Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 14, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Reassessment u/s 147 - entire issue was placed before the CIT (A) – AO’s attempt to change the reasons for disallowance, once the CIT (A) reversed his order of assessment, would thus be a mere change of opinion - HC
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Registration u/s 12AA - port trust to control the activities at a major port for utilizing and creating facilities - Charitable Purpose - though it earns income in the process, it is not liable to income-tax - HC
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Penalty u/s 271(1)(c) - tax was paid on the income assessed u/s 115JB - the concealment did not lead to tax evasion at all penalty u/s 271(1)(c) could not be imposed in respect of the false claim of depreciation. - HC
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Ambit and scope of section 80IB - the Revenue's assertion that the marketing concern was floated with a view to claim higher deduction u/s 80IB, is baseless - HC
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Valuation of land – CIT(A) has rightly pointed out that there is a specific provision u/s 55 - once the valuation report is obtained by the Assessing Officer, it is binding on him - AT
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Accrual of income – claim of credit for the tax deducted (TDS) does not make the assessee “bound” to pay tax on the receipts, unless such receipts constitute income in his hands - AT
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Disallowance of interest expenses – The interest charged from the sister concern as per the prevailing market rate - they have also assessed to tax (in same tax bracket) and there is no loss of revenue - AT
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Claim of deduction u/s 54F - the onus is on the assessees to prove that the claim made by them u/s. 54F is in accordance with law - matter remanded back - AT
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Scope of section 269SS of the Act – Journal entries – there is no proof of receipt of such loan from the records and they were only found to be journal entries - No Penalty u/s 271D - AT
Customs
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Bar of Limitation - Refund of Duty – The authority finalizing the provisional assessment was legally bound to refund the excess amount without any application from the importer - AT
Service Tax
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Supply of Tangible Goods Service - operational control - In the absence of operational control in the hands of the service provider, the service cannot be classified under “supply of tangible goods for use”. - AT
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Waiver of pre deposit - Cleaning service - cleaning of township is not, prima facie, covered under the cleaning activity therefore prima facie the applicant has a strong case in its favour. - AT
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Demand of service tax - C & F are agent services - mere booking of orders for the principal by an agent on commission basis is not covered under C & F agent services - AT
Central Excise
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CHA Services - input services - nexus with manufacturing activity - In absence of correlation, simply a C.A. Certificate cannot be made as a basis for allowing cenvat credit - AT
VAT
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Decisiono of ARA under VAT rendered on the application of Hindustan Unilever Limited in AR.Com.6/2011 is binding upon other non-applicant dealers who are dealing in LPG until it is set aside - HC
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Whether talcum powder includes ‘prickly heat powder’ - the nycil prickly heat powder is not a “drug“ and it is only a medicated talcum powder - HC
Case Laws:
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Income Tax
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2014 (5) TMI 404
Validity of notice for reopening of assessment – Mere change of opinion - Infrastructure facilities – Claim of deduction u/s 80IA(4) of the Act – Held that:- Assessee had claimed deduction under section 80IA(4) of the Act - The assessee was entitled to claim deduction u/s 80IA(4), the assessment order was passed - Any attempt on the part of the AO now to revisit such a claim would be based on a mere change of opinion – Relying upon CIT v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - power to re-open is much wider - one needs to give a schematic interpretation to the words “reason to believe” failing which, Section 147 would give arbitrary powers to the AO to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. - The AO has no power to review - he has the power to re-assess. Even within four years, it would not be open for the revenue to reopen the assessment - The agreement between the petitioner and the GSRDC was on record - The assessee had pointed out that GSRDC is a 100% Government owned company - The status of the contractee was very much before the AO – the reopening cannot be permitted – Decided in favour of Assessee.
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2014 (5) TMI 403
Stay application – Waiver of Pre-deposits – Held that:- The issue is examined merely for the purpose of providing an interim formula, on the basis of which the assessee should enjoy stay against further recovery – prima facie, it appears that addition approximately worth Rs. 140 crores represents the excess sale of gas in million cubic meter units, which the AO did not account for in the order of assessment – the revenue imposed a condition which was too harsh at the first appellate stage – the assessee is directed to deposit a sum of Rs. 50 Crores and rest of the amount to be waived till the disposal – Partial Stay granted.
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2014 (5) TMI 402
Validity of re-opening of assessment u/s 148 of the Act – Doctrine of merger - Held that:- The AO had examined the assessee’s claim of deduction of the entire expenditure - the CIT (A) and the Tribunal committed no error in quashing the reassessment proceedings - When the Revenue had carried the issue in appeal and the same was pending before the Tribunal, it would reflect the Revenue’s opinion that the expenditure was capital and not revenue in nature - If that be so, the Assessing Officer’s premise that the same was required to be taxed as an expenditure not accrued during the relevant period would be incongruent - His entire belief that the income chargeable to tax had escaped assessment on such basis thus would be lacking in validity - once the AO taxed the income and the entire issue was placed before the CIT (A) – AO’s attempt to change the reasons for disallowance, once the CIT (A) reversed his order of assessment, would thus be a mere change of opinion. The assessment order in respect of the items for which assessment is sought to be reopened has merged with the order of Commissioner (Appeals) and as such has no independent existence and therefore the assessment could not be reopened in respect of the items – the reopening of assessment apart from being based on a factually erroneous premise, is also based upon a mere change of opinion without there being any tangible material to come to the conclusion that there is escapement of income from assessment – Relying upon Commissioner of Income-tax v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the condition precedent for reopening of assessment has not been fulfilled and as such, the assumption of jurisdiction u/s 147 of the Act is not valid – thus, the notice issued u/s 148 of the Act is set aside – Decided against Revenue.
