Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 19, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
PMLA
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Reassessment u/s 147 / 148 - question is of acquisition of jurisdiction which is a mandatory requirement of the Act. - action can not be rectified u/s 292BB - AT
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Assessee advanced the sum to its sister-concern only and that too in the nature of loan and not as a trading advance. - Amount not recovered - neither bed debt nor business loss - AT
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Education trust - corpus fund - AO was not justified in holding contributions towards different corpus funds as current income liable to tax. - AT
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Disallowance u/s 40A(3) - 20% of the expenditure made in cash - payment made towards advance - decided in favor of assessee - AT
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Disallowance u/s 40(a)(ia) - TDS u/s 194C - C & F agents services - reimbursement of expenses - services procured from others to fulfil his own contract
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U/s. 35AC, read with Explanation (b) thereto of the IT Act, 1961 - Eligible projects or schemes, expenditure on - Notified eligible projects or schemes - Notification
Customs
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Exemption on Re import - notification no. 94/96-Cus dated 16.12.1996 -
Benefit of said notification would not be available in a case where any goods exported are re-imported after fitment to and assemblage with other goods
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Amends the Handling of Cargo in Customs Areas Regulations, 2009 - Notification
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Appointment of Common Adjudicating Authority - Notification
DGFT
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Treatment of Capital Goods sourced from SEZ and import of spares for such Capital Goods under EPCG Scheme – Para 5.2A of FTP– reg. - Circular
Indian Laws
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Money laundering - attachment of property owned by or in possession of a person, other than a person charged of having committed a scheduled offence - expressions - person; proceeds of crime; property and transfer - Constitutional validity upheld
Service Tax
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Adjustment of excess amount of service tax paid - Scope of the term subsequent period
Central Excise
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Cenvat Credit - Collection of amount @8% or 10% on exempted goods - Demand under Section 11D of the Central Excise Act not sustainable.
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Clarification regarding classification of Structural Components of Boiler and Admissibility of CENVAT Credit on these Structural Components, reg- - Circular
Case Laws:
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Income Tax
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2012 (5) TMI 239
Deemed Divided - Assessment order u/s. 144 r.w.s. 147 - Notice u/s 148 - held that:- in reopening of a completed assessment there is nothing arbitrary about any of these provisions and that rigorous checks and controls have been provided on the exercise of power by the AO to initiate an action for re-assessment. In the forefront of these checks and controls is the requirement of the section 148 of the Act to issue proper notice. Application of section 292BB - held that:- On plain reading of section of 292BB we find that the said section is in respect of certain procedural lapses in respect service of notice, but in the case under consideration the question is of acquisition of jurisdiction which is a mandatory requirement of the Act. The CIT(A) discussed this aspect of the matter of "irregularity" and "nullity" in detail. No consent can confer jurisdiction upon a Court if the Courts has no jurisdiction, and if we take the view that the AO can have jurisdiction only provided he complies with the conditions laid down in sections 147 and 148 of the Act. Since the order of the AO is without jurisdiction we therefore find that the CIT(A) has rightly quashed the order of the AO. - Decided against the revenue.
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2012 (5) TMI 238
Reassessment u/s 147 - jurisdictional pre-conditions - full and true disclosure - held that:- The assessment orders for the assessment years 1990-91 and 1991-92 clearly indicate that the Assessing Officer was aware of the nature and character of income, which was received by the respondent, i.e., pay- ment was made by the Department of Science and Technology towards maintenance and service charges. The assessee is required to disclose full and true material facts and need not explain or interpret the law. Legal inference has to be drawn by the Assessing Officer from the facts disclosed by the assessee. This is different and cannot be regarded as an omission or failure on the part of the assessee to disclose material facts. Decided in favor of assessee.
