Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 20, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Income received by the Ruler from part of the palace - rental income - the annual value of any one palace in the occupation of a Ruler is exempt from tax in computing his total income - HC
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Dividends were declared on 25.11.2005 and received by the assessee on 29.11.2005 itself - the shares resulted in a loss were sold by the assessee after enjoying the dividends declared on that - u/s 94, it is a clear case of dividend stripping - AT
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Remission/cessation of sales tax liability u/s 41(1) - differential amount representing the actual loan amount and the present value of the future liability paid by the company is on capital account and not taxable - AT
Customs
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Penalty - Diamonds recovered from aircraft confiscated - Tribunal reduced penalty - assessee claims complete exoneration - Once there was independent material to support the charge, then, this is not a fit case for interference in our appellate jurisdiction - HC
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Refund claim - Provisional assessment - Unjust enrichment - claim of refund was not subjected to the condition which was brought in by way of amendment for the first time on 13.07.2006 - HC
Service Tax
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Management or Business Consultant - Merger and acquisition services - import of services - Matter remanded back to lower authorities to find out the factual position as to whether the services were received by the appellant or not. - AT
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CENVAT Credit - Export of BPO service - during the relevant period the service was not taxable, appellant was not eligible for available cenvat credit - not eligible for refund - However demand for recovery invoking extended period of limitation not allowed - AT
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Waiver of pre deposit - Construction Service - The Police Housing Corporation appeared to have worked as an extended arm of the Government. - stay granted - AT
Central Excise
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Clandestine removal – Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements - HC
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Invocation of extended period of limitation - it could very well be seen that the assessee had a decision in his favour and therefore it was reasonable on its part to hold a belief that the Cenvat credit was available. - demand set aside - HC
Case Laws:
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Income Tax
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2014 (5) TMI 597
Duty Entitlement Pass Book (DEPB) benefits – Deduction u/s 80HHC of the Act – Held that:- Following Topman Exports Vs. Commissioner of Income-Tax [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - where the export turnover of an assessee exceeds Rs.10 crores, he does not get the benefit of addition of ninety per cent of export incentive u/s 28(iiid) to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit - a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to Section 80HHC r.w. section 28(iiid) and (iiie), the assessee was entitled to a deduction u/s 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee - The AO is directed to compute the deduction u/s 80HHC of the Act in accordance with the observations of Topman Exports – Decided in favour of Assessee.
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2014 (5) TMI 596
Revision u/s 263 - Applicability of section 158BB(1)(c) OR section 158BB(1)(ca) of the Act – Block assessment u/s 158BC of the Act - Reduction of income shown in belated return – Held that:- In the notice as well as in the order passed by the CIT u/s 263 of the Act, it was clearly mentioned that the AO did not properly examine the computer generated account for the AY 2002-03, which were generated from the C.P.U. seized during the course of the search and seizure operation on 4.9.2002 and do not include the undisclosed income reflected from the said accounts while completing the block assessment order - from the records of the Block proceedings, no indication appears that the issue was discussed with the assessee at any stage of the Block assessment proceedings - filing of the regular return for the AY 2002-03 was within the knowledge of the AO at the time of completing the Block assessment order dated 30.09.2004, but the AO while passing the Block order has failed to take into account the correct position of law – the vital issues were not examined by the Tribunal before passing the order – thus, the order of the Tribunal is set aside and the matter is remitted back to the Tribunal for fresh adjudication and the answer to the substantial question of law is not required - Decided in favour of Revenue.
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2014 (5) TMI 595
Reopening of assessment – Mere change of opinion - Allowability of deduction u/s 37 of the Act –Amount paid to LIC under unapproved gratuity scheme – Held that:- At the time of making the payment of premium, both the schemes of LIC were not recognized as Recognition Certificate was not issued, but in due course, the Recognition Certificate was issued - Schemes were for the welfare of the employees which cover the substantial life insurance of the employees of Textile unit - The expenditure is allowable as a business expenditure under the Act - on merit, the claim of the assessee is allowable - thus, there is no reason to interfere with the order passed by the Tribunal – Decided against Revenue.
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2014 (5) TMI 594
Availability of Alternate remedy - Order passes u/s 201(1) and 201(1A) of the Act – Failure to deduct TDS – Held that:- The assessment orders and the demand notice have to be set aside cannot be countenanced as the Act specifically provides an appeal remedy and the same has to be exhausted first by the assessee before approaching the Court under Article 226 of the Constitution of India - the writ petitions are not maintainable – Decided against Assessee.
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2014 (5) TMI 593
Availability of alternate remedy - Validity of notice u/s 147 of the Act – Income escapement – Held that:- The issues are urged by way of a reply to the notice - If there is a response to the notice, the authority shall consider the same and pass orders on merits - the assessees are entitled to make all legal pleas in response to the notice - the assessment order can be assailed in appeal - the assessees have not made out a case for invoking the extraordinary jurisdiction of the court under Article 226 of Constitution of India bypassing the effective alternative remedy – Decided against Assessee.
