Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 13, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Central Excise
CST, VAT & Sales Tax
Articles
News
Highlights / Catch Notes
Income Tax
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Validity of petition u/s 153C of the Act - Validity of Reference made to DVO writ petition cannot be entertained in view of the availability of statutory remedies - HC
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Validity of recall of order - Whether the Tribunal was justified in recalling its earlier order on an application for rectification filed by the assessee - Held no, tribunal committed an error - HC
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Assessment of the interest received u/s 244A - when interest is actually granted along with the refund, the requirement of sections 4 and 5 of the Act are fully satisfied and the same can be taxed in the year of receipt - AT
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Proceedings u/s 153C only the assessment proceedings and the re-assessment pending on the date of initiation of search, shall abate u/s 153A and if an appeal is pending against a completed assessment before the Tribunal on the date of search, then such completed proceeding do not abate - AT
Customs
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Determination of assessable value - the basis of determining the assessable value on the basis of sale price giving margin of 20% of profit on the sale price is to be ignored when we are having the cost price including the expenses incurred by assesse - AT
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Clearance of goods - Classification of Heavy Melting Scrap - goods in question be cleared after mutilation under the supervision of the Customs authorities - AT
VAT
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Tax liability of interstate stock transfer - The goods has been transported from one project area to another situated out side the State and the same is not for sale - Hence, the question of payment of tax does not arise - HC
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Exemption of Tax Export of cotton Yarn - Notice of pre-assessment - the notification leaves no restriction as to the subject of export to condition the grant of exemption - HC
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Electronic gas lighter - Classification - electronic gas lighter is not an electronic good operated through electricity or devices like sensor, but it is operated manually - HC
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Rate of Tax Ramtirth Brahmi Oil Hair oil or medicament - if medicated oil is not sold just as a hair oil, it would not make the oil sold by the assessee, a pure and simple hair oil - HC
Case Laws:
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Income Tax
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2014 (5) TMI 374
Validity of revision u/s 263 of the Act Existence of a Bank Account not disclosed - Held that:- Whether it is the assessee who is right or whether it is the version of the Commissioner of Income Tax which is correct, It will be for the AO to decide whether the amounts which have been credited and debited in Bank Account No.30044789261 of SBI are reflected in the books of account or not - If they are reflected in the books of account then the only non-disclosure is about the final amount lying in the bank account in the return - the transactions of the bank account are not reflected in the books of account then the order of the CIT would be right and all the transactions in the bank account which were not reflected in the books of account would have to be treated as undisclosed income - the AO while looking into the issue as to where the credits have come from and where the debits have gone, shall also look into the issue as to whether these credits and debits have been reflected in the books of account of the assessee which were produced before him the matter is remitted back to the AO for adjudication - Decided in favour of Assessee.
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2014 (5) TMI 362
Validity of petition u/s 153C of the Act - Validity of Reference made to DVO Valuation of immovable properties Held that:- At this stage no interference is called for - Section 153C of the Act pertains to assessment of income of persons other than one who is subjected to search - Subsection (1) of section 153C provides that where any AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belonged to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A of the Act - Section 158BD of the Act makes similar provisions for block assessment of undisclosed income of persons other than the searched person. In context of section 158BD of the Act Relying upon CIT v. Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT] the contention that notice u/s 153C of the Act could not have been issued after search operations were over cannot be accepted. Relying upon Indo Asahi Glass Co. Ltd. v. ITO [2001 (9) TMI 5 - SUPREME Court] the petition cannot be entertained in view of the availability of statutory remedies - no opinion on the validity of the reference is expressed - it would be open for the petitioner to raise all contentions with respect to the validity of the notice u/s 153C as well as the reference made to the DVO before the appropriate forum Decided against Assessee.
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2014 (5) TMI 361
Application u/s 220(6) of the Act Stay application - Assessee not to treat as assessee in default - Whether pending the disposal of the stay application, the assessee should be granted a blanket stay of demand Held that:- The FAA granted a stay of demand to the extent of 70% - the assessee was required to deposit approximately 15% of the total demand the petitioner is to be directed to deposit an amount of Rs.6 crores - the balance amount would be stayed till the disposal of the stay application before the CIT (A) Partial stay granted.
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2014 (5) TMI 360
Validity of recall of order - Whether the Tribunal was justified in recalling its earlier order on an application for rectification filed by the assessee Held that:- The Tribunal reversed the decision of the CIT(A) - CIT(A) was not right in allowing the appeal of the assessee - this was not a case of typographical error- If there was a simple and obvious typographical error, the Tribunal could easily have corrected the same - the entire order only pointed to only one thing that the Tribunal desired to allow the Revenues appeal - If the order of the Tribunal was suffering from an typographical error, its ultimate conclusion that CIT(A) was not right in allowing the assessees appeal would be incongruous with such expression - the Tribunal committed an error in reversing its own decision which was rendered on merits, on an application for rectification filed by the assessee on the plain ground that the earlier order suffered from typographical error thus, the order of the Tribunal is set aside Decided in favor of revenue.
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2014 (5) TMI 359
Disallowance of loss in MCX division Held that:- Following Commissioner of Income-tax- III Versus Jay Enterprise[2012 (6) TMI 545 - GUJARAT HIGH COURT] - the AO did not deny the fact that the assessee is a bullion merchant and has a terminal of MCX as a member - the loss arose on account of dealing in commodities ordinarily dealt in by the assessee in its business - CIT(A) was of the view that the transactions were of an integrated nature and were entered into to guard against future losses and came within the exception to Section 43(5) of the Act the CIT(A) was justified in holding that the loss could not be said to be a speculation loss Decided against Revenue. Deletion of interest on unsecured loan Held that:- The Tribunal confirmed the view of CIT (A) as in the case of assessee for the year 2006-07 - it had upheld the view of the CIT (A) by deleting the addition made on account of interest on unsecured loan - Revenue is unable to point out as to whether such issue was carried to the High Court in the earlier year - the total amount diverted from the Head Office to the MCX Division under the head of unsecured loan was to the very Division of the assessee, and was for the purpose of business transaction and the said fund was not advanced to any parties for non-interest bearing activities - the amount was diverted to its own business division and in absence of any diversion outside for activities not bearing interest the addition could not have been confirmed Decided against Revenue. Deletion of penalty expenses Shortage of sum - Held that:- The Tribunal on the ground that the nature of penalty was not explained by the AO held that the penalty was on the business transaction and not for violation of statute concurring with CIT(A) - The issue also does not require any consideration only on the smallness of assessment Decided against Revenue.