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2012 (5) TMI 237
Bad debts or business loss - advances to sister concern - Except the sum of Rs.23.70 lakh which the assessee wrote off in the instant year, the remaining amount was collected. - held that:- Obviously this amount cannot be considered as bad debt deductible u/s 36(1)(vii) in view of the fact that the condition laid down u/s 36(2) being the recognition of income from such debt in the same or an earlier year, is not satisfied. - As this debt did not arise out of any sale made by the assessee, cannot also be claimed as bad debt. The assessee advanced the said sum to its sister-concern only and that too in the nature of loan and not as a trading advance. If a part of the same is not recovered, that does not become business loss. - Decided against the assessee. Reassessment u/s 147 - fresh claim of depreciation u/s 32 - held that:- The claim for deductions, if any, can be entertained in the reassessment proceedings only in respect of those items of income which are the subject matter of addition in the assessment u/s 147. Adverting to the facts of the instant case it is observed that the claim for depreciation u/s 32 is independent of and unconnected with the items of income added by the A.O. in assessment u/s 143(3) r.w.s. 147. As such this deduction cannot be allowed. - Decided against the assessee. However relief granted to assessee, that if the depreciation allowance is not to be actually allowed then the written down of the assets, which was reduced by claiming depreciation should be accordingly increased, subject to verification by AO. Deduction u/s 80IA - Exemption u/s 10(23G) in respect of any income by way of dividend, interest or long term capital gains of an infrastructure capital fund or an infrastructure capital company or investment made by way of shares or long term finance in any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility, which fulfils the conditions specified in sub-section (4A) of section 80-IA. - shares purchased prior to the introduction of this provision are ineligible for the benefit. - held that:- there is no logic in denying the exemption u/s 10(23G) in respect of the shares which were purchased on 31.01.1996. We have noticed above that the exemption under this provision is available on income resulting from the transfer of shares and not from the purchase of shares. If the eligible shares as sold in the relevant period, exemption cannot be denied simply on the ground that such shares were purchased in 1996. - Decided in favor of assessee. Inter corporate deposits - dis allowance of interest - held that:- if there are interest free funds available with the assessee sufficient to meet its investment and at the same time loan has been raised it can be presumed that the investments were from interest free funds and resultantly no disallowance of interest can be made.
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2012 (5) TMI 236
Education trust - corpus fund - amount charged from students against various funds directed credited to balance sheet - AO denied the exemption and held as current income - held that:- AO has failed to appreciate that the appellant trust has not made any appropriations from the corpus donations after having received the same. It appears that AO has mixed up the facts of Educational Research Fund with the other funds such as building fund, library fund, staff welfare fund, student welfare fund etc. The distinctions between the same are that the former is mainly appropriation at 50% out of tuition fees whereas the later is specifically donated by the parents/students but the bifurcation of the aggregate amount is made as per the decision of board of trustees such as 30% towards building fund and educational Research Fund etc. - AO was not justified in holding contributions towards different corpus funds totalling to ₹ 1,90,01,319/- as current income liable to tax. - Decided in favor of assessee. Allegation of payment on behalf of trustee - held that:- There evidences to attribute that the said transaction took place only to benefit the managing trustee or his relatives except that the funds of the trust were routed through the trustees to the vendor which merely exhibits the expediency which prevailed at that relevant time. Cancellation of registration - charitable purpose - section 2(15) - held that:- it makes it crystal clear that the amended provision of s.2(15) of the Act will come into fore only that the advancement of any other object of general public utility shall not be a charitable purpose, 'if it involves the carrying on of any activity in the nature of trade, commerce or business…'. In the case under consideration, the assessee trust did not in anyway involve itself in indulging in carrying on of any activity in the nature to any trade, commerce or business. Therefore, the question of bringing the assessee trust's case under the ambit of the amended provisions of s. 2(15) of the Act doesn't arise. - Decided in favor of assessee. - DIT(E) was not justified in resorting to cancel the registration granted to the assessee trust earlier - Decided in favor of assessee.
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2012 (5) TMI 235
Application for advance rulings before AAR after filing of return u/s 139(1) - held that:- the date of the filing of the application before the Authority should be the crucial date for determining the question of the applicability of clause (i) of the proviso to section 245R(2) of the Act and not the date when the application comes up for hearing either under section 245R(2) or under section 245R(4) of the Act. Once we come to the conclusion that the date of filing of the return is the relevant date to consider the applicability of the proviso to section 245R(2) of the Act, and that the filing of the return of income generates questions including the ones raised before this Authority, the jurisdiction to give a ruling in the present application has to be held to be barred. - Application rejected.
