TMI Tax Updates - e-Newsletter
May 14, 2013

Case Laws in this Newsletter:

Income Tax Customs Law of Competition Service Tax Central Excise CST, VAT & Sales Tax

News

1. India Ratings & Research (Ind-Ra) Announces Rating of the First Infrastructure Debt Fund

2. Il&FS Infrastructure Debt Fund Signs MoU with eight Public Sector Banks; need for more than one Trillion Us Dollars for Infrastructure Sector in Next Five Years; Government And Private Sector to Contribute Fifty Percent Each

3. India’s Foreign Trade: April, 2013

Notifications

Customs

1. 27/2013 - dated 10-5-2013 - Cus

Amends Notification No. 12/2012-Customs dated 17.03.2012 to reduce Customs Duty on Cashew nuts.

Circulars / Instructions / Orders

FEMA

1. 103 - dated 13-5-2013

Import of Gold by Nominated Banks/Agencies

Highlights / Catch Notes

Income Tax

• Section 23(1)(a) Disallows Adding Notional Interest to Annual Letting Value for House Property Income Calculation.

  Case-Laws - AT : Addition on account of Notational Interest - Income from house property - no addition to the annual letting value for notional interest u/s.23(1)(a) is sustainable. - AT
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• Claiming Expenses Without TDS Acknowledgment Deemed Contradictory; Compliance Requires Consistent Recognition of Both Expense and TDS Liability.

  Case-Laws - AT : Expenditure on account of access charges payable - accrual - claim of expenditure versus accrual of TDS liability - The assessee cannot be allowed to take such contradictory stand. - AT
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• ITAT lacks jurisdiction to rule on the constitutional validity of Income Tax Act provisions, focuses on interpretation only.

  Case-Laws - AT : ITAT is a creation of the IT Act and not a constitutional authority. - It has to interpret the provisions of the - It cannot adjudicate upon constitutional validity or otherwise of any provision of the Income-tax Act. - AT
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• Sacred Heart Congregation Branch Denied Section 12A Registration Due to Lack of Independent Institution Status.

  Case-Laws - AT : Registration u/s 12A - the assessee appears to be one of the branches coming under the “Sacred Heart Congregation“ - assessee has failed to prove that it is an independent institution - registration declined- AT
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• AO Can't Assess Other Income if Initial Suspicion of Escaped Income u/s 148 Proves Unfounded.

  Case-Laws - AT : If after issuing the notice under section 148, the AO holds that the income which he has initially formed a “reason to believe“ had escaped assessment, which, later on, has been found as a matter of fact that it has not escaped assessment, then it is not open to the AO independently to assess some other income. - AT
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• Non-compete fees not eligible for depreciation as they don't qualify as an asset under income tax laws.

  Case-Laws - AT : Depreciation on the capitalised sum of non - compete fees - as non compete fee is not an asset, depreciation cannot be allowed - AT
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• Illegally obtained evidence remains admissible for assessment; search's illegality doesn't affect collected material's validity.

  Case-Laws - AT : Illegality of search does not vitiate the evidence collected during such illegal search. - the material collected during the course of survey can be used for the purpose of assessment - AT
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• Section 80IA(4) Deduction: No Need for Assessee Ownership of Infrastructure to Claim Tax Benefits.

  Case-Laws - AT : Deduction u/s 80IA(4) - the word “it“ is used to denote an enterprise. - there is no requirement that the assessee should have been the owner of the infrastructure facility. - AT
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VAT

• High Court Rules Rejection of Compounded Tax Application u/s 8(b) KVAT Act Invalid Due to Lack of Hearing Opportunity.

  Case-Laws - HC : Application for remitting the tax at the compounded rate under Section 8 (b) of the KVAT Act was rejected - opportunity of being heard - the said order is not correct or sustainable - HC
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• High Court Upholds Penalty u/s 17(5A) for Pre-1998-99 Period Despite Assessee's Objection.

  Case-Laws - HC : Penalty under Section 17(5A) - assessee contested against that it cannot be levied for any year prior to 1998-99 as it was introduced with effect from 1.4.1998 - penalty confirmed. - HC
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Case Laws:

• Income Tax

• 2013 (5) TMI 311
  Addition on account of Notational Interest - Income from house property - determination of annual letting value - held that:- The question whether notional interest on interest free deposit is includible while calculating annual letting value of the property u/s.23(1)(a), came up for consideration before the Full Bench of the Hon’ble Delhi High Court in CIT vs. Moni Kumar Subba [2011 (3) TMI 497 - DELHI HIGH COURT]. - The Hon’ble Delhi High Court has held that no addition to the annual letting value for notional interest u/s.23(1)(a) is sustainable. - Decided against the revenue.