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2014 (5) TMI 358
Disallowance u/s 14A of the Act r.w. rule 8D of the Rules Computation of Disallowance Held that:- Following Maxopp Investment Ltd. Vs. CIT - [2011 (11) TMI 267 - Delhi High Court] the AO cannot embark upon a determination of the amount of expenditure for the purposes of section14A(1) - the order of the is set aside and the matter is remitted back to the AO for fresh adjcudication Decided in favour of Assessee. STCG treated as Business income Held that:- Following Commissioner of Income Tax (Central) Versus M/s Express Securities Pvt. Ltd. [2013 (10) TMI 1182 - DELHI HIGH COURT] - merely because due to amendment under the Income Tax Act by which long term capital gain is exempt and short term capital gain is chargeable at a lesser rate of tax, then business income does not mean that the conversion of stock-in-trade to the investment is improper or illegal - The assessee was entitled to convert the holding from stock-in-trade to investment on noticing the tax benefit - on the sale of shares during the year which were converted into stock-in-trade last year, the gain arising was partly long term capital gain and partly short term capital gain in view of the period of holding of such shares thus, the AO was not justified in treating the short term capital gain as income from business or profession Decided in favvour of Assessee.
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2014 (5) TMI 357
Addition made u/s 68 of the Act Proper opportunity not given - undisclosed income represents share application money Held that:- Assessee contended that the assessment was completed without allowing adequate opportunity of being heard share application money was received during the financial year 2003-04 and the AO ssessing Officer had directed the assessee to produce all the shareholders in the year 2011 - He allowed only a few days time to produce the shareholders which would be evident from the fact that the assessment order was passed on 30.11.2011, i.e., within 13 days - if adequate time is allowed, the assessee would make a sincere effort to produce all the shareholders before the AO - the assessee will also produce all the relevant evidences to explain the share application money - adequate opportunity of being heard/producing the shareholders were not allowed to the assessee - the matter is required to be remitted back to the AO for fresh adjudication decided in favour of Assessee.
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2014 (5) TMI 356
Validity of reopening of assessment Income escapement - Held that:- The reasons recorded by the AO clearly manifest that the income chargeable to tax has escaped assessment by the reason on failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - the assessment has been reopened after expiry of four years however the benefit of the proviso to section 147 is not available to the assessee in view of the fact that there is a complete failure on the part of the assessee to disclose the primary fact of receipt of this amount in the return of income and further no explanation in the return of income as to why this amount has not been offered to tax. When the assessee has failed to disclose the interest amount received u/s 244A in the return of income and even during the assessment proceedings then this conduct of the assessee clearly falls under the category of the cases where the income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment in terms of section 147 of the income Tax Act - The mere fact that the amount was received from income tax department does not obliterate the requirement and duty cast on the assessee to disclose all facts relevant to the assessment - the benefit of the proviso to section 147 is not available to the assessee in the case there was no error or illegality in the orders for the issue of validity of reopening of assessment. Assessment of the interest received u/s 244A of the Act Held that:-Section 244A(1) clearly reveals that as soon as any refund becomes due under any provisions of the Act, the assessee becomes entitled to receive the interest in respect of such refund calculated in the manner provided in clauses (a) and (b) of such provisions - the moment the refund is granted, as enforceable debt is created in favour of assessee in respect of interest due on such refund - income can be said to accrue on the date of refund itself - when interest is actually granted along with the refund, the requirement of sections 4 and 5 of the Act are fully satisfied and the same can be taxed in the year of receipt Decided against Assessee. Netting of interest received u/s 244A of the Act - Amount of interest paid by the assessee Held that:- Interest paid under Income Tax Act falls under the category of income tax and it is not an allowable deduction - the interest received on refund of tax is an income assessable under the head income from other sources Following DCIT Vs. Sandvik Asia Ltd.[2011 (6) TMI 563 - ITAT, Pune] - the assessee's real income would not have diminished to the extent of the interest paid to the bank from which he took a loan Decided against Revenue.
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2014 (5) TMI 355
Addition made u/s 68 of the Act Unexplained cash credits Loans received from various persons Admission of additional evidences - Held that:- The assessee has received loans from 47 persons in cash during the financial year the cash loans aggregated to Rs. 92,59,530 - there were other loans also, which has been accepted by the AO - the documents are quite relevant for the adjudication of the cash credit, therefore they are admitted - the additional evidences have already been filed before the Department in the proceedings u/s 153C - the additional evidences go to the very root of the addition made, which needs to be considered for adjudication of the issue the documents should be considered for deciding the issue afresh on merits the documents have not been examined by any of the departmental authorities, thus, the matter is required to be remitted back to the AO for fresh adjudication of the entire addition made u/s 68 of the Act Decided in favour of Assessee. Proceedings u/s 153C of the Act Held that:- A search and seizure action u/s 132(1) has taken in the case of the assessees husband Mr. Jawahar B. Purohit proceeding u/s 153C has been initiated in the case of the assessee - it cannot be held that the assessment proceedings for the assessment year 2005-06 were pending on the date of the search - the original assessment order in the case does not get abated - Once the original order does not abate, then whatever is the fate of the addition made u/s 68, in the regular proceedings u/s 143(3), it would be applicable in the proceedings only and that would be final qua the assessment year 2005-06 - No further addition on this count as to u/s 68, pertaining to same creditors can be made again u/s 153C / 153A proceedings Relying upon CIT v/s Shaila Agarwal [2011 (11) TMI 213 - ALLAHABAD HIGH COURT] - only the assessment proceedings and the re-assessment pending on the date of initiation of search, shall abate under the second provisio to section 153A and if an appeal is pending against a completed assessment before the Tribunal on the date of search, then such completed proceeding do not abate -if any addition on account of provisions of section 68 is called for in the case, it should be examined in the regular assessment proceedings u/s 143(3) and not u/s 153C r/w section 153A - no addition is warranted in the proceeding u/s 153C r/w section 154A Decided in favour of Assessee.