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2012 (5) TMI 234
Disallowance of bad debts - It was submitted by the Ld. A.R. that now, this issue is squarely covered in favour of the assessee by the judgement of Hon'ble Apex Court rendered in the case of TRF Ltd. (2010 -TMI - 76626 - SUPREME COURT). Ld. D.R. supported the order of austerities below - there is no dispute regarding the compliance of the provisions of Section 36(2) of the act and the only objection of the A.O. was that the assessee has not established that the debts had become bad - Decided in favor of the assessee Regarding disallowance of car rent U/S 40A(2)(b) - it is noted by the A.O. in para 5.1 o the assessment order that the assessee was asked to prove reasonableness of payment made on account of vehicle rent but the assessee failed to offer any satisfactory explanation or any comparison of other person in this regard - Decided in favor of the assessee by way of remand to AO
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2012 (5) TMI 233
Disallowance u/s 40A(3) - 20% of the expenditure made in cash - AO alleged that since the assessee was engaged in the business of purchase and sale of land, the payment made towards advance should be treated as payment made towards purchase of land - Held that:- The disallowance under s. 40A(3) can be made where the assessee Incurs any expenditure. In the instant case, the assessee has not claimed the expenditure in respect of purchase of land. The Revenue has not collected any material to suggest that what is apparent is not real. The assessee has filed the copy of the cancellation of the sale agreement by the assessee - Decided in favor of the assessee Interest free advances / loans - held htat:- The assessee is having sufficient capital. If there are mixed funds then non-interest-bearing funds are to be considered as utilized for non-interest-bearing advances. It is the assessee who has to take a business decision. Fees is generally received at the beginning and surpluses are used for making fixed deposits as receipts are in advances while expenses are spread out throughout the year. Since interest-free advances are less than the capital and the AO has not brought on record any nexus of interest-bearing loans used the AO could not have disallowed the interest. - There is no onus on the assessee to establish that interest-free advances are out of interest-bearing advances if non-interest-bearing funds are more. - Decided in favor of the assessee
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2012 (5) TMI 232
Disallowance u/s 40(a)(ia) - TDS u/s 194C - C & F agents services - reimbursement of expenses - services procured from others to fulfil his own contract - It was submitted that many of the payments made by C and F agents are even not liable to TDS at all which include certain Government payments and on foreign companies directly on which no TDS is deductible - Held that: learned CIT(A) was justified in holding that on certain payments the provisions of ss. 194C and 195 were not applicable and, therefore, assessee was not liable to deduct TDS - Decided in favor of the assessee
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2012 (5) TMI 231
Disallowances/additions on account of interest - AO observed debit interest entry against the business income and Royalty income - unsecured loan and interest paid thereon – Held that:- as per the clauses of the Addendum agreement with the company and in order to fulfillment of the condition, the assessee through its partners has deposited Rs.2 crores after taking unsecured loans from the various parties and in lieu thereof the assessee has received the interest free deposits of Rs.1.50 crores and Royalty - the amount advanced to the company by the assessee firm through its partners is a measure of commercial expediency and the AO has erred in holding that the investment cannot be said for business consideration. Payment of interest without deducting TDS – disallowance u/s 40(a)(ia) - Held that:- the assessee has submitted Form No.15H in respect of two parties for not deducting TDS no default on the part of the assessee. Disallowance of unexplained cash credit – assessee not filed the copy of bank statements and copy of returns of loan creditors to prove the genuineness and creditworthiness of the creditors - summons u/s 131 issued - 11 summons returned back by the postal authority as un-served and 23 loan creditors have not filed any submission in response to summons issued to them - assessee during hearing submits that these loans are 'Hundi' loans taken through the brokers by cheques with TDS on interest – Held that:- In the absence of any material to show that apart from issuing notice u/s 133(1) as to how the AO pursued the matter further with the said parties and keeping in view that the assessee is ready to file confirmation letter along with the PAN, we are of the view that in the interests of justice, the matter should go back to the file of the AO.