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• 2013 (5) TMI 310
  Expenditure on account of access charges payable - assessee claims ascertained liability for claiming expenditure and un-ascertained liability for non deduction of TDS - held that:- when claiming the provision to be allowed as expenditure the assessee treats it as a known and ascertained liability accrued during the financial year, however, when confronted with the obligation under the TDS provision, the assessee takes a contradictory stand that the deductees are not identifiable and in absence of details relating to correct amount to be paid and correct amount of TDS, adhoc deduction of tax on estimated provision was not possible. The assessee cannot be allowed to take such contradictory stand. It is also a fact that the assessee has not been able to substantiate as to how the said provision was only in respect of the contents/value added services for which revenue was recognized for relevant year as has been observed by the CIT(A). Ratio of the decision of apex court in Bharat Earth Movers [2000 (8) TMI 4 - SUPREME Court] are not applicable in the present case.

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• 2013 (5) TMI 309
  Allowability of benefit of tolerance margin - The matter in dispute relates to the question Whether prior to insertion of second proviso to Section 92C(2), the benefit of 5% tolerance margin as prescribed under proviso to Section 92C(2) of the IT Act, 1961 for the purposes of determining the arm's length price of an international transaction is allowable as a standard deduction in all cases, or is allowable only if the difference is less than 5%? Held that:- After the retrospective amendment to the second proviso to Section 92C(2) by the Finance Act, 2012, the benefit of tolerance margin is available only when the variation between the arm's length price as determined under Section 92C(1) and the price at which the international transaction has actually been undertaken does not exceed the tolerance margin. Once it exceeds the tolerance margin, no benefit under the proviso would be available to the assessee and the ALP as determined under Section 92C(1) shall be considered. The question referred is answered accordingly, in favour of the Revenue and against the assessee. Assessee has also challenged the constitutional validity of retrospective amendment to second proviso to Section 92C(2). Held hat:- Income Tax Appellate Tribunal is a creation of the Income-tax Act and not a constitutional authority. It has to interpret the provisions of the Income-tax Act as it stands. It cannot adjudicate upon constitutional validity or otherwise of any provision of the Income-tax Act.

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• 2013 (5) TMI 308
  Registration u/s 12A - denial of claim - Held that:- There is no dispute that the applicant herein is a "Convent" coming under the exclusive control of the Generalate through the hierarchies of 'Sacred Heart Congregation". It is directed under Chapter X to form further small units viz., local communities. From these discussions, it can be fairly concluded that the assessee appears to be one of the branches coming under the "Sacred Heart Congregation". In the absence of any other documents, the applicant cannot be considered to be a separate and independent institution. As pointed out by CIT, the assessee has failed to prove that it is an independent institution, having its own bye-laws and regulations. Accordingly no infirmity in the order passed by CIT in declining the registration u/s 12A - against assessee.