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2014 (5) TMI 354
Determination of real owner of liquor business assessee denies to tax and for any liability which has been created in her name interalia - Held that:- The assessee first approached ITO for examination of her signatures on the income tax return, vakalatnama, audit report, memorandum of appeal form no. 35, ground of appeal etc. through handwriting expert report on 3.4.2013 and at the same time, the assessee herself obtained a report from Shri Sanjeev Tomar, handwriting expert and as per his report dated 29.4.13, the signatures on liquor licence application, licence, income tax return, vakalatnama, audit report, appeal form No. 35 were found forged and as per this report, signature on all above documents were not signed by the assessee as the disputed signatures and standard signatures were not made by the same person. The documents submitted by the assessee first time before the Tribunal contained in paper book 2 dated 28.4.2012 were not before the authorities below during assessment and appellate proceedings it would be just and proper that the documents should be verified and examined at the end of AO - the orders of the authorities had been passed on the back of the assessee and by ignoring vital objections and contentions of the assessee the assessment order and appellate order are not sustainable and are set aside thus, the matter is remitted back to the AO for fresh adjudication - the AO is also directed that income tax can be charged only on the person who earned income from the liquor business Decided in favour of Assessee.
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2014 (5) TMI 353
Partial disallowance of commission paid Excessive commission paid Held that:- CIT(A) was of the view that there were some deficiencies on the part of the assessee in the details filed in support of commission payment and some commission receipts were not produced for verification, 10% disallowance out of total commission is justified - the addition has been made by the AO by disallowing 1/10th of commission paid to various parties by the assessee on the ground that there was huge increase under this head in comparison to proportionate expenses on this account in the immediately preceding year with reference to receipts of the assessee and assessee failed to justify this increase before CIT(A) also assessee was not able to satisfy him by way of producing supporting evidence though CIT(A) gave ample opportunity for doing this - assessee failed to substantiate this, there is no reason to interfere in the order of the CIT(A) Decided against Assessee. Addition u/s 69D of the Act - Income from undisclosed sources Transactions on loose papers found Held that:- CIT(A) rightly held that AO was not justified in invoking the provisions of section 69D in this case the transactions recorded in the loose papers in the names of Sailesh, M Zala, Harish etc were not recorded in the books of accounts and in the statements recorded at the time of survey also it was not denied that these loose papers contain real transaction - The cash receipts recorded in these loose papers therefore constitute assessees income unless shown to be accounted for and nature of transactions satisfactorily explained. - assessee did not discharge the onus, the addition of peak of these transactions was directed to be made there was no infirmity in the order of the CIT(A) Decided against Assessee.
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2014 (5) TMI 352
Disallowance u/s 40A(2)(b) of the Act Legal and professional charges Held that:- The Assessee has made payment to the proprietary concern of the father of one of the partner of the firm and thus the payment is to a person specified in s. 40A(2)(b) of the Act - CIT(A) has noted that that though Shri Vinodkant Sanghani is highly technically professionally qualified person but there is nothing on record to lead to the conclusion that Shri Vinodkant Shangani was qualified to deal with the tasks which has been claimed to have been handled by him - assessee has not placed any material on record to controvert the findings of AO and CIT(A) - assessee was asked to file evidence showing involvement of Shri Shangani in various activities to which, the Assessee vide letter dated 28th March 2014, submitted that it could not lay hand on any evidence as the matter was more than 10 years old as the assessee has not substantiated the claim for expenses, there is no reason to interfere with the order of CIT(A) Decided against Assessee. Disallowance of expenses u/s 35 of the Act Expenses on scientific research - Whether the firm had not laid out any funds for acquisition of the capital asset Held that:- Relying upon Commissioner of Income-Tax Versus Gujarat Aluminium Extrusions Pvt. Ltd. [2003 (7) TMI 65 - GUJARAT High Court] CIT(A) rightly was of the view that the expenditure has to be incurred in a relevant previous year - In the Remand Report, the AO reiterated that the major capital expenditure at Baroda was incurred on 30.03.2005 for purchasing building for R&D - it cannot be established by the assessee by way of evidences that the above premises were used for R & D purpose at this place acquired on 30.03.2005 the capital expenditure cannot be considered as actually used for the above research and development activity - CIT(A) while upholding the disallowance of Rs 15 lacs has noted that property of 1700 sq ft owned by Shri Jayesh Sanghani was introduced as his contribution to the firm - introduction of capital contribution in the firm by the partner does not constitute expenditure assessee has not placed any material on record to controvert the findings of CIT(A) thus, there was no reason to interfere with the order of ClT(A) Decided against Assessee.
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2014 (5) TMI 351
Penalty u/s 271(1)(c) of the Act Concealment of income Difference between income declared u/s 153A and u/s 139(1) of the Act Held that:- Relying upon CHIRAG HARMANBHAI PATEL Versus DEPUTY COMMISSIONOER OF INCOME TAX CIRCLE-1 [2014 (1) TMI 441 - ITAT AHMEDABAD] - there was no force in the contention of the assessee that the AO has not given any specific finding whether the penalty has been levied on the concealment of particulars of income or furnishing of inaccurate particulars of income - The AO has given a finding that assessee has committed a default u/s 271(1)(c) of the Act in concealing the particulars of its income Decided against Assessee.
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2014 (5) TMI 350
Disallowance of membership fee Nature of sum paid donation OR not Held that:- CIT(A) was of the view that the assessee has filed some print outs of details given on the web site of JITO as also the letters written by the organization to the Director the organization is for business man, industrialist and professionals of Jain Community only - Its membership is limited to Jains only and it is working for Philanthropic activities in education, training, health care, general up-liftment and youth development for this community - there is no finding of CIT(A) about the nature of organization with respect to JITO and thereby the fees paid by Assessee is not in the nature of membership fees but is in the nature of donation or charity the matter needs re-examination, thus, the matter is required to remitted back to the CIT(A) for re-examination Decided in favour of Assessee. Addition to the value of closing stock - Scrap sales - Held that:- There is no finding by the CIT(A) about the sale of scrap by the assessee in the subsequent year - CIT(A) while confirming the addition has noted that assessee has not shown with documentary evidence the generation of scrap of 4915.28 kg in 3 days i.e. between 28.3.2011 and 31.3.2008 and had not reconciled the quantitative difference Assessee needs to be granted one more opportunity to substantiate its stand before CIT(A) thus, the matter to the CIT(A) for re-examination Decided in favour of Assessee.