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2014 (5) TMI 401
Registration u/s 12AA - port trust to control the activities at a major port for utilizing and creating facilities. - Charitable Purpose - profit motive – Exemption u/s 11 of the Act - Held that:- For a trust to claim exemption u/s 11 of the Act from the property held wholly for charitable or religious purposes it has to apply for registration u/s 12A and such application has to be considered by the Commissioner as per the procedure laid down u/s 12AA of the Act - The port trust under the Act would control the activities at a major port for utilizing and creating facilities - Agencies utilizing such facilities would pay charges to the port trust at the rates specified with prior sanction of the Government - It would be open for the Board to utilize the money credited to the general account for the purposes mentioned in sub-section(1) of section 88 - Such purposes include the administrative expenses and salary and other benefits to be paid to the employees and also the cost of repairs and maintenance of the property of the Board and other expenses – the assessee is involved in an activity which is of general public utility is doubtless - the fact that there is no profit making or motive to make profit is equally clear from the provisions of the Act of 1963. Following Commissioner of Income-tax vs. Gujarat Maritime Board [2006 (7) TMI 102 - HIGH COURT, GUJARAT] and Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation [1986 (3) TMI 1 - SUPREME Court] - the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax - section 10(20) of the Act and section 11 operate in different spheres - Even if the Board has ceased to be a “local authority”, it is not precluded from claiming exemption under section 11(1) of the Act. Whether the conditions for exemption under section 11 are satisfied or not, are the issues which need to be examined only at the time of assessment. However, the assessee in the facts of the present case cannot be denied registration under section 12A of the Act - Decided against Revenue.
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2014 (5) TMI 400
Deletion of penalty u/s 271(1)(c) of the Act – Computation u/s 115JB of the Act – Concealment of particulars – Held that:- Tribunal was of the view that Concealment Assessment u/s 115JB loss under normal provisions Assessee's income computed as per the normal procedure was less than the income determined by legal fiction namely, book profit u/s 115JB and thus income was assessed u/s 115JB and not under the normal provisions - Though there was concealment, it had repercussion only when assessment was made under the normal procedure - Assessment as per the normal procedure was not acted upon - It is the deemed income u/s 115JB which has become the basis of the assessment - tax was paid on the income assessed u/s 115JB - the concealment did not lead to tax evasion at all penalty u/s 271(1)(c) could not be imposed in respect of the false claim of depreciation. The assessee would pay before and after additions would remain exactly the same - the Commissioner did not permit any increase in the assessee's book profit computation u/s 115JB of the Act, even after unearthing the concealed income, the assessee ended up paying the same amount of minimum alternative tax u/s 115JB of the Act even after the concealments were unearthed and accepted by the assessee - the implication of Explanation 4 to section 271(1) of the Act must be seen - the assessee's tax liability did not change despite unearthing of concealed income, no penalty could have been levied - simply because before and after the additions the assessee remained a MAT company and paid tax u/s 115JB of the Act or such similar provision, that by itself would mean that no penalty could be imposed - If the effect of the addition of the concealed income results into higher minimum alternative tax by increasing the book profit also, penalty could as well be imposed – Decided against Revenue.
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2014 (5) TMI 399
Addition to be sustained or not - Accrual of income - Advisory fees – Difference between the amount of investment advisory fees computed – Maximum rates specified under regulation 52(2) of the Securities and Exchange Board of India (Mutual Fund) Regulation – Held that:- Franklin Templetion Asset Management (India) Pvt. Ltd. [2011 (9) TMI 39 - BOMBAY HIGH COURT] - the Tribunal's view cannot be said to be suffering from any perversity or error of law apparent on the face of the record - The revenue has been unable to point out anything to the contrary or order of the superior Court – thus, no substantial question of law arises for consideration – Decided against Revenue. Depreciation at 60% on peripheral devices – Held that:- Tribunal was rightly of the view that all the items that are referred to in the order of the AO are used along with the computer system of the assessee company - the peripherals are used in the computer - the components are ancillary and used along with the computer – Decided against Revenue.
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2014 (5) TMI 398
Ambit and scope of section 80IB of the Act – Held that:- Following DCIT Versus Cello Stationery Products [2010 (2) TMI 810 - ITAT, Mumbai] - the existing financial results of the Assessee and other manufacturing concerns with their financial results need to be compared with the situation of absence of marketing or sales concern - the profit of the manufacturing concern would have been higher by the amount of profit actually earned by the marketing concern - The manufacturing concern would have claimed deduction u/s 80IB on such higher amounts of profit and the Revenue could not have resisted it - the Revenue's assertion that the marketing concern was floated with a view to claim higher deduction u/s 80IB, is baseless – no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 397
Disallowance of bogus lorry hire expenses – Failure to produce documents – Information u/s 133(6) of the act cannot called - Held that:- If the broker has not replied to the letter of the AO, no adverse inference can be drawn against the assessee - the payment is not routed through the broker - he is not in a position to reply - where the letter issued to the broker is returned unserved - Merely because the broker has shifted from one place to another or has closed his business or has not received the letter, no adverse inference can be drawn against the assessee - no satisfactory explanation has been given by the assessee in respect of the difference - CIT(A) ought to have sustained the disallowance of lorry hire expenses – thus, the order of the CIT(A) is modified and the disallowance out of lorry hire expenses amounting to Rs.12,000 is sustained – Decided partly in favour of Revenue.
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2014 (5) TMI 396
Addition made u/s 69 of the Act – Jurisdiction of the AO - Re-opening of assessment u/s 143(3) r.w.s. 147 of the Act – Insufficient evidences - Held that:- Revenue could not bring any cogent material evidence on record to show what happened in the case of other named persons - the presumption u/s 132(4A) is in respect of person in whose possession the books of accounts and other documents etc. are found - diaries were found during the course of search in the case of Dr. D.Y.Patil Group premises presumption may be valid against that group but cannot be stretched to the assessee - The provisions of section 69C of the Act clearly show that it was for the revenue to first establish that the assessee has incurred certain expenditure and then the assessee does not offer any explanation about the source of such expenditure - the assessee has paid Rs.1,60,000/- to M/s Ramarao Adik Education Society - revenue has grossly failed to demonstrate that the assessee has paid donation /capitation fees for the admission of her son to Dr.D Y Patila Medical College - the additions cannot be sustained on the strength of insufficient evidence - The finding of the CIT(A) is reversed – Decided in favour of Assessee.