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• 2013 (5) TMI 307
  Enhancement of the gross profit rate - Whether CIT(A) erred by deleting the addition amount made by invoking provision of section 145(3) - Held that:- CIT(A) observed that the basis adopted by the AO for consequent enhancement of the gross profit rate was itself faulty and can not be considered for assumption of computing correct income in accordance with the provision of Income tax Act - there was no basis for the AO to reject the book result by invoking the provision of section 145(3). DR has not been able to furnish any contrary material to that effect on perusal of the statements and the method of accounting adopted that the books of account reflecting the true and correct income is derived on the basis of purchases, sales and the valuation of closing stock do not require any further deliberation. The ground raised by the Revenue stands dismissed. Disallowance u/s 40(a)(ia) - Held that:- Evidence in respect of the deduction of TDS was made known to the AO who observed that the TDS has been deposited now does not require disallowance u/s 40(a)(ia), in so far as 40(a)(ia) allows deposition of such tax before the due date of filing of the return when the assessee claimed that it had filed the return of income on time in accordance with the provision of section 139(1) of the Act. In favour of assessee Disallowance of of freight charges - identity not proved and verification from angle of violation of non deduction of tax at source - Held that:- AO himself has agreed to the proposition that the said assumption of freight charges to trucks of more than Rs.20,000/- does not apply to the assessee's facts and in so far as the same has come into effect from 1st July, 2007 which the CIT(A) had also acknowledged but as a liberty that the assessee had admitted that there were errors in deduction of tax at source to protect the interest of the revenue confirmed 40% thereof which we are unable to satisfy ourselves either way as mentioned above. There cannot be proportionate disallowance either u/s 40(a) (ia) or 40A(3) which expenses disallowances have to be made on specific items of expenditure cannot be ruled out and the confusion in the minds of the authorities below therefore requires no further deliberation. The ground raised by the assessee is allowed. Confirmation u/s 40A(3) on payments made to M/s. Bharat Goods Transport and Joy Jharkhand Road Lines - Held that:- AO having categorically given a finding that the number of trucks with their registration number and the individual freight paid to them under no circumstances were paid exceeding Rs.20,000/-, thus the provision of section 40A(3) has been considered by the CIT(A) holding a view that such payments in a single day was not to be applied as per the provision of the Income Tax Act itself renders this addition worthy for deletion. The ground raised by the assessee stands allowed. Addition in respect of low drawings - CIT(A) deleted the addition - Held that:- Addition of Rs.36,000/- deleted against drawings already claimed at Rs.85,000/- does not justify the addition in so far as the AO has also not pointed out whether the addition of Rs.36,000/- would justify the income returned by the assessee to acclaim a status for low drawings. The CIT(A) has deleted the same as no material has been brought on record by the AO. In favour of assessee.

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• 2013 (5) TMI 306
  Unexplained gifts - Held that:- Assessee has discharged its onus by filing confirmations from the donors, copies of acknowledgment of returns of the relevant assessment year, copies of PAN card, copies of bank statements and also contra confirmation that these loans were out of the amounts received from earlier loans advanced to other parties, which was returned by these parties. Once this is the position and none of the authorities below have gone into the details and not doubted the genuineness of the transaction or the creditworthiness of these donors, nothing remains after the decision of M/s. Dataware Private Limited (2011 (9) TMI 175 - CALCUTTA HIGH COURT) wherein held that in the absence of any enquiry from the AO of the donors, the AO cannot make the addition in the hands of the assessee by treating the gifts received by assessee as unexplained. In favour of assessee.

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• 2013 (5) TMI 305
  Exemption u/s. 10(23C)(vi) - denial of claim - Reopening of assessment - also for filing the returns belatedly for these assessment years there was levy of penalty u/s. 272A(2)(e) - Held that:- There cannot be one authority for levying of penalty on assessment at Kurnool and another authority for framing assessment. Being so, issue of notice u/s. 148 by the Hyderabad Range of the Department is not correct. As the issue of notice itself is bad in law by the Hyderabad Range of the Department, consequent framing of assessment is bad in law. Being so, the reopening of assessment for all the above four assessment years quashed. Even otherwise, the notice u/s. 148 was issued on the reason recorded that approval under provisions of section 10(23C)(vi) was mandatory and it was not obtained by the assessee though the gross receipts exceeded Rs. 1 crore and, therefore, income escaped assessment. However, the assessee could claim alternate deduction/exemption u/s. 11 and non-obtaining of approval u/s. 10(23C)(vi) is not fatal in view of the decision ADIT (Exemptions) vs. Rajasthani Siksha Samithi (2008 (3) TMI 501 - ITAT HYDERABAD) wherein held that institutions falling u/s. 10(23C)(vi) are eligible for exemption u/s. 11 also. Merely because section 10(23C)(vi) provides for exemption of the income of an educational institution it does not follow that such institution cannot avail exemption u/s. 11 subject to fulfilment of the conditions laid down. Being so, when the reasons recorded do not survive reopening of assessment is bad in law as decided in Ganga Saran and Sons (P) Ltd. vs. ITO & Ors. (1981 (4) TMI 5 - SUPREME Court), CIT v. Jet Airways (2010 (4) TMI 431 - HIGH COURT OF BOMBAY), Ranbaxy Laboratories vs. CIT (2011 (6) TMI 4 - DELHI HIGH COURT ) and CIT vs. ICICI Bank Ltd., Bombay (2012 (7) TMI 521 - BOMBAY HIGH COURT) . Accordingly the reopening of assessment quashed. Assessment of income by treating the development fee receipt as capitation fee thereby denying exemption u/s. 11 - Held that:- As decided in Vasavi Academy of Education case [2010 (2) TMI 970 - ITAT HYDERABAD] the assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students, thus remit the issue to the file of the AO to consider the entire issue afresh and verify the records whether the assessee collected capitation fees from students for the purpose of giving admission. If so, the assessee is not entitled for deduction u/s. 11 of the Act. In favour of assessee for statistical purposes.