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2014 (5) TMI 349
Disallowance of expenses u/s 14A of the Act Exempted income u/s 37 for business purpose Held that:- AO rightly observed that assessee has earned commission income and has claimed several expenses in the profit and loss account - the exempt income and short term capital gain have gone out of profit and loss account, the assessee has claimed the expenditure only towards earning of commission income - assessee has earned commission income from only three parties and for purchase and sell of goods - CIT(A) agreed with the findings of AO and confirmed the addition of 75% of expenses claimed by the assessee towards earning by commission the disallowance is restricted to 50% of the expenses claimed by the assessee Decided partly in favour of Assessee.
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2014 (5) TMI 348
Deleting the disallowance on account of bad debts Held that:- Following DCIT Versus Shreyas S. Morakhia [2010 (7) TMI 455 - ITAT MUMBAI] and Commissioner of Income-tax Versus Bonanza Portfolio Ltd. [2009 (8) TMI 636 - DELHI HIGH COURT] - the amount receivable by the assessee, who is a share broker, from his clients against the transactions of purchase of shares on their behalf constitutes debt which is a trading debt - The brokerage/commission income arising from such transactions very much forms part of the said debt and when the amount of such brokerage/commission has been taken into account in computation of income of the assessee of the relevant previous year or any earlier year, it satisfies the condition stipulated in section 36(2) (i) and the assessee is entitled to deduction u/s 36(l)(vii) by way of bad debts after having written of the said debts from his books of account as irrecoverable - Revenue could not bring any contrary binding decision in its support, nor could it controvert the finding of CIT(A) Decided against Revenue.
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2014 (5) TMI 347
Deletion of disallowance of development expenses Held that:- CIT(A) rightly held that the assessee has brought up a scheme called Villa Sonata and has developed / was obliged to develop roads, common plots, club house with gymnasium, swimming pool etc., on which the expenses were claimed as Development Expenses and debited them to the Project account disallowance is to be made and the amount is added to the total income as declared by the assesee - no depreciation is allowable on the cost of facilities - the facilities and amenities ultimately would belong to the plot holders and any depreciation wear or tear would be their loss - CIT(A) while deleting the addition by a well-reasoned order granted substantial relief to the assessee revenue could not controvert the findings of CIT(A) nor had brought any material in its support thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue.
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2014 (5) TMI 346
Deletion of disallowance of deduction - Provision made for after sales services Held that:- Following M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - the provision is being made by the assessee on the basis of actual expenditure incurred in the subsequent assessment year relating to sales made in the relevant previous year - a provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation the provision has to be made based on the reliable estimation of the obligations the matter needs to be remitted back to the CIT(A) for fresh adjudication Decided in favour of Revenue. Allowability of software expenses Purchase of operating software Held that:- The assessee had incurred expenses on software expenses and was claimed as revenue expenses - the incurring of expenses has not been disputed by the Revenue - if the expenses is considered to be capital expenditure, the Assessee will have to be granted depreciation @ 60% on WDV basis in A.Y. 06-07 and also in subsequent years - the total taxable income determined by the AO, the changes that would be required to be made in subsequent assessments orders if the depreciation is to be allowed in all subsequent years, the claim of the assessee is to be allowed - the allowance of the expenditure should not be considered as a precedence for allowance of the expenditure Decided in favour of Assessee.
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2014 (5) TMI 345
Addition on account of inflation of purchases Held that:- The Assessee was able to file reconciliation statement and reconcile the purchase bills and the finding of the CESTAT is that the Assessee in the last could not reconcile the quantity involved in respect of invoices of purchases - the addition made by the AO cannot be sustained - the accounts of the Assessee could not said to represent the correct state of affairs - some reasonable estimate of addition has to be made and which may not be restricted to the actual amount of unproved purchases in the case thus, the addition is restricted Decided partly in favour of Assessee. Reductions made - Validity of consideration of the additional evidences under Rule 46A(3) of the Rules Held that:-The decision of the previous assessment year has been followed that there is no merit in the grounds of appeal of the Revenue - The addition of Rs. 75 lacs sustained while disposing of Assessees appeal the order shall cover the addition made on account of inflation of purchases, disallowance of Job Work Charges and addition on account of material inward expenses of the Assessee Decided against Revenue. Deletion of penalty u/s 271(1)(c) of the Act Additions on account of inflated purchases - Held that:- CIT(A) has passed a speaking order on the issues and has considered all the facts and law applicable - the addition made by the AO on account of inflated purchases, Job Work Charges and material inward expenses have been restricted to Rs. 75 lacs - there may be more than one reason due to which the Assessee may not be in a position to reconcile the purchase bills - penalty u/s 271(1)(c) is not imposable where some part of the addition is sustained by way of estimate only thus, the order of the CIT(A) is upheld Decided against Revenue. Deletion of disallowance of interest u/s 36(1)(iii) of the Act Held that:- The Assessees has advanced Rs. 92.31 lacs to two parties as interest free loans whereas the Assessee has huge non- interest bearing funds like share capital of Rs. 8 crore and reserves and surplus amounting to Rs. 11 crore - funds advanced as interest free loans to two parties are out of Assessees own funds which are not interest bearing and therefore no case of disallowance out of interest payment could be made out by the Department - the order of the CIT(A) is upheld Decided against Revenue.
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2014 (5) TMI 344
Gross receipts to be estimated @5% instead of 3% - Rejection of books of accounts Held that:- The estimation of income of the assessee made by the assessing officer adopting a rate of 5% is on higher side, and it would meet the ends of justice if the income is estimated applying a rate of 3% - the assessee does not own trucks used in the business and is incurring huge incidental expenditure - From such income estimated applying rate of 3%, deduction towards interest and remuneration to partners in terms of S. 40(b) of the Act may be allowed - the assessee produced the books of account and vouchers - On examination of the books of account with reference to the voucher produced, the AO found that the voucher does not tally with the cashbook - When the voucher does not tally with cashbook, the assessee has not maintained the books of account properly - the book result will not reflect the correct profit of the assessee - the AO has rightly rejected the books of account thus, there was no infirmity in the order in rejecting the books of account and estimating the profit Decided against Assessee. Claim of seigniorage charges Held that:- The material supplied by the Government/contractor will not have any element of profit - it shall be reduced from the contract receipts - the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit thus, the AO is directed that while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. Estimation of income @5% - Grant of depreciation - Held that:- Following Indwell Constructions Versus Commissioner Of Income-Tax [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed - Depreciation is allowable u/s. 32 of the Income-tax Act - as provided in section 44AD no further/separate deduction shall be allowed - the claim of depreciation on the estimated income is not justified. Payment of interest and salary to the partner Held that:- The provision of section 44AD as it is applicable for the assessment year under consideration and the amendment made with effect from1.4.2011 it is obvious that the Legislature intended to allow the interest and salary separately from the estimated income the AO is directed to allow the salary and interest paid to the partner subject to the limitation provided in section 40(b) of the Act Decided against Revenue.