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2012 (5) TMI 230
Reopening - the assessee filed return of income declaring total loss of Rs.75,239/- and the assessment under section 143(3) was completed on 31.03.2003 determining the total income at Rs.39,49,962/- which was subject matter of appeal on the issues of depreciation on BSE Membership card, SEBI turnover fees and computer software charges - assessee has not placed on record any evidence that this issue was examined in the original assessment so as to come to a conclusion that the Assessing Officer formed an opinion on the issue - Since proviso to Section 147 does not apply as the reopening was done within 4 years, we are of the opinion that the Assessing Officer has correctly invoked the provisions of section 147 Explanation 2(c) and therefore this ground of the assessee is rejected - Appeal is rejected Regrading treatment of loss claimed by the assessee to the extent of Rs.49,45,786 - Assessing Officer considered the Explanation to Section 73 and held that the assessee company deemed to be carrying on speculation business to the extent to which business consisted of purchase and sale of such shares - It is contended by the learned counsel that the loss from the purchase and sale of the shares is to be separately considered and loss on account of valuation of closing stock of the shares is to be separately considered - Consequent to the rejection of the above, the assessee's contention about expenditure attributable to the speculation activities to the extent of Rs.6.00 lakhs is also be dismissed as the assessee is not contesting the quantification of the expenditure but only on the principle that the business loss so claimed cannot be held to be covered by Explanation to section 73 - Appeals are rejected
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2012 (5) TMI 217
Avoidance of Dividend Distribution tax - commission paid to director - allegation of avoidance of DDT - Disallowance u/s 36(1)(ii) - whether commission is paid in lieu of dividend - held that:- The AO’s conclusion that the corpus for paying the dividend had reduced does not reflect the correct legal position with reference to section 36(1)(ii). Whenever any commission is paid to an employee it is bound to reduce the corpus available for distribution as dividend. But that ipso-facto cannot be the basis for holding that commission is in lieu of dividend. All the facts and circumstances of the case have to be taken into consideration for arriving at right conclusion. It cannot be disputed that the company as well as Ms. Renu Munjal were bracketed in the highest income tax slab and the only effect was on account of saving dividend distribution tax to the company which was very minimum keeping in view the overall profits of the company. This cannot be held to be device for reducing the overall tax effect in the case of company. It is not disputed that had the commission not being paid to Mrs. Renu Munjal, she would not have received dividend to the extent of Rs. 39 lacs because her holding was only .1%. The dividend would have been much less than the commission actually paid to Mrs. Renu Munjal. Thus, sum of Rs. 39 lacs, in any case, would not have been paid to Mrs. Renu Munjal as profits or dividend if it had not been paid as commission. Following the decision in the case of Loyal Motor Service Company Limited vs. CIT, decided in favor of assessee.
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2012 (5) TMI 216
Disallowance on account of proportionate interest on advances – Held that:- The assessee utilized land belonging to company as a security against loan raised from the bank proved by a copy of certificate issued by the State Bank of India certifying that the property owned by party was pledged with the bank as security against loan provided to the assessee – since the company had provided its land as security to the bank against loan taken by the assessee and in lieu of that the assessee deposited a sum of Rs.50 lakhs with the said company so it cannot be said that the said amount was an interest free advance or loan – assessee had also given advances against purchases to other mentioned company - against revenue. Additions under the head bad and doubtful debts, balances written off and additions u/s 41 – Held that:- As per amendment of section 36(1)(vii) with effect from April 1, 1989 to obtain a deduction in to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable it is enough if the bad debit is written off as irrecoverable in the accounts of the assessee -As bad debts had been written off as irrecoverable in the accounts of the assessee, therefore, the Assessing Officer was not justified in making the addition – against revenue. Addition out of disallowance of foreign exchange fluctuation – Held that:- The assessee entered into forward exchange contract through State Bank of India for purchase of 7,30,000 USD after 11 months at a fixed price to cover up the risk of upward fluctuation of the USD rate and paid fixed premium over the support rate – the proportionate amount for the period falling in the assessment year was charged by the assessee in the profit and loss account - since the amount of premium paid was fixed and there was no element of speculation in the transaction, the amount so paid set to rest the possible fluctuation liability of the assessee company at the time of repayment of loan - on verification of the calculations furnished by the assessee it can be concluded that no element of speculation in the transaction exists - the transaction in question was a business transaction – against revenue.
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2012 (5) TMI 215
Mercantile method of accounting - Revenue recognition in construction service - AS-7 issued by ICAI and sectin 145 - (i) accrual of income in the case of retention money but TDS deducted including the retention money, year of accrual is the issue and (ii) same way work-in-progress and bills receivable is the other issue. - Decided in favor of assessee by majority decision. The question is whether the Tribunal has power to decide the issues in respect of assessment year which are not before it? In this regard, it is well-settled proposition that the Tribunal has no jurisdiction to give any finding for the earlier or subsequent year while dealing with the particular assessment year. Under the Income-tax Act, each assessment year is a separate unit and the decision of the AO given in a particular year cannot operate as res judicata in the matter of assessment of subsequent years. Similarly the jurisdiction of the Tribunal in the hierarchy created by the same Act is no higher than that of the AO and hence it also should confine to the year of assessment. It is clear that the Tribunal has no power to decide the issue in respect of assessment years which are not before it.