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• 2013 (5) TMI 304
  Re opening of assessment - addition on account of long term capital gains on treating the assets sold as commercial asset and re-working the written down value (WDV) and thereby denying the indexed cost of acquisition - Held that:- Respectfully following the proposition of law laid down in case of CIT vs. Jet Airways (I) Ltd.[2010 (4) TMI 431 - HIGH COURT OF BOMBAY] as followed by different High Courts Ranbaxy Laboratories v/s CIT, [2011 (6) TMI 4 - DELHI HIGH COURT] and the CIT v/s Mohmed Juned Dadani [2013 (2) TMI 292 - GUJARAT HIGH COURT] wherein concluded that the AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reason for such issue were not included in the notice, however, If after issuing the notice under section 148, the AO accepts the contentions of the assessee and holds that the income which he has initially formed a "reason to believe" had escaped assessment, which, later on, has been found as a matter of fact that it has not escaped assessment, then it is not open to the AO independently to assess some other income. Thus the addition of Rs. 6,47,144, on account of long term capital gain as assessed by the AO is beyond the scope of income escaping assessment under section 147. Further, agreing with the contentions of the assessee the view taken by the AO in the present assessment order amounts to "change of opinion" as not only the issue of long term capital gain but also the exemption under section 54EC and sale consideration has been examined by the AO and thereafter he accepted the Assessee's computation. There is no new material on record to show that the Assessee's computation and the claim is erroneous. Accordingly, on this count also, the re-opening under section 147 is invalid in the eyes of law. Thus, on the preliminary ground itself, the addition made by the AO in the long term capital gain gets vitiated. Consequently, the impugned order passed by the Commissioner (Appeals) is set aside and the ground raised by the Assessee is treated as allowed.

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• 2013 (5) TMI 303
  Validity of Survey u/s 133A - survey of factory on a weekly holiday - additions - Held that:- CIT(A) categorically held that the survey operations u/s 133A of the Act were not under the provision of section 132(4) of the Act and the assessment has not been made u/s 153A of the Act concluding that all the facts and circumstances of bringing to tax part sustenance of the additions made by the AO emanate from the books of the assessee only. The assessee appellant himself was not able to explain the nature of such income so computed when part of it was explained as correct was admitted by the CIT(A). Thus the part sustenance of the income was worthy of income to be brought to tax in the hands of the assessee as the assessee had returned income of Rs.22,91,690/- u/s 139(1) when the survey took place on 4th March, 2008 and was part of income to be returned. Therefore, the contention of the assessee that the major relief having been granted on the very inadmissible expenses should be completely deleted, has no legs to stand on. No infirmity in the order of the CIT(A). Undisclosed cash transactions on Hulavati account - CIT(A) granted relief of Rs.39,00,207/- - Held that:- It was the computation of income on the basis of the said dumb documents whether had found place in the returned income has not been clarified either by the AO or the assessee appellant before us requires no further deliberation. The said income therefore stands as returned but for erroneous calculation computed correctly is upheld as part deleted and sustained by the CIT(A) is confirmed. Unexplained investments - CIT(A) deleted the addition - Held that:- CIT(A) after deliberation and arithmetical computation the stock valuation whether lengthwise or breadth wise granted relief of Rs.1.26 crores does not require any further deliberation as no further controverting material has been brought on record by the rival parties hereto. Disallowance u/s 40A(3) - Held that:- CIT(A) has categorically given a finding that the cash payments do not relate to the impugned assessment year. Granting relief of Rs.31,000/- against which no controverting material has been brought out on record by the revenue. Therefore, the order of CIT(A) does not require any further deliberation.