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2014 (5) TMI 592
Allowability of interest – Held that:- Revenue contended that the liability of the assessee to pay interest had arisen under the agreement dated 30 March 2000 - the CIT(A) and the Tribunal have noted that initially an agreement was entered on 30 March 2000 under which the outstanding dues of the assessee to TML in the amount of Rs.4.80 crores was squared off by the grant of a loan from Niskalp to the assessee for that purpose – There was no reason to interfere with the order of the Tribunal - it was not a statutory liability of the assessee but a contractual dispute with the assessee under the agreement dated 30 March 2000 which eventually was resolved and the liability was crystallized only when the subsequent agreement dated 12 April 2007 was made – Decided against Revenue. Disallowance u/s 14A of the Act – Difference of opinion – Held that:- Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act - what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction - the assessee had not earned any tax free income - in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance - The view of the CIT(A), which has been affirmed by the Tribunal, does not give rise to any substantial question of law – Decided against Revenue.
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2014 (5) TMI 591
Attachment of property – claim for interest and payment for damages for loss of business and reputation of the petitioner due to illegal attachment under section 226(3) and subsequently under section 281B of the Income Tax Act, 1961 – Held that:- The question of mala fide and the allegations of exercise of power irregularly or for ulterior motives, cannot be judged in the writ petition being highly disputed questions of fact. In order to grant prayers made by the assessee for awarding interest or cost, number of disputed questions of fact shall have to be gone into – assessee’s averments and allegations are very serious levelling allegations of personal mala fide – revenue contended that Shri Krishna Somani agreed to offer the amount lying in the bank account though in the name of the company for the recovery of tax due from him in his personal capacity in order to avoid unpleasant consequences arising out of coercive tax recovery – it is left open to the assessee to avail the remedy as may be available – Decided against the assessee.
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2014 (5) TMI 590
Validity of order u/s 144C of the Act – Recommendation of TPO – Maintainability of objections – Held that:- Upon the assessee’s availing of the remedy of a reference to the DRP – it shall be considered on its merits unhindered by any question of limitation - the AO may make the reference order within the time permitted by law - the penalty orders should be separately appealed - orders appear to be prima facie consequent to the draft assessment order - Revenue is directed not to enforce it during the pendency of the reference before the DRP – Decided in favour of Assessee.
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2014 (5) TMI 589
Validity of reassessment u/s 148 of the Act - Concealment or suppression of material facts – Held that:- There was no fresh or tangible material - the only ground on which reassessment can be made u/s 148 pursuant to the declaration of law in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] the reassessment notice and the final order rejecting the objections and the consequential reassessment order is set aside - the AO has no power to review - he has the power to re-assess - Decided in favour of Assessee.
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2014 (5) TMI 588
Allowability of expenses u/s 37 of the Act – Production as a part of news achieve – Capital expenses OR revenue expenses - Held that:- The data base of the programmes which are utilised for the creation of ‘news archives’ belonged to the assessee - The future likelihood of the resources being a possible source of revenue, it would not be justify to include it in the capital stream - the expenditure is a part of the entire total expenditure incurred by the assessee which is concededly treated as revenue – Decided against Revenue.
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2014 (5) TMI 587
Disallowance of Expenses - Books of account – Actual state of affairs – Held that:- Merely recording the contention is not enough - The CIT (A) should have discussed the evidence which was sought to be relied upon by the assessee - The question of disallowing any expenditure will arise in case the books of account are believed, but any particular entry in that account is not believed – the AO had evidently made the best judgment assessment after rejecting the books of accounts of the assessee – the matter is required to be remitted back to the AO for adjudication – Decided in favor of Revenue.
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2014 (5) TMI 586
Special capital incentive - to set up a new unit - revenue receipt or capital receipt – Held that:- Following Commissioner of Income Tax v/s Ponni Sugars & Chemicals Limited [2008 (9) TMI 14 - SUPREME COURT] - The Revenue has misunderstood and misconstrued the nature of receipts - Whenever new industries are to be set up in the State, there are incentives offered by the State Governments - They are offered directly or through some canalizing agencies like SICOM – also in Sahney Steel and Press Works Limited v/s Commissioner of Income Tax [1997 (9) TMI 3 - SUPREME Court] it has been that the character of receipt in the hands of the Assessee has to be determined with respect to the purpose for which the subsidy is given - The purpose test has to be applied - The point of time at which the subsidy is given is not relevant - The source is immaterial - The form of subsidy is immaterial - The main condition and with which the Court should be concerned is that the incentive must be utilized by the Assessee to set up a new unit or for substantial expansion of existing unit - If the object of the subsidy scheme is to enable the Assessee to run the business more profitably, then, the receipt is on the revenue account – no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 585
Income received by the Ruler from part of the palace - rental income - Interpretation of Section 10(19A) of the Act – Held that:- Earlier Division Bench judgment in Maharawal Laxman Singh Vs. C.I.T. [1985 (7) TMI 24 - RAJASTHAN High Court], in which it was held that under Section 10(19A) of the Income Tax Act, 1961, the annual value of any one palace in the occupation of a Ruler is exempt from tax in computing his total income, lays down correct law and the latter Division Bench judgmnet in C.I.T. Vs. H.H. Maharao Bhim Singhji - [1987 (8) TMI 12 - RAJASTHAN High Court], having not been correctly decided, does not lay down good law. - Decided against the revenue.
