Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 2, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
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Auction for Sale (Re-Issue) of Government Stocks
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High Level Committee (HLC) to Interact with Trade & Industry for Bringing More Clarity in Tax Laws
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FM: Harder Days for those Involved in Illegal and Illicit Transfer of Money Across the Border; Various Steps Taken by the Present Government to Squeeze the Black Money Including Undisclosed Assets Within and Outside the Country
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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CBEC makes Amendments to Notification Concerning Exchange Rates of Foreign Currency
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Speech of Hon’ble Finance Minister replying the debate on Finance Bill, 2015 as on 30-4-2015
Notifications
Central Excise
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27/2015 - dated
30-4-2015
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CE
Seeks to amend notification No. 15/2015-Central Excise, dated the 1st March, 2015
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26/2015 - dated
30-4-2015
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CE
Seeks to amend notification No. 14/2015-Central Excise, dated the 1st March, 2015
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25/2015 - dated
30-4-2015
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CE
Seeks to amend notification No. 16/2010-Central Excise, dated the 27th February, 2010
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24/2015 - dated
30-4-2015
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CE
Seeks to amend notification No. 12/2012- Central Excise, dated the 17th March, 2012
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23/2015 - dated
30-4-2015
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CE
Seeks to amend notification No. 62/95 – Central Excise, dated the 16th March, 1995 and notification No. 63/95- Central Excise, dated the 16th March, 1995 - Excise and customs duty exemptions available to goods manufactured and supplied to Ministry of Defence by Ordinance Factory Board and Defence PSUs withdrawn
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13/2015 - dated
30-4-2015
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CE (NT)
Seeks to amend the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010
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12/2015 - dated
30-4-2015
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CE (NT)
Seeks to amend CENVAT Credit Rules, 2004
Companies Law
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F. No. 01/13/2013 CL-V (Part-I) - G.S.R 349(E) - dated
1-5-2015
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Co. Law
Companies (Incorporation) Amendment Rules, 2015
Customs
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30/2015 - dated
30-4-2015
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Cus
Seeks to amend notification No. 27/2011- Customs, dated the 1st March, 2011
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29/2015 - dated
30-4-2015
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Cus
Seeks to amend notification No. 39/96- Customs, dated the 23rd July, 1996
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28/2015 - dated
30-4-2015
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Cus
Seeks to amend notification No. 12/2012- Customs, dated the 17th March, 2012
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42/2015 - dated
30-4-2015
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Cus (NT)
Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001
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41/2015 - dated
30-4-2015
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Cus (NT)
Rate of exchange of conversion of each of the foreign currency with effect from 1st May, 2015
Service Tax
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12/2015 - dated
30-4-2015
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ST
Seeks to amend notification No. 25/2012-ST dated the 20th June, 2012 so as to exempt certain specified services.
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Land belonging to the husband has been thrown into the common stock of joint property between the husband and the wife - doctrine of blending applied - They borne the cost of construction in the ratio of 1/3rd and 2/3rd. - Rental income has to be taxed u/s 22 and not as other sources u/s 56 - HC
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Expenditure incurred by the assessee towards the procurement of technical know how by paying a lumpsum consideration for use in the course of business is a revenue expenditure falling u./s 37 and the provisions of Section 35 AB are not applicable - HC
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Deemed dividend u/s2(22)(e) - It does not provide that any shareholder in the assessee-Company who had taken any loan or advance from another Company in which such shareholder is also a shareholder having substantial interest, Section 2(22)(e) may be applicable. - HC
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Necessity of dissolution clause in the deed of charitable trust - whether the assessee is a public charitable trust, should the deed not have a clause that upon dissolution no asset will go to any trustee, donor settler etc.? - Petition of the revenue dismissed - HC
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Exemption under Section 10 (23C) (vi) refused - if surplus is generated year after year, it cannot be said to be existing solely for educational purposes - exemption denied - HC
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Penalty u/s.158BFA(2) - Assessee has failed to pay the tax in its entirety on the undisclosed income - the provisions of law uses the word 'May' and not the word 'Shall' - No penalty - HC
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Principle of Mutuality - taxability of 'Card guest income' and 'general guest fee' received by the club paid by the members - Just because the transactions, which are non-mutual in character, would not destroy the principle of mutuality. - HC
Customs
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Valuation of goods - contemporaneous import prices in the case of the other importers have not been challenged by Revenue - assessable cannot be rejected - AT
Indian Laws
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Speech of Hon’ble Finance Minister replying the debate on Finance Bill, 2015 as on 30-4-2015
Service Tax
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Works contract - Where, the principal contractor, assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be liable to service tax - AT
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Works contract - construction of canals, pipelines or conduits for Government/ Government undertakings for augmentation of irrigation, water supply or sewerage disposal would be for a non-commercial, non-industrial purpose or user and thus excluded in view of the exclusionary clause in clause (b) of WCS definition - AT
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Turnkey/ EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105)(zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. - a turnkey/ EPC contract is taxable prior to 01.06.2007 as well.- AT
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Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract "in respect of dam" and is thus excluded from the scope of "Works Contract Service" - AT
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It can be nobody's case that inspecting agency which only inspected the facility without rendering any advice could be covered under the category of management or business consultant - AT
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Export of Business Auxiliary Service - Denial of refund claim - even though the adjudicating authority contended that services are covered under exemption notification NO. 13/2003 dated 20/6/2003 it cannot take away entitlement of refund under export of service. - AT
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Refund claim of excess service tax paid - when there is no liability for the appellant to pay Service Tax, the provision of section 11(B) regarding period of limitation are not applicable - AT
Central Excise
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Manufacture - Captive consumption - appellant is a public sector company governed by a Board of Directors consisting of IAS Officers. Be that as it may, we are satisfied that there was no attempt to evade excise duty - demand set aside - SC
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Extension of stay beyond the period of 365 days - Power of Tribunal to extend stay - No law can be so unfair as to say that if the Court/Tribunal is at fault, the parties shall suffer. No case law is required to support the proposition that an act of Court/Tribunal shall not prejudice a party.- HC
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Valuation - Job work - Legality and validity of Rule 10A of The Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Constitutional validity upheld - it would be open for the petitioner to urge in other and future cases that the relationship being not covered by Rule 10A it has no applicability. - HC
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Denial of CENVAT credit - common inputs - electricity energy not being excisable goods nor its is exempted goods in terms of Rule 2(d) of the CENVAT Credit Rules, 2004, the appellant cannot be denied of the CENVAT credit on the common input used - AT
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Cenvat credit on outward transportation services - availment of Cenvat credit came in the knowledge of department during the course of audit. If Audit would not have been conducted, the fact would not be known to the department - extended period of limitation is rightly invoked.- AT
VAT
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Right to use - Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others. It would thus be seen that unless all the requirements are transferred, the transaction will not come within the meaning of “Transfer of the rights to use any goods” - HC
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Non payment of the amount of the Value Added Tax under Jharkhand Value Added Tax Act, 2005 - It is high time for the State either to change the Assessing Officer or Commissioner, Commercial Taxes because none of them can make assessee's appeal or revision infructuous and can encash the amount lying in the nationalized bank in the manner in which this Assessing Officer has realized the money - HC
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Denial of Input tax credit - RVAT Act does not prohibit selling of goods lower than purchase value as per VAT invoice but ITC is to be allowed on the basis of VAT invoice - HC
Case Laws:
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Income Tax
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2015 (5) TMI 38
Disallowance of "Mark to Market” loss arising on valuation of forward exchange contracts - Losses on account of outstanding / open foreign exchange forward contracts - Business loss or Notional loss - Held that:- We find that this issue has also been decided by the Special Bench of the Tribunal, Mumbai Bench, in Bank of Bahrain [2010 (8) TMI 578 - ITAT, MUMBAI] wherein the Tribunal, while holding that Mark to Market losses in respect of forward foreign exchange contract debited to Profit & Loss account is an allowable deduction. The reasons given to allow this loss are :- A binding obligation accrued against the Appellant t the minutes it entered into forward foreign exchange contracts - A consistent method of accounting followed by the Appellant cannot be disregarded - Liability is said to have crystallized when a pending obligation on the balance sheet date is determinable with reasonable certainty - As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period - In view of the decision of the Supreme Court in the case of Woodward Governor India (I) P. Ltd. [2009 (4) TMI 4 - SUPREME COURT ], the Appellant's claim is allowable - In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit. Thus, in view of the above, we uphold the findings of the learned Commissioner (Appeals) for allowing loss incurred by the assessee on re-statement of pending forward contract agreement at the year end as allowable business loss. - Decided against the revenue.
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2015 (5) TMI 11
Time barred assessment u/s 158BE(1)(b) - time taken for special audit under section 142(2A) - Held that:- In this case the audit commenced on 13th November 2000 and was concluded on 24th April, 2001. Thus 163 days were consumed in the audit. Therefore, the period of 163 days has to be excluded from the period of limitation. It is not also in dispute that the delay is of 150 days under Section 158BE2 (b). If the period of audit comprising of 163 days is to be excluded, the natural consequence will be that the assessment was within time. - Decided in favour of revenue.