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2014 (5) TMI 395
Enhancement of fair market value of land – Valuation done by DVO – Re-calculation of LTCG – Held that:- There was no infirmity in the order of CIT(A) - after the set aside of the matter by the ITAT, the AO got the property valued from the DVO of the Income tax Department - The valuation report was received by him during assessment proceedings but ignoring the valuation report, he estimated the fair market value of the land as was done originally - CIT(A) has rightly pointed out that there is a specific provision u/s 55 of the Act - once the valuation report is obtained by the Assessing Officer, it is binding on him - The CIT(A) has only directed the AO to re-compute the capital gain as per the report of the DVO – there was no reason to interfere in the order of the CIT(A) - Decided against Revenue.
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2014 (5) TMI 394
Accrual of income – Element of income where credit of TDS has been claim on receipt basis - Distribution of incentives on behalf of KBPL – Held that:- CIT(A) was rightly of the view that the reimbursements made for the quarter ending 30-06-2007, have been reconciled with the bank account of M/s Zebaish and with the bank statement of M/s KBPL - claim of credit for the tax deducted does not make the assessee “bound” to pay tax on the receipts, unless such receipts constitute income in his hands - the assessee produced books of A/Cs about its retainer ship business; agreement and confirmation from KBPL - Its activity as a retainer-ship which includes distribution of incentives is not denied - The arrangement has not been held to be non-genuine or sham – thus, there is no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 393
Disallowance of interest expenses – Held that:- CIT(A) was rightly of the view that the assessee is charging more % of interest on the advances given than what he is paying on the loans taken – there was no reason as to how the AO has calculated and why the addition has been made when the facts are just opposite as has been observed by the AO - the addition made by the AO does not have any basis and is factually wrong appreciation of the facts - the assessee company has own money in form of share capital, reserve & surplus and profit earned during the year - The interest charged from the sister concern as per the prevailing market rate - they have also assessed to tax (in same tax bracket) and there is no loss of revenue - The CBDT has issued circular on this issue, wherein it has been decided by the Board that no addition should be made where the sister concerns fall in the same tax bracket – revenue has not controverted the findings of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 392
Deletion on account of unproved sundry creditors – Held that:- The amounts were all opening balances and during the year under appeal no amount was credited in the books of account – the credited balances were not written off - it was found that there was variation in balances of those parties from 2004-05 to 2008-09 which clearly indicate that these sundry creditors were alive – CIT(A) was of the view that the credit amounts can neither be treated as cessation of liability u/s. 41(1) nor can be added u/s. 68 of the Act – the order of the CIT(A) is upheld – Decided against Revenue. Disallowance of salary and wages – Proper check over the expenses – Held that:- CIT(A) was of the view that there is no need to make any addition on ad-hoc basis on the account simply stating that reasons that the vouchers were not made by the party – there was no infirmity in the finding of CIT(A) while allowing disallowance made by AO – Decided against Revenue. Addition of unexplained amount – Held that:- CIT(A) was of the view that the assessee was of the view that the difference was not on account of cessation of liability, it will not fall u/s 41(1) of the Act - no other section can bring such differences into tax since the amount of difference was a balance-sheet item and not debited to profit and loss account at any earlier point of time - it was not excess money received by any party but it was excess money paid and since assessee has not made any claim to these expenses, this addition was not called for - thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 391
Disallowance of educational expenses of director – Held that:- Relying upon Commissioner of Income-tax Versus Ras Information Technologies (P.) Ltd. [2010 (7) TMI 670 - KARNATAKA HIGH COURT] - expenses incurred by assessee-company on the foreign education of Sri Goenka whole time director of the company, be treated as business expenditure of the assessee - addition made by AO and sustained by CIT(A) disallowing the expenses is set aside – Decided in favour of Assessee. Addition of TDS already written off – Held that:- Following M/s. Ricoh India Limited Versus The Dy. Commissioner of Income-tax [2013 (11) TMI 273 - ITAT MUMBAI] - except for internal documents, there is no material on record to indicate as to why so many parties refused to issue TDS certificates to the assessee after duly deducting the same - No reason worth the name has been stated as to why the assessee did not take any action as prescribed under the law against such erring parties – Decided against Assessee.
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2014 (5) TMI 390
Claim of deduction u/s 54F of the Act – Held that:- Following Shri Mohd. Imamuddin, Narsingi Village and Others [2014 (5) TMI 264 - ITAT HYDERABAD] - provisions of section 54F are that if the assessee being a individual or HUF, the capital gain arises from transfer of any long term capital asset not being a residential house and the assessee has, within a period of one year before or two years after the date on which the transfer takes place, purchases or, has within a period of three years after that date constructed a residential house, the capital gain will not be charged to the extent of cost of new asset if the entire net consideration is invested or proportionate to the extent of new asset bears to the net consideration if the conditions laid down u/s. 54F are fulfilled the assessee is entitled for deduction u/s. 54F - the onus is on the assessees to prove that the claim made by them u/s. 54F is in accordance with law - the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (5) TMI 389
Rejection of registration u/s 12AA of the Act – Held that:- The DIT(E) is not justified in directing the assessee to obtain registration from the Competent Authority of Government of Andhra Pradesh u/s. 43 of the A.P. Charitable & Hindu Religious Institutions & Endowments Act, 1987 and furnish a copy of such order of registration in his office for record, within a period of 6 months from the date of receipt of the impugned order - There is no provision u/s. 12AA of the Act to seek registration from the Competent Authority of Government of Andhra Pradesh u/s. 43 of the A.P. Charitable & Hindu Religious Institutions & Endowments Act, 1987 so as to grant registration u/s. 12AA of the Act by the DIT(E) - the DIT(E) is directed to grant registration u/s 12AA of the Act – Decided in favour of Assessee.