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2014 (5) TMI 584
Allowability of deduction – VSAT and Lease line charges paid to stock exchange – Failure to deduct TDS – Technical services u/s 194J r.w. Explanation 2 to 9(1)(vii) of the Act – Held that:- Tribunal was of the view that VSAT and Lease Line charges paid by the assessee to Stock Exchange were merely reimbursement of the charges paid/payable by the Stock Exchange to the Department of Telecommunication - the VSAT and Lease Line charges paid by the assessee do not have any element of income, deducting tax while making such payments do not arise – Decided against Revenue. Deletion of disallowance u/s 37(1) of the Act – Payment towards penalty paid to Stock exchange – Held that:- Tribunal was of the view that the amount paid as penalty was on account of irregularities committed by the assessee’s clients - payments were not on account of any infraction of law and hence allowable as business expenditure – thus, the explanation to section 37 would not apply – Decided against Revenue.
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2014 (5) TMI 583
Dividend stripping - Scope of section 94 of the Act - Computation of income – Transaction in shares – Loss as well as profits made – Held that:-The shares which incurred loss on sale were actually sold on 29.11.2005 and not on 24.11.2005 - Transfer of shares is coming to effect when transferring entries are made in the registers maintained by the company – the transfers are governed by statutory provisions – the AO’s view is upheld that the shares were actually sold by the assessee only on 29.11.2005 - the dividends were declared on 25.11.2005 and received by the assessee on 29.11.2005 itself - the shares resulted in a loss were sold by the assessee after enjoying the dividends declared on that - u/s 94, it is a clear case of dividend stripping – the AO is justified in ignoring that loss and bringing to tax the entire amount of short term capital gains without setting off the short term capital loss – the order of the CIT(A) is upheld – Decided in favour of Revenue.
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2014 (5) TMI 582
Allowability of claim u/s 10A of the Act – Claim not made in original return - Whether the claim of the assessee regarding deduction u/s 10A is allowable if the claim was made u/s 10B in the return of income – Held that:- CIT(A) was of the view that the assessee did make the claim though, because of a technical error, the claim was made u/s 10B instead of 10A - quoting of wrong section should not deprive the assessee from claiming deduction so long as the other conditions for making such claim are satisfied – Relying upon circular issued by the CBDT dated 11.04.1955 wherein it was observed that it is the duty of the AO to guide the assessee with regard to eligibility to claim deduction - Revenue admitted that the assessee fulfilled all the other conditions necessary for the purpose of claiming deduction u/s 10A though he has not specifically mentioned the provisions before the AO - at least before the CIT(A) all the facts are on record and they have been taken into consideration – the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (5) TMI 581
Remission/cessation of sales tax liability u/s 41(1) of the Act - Whether the differential amount represents the actual loan amount and the present value of the future liability paid by the assessee is on capital account and not taxable u/s 41(1) or any other provision of the Act – Held that:- Following DCIT Versus Colgate Palmolive India Ltd. [2012 (5) TMI 434 - ITAT, Mumbai] - payment of net present value of the future liability cannot be classified as remission or cessation of the liability so as to attract provisions of section 41(1)(a) of the Act - the differential amount representing the actual loan amount and the present value of the future liability paid by the company is on capital account and not taxable u/s 41(1) or any other provision of the Act – Revenue could not brought any contrary decision while challenging the order passed by the CIT(A) - thus, the order of the CIT(A) is upheld – Decided against Revenue.
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Customs
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2014 (5) TMI 602
Penalty - Diamonds recovered from aircraft confiscated - Tribunal reduced penalty - assessee claims complete exoneration - Held that:- ground engineer working in the Air India was accused of smuggling of goods namely, diamonds out of India - One tool which was hidden in the socks on the left leg of Paowala was seized. This tool was from the toolkit of the Aircraft Maintenance Department of the Indian Airlines. The tool therein was meant for opening and closing of the aircraft panel. That was stated to be handed by copassenger - Paowala and the appellant arrived at Mumbai by a flight from Hyderabad. That flight from Hyderabad to Mumbai was operated as IC 117 but using the same aircraft. That is how Paowala narrated the entire case in his version. This is how the name of the appellant surfaced and that the seizure was affected of the diamonds as well. The diamonds were valued at approximately ₹ 5.24 crores. The department therefore relied not only on the statement of Paowala which is stated to be retracted but other materials in the form of identification carried out by a travel agent. The place was also identified and the recovery was at the instance of the present appellant. It is in these circumstances, that the Tribunal found that there is no prejudice caused to the appellant - This is not a case of the appellant being proceeded only on the alleged retracted confession of Paowala. Once there was independent material to support the charge, then, this is not a fit case for interference in our appellate jurisdiction - No substantial question of law arises - Decided against assessee.
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2014 (5) TMI 601
Penalty u/s 112 - Did the Tribunal fall into error in sustaining the penalty to the tune of Rs.50,000/- on the appellant, the Customs House Agent (CHA) under Section 112(a) of the Customs Act, 1962 - Held that:- It is evident that the appellant was saddled with the liability on a strict and technical interpretation of regulations. There is no finding ‘ either in the order-in-original or by the CESTAT with respect to malafide on the part of the appellant. Though the letter of the regulations might not have been complied with, and there was a technical violation of the law in hindsight side, the Tribunal in its opinion ought to have cancelled the penalty altogether in the peculiar facts of the case and in the absence of any evidence of contumacious conduct on its part. In these circumstances the impugned order is hereby set-aside - Decided in favour of assessee.