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2015 (5) TMI 10
Valuation of share of the assessee in the property - report of the Registered Valuer or the mean value between the valuations made by the Registered Approved Valuer and by the District Valuation Officer, as determined by the Commissioner of Income Tax (Appeals) - Held that:- Revenue/appellant has not disputed the fact that under Clause (a) of section 55A as it stood at the relevant point of time, the assessing officer could have made a reference provided he was of the opinion that the valuation made by the registered valuer was less than the fair market value of the property. When the valuation made by the registered valuer was on the higher side, there was no occasion for the assessing officer to refer the matter to the valuation officer under section 55A. therefore, the valuation at a sum of ₹ 18,40,244/- as at 1st April, 1981 was correctly accepted by the learned Tribunal. The first question is answered in the positive and against the revenue. Tribunal applying the cost inflation index with effect from 1.4.1981 - Held that:- The object of giving relief to an assessee by allowing indexation is with a view to offset the effect of inflation. As per CBDT Circular No.636, dated August 31, 1992, a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular further provides that the cost of acquisition and the cost of improvement have to be inflated to arrive at the indexed cost of acquisition and the indexed cost of improvement and then deduct the same from the sale consideration to arrive at the longterm capital gains. If indexation is linked to the period of holding the asset and in the case of an assessee covered under section 49(1) of the Act, the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee.Since the assessee, in the present case, is held liable for long-term capital gains tax by treating the period for which the capital asset in question was held by the previous owner as the period for which the said asset was held by the assessee, the indexed cost of acquisition has also to be determined on the very same basis. - Decided against the revenue. Rent from the property - assessed under the head “Income from House Property” or “Income from Other Sources ” - land stood in the name of the assessee’s husband - Held that:- Section 27 provides an inclusive definition of the expression “owner”. An inclusive definition is not an exhaustive definition in law. We can imagine a situation where a person can be the owner of the land and another can be the owner of the structure. This is permissible in law because in joint ownership unity of title is not required. In the case before us the land admittedly belonged to the husband. He has raised the building with the joint funds belonging to himself and his wife. Therefore, one inference which can be drawn is that the land belonging to the husband has been thrown into the common stock of joint property between the husband and the wife. Both of them thus became the joint owners by operation of the doctrine of blending. They admittedly have borne the cost of construction in the ratio of 1/3rd and 2/3rd. Therefore, the income arising out of the property is in fact an income arising out of house property which has to be taxed under Section 22 rather than as an income arising out of other sources under Section 56 - Decided against the revenue.
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2015 (5) TMI 9
Exemption under Section 10(10C) denied - Whether the Appellate Tribunal has erred in law in allowing exemption under Section 10(10C) of the I.T. Act 1961 even though conditions laid down in Rule 2BA of the I.T. Rules 1962 that the vacancy caused by such retirement was not to be filled up was not satisfied? - Held that:- An employee opting for voluntary retirement and the amount received on voluntary retirement shall be entitled to exemption under Section 10(20C) of the Act, however, up to the limit of ₹ 5 lacs and for the amount beyond ₹ 5 lacs shall be entitled to the relief under Section 89 of the Act. See CIT Versus Nagesh Devidas Kulkarni [2007 (4) TMI 205 - BOMBAY High Court] & Karamchari Union Vs. Union of India reported in [2000 (2) TMI 11 - SUPREME Court] - Decided against the revenue.
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2015 (5) TMI 8
Technical know-how - whether be allowed as expenditure under Section 35AB or Section 37 - whether Tribunal erred in not holding that deduction contemplated under Section 35 AB is only in respect of a capital nature and the deduction of a revenue nature is allowable under Section 37(1)? - Held that:- The reading of Section 37 of the Act makes it more clear that any expenditure not being expenditure of the capital nature described in Sections 30 to 36 shall be allowed in computing the income chargeable under the heads "profits and gains in the business or profession". It means that Section 35AB is applicable only if the expenditure is in the nature of capital expenditure. Though the Commissioner of Income Tax (Appeals) has held that the expenditure incurred by the assessee is revenue in nature, falling under Section 37 of the Act, the Tribunal failed to appreciate the same in the right perspective and has come to a conclusion that Section 35AB being a specific Provision for technical know, general Provision of Section 37 of the Act is not applicable, which is not sustainable, in view of the judgments discussed above and in terms of the contract. We are thus to allow this appeal for two reasons. Firstly, there is no 'acquisition' of technical know-how as contemplated under Section 35AB of the Act, and secondly, Section 35AB would not apply to a revenue expenditure. As discussed earlier, judgment of the Apex Court in Drilcos (India) (2012 (9) TMI 299 - SUPREME COURT) is distinguishable and not applicable to the facts of the case and the later judgment of the Apex Court rendered in the case of Swaraj Engines (2008 (5) TMI 257 - SUPREME COURT) is squarely applicable to the facts of the case. Allow this appeal by setting aside the order of the Tribunal holding that the expenditure incurred by the assessee towards the procurement of technical know how by paying a lumpsum consideration for use in the course of business is a revenue expenditure falling u./s 37 of the Act and the provisions of Section 35 AB of the Act are not applicable to the present case. - Decided in favour of the assessee
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2015 (5) TMI 7
Deemed dividend under Section 2(22)(e) - Appellate Tribunal deleting the addition on the ground that assessee company is not a registered share holder of the lender company - Held that:- As decided in Ankitech Pvt. Ltd. [2011 (5) TMI 325 - DELHI HIGH COURT] if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act What is provided under Section 2(22)(e) of the Act seems to be that the assessee-Company must be a shareholder in the Company from whom the loan or advance has been taken and should be holding not less than 10% of the voting power. It does not provide that any shareholder in the assessee-Company who had taken any loan or advance from another Company in which such shareholder is also a shareholder having substantial interest, Section 2(22)(e) of the act may be applicable. No error has been committed by the learned Tribunal in deleting the addition made by the Assessing Officer invoking Section 2(22)(e) of the Act. - Decided in favour of assessee.
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2015 (5) TMI 6
Disallowance of interest u/s 36(1)(III) - interest under charged by the respondent/assessee to the extent of 5% on borrowed capital given on loan to its associate concerns - ITAT allowed the claim - Held that:- The question do not really arise for consideration because the view taken by the learned Tribunal is evidently based on a judgement of the Delhi High Court in the case of CIT v. Sahani Silk Mills P. Ltd. reported in (2001 (4) TMI 27 - DELHI High Court ). Disallowance of expenditures incurred in sponsoring the races held by Royal Calcutta Turf club as the flagship company purported to promote the corporate image of the group companies - ITAT allowed the claim - Held that:- View taken by the learned Tribunal on the basis of a judgement of Delhi High Court in the case of Addl. Commissioner of Income-Tax v. Delhi Cloth and General Mills Co. Ltd. (1979 (8) TMI 5 - DELHI High Court )wherein it was held that the expenditure incurred by the assessee in organising tournaments was an allowable deduction. Disallowance of legal fee paid and legal charges - ITAT allowed the claim - Held that:- It is not in dispute that the expenditure was, in fact, incurred. The only point was that the payment was in connection with services rendered and billed for on 28th February, 1997 and therefore, the expenditure could not be allowed in a subsequent year but that question has not been given much importance by the learned Tribunal for the simple reason that an appeal relating to the year to which the expenditure pertained was also pending and therefore there was, in substance, no reason why the expenditure should not have been allowed. Therefore, the question are of no substance altogether. Disallowance of entrance fees paid to the clubs - ITAT allowed the claim - Held that:- Tribunal in allowing entrance fees paid to the clubs relied on the judgement of Gujrat High Court in the case of Gujrat State Export Corporation Ltd. v. CIT reported in (1993 (9) TMI 52 - GUJARAT High Court) Disallowance of sum paid to employees under Voluntary Retirement Scheme - ITAT allowed the claim - Held that:- The question does not really arise for consideration because the money spent by the assessee in meeting the liability of voluntary retirement was recovered from the subsidiaries. The money so recovered has been offered for taxation and has been taxed as income arising from other sources whereas the expenditure incurred on account of voluntary retirement was disallowed. The obvious incongruity was removed by the learned Tribunal. Therefore, this question is really based on non-application of mind. Disallowance of proportionate interest with reference to Section 36(1)(III) on borrowed capital for the purpose of determining the tax free dividend income - ITAT allowed the claim - Held that:- Tribunal has deleted the disallowance following its judgement for the earlier years. But no finding was arrived at by the learned Tribunal indicating that the borrowed capital was not utilized for the purpose of earning exempt income. In the absence of such a finding the disallowance could not have been deleted. Therefore, to that extent, the judgement of the learned Tribunal is set aside and the matter is remanded to the assessing officer. Addition of Mesne Profit - ITAT deleted addition - Held that:- The question is again an outcome of non-application of mind because the order for payment of mesne profits attained finality on 30th July, 1999. Therefore, the same can only be assessable in the year 2000-2001. The learned Tribunal did the correct thing. But the appellant has framed the question without applying any mind. Disallowance of Building Repairs & Maintenance expenditure - - ITAT deleted addition Held that:- The question is equally an outcome of non-application of mind. The immovable property has partly been let out and there were other properties rented by the assessee for the purpose of its business. The view taken by the learned Tribunal is evidently a possible view and no reason is forthcoming why is the same perverse.