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2012 (5) TMI 214
Deduction u/s 10A - FD interest - held that:- The Hon’ble jurisdictional High Court in the case of Green Agro has considered an identical issue. The judgement of the Hon’ble High Court has not been brought to the notice of the Income Tax authorities. Moreover, there has been no proper examination of the issue as to whether the bank interest to the extent of Rs.5,76,799/- is earned on deposits kept as margin money. - matter remanded back. Clubbing of turnover - deduction u/s 10A - held that:- the assessee before the Income Tax authorities had given only a general description about the computation of deduction under section 10A of the Act, probably for the reason that the assessee was under the impression that the Assessing Officer also recognized that the assessee is operating three different/distinct units. The assessee ought to have focused on the evidence to show that it is having three separate units. The evidence that the assessee is operating three separate units are already on record, however, these evidences were neither highlighted before the CIT(A) nor proper examination has been done by the authorities below. Therefore, the matter is restored to the Assessing Officer, who shall examine whether the assessee is having three separate units or one single/integrated unit.
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2012 (5) TMI 213
Deduction u/s 80IA - notified Industrial Park Scheme, 2002 - business of Hotel, builders and real estate developers - Assessee submitted that there is no reason why the income from the development of industrial park declared by the Assessee in AY 04-05 and 05-06 should not be exempted u/s.80-IA(4)(iii) of the Act as by now the Assessee has satisfied the conditions requisite for grant of the said exemption. - CBDT in Instruction No.4/2009 dt. 30.6.2009 - held that:- From the reasons assigned by the revenue authorities for rejecting the claim of the Assessee for deduction u/s.80-IA(4)(iii) of the Act, it is clear that an Assessee who adopts the percentage completion method of accounting of income from developing industrial park can get deduction of only that part of the profits that are offered to tax in the year in which the notification is received. Had the Assessee in the present case followed project completion of method of accounting of income from developing industrial park, the Assessee would have got the benefit of deduction of the entire profits from the development of industrial park. There is no reason why similar benefit should not be extended to Assessee claiming benefit u/s.80-IA(4)(iii) of the Act when the conditions for grant of deduction were satisfied by the Assessee even before the AO passed the order of assessment. The facts of the present case justify considering the plea of the Assessee for grant of deduction u/s.80-IA(4)(iii) of the Act in respect of profits declared in AY 04-05 and 05-06 and allowing the same as admittedly the conditions for grant of such deduction were satisfied though at a later point of time - Decided in favor of assessee.
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2012 (5) TMI 212
Simultaneous deduction u/s 80HHC and 80IB - on the ground that 100% deduction had not been claimed on the profits when such allowance is not permissible under both the provisions in accordance with section 80-IA(9) of the Act read with section 80-IB(13). - held that:- the contention of the revenue that the profits and gains permitted to be deducted under Section 80-IA should be deducted out of the profits of the business and thereafter the profits and gains from export business is to be calculated, as otherwise it would amount to double benefit, is contrary to the scheme of the aforesaid statutory provisions as well as Clause (baa) to Explanation (ii) to Section 80-HHC. When once it is held that Sections under the heading " 'C' - deductions in respect of certain incomes" are independent of each other and the assessee is entitled to claim deduction under more than one Section, the deduction has to be necessarily in the profits and gains arrived at after making the claims in terms of the oforesaid Section. However, the overall claim under both Sections has to be restricted to the total profits and gains of such eligible business from gross total income. - Decided in favor of assessee.
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2012 (5) TMI 211
Entitlement to deductions u/s 80HHA and u/s 80-I – Held that:- Only total value of the plant and machinery of industrial undertaking, which manufactures or produces article should alone be considered – considering the break up details of the each plant and machinery and excluding certain items such as air-conditioners for office, 63 numbers of ceiling fans, value of electrical installations in branches of the company the aggregate value of the plant and machinery relating to industrial undertaking comes less than Rs. 35,00,000 thus liable to claim deduction - in favour of assessee. Withdrawing the deductions u/s 154 by AO – Held that:- Assessing Officer was wrong in rectifying the assessment order under Section 154 in respect of the relief granted earlier under Section 80HHA and 80-I on the reason assigned that the second unit was also functioning in the same - it is not necessary that the new industrial undertaking should be set up in a new premises - no justification for withdrawing the relief granted earlier - there is no patent or glaring mistake on the face of the record regarding the original assessment that warrants rectification under Section 154 – against revenue.