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2014 (5) TMI 600
Refund claim - Provisional assessment - Unjust enrichment - Does the principle of unjust enrichment not apply to the refund claimed in a provisional assessment - Held that:- revenue cannot dispute that there was an excess payment. The second aspect of the matter is the claim arose out of and was prior to 13.07.2006. On that date there was an amendment making the provisional assessment subject to the principle of unjust enrichment. The Gujarat High Court in the judgment reported as Commissioner of Customs vs. Hindalco Industries Ltd., [2008 (9) TMI 372 - HIGH COURT OF GUJARAT AT AHMEDABAD] held that the insertion of the specific condition vis-a-vis non- existence of unjust enrichment was a prospective one and was not clarificatory as was sought to be urged by the revenue. That decision is a subject matter of a special leave petition. This Court concurs with the view of the Gujarat High Court, more so since in the present case the importation took place earlier and we note that the claim of refund was not subjected to the condition which was brought in by way of amendment for the first time on 13.07.2006. In view of the discussion no substantial question of law arises for consideration - Decided against Revenue.
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2014 (5) TMI 599
Condonation of delay - revenue while justifying the delay in filing the appeal, submits that these two appeals have to be considered as supplementary appeals. - Held that:- it is painful in hearing the matters of condonation of delay without being properly justified. We are of the view that the decisions relied upon by the Departmental Representative does not carry their case any further for the simple reason that in all those cases revenue had filed the composite appeal before the Tribunal and CESTAT registry had directed to file appeals against other respondents. In the case in hand the revenue has filed only one appeal against the respondent. Office of the Commissioner of Customs has sought the condonation of delay by only stating that through oversight only one appeal had been filed. It is seen that no other justification is mentioned in the application for condonation of delay, filed by the revenue - Condonation denied.
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2014 (5) TMI 598
Classification of goods - whether the red sanders handicrafts exported were prohibited goods falling under tariff item 4403 9918 and confiscable as held by Revenue while appellant claims the goods to fall under the tariff heading 97019091 and restricted goods but freely exportable - Held that:- There is no difference to the factual aspect that the appellant was attempting to export 7721 red sander wood items concealed under the sandal wood handicrafts. Such concealment proves apprehension and fear of the appellant as to the prohibition of export thereof. When the goods concealed were found to be red sander goods and proved from the botanical report to be so, the appellant came with the plea that the goods fall under tariff heading 9701 9091, while Revenue claimed the goods to fall under Customs Tariff heading (CTH) 4403 9918. The Entry 9701 9091 specifies the goods as ‘domestic article of wood (hand decorated)’. Such items are freely exportable. But the item of the goods presented before us in the course of hearing do not appear to be hand decorated domestic article but specific goods of the description of handcrafts made of red sanders wood. Therefore, the goods attempted to be exported shall be out of the ambit of entry 9701 9091 - export made by shipping bill No. 479 dated 25.08.2009 was covered by 2004-09 Policy. Therefore, appellant’s plea that the benefit of above notification dated 03.12.2013 is available to it is of no avail. Added to that the grant of Notification is only permissible only from the date of notification but not retrospectively as has been held by Apex Court in the case of Sunwin Technosolutions Pvt. Ltd. vs. Commr. of Central Excise, Ranchi [2010 (9) TMI 71 - SUPREME COURT OF INDIA] - Therefore, any benefit granted to the appellant under Exim policy of 2009-14 shall be mockery - Decided against the assessee.
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Service Tax
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2014 (5) TMI 617
Demand of service tax - Management or Business Consultant - Merger and acquisition services - import of services - reverse charge - Held that:- observations of the adjudicating authority are in the nature of assumption and presumption and not based upon any evidence on record to show that the appellant had received services of Mergers and Acquisitions from Amsterdam Company. Admittedly, if the services have not been received and the payment made for the said services had been adjusted between the Indian and Amsterdam Company, the said corresponding value of the services would not be liable to Service Tax Matter remanded back to lower authorities to find out the factual position as to whether the services were received by the appellant or not. If services were actually not received, the refund of the Service tax being paid by the appellant is to be refunded to them without raising the issue of unjust enrichment inasmuch as it is the tax deposited by the appellant himself which is being sought to be refunded. - Decided in favour of assessee.
