act. Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of their dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen’s portion in relation to the security held by the secured creditor of the debtor company. The above position is equally applicable where the assets of the debtor company have been sold in execution of the recovery certificate obtained by the bank or financial institution against the debtor company when it was not in liquidation but before the proceeds realized from such sale could be fully and finally disbursed, the company had gone into liquidation. The relevant date for arriving at the ratio at which the sale proceeds are to be distributed amongst workmen and secured creditors of the debtor company is the date of the winding up order and not the date of sale. However, before full and final disbursement of sale proceeds, if the debtor company has gone into liquidation and a liquidator is appointed, disbursement of undisbursed proceeds by DRT can only be done after notice to the liquidator and after hearing him. In that situation if there is claim of workmen’s dues, the DRT has two options available with it. One, the bank or financial institution which made an application before DRT for recovery of debt from the debtor company may be paid the undisbursed amount against due debt as per the recovery certificate after securing an indemnity bond of restitution The other, DRT may set apart tentatively portion of the undisbursed amount towards workmen’s dues in the ratio as per the illustration following Section 529(3)(c) and disburse the balance amount to the applicant bank or financial institution subject to an undertaking to restitute the amount to the extent workmen’s dues as may be finally determined by the liquidator Section 19(19) of the 1993 Act does not clothe DRT with jurisdiction to determine the workmen’s claim against the debtor company. The adjudication of workmen’s dues against the debtor company in liquidation has to be made by the liquidator. Section 19 (19) is attracted only where a debtor company is in winding up or a provisional liquidator has been appointed in respect of such company. If the debtor company is not in liquidation or if in respect of such company no order of appointment of provisional liquidator has been made and merely winding up proceedings are pending, the question of distribution of sale proceeds among secured creditors in the manner prescribed in Section19(19) of the 1993 Act does not arise. Thus it must be held, that the claims of the workmen who claim to be entitled to payment pari passu have to be considered and adjudicated by the liquidator of the debtor company and not by the DRT. The impugned judgment is set aside. The Debt Recovery Tribunal, Mumbai III and the official liquidator of the Company shall proceed further now concerning workmen’s dues as indicated in this judgment. The appeals are allowed with no order as to costs.

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• Service Tax

• 2013 (5) TMI 290
  Non compliance of Section 35F - Held that:- Requirement of terms of Section 35F of law can be dispensed with by appellate authority on the undue hardship being shown by the assessee. Such dispensation to the extent of 50% of penalties was done by the Commissioner (Appeals) but as the appellant had failed to comply with the said order which was also upheld by the Hon’ble High Court and Hon’ble Supreme Court, we find that the appeal can be heard only after the appellant deposit entire dues in terms of Section 35F. We, accordingly, direct the appellant to deposit the entire amount of duty, interest and penalty within a period of 12 weeks from today and report compliance to Commissioner (Appeals), who would, after ascertaining compliance, dispose of the appeal on merits.

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• 2013 (5) TMI 289
  Refund claim - Revenue rejected the refund claim on the ground that the claim was filed beyond the statutory period of one year, and secondly, on the ground that the Respondent were liable to pay service tax on GTA service, irrespective of the fact whether they had used the services of individual truck owners, lorry drivers etc. who had not issued any consignment note. - Held that:- Section 11B of the Central Excise Act, 1944 applicable to service tax refund by virtue of Section 83 of the Finance Act, 1994, stipulates that all refund claims need to be filed within a period of one year from the relevant date. In the present case, the service tax was paid on 24.04.2008 and the refund claim was filed on 17.04.2009, hence, it was within the period of one year, as prescribed. For second issue in absence of a finding of the fact that, services were received from individual truck owners and not from GTA Service Provider against consignment notes being not recorded by the revenue, and the said plea had been accepted by the ld. Commissioner (Appeals) without any evidence on record, I agree with the submission of the ld. AR that the fact whether the Respondent had availed the services of truck owners, lorry drivers etc., or from GTA against consignment notes, needs verification. Consequently, the matter is remitted to the Adjudicating Authority.

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• 2013 (5) TMI 288
  Condonation of delay - Held that:- Chronology of events shows that the appellant is choosing the way to prevent Revenue to recover its legitimate dues. Abuse of process of law is apparent from the conduct of the appellant which does not permit to consider the length of delay to be reasonable. Because of stay application and appeal it does not merit consideration in view of conduct of the appellant noticed aforesaid. In view of the above finding, there is no alternative but to reject M.A. (COD) while giving due consideration to the interest of justice.