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Customs
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2012 (5) TMI 229
Exemption on Re import - notification no. 94/96-Cus dated 16.12.1996 - held that:- at the time of importation as presented were fully built buses containing fitments such as Air Conditioner, T.V., video, Coffee maker, music system and refrigerator. The goods which were exported were (as declared by the appellant) chassis fitted with engine. Notification 94/96 stipulates that for availing the benefit thereunder , the goods should be the same which were exported. Benefit of said notification would not be available in a case where any goods exported are re-imported after fitment to and assemblage with other goods, abroad cannot be considered to be satisfying the condition under notification 94/96. - Decided against the assessee.
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2012 (5) TMI 228
Confiscation - imposing penalties - importer had not included in the Bill of Entry certain other goods viz, Metal Straps, Button Cells, Bazels with Straps and complete wristwatches which were found in 124 cartons - 11041 pieces of wristwatches were not specifically disclosed in the Bill of Entry, 8,64,000 pieces of "AAA- Pencil Cell, this item was declared in the Bill of Entry but its value was misdeclared – Held that:- import of this item was in breach of the relevant provisions of the Exim Policy on account of the fact that these goods did not conform to BIS Standards, confiscation ordered by the Commissioner in respect of the Pencil Cells under Section 111 (d) and (m) of the Customs Act cannot be interfered with. The Commissioner allowed option to re-export this item against payment of fine of Rs 25,000/- Considering the value of the Pencil Cells, reduce the quantum of fine , assessee's appeal is disposed of
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Corporate Laws
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2012 (5) TMI 227
Application for impleading - application was dismissed without issuing any notice – Held that:- CLB was not justified in disposing of the application without notifying the proposed respondent. Having regard to the fact that application is maintainable and averments make out a ease for issue of notice to the proposed respondent before consideration on merits, from the perusal of the order passed by the CLB which is impugned in this appeal, it is clear that application is not disposed of on the ground that it is not maintainable and order is passed on merits. Wherefore, for the reasons aforesaid the impugned order is liable to be set aside. Appeal is disposed of accordingly
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PMLA
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2012 (5) TMI 240
Money laundering - attachment of property - Constitutional validity - expressions - "person" ; "proceeds of crime" ; "property" and "transfer" - property owned by or in possession of a person, other than a person charged of having committed a scheduled offence - held that:- the provisions of the Act which clearly and unambiguously enable initiation of proceedings for attachment and eventual confiscation of property in possession of a person not accused of having committed an offence under section 3 as well, do not violate the provisions of the Constitution including articles 14, 21 and 300A and are operative proprio vigore. The object of the Act is to prevent money-laundering and connected activities and confiscation of "proceeds of crime" and preventing legitimising of the money earned through illegal and criminal activities by investments in movable and immovable properties often involving layering of the money generated through illegal activities, i.e., by inducting and integrating the money with legitimate money and its species like movable and immovable property. Therefore, it is that the Act defines the expression "proceeds of crime" expansively to sub-serve the broad objectives of the Act. We thus do not find any infirmity in the provisions of the Act. The huge quanta of illegally acquired wealth ; acquired from crime and economic and corporate malfeasance corrodes the vitals of rule of law ; the fragile patina of integrity of some of our public officials and State actors ; and consequently threatens the sovereignty and integrity of the Nation. Parliament has the authority to legislate and provide for forfeiture of proceeds of crime which is a produce of specified criminality acquired prior to the enactment of the Act as well. It has also the authority to recognise the degrees of harm an identified pejorative conduct has on the fabric of our society and to determine the appropriate remedy for the pathology. The vagueness challenge - held that:- In view of the clear and unambiguous provisions of section 8 (analysed above), considered in the context of the other provisions of the Act, we discern no vagueness in the trajectory of the provisions of section 8. It is clear that the stage of confirmation of an order of provisional attachment or retention of the property or record seized is an intermediary stage, anterior to confiscation. Challenge : Incoherence as to the onus and standards of proof - held that:- it is clear that the Legislature considered it appropriate to inhere different shades of presumptions and thus corollary burdens, on persons in the ownership, control or possession of property believed to be proceeds of crime, depending on whether the person is accused of a scheduled offence or not, necessitating such person to dislodge the presumption by probative evidence or material. The inherence of such presumptions is a matter of legal policy and no case is made out to hold, nor is it contended that the inherence of the burden by the enactment of presumptions is ultra vires the legislative power for being in transgression of any limitations on such legislative power in the Constitution of India. Dispossession from immovable property is prescribed under section 8(4) to prevent wastage or spoilage of the property and thus dissipation of its value so as to preserve the integrity and value of the property till the stage of confiscation. Thus construed the provisions of section 8(4) are neither arbitrary nor disproportionate to the object sought to be achieved by the provisions of the Act. The provisions of section 8(4) are reasonable and unimpeachable. The challenge to section 8 of the Act must therefore fail. Since section 23 enjoins a rule of evidence and a rebuttable presumption considered essential and integral to effectuation of the purposes of the Act in the legislative wisdom ; a rebuttable and not an irrebuttable presumption, we are not persuaded to conclude that the provision is unduly harsh, oppressive or arbitrary. After all a legislative remedy must correspond to the social pathology it professes to regulate. A person other than one accused of having committed the offence under section 3 is not imposed the burden of proof enjoined by section 24. On a person accused of an offence under section 3 however, the burden applies, also for attachment and confiscation proceedings.