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2014 (5) TMI 616
CENVAT Credit - Business Auxiliary Services - notification no.8/2003-CE dated 20.06.2003 - whether the appellant would be eligible for cenvat credit availed by them in respect of various input service used in or in relation to the providing of Call Centre Service and BPO service which had been exported - Held that:- From a perusal of the Rule 5, it will be seen that this rule is applicable when any input or input service has been used in providing output service which is exported. The term ‘output service’ as defined in Rule 2(p) of the Cenvat Credit Rules, 2005 during the period of dispute, means any taxable service provided by the provider of taxable service to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expression ‘provider’ and ‘provided’ shall be construed accordingly. In terms of explanation to Rule 2 (p), if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service tax for which he is liable to pay service tax shall be deemed to be the output service. Thus, in terms of definition of ‘output service’ in Rule 2 (p) of the Cenvat Credit Rules, 2004, the ‘output service’ has to be a ‘taxable service’. A ‘taxable service’ is the one in respect of which, in terms of the provisions of Section 66 of the Finance Act, 1994, the tax at the prescribed rate is required to be paid and these services are those services which are specified in various clauses of Section 65(105). A service which is not specified in any of the clauses of Section 65(105) of the Finance Act, 1994, could not be treated as a ‘taxable service’ during the period of dispute. Since BPO service which was provided by the appellant to their offshore client and which involved transaction processing and the processing of mediclaims, etc. was not a taxable service during the period of dispute and it became taxable as ‘Support Service for business of Commerce’ w.e.f. 1.5.2006 under Section 65(105)(zzzq) read with Section 65(104) (c) ibid, during the period of dispute, this service would not be covered by the provisions of Rule 5 of the Cenvat Credit Rules, 2004 and accordingly, the cenvat credit would not be available in respect of inputs or input services used in or in relation to providing of this service, whether for offshore clients or for domestic clients. Therefore, the appellant were not entitled for cenvat credit of service tax paid on input services used in or in relation to providing of the BPO service during the period of dispute, even if the same had been exported. When the department accepts that the appellant under their letter dated 9.3.2007 had submitted the required information about export of service and availment of cenvat credit in respect of the input service during the period of dispute, they cannot be accused of having suppressed this information from the department with intent to evade service tax by wrongly availing the cenvat credit. The ST-3 returns filed by an assessee are, after all, required to be scrutinized by the concerned range officers/Asstt. Commissioner - longer limitation period would not be applicable to the department and as such, the entire demand for wrongly availed cenvat credit would be time barred - Decided in favour of assessee.
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2014 (5) TMI 615
Condonation of delay - Inordinate delay of 580 days - Advocate did not file appeal in time - Held that:- appellant had only forwarded the communications received from the Office of the Superintendent of Service tax, Rural Range, Bhavnagar to their Advocate. It is very clear from the record that the appellant was always reminded by the authorities to pay the tax due or produce a copy of the stay order against order-in-original. The appellant had kept quite on all these reminders of the Department. In our view, the appellant has not made out any case for condoning the delay in filing the appeal before the Bench. Accordingly, the application for condonation of delay of the appeal is dismissed and devoid of merits - Condonation denied.
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2014 (5) TMI 614
Demand of service tax - CENVAT Credit - Goods Transport Agency - appellant pays tax on output service being “Authorised Service station” and Business Auxiliary Service” - Held that:- Following decision of Badrika Motors (P) Ltd. Vs. CCE, Bhopal 2014 (1) TMI 316 - CESTAT NEW DELHI - Decided in favour of assessee.
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2014 (5) TMI 613
Waiver of pre deposit - Construction Service - Held that:- prima facie case for the appellant inasmuch as it is not in dispute that the houses constructed by the Tamil Nadu Policy Housing Corporation Ltd., are owned by the State Government and were allotted to police personnel by the Department. The Police Housing Corporation appeared to have worked as an extended arm of the Government. Some of the decisions cited by the learned Counsel are apparently supportive of his point that the houses that were constructed should be considered to be in a personal use of the State Government - Following decision of S.Kadrivel Vs CST, Tiruchirapalli [2013 (8) TMI 262 - CESTAT CHENNAI] - Stay granted.
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2014 (5) TMI 612
Waiver of pre deposit - CENVAT Credit - Creative and art work services - Publication of magazine - Held that:- In the case of creative and art work service and garden maintenance services, there can be some doubt regarding eligibility.. However, at this stay stage, the benefit should go to the applicant. In the case of foreign exchange marketing services, I am of the view that this is related to procurement of inputs and marketing of their final products and has close nexus with the manufacturing activity and business. The amount relating to this service is the major amount disputed. Considering overall facts and circumstances, including the case laws, I waive the requirement of predeposit of dues arising from the impugned order for admission of appeal and there shall be stay on collection of such dues during pendency of the appeal - Stay granted.
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Central Excise
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2014 (5) TMI 607
Payment of duty of excise, interest and 25% penalty before issuance of Show Cause notice - challenge to the order of penalty - conclusion of proceedings before issue of SCN - while disposing the appeal of the assessee, tribunal observed that, the appellant’s appeal is disposed of, with clear direction to lower authorities that the proceedings initiated against the appellant in this case stand concluded even before the issuance of show cause notice. - Held that:- When the appellant disputed the basic duty liability by filing appeals, he could avail of reduced penalty to 25% under Section 11AC of the Act. This question, however, we need not go into since the Tribunal has already given its findings in favour of the appellant and the Revenue has not questioned the same - Decided against the assessee.
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2014 (5) TMI 606
Clandestine removal – retraction of statements - Demand on the note books and pen-drive recovered from the premises of third party, who was a dealer of assessee – Lack of evidence - Whether the Customs, Excise & Service Tax Appellate Tribunal, was correct in holding that evidences collected by Departments are admissible evidences only for one offence while the same set of evidences only for one offence while the same set of evidence are insufficient to establish another offense - Held that:- in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. All the appeals are based predominantly and essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of ₹ 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts - No substantial question of law arises - Decided against Revenue.