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• Central Excise

• 2013 (5) TMI 268
  Emergence of the iron ore fines - unavoidable waste or by-product - reversal of cenvat credit - exempted goods - whether the GTA service can be said to be commonly used in the manufacture of dutiable and final product - whether the provisions of Rule 6(3)(b) of Cenvat Credit Rules, 2004 would be attracted? - Held that:- Iron ore fine emerges as an inevitable waste while screening and sieving the iron ore for removal of smaller particles prior to manufacture of sponge iron. The provisions of Rule 6(2) and Rule 6(3) of Cenvat Credit Rules, 2004 are applicable when a manufacturer consciously manufactures two products an excisable and the other fully exempted product using common inputs and /or input services. In this case iron ore fine has emerged as an unavoidable and inevitable waste and compliance with the provisions of Rule 6(2) is impossible. The provisions of Rule 6(3)(b) of Cenvat Credit Rules, 2004 become applicable only if the manufacturer consciously manufactures dutiable and exempted final product using common cenvat credit availed inputs and/or input services and does not comply with the provisions sub-rule (2) of Rule 6 of Cenvat Credit Rules, 2004. It would not apply in a case like this when the exempted final product emerges as an unavoidable waste or by-product and compliance with the provisions of Rule 6(2) is impossible. In the case of Rallis India Ltd. (2008 (12) TMI 46 - HIGH COURT BOMBAY) the Hon’ble Bombay High Court held that in such circumstances, the provisions of Rule 6 (2) would not be applicable. The Revenue’s appeal is accordingly dismissed.

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• 2013 (5) TMI 267
  Delay in filling appeal of 67 days beyond the initial period of limitation of 60 days - appeal dismissed - Held that:- The proviso to Section 35 authorises the Commissioner (Appeals), if satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, to present an appeal within a further period of thirty days. No discretion is granted to the Commissioner (Appeals) to condone a delay of 67 days beyond the initial period of limitation of sixty days. Thus dismissal of the appeal is in conformity with the text and context of Section 35 of the Central Excise Act, 1944.

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• 2013 (5) TMI 266
  Cenvat credit denied - welding electrodes - Held that:- As the same have been used for repair and maintenance of the plant and the issue stands decided in favour of the appellant by judgments of Ambuja Cement Eastern (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN) and Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) - denial of cenvat credit not sustainable. In favour of assessee. Sulphur - Held that:- The same admittedly is used for whitening of the sugar and hence the same would be covered by the definition of input covering all the items in or in relation to the manufacture of final product whether directly or indirectly or whether contained in final product or not - denial of cenvat credit not sustainable.In favour of assessee. Paints - Held that:- As used for protecting the mill machinery from rust. The paints is covered by the definition of input - denial of cenvat credit not sustainable.In favour of assessee. Boiler chemicals - Held that:- As used for conditioning the heat water of the boiler which is necessary for smooth functioning of the boiler. Since with smooth functioning of the boiler, manufacturing is not feasible keeping in view the ratio of Singh Alloys & Steel Ltd. vs. Asstt. Collector of Central Excise (1993 (1) TMI 97 - HIGH COURT AT CALCUTTA) cenvat credit in respect of boiler chemical has to be allowed.In favour of assessee. Polythene sheets - Held that:- The use of this item is to protect the sugar from moisture & to avoid reprocessing, the sugar bags are covered by polythene bags. Since the use of polythene sheets is after completion of manufacture of sugar, polythene sheets cannot be treated as input & not be eligible for cenvat credit. Against assessee Machinery parts - Held that:- Same admittedly are parts of various machinery and hence would be covered by the definition of capital goods - denial of cenvat credit not sustainable.In favour of assessee.

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• 2013 (5) TMI 265
  Eligibility for cenvat credit - whether the welding electrodes and H.R. Plates used for repair and maintenance of the plant and machinery are eligible for cenvat credit? - Held that:- As decided in Ambuja Cements (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN) and Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) welding electrodes other items used for repair and maintenance of plant and machinery would be eligible for cenvat credit. Moreover for permitting cenvat credit in respect of an item what is relevant is as to whether the use of that item has nexus with manufacture and not whether use of that item is part of the manufacture. Nexus has to be determined on the basis as to whether without use of that item manufacture is commercially feasible. Since repair & maintenance of plant and machinery is necessary for smooth manufacturing operation, the cenvat credit be eligible for credit would be admissible in respect of inputs used in repair and maintenance of plant and machinery. In favour of assessee

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• 2013 (5) TMI 264
  Eligibility for cenvat credit - whether the welding electrodes and H.R. Plates used for repair and maintenance of the plant and machinery are eligible for cenvat credit - Held that:- As decided in Ambuja Cements (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN) and Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) welding electrodes other items used for repair and maintenance of plant and machinery would be eligible for cenvat credit. Also decided in Singh Alloys & Steel Ltd. case (1993 (1) TMI 97 - HIGH COURT AT CALCUTTA) that for determining the question as to whether an input is eligible for cenvat credit what is relevant is whether its use is commercially expedient and what ought to be used is not relevant. Since with defective machinery, leaking pipes and tubes and leaking tanks manufacturing operations are not commercially possible and regular repair and maintenance is an essential activity for smooth manufacturing operation, the inputs used for repair and maintenance of the plant and machinery would be eligible cenvat credit. In favour of assessee.