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2014 (5) TMI 388
Scope of section 269SS of the Act – Journal entries – Penalty proceedings u/s 271D of the Act – Held that:- Following Smt. C. Swapna, Hyderabad [2014 (4) TMI 71 - ITAT HYDERABAD] - The assessee challenged the penalty proceedings initiated u/s 271D of the Act on the ground of illegal borrowings in contravention of section 269SS of the Act - there is no proof of receipt of such loan from the records and they were only found to be journal entries - relying on an entry in the journal, no penalty proceedings can be initiated - the CIT(A) have followed the order of the coordinate bench and the AO is directed to verify and delete the penalty in case it is found as merely journal entries and no cash loans was taken - there is no infirmity in the order of the CIT(A) – thus, the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (5) TMI 387
Estimation of income – Low GP declared – Rejection of Books of accounts - Entitlement for deduction u/s 80C and 80D of the Act – Held that:- Assessee contended that the rate of net profit is very low on the reason that earlier year job work charges were included in the trading account and for this assessment year it was accounted in Profit and Loss A/c - even if the argument of assessee is accepted, the net profit rate cannot go so less at 0.54% - the expenditure is not properly vouched and also assessee has not given proper explanation for low gross profit - estimation of income on the basis of gross profit is not proper - The AO should have compared the net profit rate of previous years for the discrepancies noticed in the books of account of the assessee. Considering the discrepancies in the books of account rejection of books of account is proper - estimation of income of the assessee on the basis of the gross profit is not proper – thus, the order is modified and the AO is directed to estimate the income of the assessee on the basis of average net profit rate for AYs. 2007- 08 and 2008-09 as the past records could be the basis for estimation of income of the assessee – the AO is directed to estimate income of the assessee at 1.22% of gross receipts - there cannot be any addition after estimating the income of the assessee - The assessee shall produce necessary details before the AO regarding the claim for deduction u/s. 80C and 80D of the Act – Decided partly in favour of Assessee.
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2014 (5) TMI 386
Disallowance u/s 40(a)(ia) of the Act – TDS on Reimbursement of expenses – Held that:- Though assessee submitted before the CIT(A) that the amounts are reimbursement and also CIT(A) accepted – but, the issue was not examined in correct perspective - If the amounts are to be spent by the retail dealers, assessee has to submit separate debit notes duly supported by the individual vouchers of the retail dealers - the original expenditure being incurred by the retailers, assessee acts as an agent - as per the agreement assessee has to forward the individual vouchers signed by the retail dealers with their seal and also with APBCL invoice for reimbursement of the expenditure to the retail dealers - No evidence was placed as to what assessee got from the company was reimbursement of expenditure incurred by the retailers - AO is directed to establish whether the amount is expenditure by the assessee or reimbursement of expenditure on behalf of the retailers and in case, if it is an expenditure by the assessee, whether provisions of TDS are attracted and if so, to what extent of the payments made by the assessee to various dealers - thus, the matter is required to be remitted back to the AO for adjudication – Decided in favour of Revenue.
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2014 (5) TMI 385
Admission of additional evidence under Rule 46A of the Rules - Treatment of income receivable – Income from letting out of property - Whether the lease rental income received by the assessee is to be assessed under the head “Business” or under the head “Income from Other Sources – Held that:- There is no merit in the Revenue contention as the action of the AO in excluding income from business and assessing the same under the head “Other Sources” is not proper – the order of the CIT(A) is upheld that income has to be considered as business income - whether the income was treated as business income or income from other sources there is no effect on computation of income - Unless the income is taken under the head “Income from House Property ” working of income does not vary whether income is considered under the head “Business” or “Other Sources” - CIT(A) did not admit any of the additional evidence as contended by the revenue – Decided against Revenue.
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Customs
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2014 (5) TMI 407
Valuation - Importation of certain goods from foreign principals and selling in India – Influence of relationship with the supplier on the price – Non-production of Price List of unrelated suppliers and not to their 100% subsidiaries - Held that:- Price list is one which indicates prices of the goods at which the goods are available to any buyer who is not related to the seller of such goods - In the present case, as is indicated on the price list, the prices are applicable only for Kemper (India) - Goods are not available on such price to unrelated buyers in India or abroad - The importer has not been able to produce any price list of the supplier, which is applicable to unrelated persons (and not to their 100% subsidiaries) - The so called price list meant for Kemper (India), Kemper (China) or Kemper (Japan) is of little utility in determining the issue. The analysis by original authority is purely based upon the balance sheet and profit & loss account - It would have been more appropriate if the original authority would have done analysis as per Rule 7 of the Customs Valuation Rules, i.e. starting from sale value in India and working out backward - Without doing any analysis or any data supporting certificate from the supplier, the Assistant Commissioner seems to have concluded about the prices under Rule 8 (or Rule 7A under old Rules) of the Customs Valuation Rules, 2007 – It is also noted that the first appellate authority also has not done any analysis but on certain grounds, has only set aside the order of the original authority - Both the orders and remand are set aside - Whole matter remitted back to the original authority for analyzing the data in proper perspective and then come to the conclusion – Decided in favour of assesse.