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2015 (5) TMI 5
Necessity of dissolution clause in the deed of charitable trust - whether the assessee is a public charitable trust, should the deed not have a clause that upon dissolution no asset will go to any trustee, donor settler etc.? - Held that:- When the trust deed specifically provides for a closure of the trust and it specifically provides that if necessary to close the trust, than the property of the trust be handed over to other institution - trust having similar objects by passing resolution by minimum 2/3rd majority of the trust and unanimous decision of the committee working trustees and considering the above, when the learned Tribunal has directed the DIT (E) to grant the registration under section 12(aa) of the Act, it cannot be said that the learned Tribunal has committed any error, which calls for the interference of this Court. It goes without saying that any decision to close the trust even in the eventuality as per the aforesaid clause shall always be after obtaining appropriate permission from the Charity Commissioner under the Bombay Public Trust Act. Thus the substantial questions of law raised/framed are not required to be answered and are accordingly not answered.
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2015 (5) TMI 4
Reopening of assessment - indexed cost of property not claimed - Held that:- In the present case, it is required to be noted that during the original assessment proceedings, the assessee did claim the indexed cost of property at ₹ 93,98,488/- may be without filing any revised return of income and by submitting only revised computation of income. However, the same came to be considered by the Assessing Officer and while computing the long term capital gain, the Assessing Officer considered the indexed cost of property of Rs.Rs.93,98,488/- as claimed by the assessee. Therefore, as such, it cannot be said that the assessee did not disclose fully and truly all material facts necessary for the assessment, for that assessment year. May be the method adopted by the assessee was not correct. He ought to have submitted the revised return of income. However, by that itself, cannot confer the jurisdiction on the Assessing Officer to initiate the reassessment proceedings and/or reopen the assessment in exercise of powers under section 147 of the Act beyond the period of four years unless and until the assessee did not truly and fully disclosed the material fact, which was necessary for the purpose of assessment. Under the circumstances, in the present case, the condition precedent for initiation of the proceedings beyond the period of four years under section 147 of the Act are not satisfied at all. Under the circumstances, the initiation of reassessment proceedings/reopening the assessment for AY 2008-2009, which has been initiated beyond the period of four years, is wholly without jurisdiction and authority under the law and therefore, this is a fit case to quash and set aside the impugned notice of reopening the assessment. - Decided in favour of assessee.
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2015 (5) TMI 3
Exemption under Section 10 (23C) (vi) refused - Held that:- Evidently, the application itself was filed without the audited accounts for the last three years. The provision of 30th day of September of the assessment year concerned as the cut-off-date for filing of the application has been clearly given so that the balance sheet and audited account of the said year could also be given. The petitioner not only failed to supply initially the audited accounts and balance-sheet for the financial year which pertained to the said assessment year but despite opportunities granted, the same was not produced nor the books of account were shown and thus rejection of the claim on the said ground cannot be said to be contrary to law. The petitioner had approached the Settlement Commission and showed his undisclosed income to the extent of ₹ 4 crores. In this connection it is submitted that the society is systematically generating huge surplus year after year and there is an institutional mechanism through which the society is perpetuating its profit motive every year. It is now well settled that if surplus is generated year after year, it cannot be said to be existing solely for educational purposes and in support of the said proposition learned counsel for the revenue has rightly relied on the decision of Uttarakhand High Court in the case of CIT Vs. Queens' Educational Society and St. Pauls Sr. Secondary School (2007 (9) TMI 347 - UTTARAKHAND HIGH COURT). The said decision has not been assailed by learned counsel for the petitioner. - Decided against assesee.
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2015 (5) TMI 2
Penalty u/s.158BFA(2) - Assessee has failed to pay the tax in its entirety on the undisclosed income - ITAT deleted penalty levy - Held that:- From the record, it is clear that in the present case, the assessee had paid ₹ 7,36,000/- earlier, which was nearly 60 per cent of the total demand, i.e. ₹ 12,83,293/-, made by the Revenue, whereas, later on the assessee paid ₹ 8,86,033/-in installments, which included the balance demand amount as well as the interest accrued, thereon. We are, therefore, of the opinion that Mr. Soparkar rightly submitted that the Tribunal was justified in allowing the appeal of the assessee, since, even if the provisions of Section 158BFA of the Act are seen in the light of the decision of the "CIT v. Smt. P.K. Noorjahan " (1997 (1) TMI 6 - SUPREME Court ), the provisions of law uses the word 'May' and not the word 'Shall', which is the interpretation put forward by the Tribunal and the same does not call for any interference at the hands of this Court. Thus the ITAT was right in law and on facts in deleting the penalty imposed u/s.158BFA(2) of the IT Act, 1961. Decided in favour of the respondent-assessee.
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2015 (5) TMI 1
Principle of Mutuality - taxability of 'Card guest income' and 'general guest fee' received by the club paid by the members - Held that:- There is not a finding of fact that the club receives any amount from non-members, all that the Tribunal has held is that the officer has brought the income from the costs, which is to be paid by the members on behalf of the guests. This itself goes contrary to the facts and the decision of the Apex Court in BANGALORE CLUB VS. COMMISSIONER OF INCOME TAX & ANR.,(2013 (1) TMI 343 - SUPREME COURT), on which reliance has been placed by Mr. Desai wherein observed that the first condition to invoke the principle of mutuality requires that there must be a complete identity between the contributors and the participators. However, in the very judgment, the Apex Court spelt out that caution to be exercised while looking to the mutuality or the commercial activity and it is a difficult question of fact. In this case, facts, which is to be seen from factual matrix, shows that neither the ITAT nor CIT come to the conclusion as to who contributed to the funds as non-members. Just because the nonmembers are brought to the club, it would not come out of the mutuality aspect. The decision of this Court in “SPORTS CLUB OF GUJARAT LTD. Vs. CIT”,(1987 (10) TMI 21 - GUJARAT High Court ), which is sought to be relied upon by the authorities below and Mr. Desai, this Court held that the assessee’s income from interest was not from a mutual activity and as such it was exigible to tax, and therefore, the assessee was not entitled to the benefit under Section 44A and that the entire expenditure incurred in all activities was not deductible from the assessee’s taxable income. In the said case, this Court further held that the contributors to the common fund are entitled to participate in the surplus, thereby creating an identity between the participants and the contributors. Just because the transactions, which are non-mutual in character, would not destroy the principle of mutuality. Thus, the decision in the case of “BANGALORE CLUB”(Supra) would not apply to the facts of the case on hand, since, in that case the assessee-Club had received income from interest on surplus funds kept in member banks. Hence, these appeals deserve to be allowed. - Decided in favour of assessee.
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Customs
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2015 (5) TMI 18
Mis-declaration of quantity and value of goods denial of claim of drawback - Action against the CHA for mischievous act done where there is no proposal in the SCN - Difference of opinion - Majority order - Held that:- When the action, under Customs House Agents Regulations was not part of the show cause notice and was not part of the adjudication order and in the appeals filed against the impugned order, the only point of dispute was as to whether or not penalties under Section 114 and 117 of the Customs Act, 1962 are imposable on the appellants, it is not at all correct for the Tribunal to go into the question of taking action against the appellant under Customs House Agents Regulations. It is well settled law that Adjudicating Authority and Appellate Authority cannot travel beyond the allegations made in the show cause notice. Penalty u/s 114 and 117 - Held that:- There was knowledge on the part of said appellants that the goods being exported by M/s. A K J Enterprises was mis-declared or over-valued. Admittedly, when the CHA and the freight forwarding agency are handling the particular export and are entering the relevant data on the documents to be presented for the export purpose, they are relying upon the declarations made by the exporters. If the exporter has made wrong declaration, the same are bound to be reflected in the export documents. As such, merely on that basis, it cannot be said that all the persons who only have prepared the export documents have mis-declared the same so as to invite the penal provisions. To invite penalty, it has to be shown that said persons have done so with full knowledge and with a malafide intention and as such has abetted the exporters. There is no dispute about the description of the goods and only allegation is are as regards quantity and value of the same. CHA and the freight forwarders are not expected to verify the correctness of the value declared by the exporters. It is seen that even Customs officer finally accepted the said declaration and allowed the clearance and it was only subsequently on investigation by SIIB that mis-declaration as regards the value of exported goods came to surface. As such, in the absence of any evidence indicating any direct role played by the said appellants for the fraudulent over valued export by M/s. AKJ Enterprises, we find no reasons to impose penalties on the present appellants under the provisions of Customs Act. If any technical or procedural offence about the working of 'G' card holders on behalf of CHA has been found by the Revenue, the action should have been taken under the Customs House License Regulation Act and the said factor cannot be taken into consideration for imposing penalties in terms of Customs Act on account of aiding and abetting the exporters, in the absence of any evidence to that effect. - Penalties imposed on the appellants are set aside - Decided in favour of appellants.