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• CST, VAT & Sales Tax

• 2013 (5) TMI 287
  Blank declaration form No. ST-18A - as per the dept. since the goods were in the category of 'Notified Goods', therefore, carrying of blank declaration form was unjustified - Rajasthan Tax Board, Ajmer allowed the appeal of the assessee and deleted the penalty imposed under Section 78(5) - Held that:- It is an admitted fact that the goods were transmitted to its branch at Jaipur and the transaction in question is prior to 20th March, 2000, therefore, Notification issued by the Government of Rajasthan, bearing No./F.4(1)FD/Tax/Div/2000-314 dated 20.3.2000 is squarely applicable to the facts and circumstances of the present case, when there was no requirement of carrying such declaration form No. ST-18A in the case of stock transfer, branch transfer/depot transfer and SOS transfer then whether it was blank or filled looses significance. In view of the above discussions no question of law arises and no illegality, irregularity or perversity is made out in the judgment of the Tax Board, as such, no interference is called for by this Court in this revision petition and the same is accordingly rejected. The stay application stands rejected. All Corrections made in the Judgment/Order have been incorporated in the Judgment and Order being emailed.

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• 2013 (5) TMI 286
  Transit pass default - Transported the goods from Chennai to Puducherry without printed serial number in Form JJ - appeal to release the goods detained - Held that:- From a reading of the provision of Section 67(3)(b) & 70 (1)(a) of the TNVAT Act it is clear that the owner or other person incharge of such goods should obtain the transit pass from the authorities. In this case, the petitioner, as transporter, has already obtained transit pass from the authorities, but, the only defect is that there is no printed serial number in Form JJ bearing No.004120 dated 05.02.2013 and also that in Column No.5, Transport details are wrongly mentioned. The petitioner shall pay a sum of Rs. 2,52,485/- being the amount of tax demanded by the respondent, within a period of two weeks from the date of receipt of a copy of this order. As regards the compounding fee, without prejudice to the petitioner's right to file a revision before the competent authority, the petitioner shall furnish Bank guarantee for a sum of Rs. 7,57,455/- being the compounding fee demanded by the respondent on compliance of which the respondent shall release the goods detained immediately.

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• 2013 (5) TMI 285
  Reassessment notice u/s 21 of the U.P. Trade Tax Act - allegation of concealed turnover of sale of M.S. Ingots for the period February, 2004 to June, 2007 - Held that:- It is not disputed by the petitioner that the search took place on 10th July, 2007 at the various business places of assessee company and in that search operation, computer Hard-disk was seized containing the details of raw material as well as finished goods and those details show suppression of production of goods. Bare denial by the petitioner is not sufficient to hold that there is no material against it. It could not be denied by the the petitioner that statements of the Directors were recorded. Statements show that in M/S Parmarth Iron Pvt. Ltd., Raj Kamal Agrawal, , Lalit Kumar Agrawal and Atul Kumar Agrawal Sons of Jitendra Mohan Agrawal and Vijay Kumar, Sanjay Kumar and Raj Kumar sons of late Ramesh Chandra are the directors while in M/s Parmarth Steel & Alloys Pvt. Ltd., Sri Raj Kamal Agrawal, Lalit Kumar Agrawal and Atul Kumar Agrawal are directors who are brothers. Thus, in M/S Parmarth Iron Pvt. Ltd. besides the aforesaid three brothers, Vijay Kumar, Sanjay Kumar and Raj Kumar are the directors. Statement of Lalit Kumar Agrawal, one of the directors in both i.e. in M/S Parmarth Iron Pvt. Ltd. and M/s Parmarth Steel & Alloys Pvt. Ltd. was also recorded, who has confirmed the statement given by Mohan Agrawal, Cashier. He has confirmed panchnama, seizer of computer's Hard-disk and other documents during search operation. He has further stated that the goods were sold by under billing or even without bills. Cash sales were also affected. Therefore, the argument of the petitioner that there is no material to form the belief that turnover has escaped assessment, is not correct. The seized material is relevant material. Thus the irresistible conclusion is that there is valid material to form a belief that the turnover of the petitioners has escaped assessments

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