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Service Tax
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2012 (5) TMI 244
Adjustment of excess amount of service tax paid - Scope of the term subsequent period - Decision in the matter of Narnolia Securities Pvt. Ltd. Vs. Commissioner of Service Tax, Ranchi ( 2008 (3) TMI 70 - CESTAT KOLKATA). - Rule 6(3) of the Service Tax Rules, 1994. - held that:- The said Rule had no stipulation that the adjustment should be made in the succeeding month or quarter. The expression used there under states that the adjustment can be made for service tax liability for the subsequent period. No doubt, the said sub-rule (3) had conditions regarding refund of value of taxable service not provided etc. but these conditions would apply to a service provider. The appellants in this case were not the service providers but were service recipients. - while the main clause of Rule 6(3) permits the appellants to make adjustment of excess payments made earlier in the subsequent period, the conditions peculiar to the service providers cannot be made applicable in their case. - there is no scope for issuing a second show cause notice dated 18.12.07 by the department. - Decided in favor of assessee.
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2012 (5) TMI 243
Waiver of predeposit – Held that:- waiver of predeposit and stay of recovery should be granted in respect of the balance amount inasmuch as a major part of the Service Tax amount admittedly stands deposited and sizeable part of the balance amount is claimed to have been paid by way of debit in CENVAT account. payment from CENVAT account claimed by the party, was not considered by the learned Commissioner. waiver of pre-deposit allowed
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2012 (5) TMI 242
Stay - refund of unutilised CENVAT Credit taken on input services availed in relation to export of output services – claim was rejected in toto by the original authority and that of the other respondent was partly allowed - original authority held that no nexus was established between the input services and the output services - ground raised by the Department against the orders of the Commissioner (Appeals) is that the latter did not have the power of remand for sending the case back to the original authority – Held that:- definite reason was found for remand of the case by the ld. Commissioner (Appeals). He was apparently of the view that proper nexus between input services and output services was not established by the parties before the lower authority and that Chartered Accountant's certificates (as per the Board's Circular) would go a long way to establish such nexus. Appeals allowed by way of remand with a direction to the original authority to pass fresh orders in accordance with law. Stay applications also stand disposed of
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2012 (5) TMI 241
Port services - service of providing crane service has been permitted to be rendered by 3 rd parties and in that connection, agreements have been entered into between the Port Trust and the said parties and amounts have been collected as licence fee. Perusal of the agreement do not indicate any clause authorizing the said parties to represent the Port Trust in the dealing with their clients. in the case of Tuticorin Port Trust (2008 - TMI - 31436 - CESTAT, CHENNAI - Service Tax), prima-facie, supports the case of the applicant. Stay allowed. pre-deposit waived
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2012 (5) TMI 220
CENVAT Credit availed on input services - appellants submitted that the original documents could not be produced since the factory had been attached by GIDC and therefore the impugned order has been passed holding that the appellant could not produce the original documents, on the basis of which credit has been taken. - matter remanded for verification.
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2012 (5) TMI 219
The appellant is engaged in providing Advertising services to their customers and availed CENVAT Credit of Service Tax paid on Hotel services, Catering service, Decorator service and Pathological laboratory service. Proceedings were initiated on the ground that such credit is not admissible - held that:- except for the Service Tax paid on both Pathological Laboratory Service and Catering Service, CENVAT Credit taken in respect of other services is held as admissible.
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2012 (5) TMI 218
Penalty u/s 76 and 78 - - Commercial & Industrial Construction service - late payment of service tax - penalty u/s 76 and 78 - held that:- penalties under Section 76 and 78 of Finance Act, 1994 are mutually exclusive even earlier to the amendment of Section 78, which permits for non-imposition of penalty and penalties are imposed under Section 78.