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2015 (5) TMI 17
Valuation of goods - Commissioner (Appeals) has rejected the loading done by Revenue, on the ground that contemporaneous prices of other importers are available - Held that:- Clearly the contemporaneous imports from the same supplier bearing the same description of goods as in the case of the respondent and also the fact that the show cause notice clearly says that the common supplier in all cases manufactures only Retro Reflective Self Adhesive Paper indicates that the goods imported under all the six bills of entries pertaining to the respondent as well as to the other contemporaneous importers are the same. - contemporaneous import prices in the case of the other importers have not been challenged by Revenue, there appears to be no ground for granting stay of the order of Commissioner (Appeals). - Decided against the revenue.
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2015 (5) TMI 16
Speaking order - Commissioner (Appeals) directed the original adjudicating authority (assessing officer) to issue a speaking order regarding the value adopted in respect of goods imported under Bill of Entry - Revenue contends that the value was loaded by 20% automatically taken by the computer system in terms of SVB Order dated 27.8.2010 and that the impugned order cannot be implemented as loading was one by the computer system in terms of the said SVB order dated 27.8.2010 and there was no assessing officer per se - Held that:- As the value of the goods was loaded by 20%, the Respondents right for a speaking order cannot be snatched away merely on the ground that it (i.e. the loading) was done automatically by the computer system. Thus, the impugned order requiring issuance of 'a speaking order regarding the value adopted in this case as per ratio of Section 17(5) of Customs Act, 1962' does not suffer from any legal infirmity. - Decided against Revenue.
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Corporate Laws
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2015 (5) TMI 15
Application for Scheme of Amalgamation - Dispensation of meetings of their equity shareholders, secured and unsecured creditors - Held that:- The transferor company has 03 equity shareholders and 01 unsecured creditor. All the equity shareholders and the only unsecured creditor have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditor of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured creditor of the transferor company, as on 22nd January, 2015. The transferee company has 13 equity shareholders and 03 secured creditors. All the equity shareholders, in their extra-ordinary general meeting held on 21st January, 2015, and all the secured creditors have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and secured creditors of the transferee company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no unsecured creditor of the transferee company, as on 22nd January, 2015. - Application for scheme of Amalgamation approved.
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2015 (5) TMI 14
Appeal against order of SEBI - Six of its Directors along with the Chief Financial Officer (CFO) restrained from accessing the securities market - Prohibition from buying, selling and otherwise dealing in securities directly or indirectly for a period of three years. Non disclosure of material information relating to those subsidiaries/ associates in the prospectus - Violation of SEBI (Disclosure and Investor Protection) Guidelines 2000 ('DIP Guidelines') – Contravention of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ('ICDR Regulations') and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ('PFUTP Regulations') - Section 11, 11A & 11B of SEBI Act. Held that: - It is true that when 100% shares of a company are acquired by third parties it is not mandatory that the existing Board of Directors and authorized signatories must be replaced and it is open to the third parties to run the company through the existing Board of Directors and authorized signatories. However in the present case, the three house wives who had acquired 100% shares of Felicite from the subsidiaries of DLF (consequently shares of Shalika and Sudipti) had categorically stated that they were not involved in the running of Felicite. Therefore, in the facts of present case, it is evident that since the three house wives who acquired 100% shares of Felicite were not involved in the running of Felicite, it is abundantly clear that DLF continued to run Felicite (consequently Shalika and Sudipti) even after divestment of shares through the Board of Directors appointed by DLF. Thus, it is beyond doubt that DLF had adopted a modus operandi of divesting shares of Felicite, Shalika and Sudipti with a view to camouflage its association with Felicite, Shalika and Sudipti as dissociation. Once it is held that the transactions of share transfer that took place on 29-30/11/2006 were sham transactions entered into with a view to camouflage association of DLF with Felicite, Shalika and Sudipti as dissociation, the question then to be considered is, whether such sham transactions amount to violating the provisions contained under the DIP Guidelines. Argument of DLF that the net financial losses incurred by Felicite, Shalika and Sudipti during the year 2006-2007 being approximately ₹ 8 lac compared to the total profit of DLF during the same period amounting to ₹ 1941 crore, failure to include aforesaid losses in the consolidated financial statements of DLF would not make any material difference is without any merit, because, if the law commands that loss/profit of the subsidiaries/associates to be taken into account in the consolidated financial statements of the parent company, then, irrespective of the fact that the quantum of loss/profit is negligible, the said loss/profit must be taken into account in the consolidated financial statements of the parent company. Hence the argument that even if the negligible loss incurred by the three companies in the offer documents it would have no material effect on the investor decision cannot be accepted. From the impugned order it is apparent that the Investigating Authority had failed to investigate the plea of DLF that filing of FIR against Sudipti came to its knowledge only on 25/06/2007. Failure on part of the Investigating Authority to investigate the above issue inspite of specific directions given by the WTM of SEBI to that effect in his order dated 20/10/2011, amounts to gross misconduct and dereliction of duty. As rightly contended by the counsel for SEBI, decision of the Apex Court in case of N. Narayanan [2013 (4) TMI 652 - SUPREME COURT], is applicable to the present case, because, the directors/CFO of DLF took decision to divest the shares of three subsidiary/associate companies of DLF by way of sham transactions with a view to avoid disclosing material information relating to those three companies in the offer documents and then represented to the investors by signing a declaration in the offer documents to the effect that the statements made therein are true and correct. In such a case, the directors of DLF cannot contend that they have not committed any violations and that no direction need be passed against them under Section 11/11B of SEBI Act. The preliminary objection raised by DLF to the effect that the impugned order has been passed without following the procedure prescribed under the PFUTP Regulations cannot be sustained. Once it is held that due procedure prescribed under PFUTP Regulations have been followed, then reliance placed by counsel for DLF on decisions of the Apex Court in case of Ramachandra Keshav Adke [1975 (3) TMI 132 - SUPREME COURT] and in case of Hukum Chand Shayam Lal [1975 (12) TMI 168 - SUPREME COURT] in support of the contention that where a power is required to be exercised by a certain authority in a certain manner, then the said power should be exercised in that manner or not or at all would have no relevance to the facts of present case, because, requisite procedure has been followed by SEBI in the present case. Resorting to sham transaction of share transfer with a view to camouflage association of DLF with Felicite, Shalika and Sudipti as dissociation and thereby misleading the investors by not disclosing material information relating to Felicite, Shalika and Sudipti in the offer documents is no doubt highly objectionable. Such a dubious method adopted by DLF is highly detrimental to the investors/general public in the securities market. Therefore, with a view to send stern message to DLF and to other listed companies that such dubious methods are not adopted again, it was necessary for SEBI to take remedial action under Section 11/11B of SEBI Act. In such a case, fact that considerable time has been taken in investigating the matter and in passing the impugned order, cannot be a ground to hold that in view of passage of time no action need be taken under Section 11/11B of the SEBI Act. Similarly, fact that in the present case, no investor is found to have been prejudiced by the violations committed by the appellants cannot be a ground to hold that no action need be taken under Section 11/11B, because, to ensure that no such dubious method is adopted again, SEBI must act immediately and SEBI cannot wait till the investors are actually prejudiced on account of adopting such dubious method hereafter. In these circumstances decision of SEBI in taking remedial measures under Section 11/11B of SEBI Act cannot be faulted. Final conclusion - Decision of SEBI that DLF has resorted to sham transaction of divesting shares of Felicite, Shalika and Sudipti with a view to camouflage association of DLF with those three companies as dissociation cannot be faulted. - By resorting to sham transaction DLF has avoided disclosing material information relating to those three companies in the offer documents and thereby failed to disclose true and adequate material information relating to those three companies in violation of Clause 6.2 of DIP Guidelines. - Once it is held that by resorting to sham transaction, DLF has failed to disclose material information in violation of Clause 6.2 of DIP Guidelines, it obviously follows that various material information’s specified in different Clauses in Chapter VI of DIP Guidelines have not been complied with.- Similarly, decision of SEBI, that DLF has concealed material information relating to the three companies by resorting to sham transaction and misled the investors by signing a declaration that the information disclosed in the offer documents are true and adequate in violation of PFUTP Regulations cannot be faulted. - Directors/CFO of DLF who were directly involved in the day to day running of DLF were the persons responsible for DLF to resort to sham transaction and therefore they are equally guilty of violating DIP Guidelines/PFUTP Regulations. - Order to the extent it holds that DLF was aware about the filing of FIR prior to 25/06/2007 and that the DLF has actively concealed the FIR in the offer documents is unsustainable and accordingly quashed and set aside. – In matter of whether DLF had knowledge about the filing of FIR prior to 25/06/2007. Despite that specific direction, the Investigating Officer of SEBI has failed and neglected to investigate that issue which was an important issue having direct bearing on the merits of the case. Thus, the Investigating Officer of SEBI is guilty of gross misconduct and dereliction of duty and failure on his part to comply with the directions contained in the order dated 20/10/2011 has led to miscarriage of justice. - Since the impugned order is held to be partially unsustainable and there are several mitigating factors in favour of the appellants as more particularly set out herein above, the restraint/prohibitory order imposed on the appellants for a period of three years is reduced to a period of six months commencing from the date of passing the impugned order on 10.10.2014. - Decided partly in favour of appellant.