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2014 (5) TMI 406
Bar of Limitation - Entitlement for Refund of Duty – Section 27 Customs Act, 1962 - Non-challenge of Orders finalizing provisional assessment – Held that:- The orders finalizing provisional assessment have not been challenged at all and they have attained finality - In respect of the two orders wherein the authority who finalized the whole assessment has observed that the refund will be subject to Section 27 - Irrespective of the legal provisions, the orders became binding on the importer and as a result, rejection of refund claims on the ground that same are time-barred in accordance with Section 27 cannot be found fault with - The appeal filed by assessee in respect of into-bond Bills of Entry No. 1546 deal with in O-I-O No. 73/2006, dated 2-6-2006 holding eligibility of refund of Rs. 5,75,256/- and O-I-O No. 72/2006, dated 2-6-2006 finalizing Bills of Entry Nos. 204006, 204167, 204927, 205181, 205776, 205883, 206378, 206717, 207187, 207460, 207711, 209274 and 210446 involving refund of Rs. 44,45,425/- have to be held as final and in respect of these two refund claims, appeal is rejected and appellants are held to be ineligible for refund on the ground that the refund claims were filed beyond 6 months from the relevant date – Decided against Assessees. Bar of Limitation - Entitlement for Refund of Duty – Section 27 Customs Act, 1962 – Held that:- Authority finalizing the provisional assessment did not specifically indicate that the refund is subject to Section 27 - Relying upon CC v. Indian Oil Corporation [2012 (1) TMI 31 - DELHI HIGH COURT ] - Prior to 18-4-2006 (the date on which Section 18 was amended) the importers were eligible for refund without filing a refund claim - The authority finalizing the provisional assessment was legally bound to refund the excess amount without any application from the importer - Rejection of these refund claims on the ground that they were time-barred cannot be sustained - The refund claims have to be decided in accordance with the provisions of Section 18 as it existed on the dates when the assessment was finalized in accordance with law - Therefore, refund claims dealt with remaining three orders viz. O-I-O No. 79/2006, dated 9-6-2006, No. 81/2006, dated 14-6-2006 and No. 27/2006, dated 5-4-2006 – Matter remanded back to original adjudicating authority – Decided in favour of assesse.
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2014 (5) TMI 405
Waiver of pre-deposit - Importation of capital goods – 100% EOU - Section 112A(ii) of the Customs Act, 1962 - Held that:- The only grievance of the department is that LOP was not there at the time of import of capital goods - The same was regularized by Development Commissioner - The licence for warehousing is found valid and the goods are also within the period of warehousing – Therefore, assessee has made out a prima facie case for waiver of pre-deposit - Thus, requirement of pre-deposit is waived of all dues adjudged against assessee and stay recovery thereof during the pendency of appeal - Stay petitions are allowed – Decided in favour of assessee.
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Service Tax
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2014 (5) TMI 425
CENVAT Credit - Cleaning service - Nexus with manufacturing activity - Held that:- From the documentary evidence available on record, it is clear that the cleaning service has been undertaken in the factory premises of the appellant. It is nobody’s case that cleaning services are not required in a factory and has nothing to do with the manufacturing activities. The manufacturing activities require not only inputs and capital goods but also on the hygienic atmosphere prevailing in the factory premises. Therefore, it is a pre-requisite for the manufacturing activity and is integrally connected with the manufacturing activity. Hence, it is an eligible “input service” as defined under Rule 2(l) of Cenvat Credit Rules, 2004 - Following decision of CCE, Raipur v. H.E.G Ltd. [2010 (6) TMI 306 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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2014 (5) TMI 424
Supply of Tangible Goods Service - operational control - cleaning service - Held that:- it is seen that the invoices have been raised for hiring of equipment. The learned counsel has clarified that in the case of hiring of equipment, it is MUSCO who had the control over the equipment and the appellant has merely hired the equipment to MUSCO. They did not provide any operators for operating the equipment nor did they undertake any activity using the equipment. If these facts are correct, then the activity of hiring of the equipment would not come under the category of supply of tangible goods for use. The said service envisages operation and control of the equipment or capital goods with the service provider. In the absence of operational control in the hands of the service provider, the service cannot be classified under “supply of tangible goods for use”. Similarly, with regard to the other activities undertaken by the appellant such as cleaning service, from the nature of the activity undertaken, it appears that the same involved excavation work also. If that be so, the activity would not be classifiable as a cleaning service. Since the factual position is not clear, we are of the considered view that the matter has to go back to the original adjudicating authority for fresh consideration for ascertaining the facts and thereafter decide the classification of service - matter remanded back - Decided in favour of assessee.
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2014 (5) TMI 423
Waiver of pre deposit - Cleaning service - cleaning the residential area i.e. township other than main hospital - Held that:- As per the cleaning activity as provided under Section 65(24b) of the Finance Act means “cleaning, including specialised cleaning services such as disinfecting, exterminating or sterilising of objects or premises, of :- (i) commercial or industrial buildings and premises thereof; or (ii) factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof, but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying - cleaning of township is not, prima facie, covered under the cleaning activity therefore prima facie the applicant has a strong case in its favour. Therefore the pre-deposit of dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.
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2014 (5) TMI 422
CENVAT Credit - service tax paid on banking and other financial services - Held that:- The underlying principles in Circular dated 29-04-2011 are applicable with equal force for services for which total credit was available prior to 01-04-2011 but only proportionate credit is available after 01-04-2011. Therefore, we grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal. Further, there shall be stay on collection of such dues during pendency of the appeal - Stay granted.
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2014 (5) TMI 421
CENVAT Credit - Revenue contends that when there is change in classification of the service provider and the service provided become exempted one, no cenvat credit shall be admissible - Assessee contends that what that is the classification in the hands of the service provider is of no relevance of the service recipient - Held that:- Nowhere the order shows about non-payment of Service Tax. It may be stated that nothing due to State cannot be collected and every due to the State cannot be sacrificed. Once the Service Tax element in terms of the aforesaid pages has come to treasury, there is no bar to grant Cenvat credit which pertains to the service availed by the appellant without any dispute of use in manufacture - Decided in favour of assessee.
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2014 (5) TMI 420
Waiver of pre deposit - cleaning service/housing keeping service - Held that:- Section 11 of the Factory Act cast a legal duty on the factory owner to maintain cleanliness in the factory. Therefore, prima facie expenses incurred on house keeping and cleanliness of the factory is incidental to manufacture of cylinder head/block casting etc. Thus, we are of the considered view that appellant has been able to make out a prima facie case for waiver of the pre-deposit condition - Stay granted.