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• 2013 (5) TMI 302
  Depreciation on the capitalised sum of non - compete fees - disallowance as the expenditure is in no way connected with the acquisition of various assets - Non-compete fees - revenue v/s capital - assessee contested against issue not to be falling under current assessment year - Held that:- The clauses clearly show that under no circumstance, the new company, i.e. the assessee, shall be able to use the technical knowhow upto 31.03.1998. The agreement between GGL and PEL under all circumstances and for all practical purposes was a prospective agreement, which could only have been made effective from 01.04.1998. It is also interesting to note that, the AO also took note of this fact, because, the AO noted that the payment of the agreed amount was paid to PEL on 02.04.1998. This can only infer, that the agreement dated 26.02.1998 actually came into force on 01.04.1998.On these fact, it is clear that the operation of the agreement, technical knowhow and application of non compete arrangement came into force on 01.04.1998, which would fall in assessment year 1999-2000, i.e. the year under consideration. DR's submission that non compete does not find place in the provision have to be accepted because non compete fee does not fall within the ambit of any other commercial or business rights, because, even when examining the meaning of different words, as per law Lexicon, word license means an authority to do something which would otherwise be inoperative, wrongful or illegal, a formal permission from a Constituted authority to do something. The meaning of the word franchise means right conferred by the government to engage in a specific business or a exercise corporate powers,corporate franchise, general franchise. "Know-how" is the fund of technical knowledge and experience acquired by a highly specialized production organization. It is usually noted vary according to, and may even be determined by, its use. Like office or factory buildings, patents and trademarks, and good will, it may be described as a "capital asset" while it is retained by a manufacturer for his own purposes, but, unlike these, its supply to another is not a transfer of a fixed capital asset because it is not lost to supplying manufacturer In Sections 530 and 531 [disposal of know-how] 'know-how' means any industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the working of a mine, oil-well or other source of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto), or in the carrying out of any agricultural, forestry or fishing operations. Thus the expression non compete fee could not be extracted. It is important, therefore, to read both the parts as read in Sharp Business Systems (2011 (6) TMI 505 - ITAT DELHI) to explain the genus of "any other business or commercial rights of similar nature" with the earlier words. as upheld by the Hon'ble Delhi High Court [2012 (11) TMI 324 - DELHI HIGH COURT]. Thus the assessee does not satisfy, the payment made to acquire non compete right, being an asset, as per the second part of clause (ii) to section 32(1), and is, therefore, not eligible for depreciation as per law - as non compete fee is not an asset, depreciation cannot be allowed - Against assessee.

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• 2013 (5) TMI 301
  Lower rate of profit shown on sale of plots in the return of income - survey under sec. 133A - rejection of books of accounts - Held that:- As the assessee voluntarily offered during the course of survey income at Rs. 1853 per sq. yard which was reduced to Rs. 757 per sq. yard later. The reasons explained by the assessee are not satisfactory as merely because certain expenditures were not booked on earlier occasion and have to accounted on accrual basis, there cannot be fluctuation of profit from Rs. 1853 to Rs. 757 per sq. yard. The gap between Rs. 1853 and Rs. 757 per sq. yard is Rs. 1096 which is very abnormal which could not be explained by the assessee properly. As concerned with the correct expenditure relating to the assessment year under consideration expenditure cannot be changed in such an abnormal manner. Change in the profit rate per sq. yard from Rs. 1853 to Rs.757 per sq. yard clearly suggests that the assessee has tried to manipulate the accounts by inflating the expenditure and submitted that certain expenditures were left out while admitting the profit at Rs. 1853 per sq. yard. Facts brought on record show that the assessee is not keeping books of account to show correct income. In such circumstances, the lower authorities have no alternative to stick to the income declared by the assessee. The Supreme Court in the case of Pooranmal vs. DIT(E) (1973 (12) TMI 2 - SUPREME Court) held that material obtained in search made in contravention of the provisions can be used for assessment. Being so, the Assessing Officer can use the material collected during the course of survey for making assessment. Also as decided in Dr. Pratap Singh vs. Director of Investigation (1985 (4) TMI 1 - SUPREME Court) illegality of search does not vitiate the evidence collected during such illegal search. In view of this the material collected during the course of survey can be used for the purpose of assessment - assessee appeal is dismissed.

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• 2013 (5) TMI 300
  Entitlement to deduction u/s 80IA(4) - whether the assessee is a developer or mere works contractor - Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract and he is not eligible for deduction under section 80IA (4) of the Act - Held that:- according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word "it" denotes the enterprise carrying on the business. The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word "it" is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. Considering the case of GVPR Engineers Ltd. v. ACIT [2012 (4) TMI 149 - ITAT HYDERABAD], KMC Construction Ltd. v. ACIT [2012 (5) TMI 181 - ITAT HYDERABAD] & Sushee Hi-Tech Constructions Pvt. Ltd. vs. DCIT [2012 (8) TMI 633 - ITAT HYDERABAD] remit the issue back to the file of the AO with a direction to examine the issue afresh and to see whether the assessee carried on the development of infrastructure facilities cumulatively with the activities of design, development, operation, maintenance, financial involvement, defect correction of the contract executed by the assessee itself. In the event, the assessee itself carried on the development of infrastructure facilities/contract along with design, development, operation, maintenance, financial involvement, defect correction of the contract during the warranty period, then such contract to be considered as a development of infrastructure facility executed by the assessee and thereby eligible for deduction u/s. 80IA.