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Service Tax
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2015 (5) TMI 37
Works contract - classification of contract after 01.06.2007 where contract entered into prior to 01.06.2007 - whether "works contract" is a taxable service only w.e.f. 01.06.2007 - Erection, Commissioning or Installation Service - services are not primarily for industry or commerce - aying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal - Scope of the term 'Dam' - execution of the whole or a part of the work is sub-contracted on back to back basis by the main contractor (which is a joint venture) to sub contractors. Held that:- Laying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal, undertaken for Government/ Government undertakings and involving associated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period upto 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS) Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract "in respect of dam" and is thus excluded from the scope of "Works Contract Service" defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision; Turnkey/ EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105)(zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. In the light of the decision in Alstom Projects India Ltd ., fortified by the Special Bench decision (dated 19.03.2015) in Larsen & Toubro Ltd. reference, a turnkey/ EPC contract is taxable prior to 01.06.2007 as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses (a) to (d), Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/ EPC contract, classifiable as Commercial or Industrial Construction Service (CICS) prior to 01.06.2007, would be classifiable under clause (b), Explanation (ii), Section 65(105)(zzzza) on and from 01.06.2007 and would not be exigible to service tax if the rendition of service thereby is primarily for non-commercial, non industrial purpose, in view of the exclusionary clause in clause (b) of the definition of WCS. Construction of canals under a dam for transmission of water or sewerage; or construction of pipelines or conduits for conveyance of water for irrigation, domestic consumption or sewerage disposal even where executed as turnkey/ EPC contracts; (i) would be classifiable under clause (b), Explanation (ii) of Section 65(105) (zzzza); (ii) construction of canals, pipelines or conduits for Government/ Government undertakings for augmentation of irrigation, water supply or sewerage disposal would be for a non-commercial, non-industrial purpose or user and thus excluded in view of the exclusionary clause in clause (b) of WCS definition; and (iii) construction of canals, pipelines or conduits for transmission of water including by lift irrigation would be, when these works are conceived as integrated to a dam project, works contract "in respect of a dam" and thereby excluded from the purview of WCS. Construction of canals/ pipelines/ conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/ Government undertakings would be for non-commercial, non-industrial purposes, even when executed under turnkey/ EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to service tax, in view of the exclusion enacted in clause (b) This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65 (105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable services like ECIS, CICS or COCS; and other services when bundled to amount to turnkey/ EPC; Where under an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/ contractee, assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act.
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2015 (5) TMI 36
Works contract service - Denial of benefit of Notification No. 12/2003-ST - Denial on the ground that merely because some goods and material were purchased and then used in the course of providing taxable services cannot be said to have been sold, even if VAT or sales tax is paid on deemed basis in terms of works contract - Held that:- Prima facie, the reasoning of the Commissioner denying the benefit of Notification No. 12/2003-ST suffers from infirmity inasmuch as, apart from the provisions of Notification No. 12/2003-ST, even in terms of Section 67 of Finance Act, the assessable value of the service rendered does not include value of the deemed sale of goods involved in the composite contract. It also seems that in Annexure 5 and Annexure 6 of the appeal, the details of goods supplied in the execution of works contract are given. Therefore and specially having regard to the claim that if the value of goods is abated in terms of Notification No. 12/2003-ST, then as per details in Annexure 5 and Annexure 6 of their appeal, their service tax liability would be in the range of the amount already paid, we are of the view that the appellants have made out a good case for waiver of the pre-deposit of the remaining adjudicated liabilities and we order accordingly staying recovery of the same during pendency of appeal. - Stay granted.
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2015 (5) TMI 35
Waiver of pre deposit - 'business support service' - Held that:- On perusal of one of the inspection orders which reveals that the inspection was to verify compliance to good practices in accordance with law. It can be nobody's case that inspecting agency which only inspected the facility without rendering any advice could be covered under the category of management or business consultant as they did not provide any service directly or indirectly in connection of management of any organisation or business nor did they provide any advice, consultancy or technical assistance in relation to any area of management. Prima facie thus, this component of demand is on a weak wicket. - the appellants have been able to make out a good case for waiver of pre-deposit and we order accordingly staying recovery of the impugned liability during pendency of the appeal. - Stay granted.
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2015 (5) TMI 34
Export of Business Auxiliary Service - Denial of refund claim - Held that:- On perusal of records, such as application of refund and documents submitted alongwith the said refund it is observed that the appellant have submitted export invoices, FIRCs, C.A. Certificate etc., which clearly shows that the claim is in respect of service tax paid on the services which was admittedly provided to foreign entity and the remittance of service charges was made by the foreign entity in convertible foreign currency to the appellant. With this admitted fact it is beyond any doubt that the services clearly falls under the export service in terms of export of service Rules, 2005. In view of this fact denial of refund on the ground that the appellant have not claimed the refund considering as export services is misleading and not sustainable. Once it is undisputed that the service in question falls under Export of Services Rules, 2005 and the remittance of service charges made in convertible foreign currency which is evident from FIRCs submitted to the adjudicating authority. The claim of the appellant falls under the claim towards export of services therefore even though the adjudicating authority contended that services are covered under exemption notification NO. 13/2003 dated 20/6/2003 it cannot take away entitlement of refund under export of service. In view of my above discussions, I am of the considered view that the appellant in any case is legally entitled for the refund and therefore sanction of the refund is liable to be maintained and cannot be interfered therefore the impugned order is set aside - Decided in favour of assessee.
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2015 (5) TMI 33
Denial of refund claim of excess service tax paid - goods transport agency services - Bar of limitation and unjust enrichment - Held that:- rejection of refund claim by Ld. Commissioner on account of unjust enrichment, the order of review is not sustainable in the eyes of law as held by Hon ble High Court of Rajasthan in the case of Inani Carriers (2008 (11) TMI 79 - RAJASTHAN HIGH COURT ) wherein the Hon ble High Court has held that the superior jurisdiction was capable of reversing, modifying or affirming the order which was not issued before it and in the present case Ld. Commissioner (A) has declined to modify or simply affirm the order. As per notification no.32/2004 the appellant was not required to pay Service Tax at all when there is no liability for the appellant to pay Service Tax. Therefore, the provision of section 11(B) of the Act are not applicable to this case as held by this Tribunal in the case of Jubilant Enterprises Pvt. Ltd. (2014 (6) TMI 425 - CESTAT MUMBAI). Therefore, I hold that bar of limitation is not applicable to the facts of this case. Consequently, the order of rejection of refund claim on the ground of limitation is set aside. - decided in favour of assessee.
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Central Excise
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2015 (5) TMI 28
Manufacture - Captive consumption - whether excise duty is payable on an intermediate product, namely, Transmission Assembly which comes into existence during the manufacture of tractors made by the appellant - Exemption claim under notification 162/1986 - Suppression of facts - Evasion of duty - Invocation of extended period of limitation - Held that:- Transmission Assemblies of tractors are commercially known products as has been pointed out above. The fact that not a single sale of such Assembly has been made by the appellants is irrelevant. This being the case, we are of the view that the Transmission Assembly of the tractor on the facts before us is clearly an intermediate product which is a distinct product commercially known to the market as such. On this ground therefore, the appellants are not liable to succeed. There was no suppression on the part of the appellants nor was there any willful attempt to evade duty. As stated by the appellant, the appellant has been manufacturing tractors from 1965 onwards. There has never been any change in the manufacturing process. In the year 1994-95, IC engines were stated by the department to contain Transmission Assemblies, which were dutiable. On receiving a reply from the appellant, the department did not levy any excise duty on such Transmission Assemblies. The show-cause notice itself stated that the issue of manufacture and captive consumption of Transmission Assemblies for tractors is the same as that for IC engines. These facts, coupled with the fact that not a single Transmission Assembly of tractors manufactured by the appellant had been sold makes it clear that there was no suppression or any intent to evade excise duty in the present case. Extended period of limitation is not available as we are satisfied that the reply extracted above of the respondent shows that the respondent bona fide believed that Transmission Assemblies were not dutiable. Successive declarations made by the assessee in this case starting from 16.3.1995 the assessee had declared not merely the tractor but the chassis therefor. The assessee bonafide believed that the declaration of the chassis would suffice as according to them Transmission Assemblies were not taxable goods. The intention to evade duty is according to the Commissioner made out from a statement made by Shri P.C. Kale dated 12.4.2001. It is pointed out by learned counsel appearing on behalf of the appellant that in the memorandum of appeal filed against the order in original, Shri P.C. Kale was never in the employment of the appellant during the relevant period as he joined the appellant only in July, 2000. Apart from this, it is also pointed out that the appellant is a public sector company governed by a Board of Directors consisting of IAS Officers. Be that as it may, we are satisfied that there was no attempt to evade excise duty and in this case also the show cause notice being beyond the period of limitation of one year would have to be quashed on this ground. - Decided in favour of assessee.