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2014 (5) TMI 605
Condonation of delay - Held that:- The facts culled down from the affidavit filed in support of the petition would go to show that the final order was passed by the CESTAT as early as on 14-6-2007. The said order was directly despatched to the office of the Chief Commissioner, who admittedly received it on 27-6-2007. The appeal should have been filed within a period of 180 days from 27-6-2007, i.e., on 27-12-2007. But, such an appeal was filed only on 4-2-2008. The delay between 27-12-2007 and 4-2-2008 is sought to be explained on the ground that the true copy of the order of the CESTAT has not been forwarded to the Commissionerate directly. However, there is no explanation as to why the appeal could not be preferred within the period of limitation, when admittedly the copy of the order, which was directly sent to the Chief Commissioner’s office and which was received on 27-6-2007. Even if the said explanation is accepted, there is no explanation for the subsequent periods. - Condonation denied. Demand - Intention to evade - Penalty - Held that:- The imposition of penalty is neither automatic nor could be mechanical, as, for such order imposing penalty, the basic requirement of suppression, wilful misappropriation or fraud must be shown. The CESTAT factually found that there has been no suppression, wilful misappropriation or fraud on the part of the first respondent-assessee. This being a factual finding not concerning with any law, much less substantial question of law - Decided against Revenue.
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2014 (5) TMI 604
Maintainability of second application before the settlement commission where first application was dismissed earlier - Demand of additional excise duty - Interest - Held that:- though the provisions of the Civil Procedure Code, 1908, are not applicable to the Settlement Commission, but the principles of res judicata would be applicable. The second application filed by the petitioners would be barred if the first applications have been decided on merits. In absence of any decision on merits, and the first applications having been dismissed on technical ground of non-compliance of clause (d) of Section 32E(1) of the Act, the second applications after depositing of admitted additional excise duty and interest would be maintainable. There is nothing that under any of the clauses of Section 32-O the second applications of the petitioners will be barred. In the order dated 2-3-2012 no direction had been issued under Section 32L nor any such direction could be issued under Section 32L of the Act as the applications of the petitioners had to be rejected as not entertainable and no opinion could be recorded by the Settlement Commission. It is true, that under Section 32L the Settlement Commission could send the case back to the Central Excise Officer if in the opinion of the Settlement Commission, the person who made the application for settlement under Section 32E has not co-operated in the proceedings before the Settlement Commission. But no such opinion had been recorded, in the case in hand, therefore, the Settlement Commission could not send the case to the adjudicating authority, i.e. the Central Excise Officer. Since the petitioners’ earlier applications were dismissed on technical defect for non-compliance of the provisions of clause (d) of the proviso to sub-section (1) of Section 32E of the Act and the applications were not considered and decided on merits, therefore, the second applications filed by the petitioners after depositing the additional excise duty and interest would be maintainable and the order passed by the Settlement Commission dated 2-3-2012 and 18-5-2012 cannot be maintained and the writ petition deserves to be allowed and a direction is liable to be issued to the Settlement Commissioner to accept the second applications forthwith, which were returned back to the petitioners and thereafter decide the same in accordance with law - Decided in favour of assessee.
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2014 (5) TMI 603
Duty demand - Invocation of extended period of limitation - MODVAT Credit - capital goods namely angles, beams, plates, M.S. Channels, sheets, welding rods, etc. - Whether the Tribunal committed substantial error of law in holding that the assessee was under bona fide belief that the items in question were capital goods for the purpose of Modvat Credit and, therefore, the Department was not entitled to invoke extended period of limitation and consequent demand of duty for the extended period of limitation as well as penalty imposed was liable to be set aside - Held that:- it could very well be seen that the assessee had a decision in his favour and therefore it was reasonable on its part to hold a belief that the Cenvat credit was available. It was only subsequently that the issue came to be decided against him. It was hardly a relevant aspect. The assessee acted bona fide and in honest belief that Cenvat credit was available. In the facts and circumstances, no intention could be ascribed on the part of the assessee to evade the duty or suppress any fact. In that view, there was no justification in invoking the longer period of limitation beyond the normal period as the conditions therefor were not satisfied. The question formulated does not raise any substantial question of law - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (5) TMI 611
Tax Exemption - Nature of Agreement – Whether sale of cement to NBCC is a sale, which is deemed to be a sale in the course of export within the meaning of Section 5(3) of the CST, 1956 and thus not part of the taxable turnover of Asseessee for the purpose of the TNGST Act, 1959 – Works Contract - Sale in the course of export - Taxable turnover – Claim u/s 5(3) of CST Act – Filing of Form H - Brief Facts - The order dated 29.3.1980 shows that contract for execution of 200 bed Indira Gandhi Memorial Hospital was outsourced to NBCC and in the execution of the said project, NBCC in turn placed orders with the assessee for the supply of cement - Assessee sold cement to NBCC, who in turn, exported the same to Maldives from Tuticorin Port - The only ground on which the Revenue rejected the assessee's case was for non-filing of Form H - Held that:- At the relevant assessment year under consideration viz., 1991-92, Section 5(4) was not there to hold that filing Form H as a mandatory