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• 2013 (5) TMI 299
  Addition on account of peak credit balance - Held that:- As the dispute is with regard to three bank accounts, the transactions of which, according to the assessee, have been declared to the department, whereas it is the stand of the department that only those transactions which have not been disclosed by the assessee, have been considered for the purpose of working out the peak credit it is desirable to remit the matter back to the file of the AO for doing the assessment de novo after verifying the transactions in all the bank accounts maintained by the assessee.

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• Customs

• 2013 (5) TMI 298
  Condonation of delay and stay of realization - appeal suffers from delay - The cause of delay was unreasonable. While appreciating rule of law laid down by Apex Court in the case of Ketan V.Parekh vs. Special Director, Directorate of Enforemment [2011 (11) TMI 62 - SUPREME COURT OF INDIA], we are satisfied that present application for condonation of delay is devoid of merits but an abuse of process of law. Thus, MA(COD), and stay application as well as appeal are dismissed.

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• 2013 (5) TMI 297
  Classification/Valuation dispute – import of re-rollable plates - Imposition of redemption fine or penalty – Held that :- The observation of Chartered Engineer available who has categorically remarked that 90% of the goods imported were serviceable material and recoverable from the plates imported by appellant. Balance material of 10% was found to be re-rollable after cutting from the plates to make that serviceable. The appellant has not declared thickness or size of the goods in the bill of entry and it only says re-rollable plates. Therefore, there cannot be any divergent view from the technical view relied by Revenue who has occasion to physically inspect the goods for his opinion. The goods imported shall fall into tariff entry 7208.4010 for the percentage and character described in technical report. Redemption fine - held that:- appellant has force for reduction in redemption fine since percentage of the character of the goods has been mentioned in technical report which is 10% to be re-rollable. Keeping this aspect in view we direct that redemption fine be reduced to Rs. 2 lakhs. So far as penalty is concerned, in view of classification issue involved, finding the declaration contrary to law and looking into modus operandi followed, penalty of Rs. 25,000/- is confirmed.

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• Law of Competition

• 2013 (5) TMI 296
  Abuse of dominance Determination of relevant market - Contravention of provisions of sections 3 and 4 of the Act - The informant pleaded the following three types of agreements were in contravention of the provisions of the Act: (a) Voluntary non-exclusive agreements entered into by the OP directly with Indian Pharmaceutical companies since 2006 for production and distribution of TDF and FTC medicines and their combinations. (b) Licence agreement of the OP with MPP which allowed MPP to have sub-licences with Indian pharmaceutical companies. (c) The sub-license tripartite agreement among the OP, MPP and the Indian pharmaceutical companies. (all three agreements collectively referred to as license agreements . Held that:- OP first entered into the voluntary license agreement LA-2006 with the Indian pharmaceutical companies and allowed them to manufacture and sell the drugs as per terms and conditions of the agreement. However, it was not clear whether LA-2006 was still effective or continued to have any continuing effect post 20.05.2009 as the substantive provisions of the Act came into force on this date, whereas LA-2006 was signed prior in time. Therefore, the agreement between the OP and the Indian pharmaceutical companies could not be examined for the agreement was entered into much prior to the enforcement of the provisions of the Act. The second agreement was between the OP and MPP i.e. LA-2011 which allowed MPP to sub-license the manufacture and sale of the drugs to Indian pharmaceutical companies. This agreement will not fall within the ambit of section 3(4) of the Act since MPP is nowhere in the production chain. The last agreement i.e. the tripartite agreement falls within the contours of section 3(4) of the Act vis- -vis the OP and the Indian pharmaceutical companies who are placed in different stages of the production chain and therefore, appreciable adverse effect on competition needs to be examined keeping in view the factors in section 19(3) of the Act. The explanation to section 4 of the Act defines dominant position to mean a position of strength enjoyed by an enterprise in the relevant market in India which enables it to operate independent of competitive forces prevailing in the relevant market or affect its competitors or consumers or the relevant market in its favour. On examining the dominant position of the OP, it was seen that the OP had no legal existence in India and did not engage in any business in India. Accordingly, the OP was not a dominant player in the relevant market in India and therefore, no abuse as envisaged under section 4 of the Act could exist. In the light of aforesaid discussion, the Commission finds that no prima facie case was made out against the opposite party u/s 3 or 4 of the Act for referring the matter to DG for investigation. It was a fit case for closure under section 26(2) of the Act.