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Central Excise
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2012 (5) TMI 226
Demand - extended period of limitation - confiscation and penalty - respondent filed a declaration for claiming exemption under Notification No.64/95 dated 16/03/95 on the furniture items cleared at Nil rate of duty claiming these furniture to be stores for consumption on board vessel of Indian Navy where as these furniture items were used for manufacture of ships – Held that:- goods are to be used for supply as stores for consumption on board a vessel of Indian Navy, allegation of suppression is not sustainable when the respondent has availed the exemption on the basis of certificate issued by the Indian Navy, extended period of limitation is not invocable, order upheld and the appeals filed by the Revenue are dismissed
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2012 (5) TMI 225
Refund - Period of limitation - annual capacity of production was finally determined by the Commissioner vide order passed in February 2001, which was accepted by the appellant and the duty assessment was also finalized in accordance with the said order. Once the assessments have been finalized, which was not challenged, the question of filing a refund claim thereafter will not sustain as per the apex Court's decision in the Flock India case ( 2000 (8) TMI 88 - SUPREME COURT OF INDIA - Central Excise) , refund claim is clearly time-barred as has been rightly held by the lower adjudicating and appellate authorities, appeal dismissed
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2012 (5) TMI 224
Cenvat Credit - Collection of amount @8% or 10% on exempted goods - Demand under Section 11D of the Central Excise Act, the amounts so recovered are liable to be deposited to the credit of the Central Government – Held that:- assessee has paid 8% / 10% of the value of the exempted goods by reversing the Cenvat credit account, demand for the recovery of interest under Section 11DD of the said Act, has also no legal basis and is accordingly set aside, penalty under Rule 27 of CER, 2002 is also not legally sustainable
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2012 (5) TMI 223
Duty evasion - Appellant has submitted that the Tribunal while holding that the requirements of Section 11AC of the Central Excise Act, 1944 had been met, merely observed that the allegation of the Department that the assessee had contravened various provision of the Rules with an intent to evade the payment of duty was not successfully contested by the assessee – Held that:- Tribunal has not addressed itself to the question as to whether the fundamental requirement of an intent to evade the payment of duty was duly established so as to attract the extended period of limitation, defence of the assessee was that there was no intent to evade the payment of duty, matter remanded to Tribunal
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2012 (5) TMI 222
Refund – refund claim rejected on the ground that appellants were unable to establish that they had not passed over the burden of duty to the customers - Consequent to the finalisation of the provisional assessment, the appellants had filed refund claims which were sought to be denied by the department – Held that:- mere issuing credit notes to the buyers, it does not lead to presumption that the duty element was not passed over to the buyers, credit notes were issued to square up the balance amount which remained unpaid out of the invoice amount already partially paid, assessments were provisional and subsequently finalised. The issue as to whether burden of duty has been passed on to the customers or not is not relevant at the time of finalisation of assessment. The said issue essentially arises at the time of claim of refund. Question of refund can arise only after finalising the assessment, appeals fail and are hereby dismissed
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2012 (5) TMI 210
Constitutional validity - Restriction on Cenvat / Modvat Credit on inputs when imported - petroleum products - restriction imposed retrospectively - but the same restriction was deleted prospectively - Constitutional validity of Section 87 of the Finance Act, 1997 and Section 11a of the Central Excise Act - Notification No.14/97-Central Excise (NT) - held that:- It is a settled legal proposition that if initial action is not in consonance with law, subsequent proceedings would not sanctify the same. In such a fact situation, the legal maxim sublato fundamento cadit opus is applicable, meaning thereby, in case of foundation is removed, the superstructure falls. Similar principle of law, in our opinion, can be extended in the present case too. Though the restriction operated for about 16 months, the action of not allowing the Modvat credit of the actual amount paid as additional duty to the petitioner-Company is in violation of Article 14 of the Constitution of India because such a restriction was unreasonable and arbitrary even during the intervening period i.e. during the period of operation. The petition is accordingly allowed. It is hereby declared that the Notification No.14/1997 dated May 3, 1997 restricting admissibility of Modvat credit for all the petroleum products to the extent of 10% irrespective of the fact that whether the inputs were manufactured in India or the inputs were imported into India, being violative of Article 14 of the Constitution of India, is hereby quashed and set-aside.
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2012 (5) TMI 209
Inclusion of extra amount in the name of Majuri (labour charges) and the Octroi from their customers in the value under central excise - held that:- matter remanded back for verification and fresh decision.
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