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2015 (5) TMI 27
Extension of stay beyond the period of 365 days - Power of Tribunal to extend stay - Held that:- If the assessee has not sought adjournment and has not avoided hearing of the appeal in any manner, there can be little or no justification for his interim order being vacated only because 180/365 days have elapsed. Any other interpretation jeopardising the rights of such an assessee would in our opinion be per se arbitrary. It is settled law that the assessee cannot be permitted to suffer for the wrong of the Court/Tribunal nor the taxing authorities can be permitted to take benefit of the wrong committed by the Court/Tribunal. - An act can either be an act of omission or be an act of commission. The non-disposal of an appeal, if not due to the fault of any of the parties, but due to the heavy work with the Tribunal, would fall under the category of "act of omission". No law can be so unfair as to say that if the Court/Tribunal is at fault, the parties shall suffer. No case law is required to support the proposition that an act of Court/Tribunal shall not prejudice a party. - Decided against Revenue.
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2015 (5) TMI 26
Condonation of delay - Held that:- There is no allegation of mala fide against the petitioner. It has not been recorded that the delay has been caused deliberately as a part of dilatory tactics on behalf of the assessee. - It has been held by the Apex Court in the case of N. Balakrishnan (1998 (9) TMI 602 - SUPREME COURT OF INDIA) that rules of limitation are not meant to destroy the rights of the parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. - petitioner may be put to terms for the delay in filing of the appeal and thereafter, the Tribunal be asked to decide the appeal on merits. - Appeal restored conditionally.
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2015 (5) TMI 25
Valuation - Job work - Legality and validity of Rule 10A of The Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Imposition of penalty - Held that:- Rule 10A (i), comes into play when the excisable goods are sold by the principal manufacturer for delivery at the time of removal of the goods from the factory of the job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale. Since the goods are sold by the principal manufacturer for delivery at the time of removal of the goods from the factory of the job-worker and the other condition being fulfilled the value of the excisable goods is taken to be the transaction value of the said goods sold by the principal manufacturer. Clause (ii) deals with a situation where the goods are not sold by the principal manufacturer at the time of removal of the goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of the job-worker. The Legislature had to evolve some measure or mode of computation and calculation and, therefore, inserted Rule 10A. The object and purpose of introducing or inserting it is apparent if one peruses the proviso and explanation to Rule 10A. The proviso clarifies that the cost of transport, if any, from the premises wherefrom the goods are sold to the place of delivery shall not be included in the value of the excisable goods. The explanation denotes as to how the term "job-worker" has to be understood and throughout this rule by the Legislature. If the job-worker means a person engaged in the manufacture or production of goods on behalf of the principal manufacturer from any inputs or goods supplied by the said principal manufacturer or by any person authorised by him, then, it is clear that the job-work or the effort which has been taken by the job-worker for and on behalf of the principal manufacturer enables the principal manufacturer to sell the completed product or finished goods. It cannot be, therefore, that the Legislature must only take the price which parties like the petitioners charge for the job-work to M/s. Tata Motors Limited. It would be also clear from a reading of Rule 11 and the preceding rules that a combined or conjoint reading of these rules would enable us to conclude that it is only in cases covered by Rule 10A clauses (i) and (ii) that the value of the excisable goods is measured or computed at the transaction value of the goods sold by the principal manufacturer. In cases which are not covered by clause (i) or clause (ii) of Rule 10A, all the provisions of the foregoing rules viz. rules earlier to Rule 10A wherever applicable shall mutatis mutandis apply for determination of the value of excisable goods. Therefore, Rule 10A is a rule enabling determination of the value of excisable goods and hence cannot be read as a stand-alone or isolated provision. It would have to be read together and harmoniously with other rules so also sections 3 and 4 of the Central Excise Act, 1944. So read, there is neither any merit in the challenge to the validity and legality nor is it necessary to read the Rule down or restrict its application as prayed for by the petitioners before us. Rule which is termed as invalid and ultra vires the parent Act is incorporated and inserted in the Central Excise Valuation (Determination of Price of Excisable Goods) Amendment Rules, 2007. These rules, therefore, would not receive an interpretation and as strict as required to be placed on the charging sections. The learned author has also pointed out that the nature of the tax imposed by a statute has to be determined by examining the pith and substance of the statute and by paying more attention to the charging section than to the basis or machinery adopted for assessment and collection of tax for the nature of tax is different from the measure of tax. Thus, there are three components of a taxing statute viz. subject of tax, person liable to pay the tax and the rate at which the tax is levied. We do not find that while valuing excisable goods for purposes of charging the duty of excise in the case of job-worker by taking into consideration the transaction value of the goods sold by the principal manufacturer, the rule in any way travels beyond the Act or alters the character or nature of the tax or duty. The argument that measure provided by Rule 10A is beyond the subject since it ceases to have nexus with the essential character of levy rejected. - We have established sufficiently in the foregoing paragraphs the nexus that Rule 10A has with the essential character of levy. In these circumstances, we do not think that the arguments based on this essential submission and elaborated in writing can be accepted by us. We are also not sustaining the legality and validity of Rule 10A on any notion of Revenue leakage. However, we are mindful of the fact that every arrangement devised by the parties like the petitioners and M/s. Tata Motors Limited could not be presumed to be genuine. It could be, in a given case, a device to avoid payment of excise duty in terms of the rate set out in the schedule. Therefore, to plug the loopholes and to discourage such arrangements as would be not conducive to the recovery of the duty that a comprehensive and complete mode has been prescribed by the Rules. We cannot find any fault with the Rule if this is also one of the object sought to be achieved. Petitioners and in the given facts and circumstances can urge that they have not manufactured the goods on behalf of another person or that their relationship with M/s. Tata Motors Limited is on principal to principal basis. The argument on relationship can be advanced in future cases by the petitioners SRP 87/91 irrespective of the conclusions that we have reached on the legality and validity of Rule 10A. Insofar as order dated 30th November, 2012 passed by the Tribunal is concerned, that clearly proceeds on the applicability of Rule 10A to the transactions and dealings noted therein. Therefore, it would be open for the petitioner to urge in other and future cases that the relationship being not covered by Rule 10A it has no applicability. In other words, they can urge that Rule 10A cannot be invoked or has been erroneously and incorrectly invoked and applied to a given transaction and case. All such contentions and based on the judgments which have been relied upon by Mr. Sridharan can be canvassed. If the Rule is read in its entirety with the proviso and the explanation, then we are sure that the applicability of Rule 10A is a matter which can be independently dealt with and depending on the facts and circumstances in each case. Therefore, it is not possible to lay down a general rule as to when can the process be said to be a jobwork and undertaken on behalf of a person named as principal manufacturer from any inputs or goods supplied by him or by any other person authorised by him. The contentions on the applicability of Rule 10A thus can be canvassed irrespective of Rule 10A being upheld by us. - Writ petition dismissed - However, levy of penalties set aside - Decided partly in favour of assessee.
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2015 (5) TMI 24
Duty under Compounded Levy Scheme - Notification No. 16/2001-CE (NT) dated 30.4.2001 - demands of differential duty - Whether the original value of investment in plant and machinery of the appellant is above ₹ 3 Crore or not for being eligible to voluntary Compounded Levy Scheme under the provisions of Rule 96ZNA to 96ZND (Section ExA) of the Central Excise Rules, 1944 - Held that:- It is revealed from the records that the appellant filed application in proper form ASP-I duly certified by the Chartered Accountant as required under Rule 96ZNB (I) of the erstwhile Rule 1944. By a letter dated 02.7.2001, the appellant was asked as to why their application under Rule 96ZNA should not be rejected as the Deputy Commissioner of Central Excise verified and reported on the basis of Balance Sheet the original value of plant and machinery was more than three crores. Once the competent authority who is technically qualified to tender opinion in relation to the technical standards prescribed under the provisions of Food Adulteration Act and Rules thereunder has tendered his opinion it would not be open to any one to take a contrary stand, unless and until such technical opinion is displaced by specific and cogent evidence in the form of another technical opinion. Merely by approaching the matter by stating that the goods could be converted into palm oil of edible grade by carrying out certain processes, the respondent No. 3 who is an officer of the department cannot displace the report of technical expert, nor can he insist that inspite of such report the importer must establish that end-use of the product shall not be other than one as regards entry in which the goods admittedly fall at the time of import. Adjudicating authority was not justified in rejecting the valuation done by a Chartered Accountant when it is subsequently also certified that the valuation is done as per Accounting Standards-10. The adjudicating authority was not right in deciding the original valuation of plant and machinery himself, in the absence of any contrary expert opinion. - Decided in favour of assessee.