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• Service Tax

• 2013 (5) TMI 315
  Rejection of refund claim of CENVAT Credit – 100% EOU filed cash refund under the provisions of Notification No.5/2006-CE(NT) – As per appellant the refund was allowed by ld. Commissioner on the same input services availed by them. Further, he has submitted that the he had not considered any of their submissions including the guidelines issued in Circular No.120/01/2010-ST dated 19.01.2010 by the Board and the case laws. Held that:- In view of the Circular of the Board No.120/01/2010-S dated 19.01.2010 and the case laws on the subject, the issue needs to be considered afresh. Hence, with the consent of both the sides, the matter is remitted back to decide the issue afresh, keeping in view the Circular and the relevant case laws, including the Orders passed by him.

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• 2013 (5) TMI 314
  Waiver of pre deposits – Demand of service tax under the head rent-a-cab service - Having found no evidence of pre-deposit, the Commissioner dismissed the appeal on the ground of non-compliance with Section 35F of the Act. - Held that :- The appellant before us had allowed their buses to be used by the APSRTC as stage carriages during the material period. According to the department, the appellant was rendering rent-a-cab service to APSRTC. On similar sets of facts, this bench passed the cited stay orders after taking the prima facie view that APSRTC was not receiving rent-a-cab service from the parties. In this view of the matter, we are inclined to remand this case to the learned Commissioner (Appeals) for final disposal without insisting on any pre-deposit, after giving the party a reasonable opportunity of being heard.

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• 2013 (5) TMI 313
  Service during warranty period - Liability to service tax - Revenue pray that as an interim measure if Revenue is protected during resolution of the dispute it may not have grievance. Held that:- We direct the appellant to make a deposit of Rs. 1 lakhs to protect the interest of Revenue for expeditious disposal of the matter by ld. Commissioner (Appeals). The deposit shall be made by 31.03.2013 and an application shall made by Appellant before that authority to fix date of hearing. Accordingly decide the case on merits.

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• 2013 (5) TMI 312
  Service tax/interest/penalty under GTA services –As per by department appellant was providing taxable service from more than one premises and not having centralized registration, billing or accounting system and they also had not obtained registration from the jurisdictional authority - Service Tax demand on gross amount collected for providing services by them. Held that - Show cause notice issued to the appellant initially talks about the demand of Rs.4,67,671/- for the demand of Service Tax under GTA services for the period January 2005 to October 2005. On totaling the amount paid by the appellant as per the annexures indicating the exact amount of Rs.1,59,312/- as being paid from the centralised registered unit at Gurgaon and adding an amount of Rs.76,819/- which has been paid for the month of October 2005, the total demand which has been raised in the show cause notice is tallying with the amount paid by the appellant. Thus, the appellant has correctly discharged the Service Tax liability due to the above reason. Impugned order to the extent it upholds that the Service Tax of Rs.1,59,312/- with interest and penalties, is liable to be set aside

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• Central Excise

• 2013 (5) TMI 295
  Payment of excise duty – As per revenue appellant had cleared the excisable goods without payment of duty against challans. Appellant had requested cross-examination of the main witness. During the course of cross-examination, he had admitted that he was a broker and not a purchaser of the goods to whom the goods cleared without payment of duty against challans. To verify such statement, the ld. Commissioner sought report from the Investigating Officers, and on the basis of such report, the demand was confirmed. It is the grievance of the Appellant that they were not given a copy of the said report. Held that:- Non-supply of the said report resulted into violation of the principles of natural justice and also would have bearing on the findings. Thus, we are of the opinion that the issue be re-examined afresh, after handing over a copy of the report to the Appellant. At this point, ld. AR for the Revenue submitted that this issue has been pending since 2008 and hence, time-frame be fixed for adjudication. Thus, we direct the Adjudicating Authority to complete the adjudication proceedings within three months from the date of supply of the copy of the Investigation.