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Customs
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2014 (5) TMI 367
Determination of ownership of seized goods - diversion of free imported goods into local market - Importation of "Mulberry Raw Silk Yarn/Silk Yarn" under Advance Licence Exemption notification Rate of Duty Levy of interest and penalties - Whether Adjudicating authority had not considered the evidences and provisions of various laws, such as Bill of Lading Act, Customs Act etc. placed by them to decide the ownership of the seized goods as claimed by the High Sea Sellers - Held that:- On perusal of Adjudication Order dt. 12.6.2013, it is found that duty was demanded jointly and severally - The seized goods were confiscated and redemption fine was imposed but it was not mentioned to whom the seized goods would be released - It has demanded interest against 4 noticees, without mentioning the names and therefore such order cannot be sustained. This Court directs the Adjudicating authority to decide the claim of the ownership of the seized goods as claimed by the High Sea Sellers in terms of the order in M/s. Prachi Silks Versus The Commissioner of Customs (Seaport-Exports)[2014 (5) TMI 121 - MADRAS HIGH COURT] on the basis of documents and provisions of Customs Act and Regulations - Thereafter, the demand of duty along with interest and penalties would be determined as proposed in the show cause notices in accordance with law - So, the impugned orders are set aside to the extent of appeals filed Matter remanded back to the Adjudicating authority. Decided in favour of Assessee.
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2014 (5) TMI 366
Determination of assessable value - Valuation of imported goods Enhancement of selling price - Price in Bill of Entry - What should be the correct value of the imported goods Held that:- While determining the price in the case of Tixosil 38AB the adjudicating authority has re-determined the assessable value as Rs. 82,304 - If the calculation sheet produced by assesse is taken the cost comes to Rs. 83,321 which is appropriate considering that the customs duty, local clearance, logistic cost, insurance are to be includible in the cost price of assesses - Therefore, both the lower authorities have erred in determining the assessable at Rs. 82,304/- - In fact, they had to determine what is the cost at the hand of assessee and at which price the goods are being sold by them - Assessees have been able to prove that after importing the goods, they have incurred certain expenses which have been shown by the appellants before the lower authorities as here with documentary evidences - Therefore, those expenses are necessary to arrive at cost price of the impugned goods - Thus, the basis of determining the assessable value on the basis of sale price giving margin of 20% of profit on the sale price is to be ignored when we are having the cost price including the expenses incurred by assesse - Therefore, the declared price is to be accepted - The impugned order is set aside Decided in favour of assesse.
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2014 (5) TMI 365
Stay of Re-export of polyester/cotton blended fabrics on payment of fine Earlier no Request made for Re- export - Held that:- Learned Superintendent (AR) submits that the order has to be stayed since the lower authorities can be compelled to allow re-export in the absence of any order from Tribunal - It was on the fourth occasion of adjudication of the dispute that the respondent came up with a request for re-export of the goods - It is to be noted that the duty liability had been originally worked out more than Rs.22 lakhs on fabrics - The assessable value of which was about Rs.1 lakh and even at that stage when the party filed the appeal they had not requested for re-export - When the matter came up for the second time before Commissioner (A), suddenly the request for re-export had come up for the first time - Such a request was not made earlier and neither Commissioner (A) has thought it fit to consider this aspect - The decision in COMMISSIONER OF CUSTOMS, KOLKATA Versus GRAND PRIME LTD. [2003 (7) TMI 73 - SUPREME COURT OF INDIA] has also not been taken note of by Commissioner (A) - Thus, Revenue has made a strong prima facie case for grant of stay against the order of re-export passed by Commissioner (A) - Impugned order is stayed and the application for stay of the impugned order is allowed Decided in favour of Revenue.
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2014 (5) TMI 364
Bar of Limitation Non-initiation of enquiry proceedings for 3 years - Suspension of CHA licence - Regulation 20(2) & 22 of the CHALR, 2004 Held that:- As per C.B.E.& C. Circular No. 9/2010-Cus., dated 8-4-2010 the time limit has been prescribed to complete the proceedings under Regulation 22 of the licence suspended under Regulation 20(2) - Overall the time limit is only nine months - In this case, almost three years have been elapsed and no enquiry proceedings have been initiated against the appellant - Therefore, the impugned order set aside Decided in favour of Appellant.
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2014 (5) TMI 363
Clearance of goods - Classification of Heavy Melting Scrap - Chapter 72 or 82 of Customs Tariff Act or not Use of defective & rejected rollers - Held that:- It is found assessee made import of old and used rollers and declared the same as heavy melting scraps and classified the same under Chapter 72 of Customs Tariff - Clarification was brought from Chartered Engineer to the effect that the rollers in question, used defective & rejected rollers, are part of the Rolling Mill Plant and these rollers can be serviceable to put into use - As per the opinion of the Chartered Engineer, the surface of the rollers are not uniform and rollers cannot be used for the purpose they are meant for and the product cannot be extracted up to the mark - In view of the offer made by learned counsel that goods can be cleared after mutilation, this Court directs that the goods in question be cleared after mutilation under the supervision of the Customs authorities - Also in view of the fact that earlier two consignments imported by the same importer were cleared after due verification, the impugned order is not sustainable and the same is set aside Decided in favour of assesse.
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Corporate Laws
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2014 (5) TMI 373
Appointment of Arbitrator - High Court appointed arbitrator - in the order that the arbitrator nominated by the applicant (present respondent) and the arbitrator appointed by the Designate Judge on behalf of the petitioner (respondent therein) are required to appoint the third arbitrator before entering into reference - Petitioner declined to appoint arbitrator - Held that:- petitioner declined to appoint its arbitrator as according to it there was no question of appointment of arbitrator by either of the parties and there being no arbitral dispute, there was no occasion for resolution of dispute as provided in the Development Agreement. The stance of the petitioner amounted to failure on its part to appoint its arbitrator on receipt of the request to do so from the respondent - The petitioner's right to appoint its arbitrator in terms of clause 25 of the Development Agreement got extinguished once it failed to appoint the arbitrator on receipt of the notice dated December 10, 2010. There is no merit in the submission of the learned senior counsel for the petitioner that the Designate Judge ought to have given an opportunity to the petitioner to nominate its arbitrator - Decided against appellants.