requirement for claiming exemption u/s 5(3) of the Act – The law as it existed required that so long as the assessee was in a position to substantiate the penultimate sale claim, that it was for the purpose of complying with the agreement or order that the exporter had for or in relation to such export, the assessee would be entitled to claim exemption u/s 5(3) of the Act - A reading of the amended Rule 12(10)(a) of the CST (Registration and Turnover) Rules, 1957, shows the mandatory character of the furnishing of Form H by the dealer to the prescribed authority upto the time of assessment before the first Assessing Authority - Thus, as evident from the amendment inserting Section 5(4), with effect from 13th May 2005, It is agreed that the claim u/s 5(3) as it stood at the material time cannot be rejected solely on the ground that Form H was not filed - Therefore, it is open to an assessee to prove the claim for Section 5(3) exemption through such materials also and not necessarily through Form H Agreement – Direct Agreement – Penultimate sale - Overseas Contract – Held That:- Judgment in STATE OF A.P. v. LARSEN AND TOURBO LIMITED [2008 (8) TMI 21 - SUPREME COURT] followed The ground on which the said claim was rejected was that NBCC did not have direct agreement with foreign buyer for export - Secondly even assuming that the contract was one with Maldives Government, the same was only for construction of a building and there was no specific contract or supply of the cement to the foreign customer - Consequently, the claim was to be rejected - The said reasoning of the Appellate Assistant Commissioner found favour with the Tribunal too - SC rejected the contention of the Revenue that where the main contractor and sub contract enter into an execution of works contract, even if there is no privity of contract between the contractee and the sub-contractor, that would not do away the principle of transfer of property by the sub contractor by accretion on the property belonging to the contractee – Treating the sub contract given to NBCC as the contract for execution by Government of India, we hold that the assessee is entitled to succeed in its claim for exemption u/s 5(3) of the Act as the penultimate sale leading to export. Relying upon BUILDERS ASSOCIATION OF INDIA [1989 (3) TMI 356 - SUPREME COURT OF INDIA] and held that the tax leviable by virtue of clause (29-A)(b) of Article 366 of the Constitution thus is subject to the same constitutional discipline to which any levy under Entry 54 of the State List is made - Thus, Supreme Court held that principles of Sections 3, 4 and 5 of the Central Sales Tax Act would apply to deemed sale also resulting in transfer of property involved in the execution of works contract - Applying the said principle of law to the facts herein, even though the execution of the works contract, is outside the country, nevertheless the contract that NBCC had on the execution of the works contract being a deemed sale, and going by the agreement that Government of India had with Government of Maldives, which had assigned the work to NBCC for execution and contract having been executed, This Court has no hesitation in accepting the plea of the assessee that it is entitled to claim exemption u/s 5(3) – It may be pointed out herein that what is an applicable to an interstate works contract as the deemed sale has to be come for its application to an execution of an overseas works contract - Revision is allowed in respect of question Nos. 1 and 2 - In the circumstances, and the assessee is entitled to Section 5(3) exemption on the penultimate sale of cement leading to its export. Levy of tax - Purchase tax on purchase of Fly Ash - Whether the petitioners are liable to pay purchase tax on the purchase of Fly Ash from the TNEB (Tuticorin Thermal Power Plant) - Held that:- Assessee himself submitted that the said issue is covered by the decision of this Court rendered in T.C(R). No. 34 of 2011 dated 22.9.2011 in the assessee's own case, wherein this Court rejected the assessee's plea - Following the said decision, this question of law is answered against the assessee – Decided against the assessee. Levy of Penalty – Held that:- As already held that the purchase tax on purchase of Fly Ash was held against the assessee by reason of this decision of this Court rendered in T.C(R). No. 34 of 2011 dated 22.9.2011 in the assessee's own case - The levy of penalty was however deleted by the Tribunal in the appeal relating to the assessment year 1986-87, which was also not subjected to any revision at the hands of the Revenue - On the mere score of purchase tax being levied, the penalty should not be sustained, particularly with reference to the sustained portion of the assessment on purchase tax levy on fly ash - In the circumstances, maintaining uniformity in the treatment on the levy of penalty between the assessment year 1986-87 and the current year 1991-92, No justification found to restore the levy of penalty on the above relating to purchase tax levy - Revision is partly allowed – Decided partly in favour of Assessee.
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2014 (5) TMI 610
Levy of Penalty - Deletion of penalty u/s 12(3)(b) of the TNGST Act - Whether Tribunal in affirming the deletion of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act is legally sustainable in view of the amendment of Section 12(3) under Act 25 of 1993 – Best of judgment – Assessment based on Best of judgment - Bonafide of the assessee - Held That:- Judgment in Cement Marketing Company of India Vs. Assistant Commissioner of Sales Tax [1979 (10) TMI 184 - SUPREME COURT OF INDIA] followed - Section 12(3) would operate only in the case of best of judgement assessment, whereby the returns filed by the assessee appears to the Assessing Authority to be incomplete or incorrect - It was held that in the case on hand there was no best of judgement assessment and hence the levy of penalty was set aside - Relying upon Appollo Saline Pharmaceuticals Private Limited Vs. Commercial Tax Officer (SAC) and others [2001 (10) TMI 1100 - MADRAS HIGH COURT] - Penalty may be levied only in case where the assessment is best of judgement assessment – The addition was only as regards the gross profit and freight and there was no suppression found in the turnover, otherwise - No sufficient cause or reason is found to set aside the order of the Tribunal - Hence, Revision stands dismissed – Decided in favour of Revenue.