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2014 (5) TMI 419
Demand of service tax - C & F are agent services - Held that:- Failure on the part of the assessee to produce agreement copies cannot result in confirmation of demand. The facts have to be seen. It is the Revenue who has alleged the activities of the appellants as C & F agent activities and as such onus is upon them to show that the said activities are covered under the said category. We find that the show cause notice very clearly mentions that the appellant is engaged in trading activities on behalf of their client and are charging commission from their clients. The notice proposes to hold the said activity of trading as falling under C & F category. We find that definition of C & F agent as is given under Section 65(25) of Chapter V of the Finance Act, 1994 refers to the activities which are much more that the mere procurement of orders for the clients on commission basis. The Circulars issued by the Board, on the basis of which trade notice were issued by various Commissionerates, details the said activities as covering receiving of the goods from principal, warehousing goods received, dispatching the goods from the principal, arranging dispatch of goods as per the directions of the principal, maintaining record of receipt, dispatch of the goods and stock available at the ware house and preparing facts on behalf of the principal. As such, it is seen that the definition covers various activities required to be undertaken by C & F agent and mere procurement of orders on commission basis, by itself would not get covered under the clearing and forwarding agent services. There is no allegation in the show cause notice to the effect that the appellant was undertaking such activity on behalf of their client. It was held that the expression ‘directly or indirectly’ and ‘in any manner’ in the definition of ‘Clearing and Forwarding Agent’ services is not to be isolated from the activity of C & F operations. And after taking into consideration the definition as also the Board’s Circular, it was held that mere booking of orders for the principal by an agent on commission basis is not covered under C & F agent services. - Decided in favour of assessee.
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2014 (5) TMI 418
CENVAT Credit - Cenvat credit of Service Tax on the value of the input services used for trading activity - Held that:- Even if the services, in question, were common input services for manufacturing as well as trading activity and trading is treated as an exempted service, since Cenvat credit is available in respect of manufacture of dutiable final product or providing of taxable services, the Cenvat credit could be denied only in he proportion to the extent the input services had been used in or in relation to the trading activity. Moreover, when the appellant were filing returns in respect of their manufacturing activity as well as trading activity, we are of prima facie view that the department cannot be unaware of the fact that the appellant were engaged in both the activities from the same premises and the Department could not be unaware of the fact that they had availed Cenvat credit in respect of services which could be common inputs for both the activities. However, even if the extended period is not invoked, still the entire demand would not be time- barred. In view of this, this is not the case for total waiver as the appellant would not be eligible for Cenvat credit in respect of input services used in or in relation to trading activity. - Conditional stay granted.
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2014 (5) TMI 417
Demand of service tax - Foreign service provider - Held that:- The period of dispute in this case is from 1-7-2003 to 31-12-2004. There is no dispute that the service provider is a U.K. based company not having any office or establishment in India, and it has provided the taxable service, in question, to their client in India, M/s. Goeteze (India) Limited. It is alleged that the appellant during the period of dispute by making available to M/s. Goeteze (India) Limited certain technical information for manufacture of certain product and permitting them to the use of their brand name within certain territory, have provided business franchise service and, therefore, the royalty charged by the appellant from M/s. Goeteze (India) Limited (sic) would attract service tax. During the period of dispute, there was no provision for recovery of service tax from a foreign/offshore provider in case where any taxable service has been provided by a foreign/offshore service provider to a person in India. On the contrary, in terms of the provisions of Rule 2(1)(d)(iv) of Service Tax Rules, 1994 in such situation, it is the service recipient in India who is liable to pay service tax. Subsequently a Notification No. 36/2004-S.T. dated 31-12-2004 effective from 1-1-2005 was issued under Section 68(2) of the Finance Act, 1994 specifically making the service recipient in India liable to pay service tax when service is received from a non-resident foreign service provider not having any office or business establishment in India. Thus, throughout during the period of dispute, there was no provision under which the service tax could be recovered from a foreign/offshore service provider, rather as per the provision of service tax rules it is the service recipient in India who is liable to pay service tax. Moreover, the provision of Finance Act, 1994 cannot be extended beyond the territory of India for demanding service tax from a foreign service provider - Decided against Revenue.
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Central Excise
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2014 (5) TMI 412
Waiver of pre deposit - Company declared as sick unit - Financial hardships - Bar of limitation - Held that:- issue is pending since 1994. Several orders have been passed by different authority at different stages. The tribunal's order requiring the entire amount by way of pre-deposit was never challenged by the petitioners further. Such order passed in the year 2001, thus became final. The petitioner could not comply with the directions. The appeals were also dismissed. Several applications were filed for modification of stay order/ restoration of appeals. Such applications were also dismissed. Last of such applications was dismissed on 22.1.2014. More than 10 years have passed in the meantime. No explanation is coming forth why such belated approach should be permitted before the Court. Merely suggesting that the petition though filed was not moved or that because of financial difficulties, the petitioner could not approach the High Court, would not be sufficient - Decided against assessee.
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2014 (5) TMI 411
Restoration of the appeal - Held that:- it is no doubt true that the appeal filed by the petitioner no.2 before the tribunal stood dismissed on the basis of an application filed in this regard. The Four Corners of the applications would reveal that a specific stand was taken by the petitioner no.2 that the appeal is incompetent having abated on the death of the proprietor. The tribunal recorded the abatement by relying upon the statement made by the petitioner no.2 in the said application. It is indeed true that the appeal was taken out by the petitioner no.2 and not by the deceased proprietor and, therefore, the recording of an abatement even on the basis of the application taken out in this regard is a mistake committed by the tribunal. The petitioner was advised that the demand upon a deceased proprietor would perish automatically after the constitution of the partnership firm which has a separate legal entity. In fact, on the aforesaid plea, the earlier writ petition was filed before this Court which stood dismissed with a categorical finding that mere conversion of the proprietorship concern into a partnership firm does not evaporate the liability of the erstwhile concern. The petitioner tried to take shelter under a mistaken advice and also deriving a clue from the correction made in an order passed in an earlier writ petition. Section 35C does not provide for condonation of delay in making out an application beyond the stipulated period of six months from the date of the order. When the statute has provided the maximum period of limitation, the tribunal cannot pass an order condoning the delay of more than the prescribed period in absence of any express power to do so. Equally the Court cannot direct the authority to act contrary to the law - Decided against assessee.