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2014 (5) TMI 372
Appointment of arbitrator - Subsequent partnership deed executed between parties - Appellant contends that subsequent partnership deed was forged and fraudulent - High Court appointed arbitrator - Held that:- It is well settled that an arbitrator can be appointed only if there is an arbitration agreement in regard to the contract in question. If there is an arbitration agreement in regard to contract A and no arbitration agreement in regard to contract B, obviously a dispute relating to contract B cannot be referred to arbitration on the ground that contract A has an arbitration agreement. Therefore, where there is an arbitration agreement in the partnership deed dated 12.6.1988, but the dispute is raised and an appointment of arbitrator is sought not with reference to the said partnership deed, but with reference to another partnership deed dated 19.5.2000, unless the party filing the application under section 11 of the Act is able to make out that there is a valid arbitration clause as per the contract dated 19.5.2000, there can be no appointment of an arbitrator. - We therefore allow this appeal, set aside the order of the High Court appointing an arbitrator and remit the matter to the High Court for deciding the questions whether the deed dated 19.5.2000 was forged or fabricated and whether there is a valid and enforceable arbitration agreement between the parties - Decided in favour of appellant.
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Central Excise
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2014 (5) TMI 384
Duty demand - Demand of differential duty - Difference in price of tractors and duty paid - Assessee contends that the difference in price has been on account of freight, after sale service charges, dealer's margin, expenses in respect of marketing, selling etc - Held that:- In Collector of Central Excise v. M/s. Indian Oxygen Ltd., [1988 (7) TMI 58 - SUPREME COURT OF INDIA], referring to the decision in Union of India v. Bombay Tyre International Ltd. [1983 (10) TMI 51 - SUPREME COURT OF INDIA], this Court held that in the light of the aforesaid principles it has to be borne in mind that any activity ancillary to but not incidental to the manufacture cannot be included as part of the activity for the manufacture. Any income either in the form of interest on deposits, notional or real earned on the deposit etc. would not be the price for the manufacture though they might be profits or gains, if any, of any ancillary or allied venture. Assessee failed to bring the ascertainable price of the tractor, cost of transportation to depot, etc. to the notice of the High Court. The assessee simply challenged the show-cause notices on the ground that the amended Section 4 is not applicable. The High Court without looking into the relevant fact, only on the ground that sub-clause (iii) to Section 4(b) was subsequently added by amendment including `depot', `premises of consignment agent' or `any other place' or `premises' from where the excisable goods were to be sold after their clearance from the factory, declared the notices illegal and set aside the same. Even the matter was not remanded back to competent authority allowing the assessee to bring to its notice "normal price", in course of wholesale trade, place of removal of tractors, transportation charges, etc. There is no option but to set aside the impugned judgment dated 13th September, 2002 passed by the High Court - The case is remitted to the competent authority granting liberty to the assessee to forward a copy of each of the show-cause replies already filed within four weeks. Assessee is also given liberty to produce relevant evidence in support of its claim - Decided in favour of Revenue.
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2014 (5) TMI 383
Maintainability of appeal - waiver of pre-deposit - issue of valuation involved - decision of third member of the tribunal - determination of the retail sale price in the absence of retail sale price being declared on the package prior to 1st March, 2008 - Held that:- Prior to the decision of the third member, there was a decision of the Tribunal which supported the appellant's contention before the Tribunal. That decision was brought to the notice of the learned third member before passing the order. The third member was bound to consider the judgment of the Tribunal. He, however, did not do so. We would have had no hesitation therefore in setting aside the order of the third member and remanding the matter to him for passing a fresh order. Respondent has however, raised a question of maintainability of this appeal under Section 35(G) of the Central Excise Act,1944. The respondent contends that this appeal relates to valuation. According to the respondent, therefore, the appeal would be maintainable only before the Supreme Court under Section 35(L) of the Act. In view thereof, we are not inclined at this stage to dispose of the appeal on this ground. - appeal is accordingly admitted, but subject to the point of maintainability. There shall be adinterim order in terms of prayer clause (b). However, the statement on behalf of the appellant that the tax has been paid and will be continued to be paid with effect from April 2008 is accepted and it is so ordered. - appeal admitted - stay granted.
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2014 (5) TMI 382
Duty demand - Penalty - Bar of limitation - manufacturing without aid of power - Benefit of the exemption notification under Serial No.13 of Notification No.9/96-CE, dated 23.07.1996 as amended and also exemption notification No.40/95-CE, dated 16.03.1995 - the process of calendaring, stentering, padding, etc. are carried on with the aid of power and bleaching, dying and printing and process not mentioned in the Notification No.40/95 - Held that:- aspect of ineligibility of the benefit of Notification No.40/95 would get attracted only when the respondents' usage of power in the process of bleaching, dyeing and painting and not with respect to usage of power in carrying out any of the processes mentioned in paragraph No.2 of the Notification. Likewise, under Notification No.9/96 which was a subsequent notification, there were 12 processes which were specified and the disability is mentioned in Condition No.1 which is only in respect of the manufacture of denim fabrics. In relation to the respondents, it is nobody's case that they are manufacturers of denim fabrics or other fabrics mentioned in the prohibited category. Order of the Commissioner itself records that the respondents by letter dated 23.03.1998 had explained in detail the process of manufacturing since 1992 and periodical checks were being done by the Department, and as a matter of fact, a show cause notice was issued earlier and an order in original was passed in O.I.O. No.2/98 - ASR, dated 19.02.1998 (mentioned as 1988) which goes to show the knowledge of the departmental officials, and in that view of the matter, there is no justification for invoking the extended period of limitation under Section 11-A of the Act, and there is no contra material before us to take a contra view. Even on the ground of limitation, the appeal of the Department would fail - Decided against Revenue.
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2014 (5) TMI 381
Duty demand - Alternate remedy - Writ petition or appeal u/s 35 - Held that:- Court called respondents to make an appropriate statement so as to enable the petitioner to avail of the alternate remedy and also seek interim protection therein. In all fairness, it is stated that the respondents and without prejudice to their rights and contentions shall not take any coercive measures to recover the duty and penalty demanded for a period of three months from today - In view of the remedy which is available and which we find equally efficacious that this Writ Petition is allowed to be withdrawn with liberty to file an Appeal - Appeal disposed of.