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2015 (5) TMI 23
Undervaluation of goods - Demand of differential duty - Held that:- Appellant had no knowledge that the input suppliers were not registered with the Central Excise Authorities. The appellant during the investigation, categorically stated that they received the goods accompanied with Central Excise invoice and duty recorded in Cenvat Register. It is further evident from record that inputs were utilized in the finished goods, cleared on payment of duty. There is no material available that the appellant was party to the fraud and the decision of the Hon ble High Court is applicable in this case. - Regarding the demand of ₹ 14,266/-, the appellant cleared 4953.400 kg of plastic scraps/waste to Milan Plastics under the cover of Central Excise invoice showing the value of goods of ₹ 52,011/- and paid Central Excise duty of ₹ 8,322/-. It has been alleged in the show cause notice that during the investigation, the officers found a chit paper that the appellant received a payment of ₹ 1,41,142/- from Milan plastics for the goods cleared under the said invoices. The appellant in reply to show cause notice took a stand before the Adjudicating Authority that the said paper would not reveal the clearance of goods in respect of the said invoices. It is stated that the figures mentioned in the rough paper pertained to cash received by the appellant factory from their office for disbursement to the employees. There is no indication undervalue of sales of scraps. The appellant requested the adjudicating authority to produce the seized documents at time of hearing to reveal the truth. The appellant also took same ground before the Commissioner (Appeal). Both the authorities below failed to examine the seized documents. Taking into account of the amount involved and the appeal is old one, there is no reason to remand the matter on issue and the benefit of doubt goes in favour of the assessee. - demand of duty alongwith interest is held barred by limitation - Decided in favour of assessee.
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2015 (5) TMI 22
Denial of CENVAT credit - common inputs - whether common inputs used by appellant in the course of manufacture of sugar resulting in sugar as well as bagasse and press mud not liable to duty is entitled to CENVAT credit on the inputs used - Held that:- Following decision of CCE, Pondicherry Vs. EID Parry (I) Ltd. [2013 (3) TMI 366 - MADRAS HIGH COURT], Gularia Chini Mills Ltd. Vs. Union of India [2013 (7) TMI 159 - ALLAHABAD HIGH COURT] and Balrampur Chini Mills Ltd. Vs. Union of India [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] - if generation of power by appellant was neither using mineral fuels, mineral oils and products of their distillation, bituminous, substances, mineral waxes etc., the energy so generated from bagasse is not be covered by Chapter 27 of the Central Excise Tariff Act, 1985. Therefore, there cannot be denial of CENVAT credit. It was the opinion of the Court that the electricity energy not being excisable goods nor its is exempted goods in terms of Rule 2(d) of the CENVAT Credit Rules, 2004, the appellant cannot be denied of the CENVAT credit on the common input used. - Decided in favour of assessee.
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2015 (5) TMI 21
Denial of SSI Exemption - Manufacture of branded goods - Held that:- Unbranded goods shall not result in denial of SSI exemption. There is nothing apparent from show-cause notice demonstrating that the respondent was instrumentality of the group company to claim SSI exemption. In absence of corporate veil being lifted by the show-cause notice itself that fails to provide a basis for adjudication. Accordingly, entire adjudication fails to stand. Therefore, order of both the authorities sustain and Revenue appeal is dismissed accordingly. - Decided against Revenue.
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2015 (5) TMI 20
Denial of input Cenvat credit on outward transportation services - Goods are being sold on FOR basis - Non Compliance of CBEC circular No. 97/8/07 dated 23.8.07 - Extended period of limitation - Denial on observation during the course of audit - Held that:- Considering the fact that in the case of Ambuja Cement Eastern [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], the Hon'ble High Court held that if the goods are sold on FOR basis, and if the freight is not included in the assessable value and the assessee has not complied with the condition of the CBEC circular No. 97/8/07 dated 23.8.07, the assessee is not entitled to take Cenvat credit on outward transportation service. Therefore, I hold that in this case, appellants are not entitled to take Cenvat credit on outward transportation service as same is not included in the assessable value of the goods in compliance with the CBEC Circular No. 97/8/07 dated 23.8.07. I further find that during the course of arguments, learned advocate for the appellants submits that show cause notice dated 27.3.2012 has been issued by invoking extended period of limitation. As there is no suppression on the part of the appellants, therefore extended period of limitation is not invokable. On this account, I find that availment of Cenvat credit came in the knowledge of department during the course of audit. If Audit would not have been conducted, the availment of inadmissible credit would not be known to the department. In these circumstances, I hold that extended period of limitation is rightly invoked. - Decided against the appellant.
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2015 (5) TMI 19
Denial of CENVAT Credit - welding electrodes - Cenvat credit sought to be denied on the premise that these welding electrodes are neither inputs nor capital goods - Held that:- Particularly for usage of welding electrodes, in reply to the show cause notice, the appellant has explained their usage which was used in the manufacturing of their final product by removing the runners and risers from the ingots. But these contentions have not been controverted by the Revenue neither in the adjudication order nor in the order of Commissioner (Appeals) to deny Cenvat credit . With regard to other steel items which were embedded to earth but not with regard to welding electrodes. - As in the case of Hindustan Zinc Ltd., the Hon'ble Court [2008 (7) TMI 55 - HIGH COURT RAJASTHAN ] held that if welding electrodes have been used for repair and maintenance of plant and machinery, Cenvat credit is available. Therefore, said decision will prevail over the decisions of Hon'ble High Courts. In these circumstances, I hold that appellant is entitled to take Cenvat credit on welding electrodes which have been used in repair and maintenance of their final product - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (5) TMI 32
Transfer of the rights to use any goods - Leasing transaction - Dealer - Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the respondent is not a “dealer” within the meaning of the term as defined under section 2(4) of the “Maharashtra Sales on transfer of right to use any goods for any purpose Act, 1985” - Held that:- for a person to come within the definition of 'dealer', he is required to transfer the right to use any goods for any purpose. It could, thus, be seen that the right to use any goods for any purpose is essential so as to bring the person within the ambit of dealer as defined in the said Act. Consequently, for the transaction to be a sale within the meaning of the said Act, what is essential is transfer of right to use any goods for any purpose. - to constitute a transaction for the transfer of the right to use the goods, it is necessary that there must be a consensus ad idem as to the identity of the goods. It is further necessary that the transferee should have a legal right to use the goods, all legal consequences of such use including any permissions or licences required therefor should be available to the transferee and for the period during which the transferee has such legal right, it has to be and to the exclusion of the transferor. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others. It would thus be seen that unless all the requirements are transferred, the transaction will not come within the meaning of “Transfer of the rights to use any goods”. - Tribunal has extensively reproduced the terms of contract which are also been reproduced by us hereinabove. Perusal of the terms of contract would reveal that as per the contract, the driver, cleaner, diesel and oil was to be provided by the respondent. So also, transportation of accessories was to be done by the respondent. It can further be seen that there is no provision in the contract that the legal consequences such as permissions or licences were to be transferred to the transferee. The ultimate control over the crane retained with the respondent. We find that the learned Tribunal, applying the judgment of Apex Court [2006 (3) TMI 1 - Supreme court], has rightly construed that the transaction which were entered into by the respondent with Offshore Hook Up & Construction Services (I) Pvt. Ltd. would not fall within the meaning of Lease Act and the respondent was not a dealer within the meaning of definition of Section 2(4) of the Lease Act. - Decided against Revenue.
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2015 (5) TMI 31
Inputs loss during production - Held that:- Following decision of Interfit Techno [2015 (4) TMI 935 - MADRAS HIGH COURT] - Decided in favour of assessee. Going by the object of the enactment, the Assessing Officer is bound to examine the refund claim under Section 18 in accordance with the procedure stipulated for availing input tax credit by applying Section 19 of the VAT Act and it is only then, the Authority can pass an order on a refund claim. Therefore, the processing of refund application under Form W is in effect akin to an assessment proceedings since the benefit which flows under claim in Form W, is in effect, the amount which the dealer avail as refund would be a credit if the transaction was not a zero rated sale. - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or adhoc basis stands set aside. However, liberty is granted to the concerned Assessing Officer to issue show cause notices to the petitioners clearly setting out the circumstances under which they propose to revise or call upon the petitioner to reverse refund sanctioned and after receiving their objections shall proceed in accordance with law. Section 18 of VAT Act is subject to the restrictions and conditions under Section 19 of VAT Act. Therefore, if in a given cases of wrong availment, Section 19 provides for reversal. Therefore, it is incorrect to state that once the refund is granted, reopening does not arise. Such interpretation is not in consonance with the scheme of the Act; more so, when what is given to the petitioner is concession or set-off. - Decided partly in favour of assessee.
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2015 (5) TMI 30
Non payment of the amount of the Value Added Tax under Jharkhand Value Added Tax Act, 2005 - Recovery of tax under Section 46 - Held that:- It is a duty of the "State"-within the meaning of the Article 12 of the Constitution of India, not to infructuous the efficacious alternative remedy. It is constitutional duty of every "State"-within the meaning of Article 12 of the Constitution of India that if any assessee is availing statutory remedy by way of appeal or revision, the low ranking officer should not make appeal or revision infructuous. - there was no need of the Assessing Officer to take a recourse under section 46 of the Jharkhand Value Added Tax Act, 2005 for recovery of the money from the nationalized bank as per the order dated 10th December, 2014 at Annexure- 8 and it is expected from the very same Assessing Officer that such type of mistakes will not be repeated henceforth. As the amount has already been recovered we are restraining ourselves from passing an order of refund, but, we hereby direct the Commissioner, Commercial Taxes to decide the appeal preferred by this petitioner within a period of four weeks from the date of receipt of the copy of the order passed by this Court. - It is high time for the State either to change the Assessing Officer or Commissioner, Commercial Taxes because none of them can make assessee's appeal or revision infructuous and can encash the amount lying in the nationalized bank in the manner in which this Assessing Officer has realized the money. - Appeal disposed of.