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2014 (5) TMI 410
CENVAT Credit - Whether the respondents are eligible to avail CENVAT credit for the service tax paid on freight for outward transportation from the place of removal during the period January 2005 to June 2007 - after considering the decision of the Larger Bench of the Tribunal in the case of ABB Ltd. (2011 (3) TMI 248 - KARNATAKA HIGH COURT) held that CENVAT credit is eligible on service tax paid on GTA service prior to 1.4.2008. The Hon’ble Gujarat High Court [2011 (4) TMI 975 - GUJARAT HIGH COURT] is also of the same view. I find that the decisions of the Hon’ble Karnataka High Court and Hon’ble Gujarat High Court are squarely applicable in the present case. The decision of the Hon’ble Calcutta High Court in the case of Vesuvious India Ltd. (2013 (12) TMI 1025 - CALCUTTA HIGH COURT), as relied upon by the learned AR, has only granted temporary stay - Decided against Revenue.
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2014 (5) TMI 409
CHA Services - input services - nexus with manufacturing activity - Whether the service tax paid by the applicant on the CHA services availed by them is admissible or not - Held that:- Definition of input service given in Rule 2 (1) of the Cenvat Credit Rules, 1994 is quite comprehensive. However, every assessee taking cenvat credit of input service has to establish that such services are utilized in relation to manufacturing active ity. In the event of CHA services availed by appellants, it was required to be shown that these services are utilized for clearance of inputs under specific bills of entry in order to establish that such services are utilized in bringing raw materials etc. by the respondents. In absence to such correlation, simply a C.A. Certificate cannot be made as a basis for allowing cenvat credit - Decided against assessee.
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2014 (5) TMI 408
Waiver of pre-deposit of duties - CENVAT Credit - Held that:- adjudicating authority has recorded detailed findings as regards authenticity of the notebook, statements of the transporter, director and the employee. The evidences relied upon by the adjudicating authority needs to be appreciated with the defence taken by the appellant in the grounds of appeal, which will take considerable time as the defence taken by the appellant seems to be diagonally opposite to the findings recorded by the adjudicating authority. This can be done only at the time of final disposal of appeals. appellants have not made out a case for complete waiver of the amounts of duty confirmed by the adjudicating authority. Keeping in mind that the appellant has already deposited an amount of Rs 32 lakhs during the course of investigation - Conditional stay granted.
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CST, VAT & Sales Tax
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2014 (5) TMI 416
Eligibility for Input Tax credit – ‘Other similar fuels’ – Classification - Section 67(4) of AP VAT Act r/w Section 245S of Income Tax Act – Advance Ruling Authority (ARA) Decision – Binding on 3rd parties or not – Interpretation of Statute - Whether decision of the ARA will bind the third parties or not – Held that:- According to Section 67(4), decision of the ARA would be binding- on the applicant who had sought for clarification, on all the officers other than the Commissioner and in respect of the goods or transactions in relation to which a clarification was sought – Therefore, the decision of the ARA will be binding upon any dealer, even though he has not applied for ruling, if he deals in the same goods in relation to which the decision has been rendered - Since the literal reading of the above statutory provisions emerges an intelligible result, the Court cannot interpret the same in other way - Where the words of the statute are clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule. When the Legislature makes a provision not intending to apply the principles of natural justice, this has to be accepted howsoever unpleasant it is - The intention of the Legislature is to be gathered from the language employed having regard to the context in connection with which it is employed - The primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself – Relyied upon Unique Butyle Tube Industries P. Ltd. v. U.P. Financial Corporation [2002 (12) TMI 508 - SUPREME COURT OF INDIA] - In M/s. Hindustan Unilever Limited, the ARA has given a decision that the LPG is one of the categories of other similar fuels, hence, the said amended Rule is applicable in order to disqualify any dealer to get the input tax credit - Therefore, going by the aforesaid interpretation, although the petitioners are non-applicants, the decision is binding upon them. Applicability of Section 245S of Income Tax Act – Held that:- The persons, who shall be bound by the said authority, are limited because the word 'only' after the word 'binding' makes it clear that it would be binding on the applicant who had sought it, thereby no other person, and again on the Commissioner and the other income tax authorities subordinate to him in respect of the applicant and the said transaction - Therefore, it is binding in case of particular transaction where any assessee or income tax authorities were the parties - It is very significant that the word 'goods' like in Section 67(4) of the Act is missing in Section 245S of the Income Tax Act. The Legislature is deemed to intend and mean what it says - The need for interpretation arises only when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature Relied upon ITC Ltd. v. Commissioner of Central Excise [2004 (9) TMI 103 - SUPREME COURT OF INDIA] - Therefore, the Court cannot intend otherwise than the Legislature - The Courts should not add words to statute or add words into it, which are not there, especially when a literal reading thereof produces an intelligible result - Even if there is a defect or an omission in the statute, the Court cannot, ordinarily, correct the defect or supply the omission (Refer Satheedevi v. Prasanna [2010 (5) TMI 758 - SUPREME COURT] - Therefore, provision of the statute has to be accepted and applied as it is - The decision means, decision rendered on the ratio and that part is binding - Such decision or judgment of the Supreme Court or High Courts in a particular point of law is binding upon not only the parties thereto but also the non-parties on a similar identical point although they are not heard - In view of the foregoing discussion, it is hold that decision of ARA rendered on the application of Hindustan Unilever Limited in AR.Com.6/2011 is binding upon other non-applicant dealers who are dealing in LPG until it is set aside. Impact of ARA decision - Pendency of appeal - Whether the pendency of appeal against the decision of ARA before appropriate Tribunal has got any impact as to applicability of the same – Held that:- In view of proviso to clause (iii) of Section 67(4) if the dealer, at whose instance the ruling was rendered, files appeal, the binding effect of the same ceases temporarily – Relying upon TIRUPATI CHEMICALS [2010 (11) TMI 864 - ANDHRA PRADESH HIGH COURT] - The said decision of the ARA, so long as the appeal is not decided, cannot be enforced though it is binding, meaning thereby, it operates as stay automatically - Since the Hindustan Unilever Limited has already preferred an appeal and the same is pending, naturally the decision of the ARA will automatically remain stayed, but that does not mean that the decision is obliterated and erased, and so long as it is not set aside, it remains, but may not be operative - Thus the orders, which have been passed relying on the decision of the ARA, will not be operative to the extent of which reliance has been placed. Upon reading of the entire machinery of Section 67 of the Act, it appears that the petitioners, being non-parties in the said Advance Ruling proceedings, cannot prefer any appeal directly to Tribunal against the decision of the ARA thereunder, but their remedy lies to prefer appeal under Section 33 after preferring an appeal u/s 31 of the Act - The decision of ARA can be challenged before Tribunal in the appeal itself - Therefore, writ petitions are disposed of giving liberty to all the petitioners to resort to alternative remedy in accordance with law – This Court has not decided the case on merits nor decided the legality and validity of the decision of the ARA, since very subject is pending in appeal before Tribunal – Stay granted.