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2014 (5) TMI 380
Restoration of appeal - Clearance from COD neither applied nor obtained - no proof was filed showing that the application for clearance has been filed and pending before the COD - Held that:- petitioner, HCL, filed appeal in 2009. As per the Oil & Natural Gas Commission (1994 (1) TMI 88 - SUPREME COURT OF INDIA), the petitioner should have approached COD for obtaining clearance within one month after such filing (i.e. on 14.10.2009). But even though the appeal was pending from 2009 to 2012, the petitioner has not approached COD for obtaining clearance. As on the date of the judgment of Electronics Corpn. of India Ltd. (2011 (2) TMI 3 - Supreme Court), i.e. 17.2.2011, the petitioner has neither obtained COD clearance, nor produced evidence showing that it had approached COD for obtaining clearance. It is a matter of record that the petitioner had applied for COD clearance only on 4.9.2012 just ten days prior to taking up of its appeal. When assessee filed appeal on 14-10-2009, COD system was in force; hence, as per Oil & Natural Gas Commission v. Collector of Central Excise, assessee should have filed application before COD within 1 month after filing appeal - As on 17-2-2011, assessee had neither obtained COD clearance, nor applied for COD clearance, therefore, assessee was not eligible for benefit of Instruction dated 24-3-2011 - Having not been vigilant in applying for COD clearance, assessee could not take advantage of Electronics Corpn. of India judgment - Decided against assessee.
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2014 (5) TMI 379
Penalty - Duty demand - Held that:- The appellant only issued invoices and passed on the Cenvat credit without actually delivering the goods - appellant was a registered dealer who was involved in issuing bogus invoice without selling any goods to M/s Sonia Overseas on the basis of which the said firm took the Cenvat Credit. It was in those circumstances that the penalty of ₹ 1 lac was imposed under Rule 25(1)(d) and 26(1) of the Rules - even if there is jurisdiction to levy penalty equal to the amount of duty evaded distinction in culpability may be found in person who actually evades the duty and the person who enables the same to be done. This distinction in culpability may be required to be gone into from case to case - no substantial question of law arises in this appeal - Decided against assessee.
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2014 (5) TMI 378
Waiver of pre deposit - Clearances on principal to principal basis v/s job workers to principal basis - duty demand on differential value with interest & penalty - Duty evasion - Mis declaration of goods - Tribunal demanded 10% duty as pre deposit - Held that:- neither of the two companies have either pleaded or proved any ground of financial hardship before the Tribunal. Even before us, no such case was made out - The order of the Tribunal does not suffer from any material illegality. At this stage, it is not necessary to examine the contentions of the petitioners finally. A mere fact that the petitioners have prima facie case and some arguable points would not be the ground for insisting on waiver of entire pre-deposit. It was the discretion of the Tribunal in terms of the statutory provisions of Section 35F of the Central Excise Act, 1944 to waive either full or partial pre-deposit requirement. The Tribunal to safeguard the interest of Revenue having imposed certain conditions which cannot be stated to be so onerous that the petitioners cannot weigh them, granted waiver of the pre-deposit. - However, time period to make pre deposit is extended - Decided partly in favour of assessee.
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2014 (5) TMI 377
Cenvat Credit - input services - services provided by the outdoor caterer in the factory premises and on life insurance policies to provide coverage on occupational risk at their unit by paying premiums on the policies in favour of the factory workers. - Held that:- respondent is eligible to avail credit on the life insurance policies. In respect of outdoor caterer, the respondent is liable to reverse the credit to the extent of the cost of food, if any, recovered from the employees - Decided partly in favor of assessee.
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2014 (5) TMI 376
Waiver of pre deposit - Denial of the benefit of Notification No.45/86-CE - Suppression of facts - Bar of limitation - Held that:- Applicants had filed necessary declaration before availing the benefit of the Notification, therefore, prima facie the applicants have a strong case on time bar. Further, we find that some period of the demand is within the normal period of limitation - Conditional stay granted.
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2014 (5) TMI 375
Denial of refund claim - CENVAT Credit - Held that:- Applicants availed credit in respect of the lubricating oil and the same was used thereafter the same is cleared from the factory without payment of duty. The appellant paid the duty at the asking of the Revenue. The assessment regarding the demand is not challenge by the appellants. The appellants challenge the demand by way of filing the refund claim. The Honble Supreme Court in the case Collector of Central Excise, Kanpur Vs. Flock India Ltd. [2000 (8) TMI 88 - SUPREME COURT OF INDIA] held that in the absence of challenge to the assessment order the refund is not maintainable. In the present case, as the appellants are challenging excisability of the goods which were cleared without payment of duty. In the refund application which is not permissible - Decided against assessee.
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CST, VAT & Sales Tax
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2014 (5) TMI 371
Tax liability of interstate stock transfer - Movement of goods for works contract assessee claimed that could not use the electronically generated Forms VAT 505 stating that the goods being transported were not for sale and it is only a stock transfer. Levy of Tax Imposition of Penalty - Power of commissioner validity of circular - Held that:- Judgment in Sri.Thirumalesh, reported in Time Tech India Private Limited V/S State of Karnataka [2014 (4) TMI 368 - KARNATAKA HIGH COURT] followed - Invoking the revisional power u/s 64(1) on the ground that the order passed by the Appellate Authority is prejudicial to the interest of the revenue is totally incorrect - The appellant has transported the goods with valid document as required u/s 53(2)(b) of the Act - When such being the case, the question of imposing penalty u/s 57(12) of the Act does not arise - There is no breach of any statutory duty - Further, the Commissioner can only issue circular and he has no power to issue notification under the Act - All the notifications had to be issued by the State Government and it has to be gazette - In the instant case, the notification dated 21-3-2009 is not gazette - Hence it cannot be treated as mandatory - The revisional authority without considering the objections raised by the appellant, only under the impression that there is revenue loss to the State Government had set aside the order passed by the Appellate Authority which is contrary to law. The appellant has not violated any of the provisions of KVAT Act - The goods has been transported from one project area to another situated out side the State and the same is not for sale - Hence, the question of payment of tax does not arise - Imposition of the penalty under Section 53(12) of the KVAT Act is contrary to the provisions of the Act - Hence, the order passed by the revisional authority cannot be sustained - The appeal is allowed. The order dated 15-9-2009 by the Addl. Commissioner of Commercial Taxes u/s 64(1) of the KVAT Act is set aside - The order passed by the First Appellate Authority is restored Decided in favour of assessee.