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2015 (5) TMI 29
Denial of Input tax credit - Sale of goods at the rate lower than the price shown in VAT invoice keeping in view the discount/incentive received - Held that:- Assessee-respondent received discount/incentives from the wholesaler/ manufacturer on account of turnover by way of credit notes etc. which was separately shown by the assessee and it is not in conflict under the VAT Act. The assessee managed his affairs in such a manner that he sold goods lower than the value as shown in VAT invoice obviously keeping in mind that discount/commission. The Tax Board after going into the material on record came to a factual finding that the input tax credit was rightly claimed by the assessee and there was no basis for deviation with the same. Act does not prohibit selling of goods lower than purchase value as per VAT invoice but ITC is to be allowed on the basis of VAT invoice. - both the appellate authorities have found that the claim of ITC was correct on the basis of VAT invoice and Tax Board has decided the controversy on the basis of factual finding - Decided against Revenue.
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Indian Laws
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2015 (5) TMI 13
Validity of auction sale - Sale of property mortgaged with bank - Property mortgaged by guarantor without having the right to do it - Held that:- Legislature has succinctly stated that the liability of the guarantor is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. This Court has decided on this question, time and again, in line with the intent of the legislature. In Ram Kishun and Ors. v. State of U.P. and Ors., [2012 (5) TMI 569 - SUPREME COURT], this Court has held that "in view of the provisions of Section 128 of the Contract Act, the liability of the guarantor/surety is co-extensive with that of the debtor." The only exception to the nature of the liability of the guarantor is provided in the Section itself, which is only if it stated explicitly to be otherwise in the Contract. - in the present case the guarantor cannot escape from her liability as a guarantor for the debt taken by the principal debtor. In the loan agreement, which is the contract before us, there is no clause which shows that the liability of the guarantor is not co-extensive with the principal debtor. Therefore Section 128 of the Indian Contract Act will apply here without any exception. Sale was confirmed on 15th November, 2006. The sale certificate was also issued in favour of the auction purchaser after paying the requisite stamp duty and registration fees which, as pointed out to us on behalf of the auction purchaser, to the tune of ₹ 30,73,800/-. It is also not in dispute that auction purchaser was put in possession of the property and is still in possession of the property since the sale certificate was issued and registration was made in his favour. It is submitted on behalf of the auction purchaser that he has purchased the property by availing private borrowing for the said property and he is paying nearly ₹ 5 lakhs per month as interest. Therefore, in our opinion, the equity and good conscience also has to play a role in the matter in question on the given facts and after considering the conduct of the respondents (C.L. Vimla and others) in the matter. - since the auction purchaser has already paid the full amount of sale consideration and is in possession of the property in question for more than about 8 years, for equity and good conscience, we do not intend to interfere with his possession and we, therefore, set aside the order passed by the High Court - Decided in favour of Appellant.
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2015 (5) TMI 12
Possession of subject property - Enforcement of security interest - first respondent was the owner of the subject property during the relevant period when on 16.05.2003 he, along with another, approached the third respondent for a housing loan - lender invoked the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by initiating action under Section 13 classifying the loan account as Non-Performing Asset. Held that:- Section 13 of SARFAESI Act vests in the secured creditor, the power to enforce the security interest 'without the intervention of the Court or Tribunal'. It may be noted, at the outset, that the rights thus conferred on the secured creditor are exercisable, by virtue of section 13(12) through officers duly authorized in such behalf. For such purposes, the legislation sets out an elaborate procedure that begins with a notice under section 13(2) issued by the secured creditor (giving requisite details of the amount due and the secured assets in which respect the enforcement is intended) and addressed to the borrower-in-default requiring him 'to discharge in full his liabilities' within 60 days. On the expiry of the said period of 60 days calculated 'from the date of notice' if the default continues, the secured creditor acquires the title to proceed further. - Upon being served with a notice under section 13(2), the borrower is given the liberty, by section 13(3A), to object or make any representation and in the event of such objection or representation, the secured creditor is obliged to consider it and communicate his response (specifying the reasons) within a week. Of course, by virtue of proviso to section 13(3A), the non-acceptance of the objection or representation at this stage does not confer on the borrower any legal remedy in the nature of appeal or application. Mere taking of possession of the secured asset of the borrower in terms of section 13(4A), with the aid of section 14, itself does not immediately lead to the realization of the money due from the borrower; the secured creditor, having taken over the possession of the secured asset, must take certain further steps in the 'manner' prescribed, inter alia, in terms of section 13(12), read with section 38 in the form of the Security Interest (Enforcement) Rules, 2002 to sell the property. - For bringing the property to sale, the secured creditor (through its authorized officer) is required, by virtue of rule 8(6), to issue and serve on the borrower 'a notice of 30 days for sale of the immoveable secured asset'. The notice of sale is also required to be given widest possible publicity, including, in terms of rule 8(7), by way of affixing on a conspicuous part of the immoveable property, and if deemed fit, by publication on the website of the secured creditor. In allowing the application under section 17 of SARFAESI Act of the first respondent, the DRT by its order dated 30-11-2010 returned findings to the effect that the representation submitted by the first respondent, under section 13(3A) had not been disposed of and that mandatory requirement of rule 8(1)(2) of the Security Interest (Enforcement) Rules, 2002 had not been complied with. It found fault with the classification of the account of the first respondent as NPA observing that this had been done 'without application of mind' and further that even the notice under section 13(2) was deficient since the factum of the account having been declared NPA or the date of NPA had not been indicated. The DRT upheld the contention of the first respondent with regard to the reserve price based on the valuation at ₹ 3 Lakhs against the backdrop of the fact that at the time of sanction of the loan the property had been valued for ₹ 4.50 lakhs, holding the sale proceedings to be suspect on account of the further fact that the sale had been confirmed by adding just one rupee over and above the reserve price. It held the entire proceedings under section 13(2) and 13(4) undertaken by the third respondent as 'illegal and invalid'. While setting aside the action under SARFAESI Act, the third respondent was given liberty to proceed afresh for recovery of its outstanding dues after following the due procedure of law. In view of this result of the application under section 17 of the first respondent, the DRT declined to go into the objections, inter alia, of the petitioner. Petitioner, not a party to the proceedings leading to the sale, cannot be allowed the liberty of defending the indefensible. There are consistent findings recorded by the two statutory forums below that the entire process undertaken by the third respondent under the colour of authority of section 13 was vitiated. The borrower/mortgager did not have sufficient notice at the crucial stages of the process. His rights were, thus, violated. In the fact-situation noted above, the transfer of his property by way of auction-sale in favour of the fourth respondent was wholly impermissible, unjust and illegal. The manner in which the authorized officer of the third respondent went about putting the property to sale was, to say the least, irresponsible and arbitrarily in flagrant violation of statutory provisions, hardly the conduct expected of a 'trustee'. The petitioner may have been a bona fide purchaser of the subject property from the fourth respondent. But, this cannot be said of the fourth respondent himself. He was the beneficiary of an auction-sale which has been found to be highly suspect, particularly on account of undervaluation for fixing the reserve price and the consideration for which it was sought to be sold (adding just rupee one to the undervalued reserve price). The petitioner, after purchasing the property on 13-12-2007 and having raised further construction, has been using the subject property for her residence. Undoubtedly, the auction-sale in favour of her predecessor-in-interest having been set aside, she has no subsisting right, title or interest left in the subject property. As a consequence of the auction-sale being set aside the petitioner (bona fide purchaser) faces the prospect of losing the property. She, however, cannot be denied the value of the improvements made by her in the property after acquiring it for consideration. The spirit of sections 51 & 63A of Transfer of Property Act will have to be enforced in her favour - In order to acquire the property, the petitioner would need to participate in the fresh auction proceedings for conduct of which liberty has been granted by the authorities below to the third respondent (secured creditor). In such fresh auction proceedings, she would be competing against other bidders which may include the borrower, the first respondent. The fresh auction of the property would necessarily have to be arranged on the basis of the current market value of the subject property. The current market value would undoubtedly include the value of the construction which was carried out by the petitioner from her own resources. The petitioner would need to be compensated appropriately for the value addition made by her to the subject property after she had purchased it from the fourth respondent on 13-12-2007. While upholding the directions of the DRT and DRAT in setting aside the auction sale in favour of the fourth respondent, the DRT is directed to determine the liability of the first respondent towards the third respondent in the context of loan availed. In the event of the subject property being sold by way of re-auction, upon such sale being confirmed in accordance with law, the amount payable to the petitioner shall be released to her by the third respondent without delay, not later than 15 days of deposit of the auction sale price. - Petition disposed of.
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