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2014 (5) TMI 415
'Penalty' – Whether the basic ingredient as contemplated under the provisions, particularly with reference to the element of 'mens rea' stands satisfied, so as to justify the penalty - Imposition of Penalty – Held that:- No interference was made by the Division Bench in W.A. No.514/2007 w.r.t. the question of 'penalty' and no observation or direction was ever given to the concerned authority in this regard - As such, the contention of the petitioner, that Ext.P11 order has been passed by the third respondent contrary to the mandate given by the Division Bench of this Court as per Ext.P9, is thoroughly wrong and misconceived; which fails and is rejected accordingly. The assessment proceedings and the penalty proceedings are distinct and separate - Petitioner brought to notice that, the first circumstance/ground as raised in Ext.P5 notice with reference to the term 'reverse tax' u/s 12 (4) of KVAT Act, in respect of the taking back of some of the goods after availing the rebate under the Entry Tax Act to places outside the State is correct or not - This is a matter which requires to be reconsidered with regard to the imposition of 'penalty' and the quantum, if any, by the third respondent - Accordingly, Ext.P7 order is set aside and STO is directed to re-consider the matter Writ petition is disposed of – Decided in favour of assessee.
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2014 (5) TMI 414
Whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment - Escapement of turnover - Order of Reopening of assessment – Order passed under the proviso to Section 21(2) of the U.P. Trade Tax Act - Material to form reason to believe - Excess stocks raw-materials and finished goods – Held that:- It is matter of record that in a search operation carried on by the Officers of Central Excise Department, a discrepancy was found with regard to raw-materials and finished goods on physical verification vis-à-vis as found in the accounts book - Whatever may be proceedings under the Central Excise Act, the fact remains that assessee has not been totally exonerated nor there is any such case in the writ petition - In a search operation, excess stocks of raw-materials and finished goods were physically found - Where and in what manner, the excess stock has been dealt with by the petitioner and where it has gone, remains unexplained - Relying upon Commissioner of Sales Tax, U.P. versus M/s Bhagwan Industries (P) Ltd., Lucknow [1972 (10) TMI 90 - SUPREME COURT OF INDIA] the relevant consideration at the stage of issue of notice is whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment - Whether that material is sufficient for making assessment or re-assessment u/s 21 would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. Effect of Repeal of U.P. Trade Tax Act on proceedings – Held that:- Learned counsel for Assessee in all fairness did not pursue the said argument when it was pointed out by learned Addl. Chief Standing Counsel that the issue stands settled against the petitioner by a Division Bench decision of this Court based on Supreme Court's decision – Therefore, there is relevant material on record to form a honest belief that the turnover of the petitioner has escaped taxation so as to justify the initiation of proceedings u/s 21 – There is no illegality or infirmity in the impugned order granting permission to the Assessing Authority to initiate re-assessment proceedings - The writ petition is dismissed – Decided against assessee.
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2014 (5) TMI 413
Whether talcum powder includes ‘prickly heat powder’ or otherwise what is the rate at which the prickly heat powder should be taxed - Rate of Tax - Classification - "nycil prickly heat powder" – Entry 20-A of Part C or Entry 1(iii) of Part F of Schedule 1 of Tamil Nadu General Sales Tax Act, 1959 – Held that:- the nycil prickly heat powder, which is used only to absorb sweat and moisture from the body and to keep away rashes in the human beings, cannot be considered to be either a "drug" or "medicine" and it would be only a "talcum powder" - However, in view of the composition, the nycil prickly heat powder is nothing but a medicinal preparation used for the purpose for which the talcum powder is used. There is no dispute that the nycil prickly heat powder is manufactured on the basis of a drug licence issued under the provisions of the Drugs and Cosmetics Act - The price of the product is also regulated, approved and the product is stored under the drug licence - It is very pertinent to note that a similar product manufactured by another assessee, which also claimed that the nycil prickly heat powder is a drug or medicine under the relevant Entries to the Kerala General Sales Tax Act in Heinz India Ltd. v. State of Kerala [2008 (9) TMI 845 - KERALA HIGH COURT] -The Kerala High Court very extensively considered the medicated talcum powder after going through the various definitions of "drug", "medicine", "cosmetic" and "talc", and ultimately came to the conclusion that the medicated talcum powder includes prickly heat powder - The Kerala High Court rejected the contention as to the theory of medicine and also after considering the basic ingredients of prickly heat powder, came to the conclusion that the base product is only a purified talc. This Court is also of the view that after considering the explanation to the main entry, it is only a medicated talcum powder and it certainly includes prickly heat powder also – This Court agrees with the reasoning of the Kerala High Court and hold that the nycil prickly heat powder is not a "drug" and it is only a medicated talcum powder - Accordingly, the issue in favour of the Revenue and against the assessee - Orders of the Tribunal set aside and restore the orders of the assessing authority - Revisions are allowed – Decided in Favour of Revenue.
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