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2014 (5) TMI 609
Validity of Tribunal Order - Includibility of duty drawback in Total Turnover - Rule 3 of the Customs and Central Excise Duties Drawback Rules, 1971 'sale price', 'turnover', Explanation 2 to Section 2(r) and 'sale' in Section 2(n) of Tamil Nadu General Sales Tax Act – Notification - Whether the duty drawback received could be treated as part of sale consideration to fall under 'turnover' – Deletion of penalty - u/s 16(2) – Held that:- Sale being a bilateral transaction, all expenses incurred by the dealer to put the goods in a deliverable state alone form part and parcel of the selling price - Post sale expenses incurred like freight and cost of installation, separately charged for after the sale of the goods, are excluded from price - The levy of tax being on the sale of goods and the turnover being the aggregate amount for which goods are brought or sold, the Act seeks to take note of only such of those receipts received by the vendor from the purchasers in connection with the sale and nothing beyond - This means, any amount received by an assessee from any other party, not connected with the sale, cannot be brought within the definition of 'turnover' for assessing the same under the provisions of the Act. Relying upon NEYVELI LIGNITE CORPORATION LTD v. CTO [2001 (9) TMI 926 - SUPREME COURT OF INDIA] - Where the receipt is from any third party who has nothing to do with the sale and the payment has no relevance or reference to the sale, the same could not form part of the sale transaction; hence, there is no question of including the same under the head of 'turnover' - The includability of any payment received by a dealer as part of the sale transaction depended on the fact as to whether the payment has any relevance to the contract of sale to treat the receipt as part of the sale consideration - As the definition of turnover, total turnover and sale go, it is only those payments made by the purchaser, including those liability of the seller that the purchaser undertakes to discharge on behalf of the vendor, can be treated as the amount for which goods are bought or sold or supplied - Post-sale freight separately charged for in the bill would not form part of the turnover. The excise duty element was only on the intermediary product and that there was no duty on the final product falling under Sub Heading No. 56.07 in terms of Notification No. 61/87 C.E. dated 01.03.1987 - When the duty drawback was as per the scheme given under the Excise and Customs Rules and that there was no agreement between the purchaser and the seller on the aspect of duty drawback and it never received any consideration and rightly so in the sale effected, the question of roping in those receipts from the Government of India long after the sale does not arise, to be included in the turnover for the purpose of assessment - The difference in price charged by the assessee in respect of sale to coastal vessels and to the foreign going vessels has no relevance at all and it is not the decisive factor in considering the question of taxability of the receipt - So long as the assessee was able to show that the receipt was as per the provisions of Central Excise and Customs Act and the Rules made thereunder with reference to export of goods manufactured from out of duty suffered goods, and the transaction thus answer the definition of 'export' as given under the Duty Drawback Rules, the State is not justified in taxing this receipt as part of the turnover - Order of Tribunal set aside and the revisions are allowed - As far as the penalty aspect is concerned, in the light of the order passed by this Court, Revision filed by the Revenue fails – Decided in favour of Assessee.
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2014 (5) TMI 608
Second sales exemption of plastic granules – genuine purchases - Held that:- The mere fact that the assessee had produced invoices from the said Brij Khandelwal, would not discharge the burden of proof that there was, in fact, a sale of goods from an existing dealer in goods, resulting in the transfer of property of goods - The invoices and the names given, including the address, do not discharge the assessee from substantiating the contention that there was a sale by Brij Khandelwal to result in transfer of property in goods - In the absence of any material to support the case of the assessee, particularly to prove the link between Brij Khandelwal and the other two firms in whose names the invoices had been raised, no justification is found in accepting the case of the assessee to grant exemption, as had been done by Tribunal and Appellate AC - With the burden of proof on the issue not discharged by the assessee as to the sale of goods in his favour, on the admitted case that it was only Brij Kandelwal who had had the transaction with the assessee, the Tribunal as well as the Appellate Assistant Commissioner misdirected themselves in deciding the case in favour of the assessee by holding that the registration of S.R.Enterprises and Sudarsan Enterprises was cancelled only subsequent to the sales and thus, the claim for exemption could not be rejected. No Evidence – No proof of transfer of goods - Held that:- When the link between the seller and the alleged seller had not been proved, the case of the Revenue cannot be slightly dismissed - In a revision where question of law alone is involved, normally this Court would not disturb the findings as given by two authorities - However, when the findings are without any material and there is perversity writ large on the face of it, it is worth accepting the case of the Revenue, more so in the context of the detailed discussion by AO, pointing out to the infirmities in the stand of the assessee - In the circumstances, the order of the Tribunal is set aside and the assessment order is restored. Levy of penalty - Held that:- It is no doubt true that the assessee had not discharged the burden as regards his claim on exemption - But then, considering the law on the levy of penalty that the degree of proof required for the purpose of levy of penalty is more than what is normally required for making the assessment and that in this case, the assessment had been upheld by this Court on the ground that the assessee had not discharged the burden of proof as regards the purchase from an existing dealer, the same line of reasoning cannot be accepted for the purpose of upholding the levy of penalty - Hence, the benefit of doubt herein for levy of penalty has to be considered as a vital factor in sustaining the order of the Tribunal in cancelling the penalty - In the circumstances, the order of the Tribunal agreed only as regards the levy of penalty - As regards the assessment, Revision stands allowed – Decided in favour of Revenue.
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