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2014 (5) TMI 370
Exemption of Tax Grant of Exemption - Export of cotton Yarn - Notice of pre-assessment - Under the Tamil Nadu General Sales Tax Act - Held that:- There is no justifiable ground found even to maintain this Tax Case for the simple reason that admittedly the assessee is a unit enjoying IFST Waiver Scheme, in which event, the tax effect on the sales effected by the assessee is nil - All that the Assessing Authority had to see in the matter of considering the claim on the benefit of IFST Waiver is to find out as to whether the assessee had complied with the terms of the waiver scheme - Given the fact that the Assessing Authority had passed an order of assessment recognising the claim of the assessee for IFST waiver of the liability on the first sales of cotton yarn, it matters very little as to whether the notification would have any application to the case of the assessee herein Thus, the tax case filed before this Court is a superfluous one and merits to be dismissed on the simple issue itself. Exemption Notification - Compliance with the terms of scheme under the Tamil Nadu General Sales Tax Act - Held that:- In contra distinction to the proviso to Section 9, the notification which preceded the introduction of the proviso to Section 9 left the subject of export open, in the sense, there is no insistence of export of what was purchased by the registered exporter - Thus in the absence of any specific restriction seen in the notification, one has to read it as an open ended clause on export There is no hesitation in accepting the case of the assessee that the notification leaves no restriction as to the subject of export to condition the grant of exemption In the face of the registration granted to the ultimate exporter as a registered exporter and the conditions of the notification thus satisfied, the Tribunal held that the assessee had rightly claimed the benefit of exemption. Reference to Sec 5(3) of CST Act with proviso Sec 9 of TNGST Act Held that:- As far as the reference to Section 5(3) of the Central Sales Tax Act, which is same as proviso to Section 9 of TNGST Act is concerned, the Tribunal pointed out that the exemption granted herein is of a general nature with reference to the goods which are exported as such and are no different from what was purchased - Thus, in contrast to Section 9 proviso, when the conditions prescribed in the notification are in specific terms as referable to sale of cotton yarn to registered exporters, that the assessee has to produce the proof of export before the final check of accounts and the documents produced by the assessee clearly substantiated the compliance of the conditions under the notification, the Tribunal rightly accepted the case of the assessee Therefore, Revision stands dismissed Decided against Revenue.
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2014 (5) TMI 369
Electronic gas lighter - Whether Tribunal was right in relying on the Dictionary meaning, when the same item is treated by the Gujarat Act as an item falling under electronic goods Rate of Tax - Tax Exemption - Classification - Electronic gas lighter - Held that:- As seen from the orders passed by the Assessing Authority, the Assistant Appellate Commissioner and Tribunal, though from the beginning it is the case of the assessee that it is an electronic good and also vehemently contended that it falls under Entry 41(c) of the First Schedule and not under Entry 123 of the First Schedule and also disputed levy of tax at 8%, all the three authorities have given their own consideration by consistently holding that the assessee has not maintained its records either through purchase or sale of the above said goods - Therefore, in the absence of such materials and in view of the the elaborate consideration of the Tribunal based on the circulars issued by the Special Commissioner and CCT and extracting the dictionary meaning thereby satisfying themselves for rejecting the claim of the assessee, no purpose will be served in remanding the matter back - This Court is satisfied that the authorities have not committed any illegality or mistaken definition of the meaning of the term, 'electronic good', while holding that electronic gas lighter is not an electronic good operated through electricity or devices like sensor, but it is operated manually, as per the circular issued by the Special Commissioner and Commissioner of Commercial Taxes Thus, Revision is dismissed Decided against assessee.
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2014 (5) TMI 368
Rate of Tax Ramtirth Brahmi Oil Hair oil or medicament - Classification - Entry 1(ii) of Part F or Entry 20 Part C of 1st Schedule Held that:- The Revenue has not produced any material or has disputed the materials produced by the assessee to support its contention that Ramtirth Brahmi Oil was ever sold as a hair oil and not as medicament - It is a settled principle of law that the onus to prove that a particular product falls under a particular head of the Schedule is on the Revenue - It is for the Revenue to show and establish that the goods in question is not a medicament or that the common man did not treat it as a medicament. - Refer Commissioner of Central Excise Vs. Sharma Chemical Works [2003 (4) TMI 102 - SUPREME COURT OF INDIA] and Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur [2006 (3) TMI 141 - SUPREME COURT OF INDIA] Relying upon Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd.) [2008 (9) TMI 4 - SUPREME COURT] - In laying down the principles for classification, SC pointed out that the extent of a small percentage of ingredients having therapeutic or prophylactic value and use of the product for beautification, would not, ipso facto, make a product a cosmetic preparation - The Apex Court pointed out that the common parlance test is not be all and end all of the matter and merely because a product could be put to cosmetic use, that would not, by itself, make it a cosmetic product - The claim that it is an ayurvedic product must be substantiated on factual basis. Entry 1(ii) of Part F of the I Schedule deals with hair oils, hair creams, hair dyes, etc., and the Explanation to the said entry stated that any of the items, even if medicated, or as defined under Section 3 of the Drugs and Cosmetics Act, or manufactured on the licence issued under the said Act, will fall under this item - Thus, if an item has to fall under Part F Entry 1, even going by the Explanation, a medicated oil has to be a hair oil simpliciter - However, if medicated oil is not sold just as a hair oil, but, as already pointed out in the preceding paragraqph and as certified by the Director of Ayurveda that it has multifarious functions and one of which happens to be for the scalp or for the hair, it would not make the oil sold by the assessee, a pure and simple hair oil - In the background of the decision of the Apex Court reported in Meghdoot Gramodyog Sewa Sansthan Vs. Commissioner of Central Excise, Lucknow [2004 (10) TMI 93 - SUPREME COURT OF INDIA] and the contemporaneous treatment given to the item Ramtirth Brahmi Oil by the other States, there is no hesitation in confirming the order of the Tribunal, thereby rejecting the Revenue's appeal - In the result, the Tax Case Revision is dismissed and the order of the Tribunal is confirmed Decided against Revenue.
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