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• 2013 (5) TMI 294
  Denial of credit – imposition of interest/ penalty - Credit had been taken without receiving any goods on the basis of bogus invoices – Held that - In view of the fact that the order of the Tribunal was not challenged and also the fact that appellant did not prove receipt and use of the goods in the manufacture of find products, there is no infirmity in the order passed by the Commissioner (Appeal). Accordingly I uphold the order in appeal and reject the appeal of the appellant.

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• 2013 (5) TMI 293
  Waiver of pre deposits - utilizing CENVAT Credit for discharge of Service Tax liability on Goods Transport Agency services. - Held that:- The issue covered by the decision in the case of Shree Rajasthan Syntex Ltd [2011 (8) TMI 265], we hold that the appellant needs to be heard and his appeal disposed of by first appellate authority without insisting for pre-deposit. Thus,the order is set aside and the appeal is allowed by way of remand and without insisting pre-deposit from the appellant.

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• 2013 (5) TMI 292
  Job Work - Eligibility of Notification No.214/86-CE - denial of Cenvat credit – imposition of penalty – As per department the benefit of the - Held that -In Rayalseema Steel Re-Rolling Mills (P) Ltd [2013 (4) TMI 594 - CESTAT BANGALORE] we had asked the appellant to pre-deposit 25% of the total amount of duty demanded. Accordingly, we direct the job worker before us to pre-deposit the with the lower appellate authority to enable it to dispose of their appeals on merits. Both the appellants shall pre-deposit the respective amounts within six weeks from today and report compliance to the Commissioner (Appeals) forthwith, whereupon the latter shall dispose of the appeals on merits without insisting on any further pre-deposit and in accordance with law, after giving the parties a reasonable opportunity of being heard. Both the appeals stand allowed by way of remand.

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• 2013 (5) TMI 291
  Denial of credit - imposition of interest/penalty - rejected and returned goods to the factory for the purpose of re-making and re-conditioning - held that - The order passed by the original authority is proper and reasonable based on the verification report of the Range Officer. However, considering the facts and circumstances of the case, the penalty imposed by the original authority cannot be sustained. Thus, we set aside the order of the Commissioner (Appeals) and uphold the order of the original authority subject to penalty is set aside. The appeal filed by the Revenue is disposed of in the above terms.

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• CST, VAT & Sales Tax

• 2013 (5) TMI 317
  Application for remitting the tax at the compounded rate under Section 8 (b) of the KVAT Act was rejected - opportunity of being heard - Held that :- the respondents are not justified in having rejected the application for compounding, placing reliance on Section 8 (f) (ii), which even according to them is applicable only to gold/silver .... dealers. There is no case for the respondents that there is any enabling provision under Section 8 (b) which is applicable to the petitioner, who is a dealer in metal crusher unit, to reject the compounding application. When the respondents contend that Section 8 (f) (ii) exclusively deals with dealers in gold, silver, they also rely on the same clause to reject the compounding application, which cannot be a paradox. If Section 8 (f) (ii) does not pertain or is applicable to the persons like the petitioner who are doing the business in metal crusher, how the said clause can be used to reject an application for compounding, is a matter mystery.. - the said order is not correct or sustainable. - Decided in favor of assessee.

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• 2013 (5) TMI 316
  Penalty under Section 17(5A) - re-opening of the assessment - assessee contested against the penalty levy on the ground as it cannot be levied for any year prior to 1998-99 as it was introduced with effect from 1.4.1998 - Held that:- Penalty as provided in the Section is attracted, when assessments completed under Section 17(4) are re-opened and on such re-opening it is found that the amount of tax already paid by the dealer is less than the amount of tax, which he is liable to pay on the fresh assessment. Therefore, as on 1.4.1998, when the Section was introduced by the Legislature, it talks about re-opening of the assessments already completed and Section is attracted in a situation when tax already paid is found to be inadequate. Such a situation can be attracted in respect of the assessment years prior to 1.4.1998 also and therefore the contention that the assessment year being 1996-1997, Section 17 (5)(A) introduced with effect from 1.4.1998 is not attracted is untenable. As the final assessment under Section 17(4) was completed on 12.1.2001 and the reopened assessment was completed still later. No material is available regarding the date on which the petitioner had opted for the assessment under Section 17(4) to hold that the option was not after 1.4.1998. In such circumstances, there is nothing illegal in the levy of penalty under Section 17(5) (A), as per Ext.P1 order, which has been confirmed by the Revisional Authorities concurrently - against assessee.

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