TMI Tax Updates - e-Newsletter
May 23, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. For benefit of revenue: Care required by revenue officers.

   By: DEVKUMAR KOTHARI

2. SERVICE TAX TERMINOLOGY – PART-VII

   By: Dr. Sanjiv Agarwal

3. Unscrew the Negative list

   By: CSSwati Rawat

4. Conflict of Service Tax and Tax Deducted at Source

   By: Rakesh Chitkara

5. Persons carrying on agency business or earning commission income should revise their return for A.Y 2011-12, if original return filed u/s 44AD

   By: AMIT BAJAJ ADVOCATE

6. STAMP DUTY -AMENDMENT IN MP- POWER OF ATTORNEY TO AGENTS NOT BEING SPECIFIED RELATIVES,IS A VALID CLASSIFICATION – LEVY OF STAMP DUTY ON MARKET VALUE IS UPHELD BY THE SUPREME COURT.

   By: DEVKUMAR KOTHARI

News

1. GST to Make Goods and Services more Competitive both in Domestic and International Markets: FM.

2. Interest U/s. 234A to 234C Not Payable If Assessment Order Silent

3. Justice V.S.Sirpurkar takes over as New Chairman of the Competition Appellate Tribunal of India.

4. Auction for Sale of Government Stocks.

5. Monitoring of CSR Activities.

6. Settlement of Claims of Employees of DMIL.

7. Revival of Closed Companies.

8. Census of Handicrafts/Handloom.

9. Average Time for Registration of Trademarks Reduced by more than half.

10. Nepal Assures Fast Tracking of HYDRO Projects.

11. Trade Agreement with Japan Yields Good Results.

12. Export of Perishable Commodities.

13. FMS Inclusion to Boost Cycle Exports.

14. White Paper on Black Money.

15. National Competition Policy in the final stages of adoption – CCI celebrates 3 years of enforcement of competition laws.

Notifications

Customs

1. 28/2012-Customs (ADD) - dated 21-5-2012 - ADD

Seeks to extend the validity of Notification no. 56/2007-Customs, dated the 12th April, 2007, by one more year, i.e. upto and inclusive of 11th April, 2013.

2. 27/2012-Customs (ADD) - dated 18-5-2012 - ADD

Continuation of anti-dumping duty on imports of ‘Zinc Oxide’, originating in, or exported from, China PR.

3. 44/2012 - dated 21-5-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 22nd May, 2012.

Circulars / Instructions / Orders

FEMA

1. 129 - dated 21-5-2012

Risk Management and Inter Bank Dealings.

Companies Law

2. 09/2012 - dated 15-5-2012

Compliance of the provisions of Companies Act, 1956 and the Rules made there under.

Highlights / Catch Notes

Income Tax

• Interest Levy Under Sec 234B is Mandatory, But Imposition Requires Judicial Review and Legal Provision Reference.

  Case-Laws - HC : Levy of interest u/s 234B - The mandatory nature of charging of interest and the actual charging of interest by application of mind and the mention of the proviso of law under which such interest is charged are two different things. - HC
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• High Court Admits Appeal on PAN Card Process Issues, Citing Harassment and Inconvenience to Citizens Without Clear Tax Benefits.

  Case-Laws - HC : Difficulty and harassment in relation of PAN card - inconvenience and harassment without any palpable advantage or benefit to the Department. - Appeal admitted and notices issued. - HC
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• Residential Flat Exchange Qualifies as New Construction; Eligible for Capital Gains Tax Exemption u/s 54 of Income Tax Act.

  Case-Laws - AT : Exchange of residential flat - exemption from capital gains u/s 54 - . The acquisition of a new flat under a development agreement in exchange of the old flat amounts to construction of new flat. - AT
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• Foreign Company Capital Gains Assessed via Agent; Notice Required Within 2 Years u/s 163 Income Tax Act.

  Case-Laws - HC : Capital gains in the hands of the Foreign Company - assessment in the hands of an agent under Section 163 - , the notice shall not be issued after the expiry of a period of two years from the end of the relevant Assessment Year - HC
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• Court Affirms Legitimacy of Share Sale, Emphasizes Consistent Transaction Assessment Without Specific Evidence Challenging Purchase Validity.

  Case-Laws - AT : Allegation of fictitious sale of shares - Once the purchase of shares is not doubted, then in our considered view, the sale of same shares should not have been doubted. - AT
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• Taxpayer's Intent and Income Classification: Short-Term Gains or Business Income for Same-Day Transactions?

  Case-Laws - AT : Short term capital gain or business income - Purchases in the same scrip on the same day has been divided into speculation and investment - the only intention of the assessee in the impugned case is just to reduce the tax liability by treating a part of the profit as short term capital gain - AT
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• Court Rules Excess Payment for Intangibles as Goodwill, Affects Depreciation in Tax Laws.

  Case-Laws - AT : Depreciation on intangible goods - whether excess amount paid is goodwill or intangible asset - held as goodwill - AT
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• Trials Costs Outside In-House R&D Not Eligible for Weighted Deduction Under Income Tax Act Section 35(2AB.

  Case-Laws - AT : Deduction u/s. 35(2AB) - weighted deduction - The expenditure incurred on trial conducted outside the in-house R and D facility will not be eligible for weighted deduction under section 35(2AB). - AT
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• High Court Affirms Investment Allowance for Alcohol Manufacturers u/s 32A, Including Rectified and Denatured Spirits.

  Case-Laws - HC : Investment allowance u/s 32A - article or thing, viz., alcohol including rectified spirit and denatured spirit manufactured by the assessee - assessee cannot be denied investment allowance. - HC
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• Court Rules SIM Card Discounts to Distributors Are Commissions, Subject to TDS u/s 194H of Income Tax Act.

  Case-Laws - AT : TDS u/s 194H - the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS u/s 194H. - AT
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• High Court Rules Palm Oil Extraction as Business Income, Not Agricultural; Affects Tax Exemptions Under Income Tax Laws.

  Case-Laws - HC : Agricultural income Vs. Business income - Sale of palm oil - activity of extracting crude palm oil from palm pericarp(fruit portion excluding the kernel) and also from the kernel - not an agriculture income - HC
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Customs

• Customs Notification No. 56/2007 validity extended by one year; new expiry date is April 11, 2013.

  Notifications : Seeks to extend the validity of Notification no. 56/2007-Customs, dated the 12th April, 2007, by one more year, i.e. upto and inclusive of 11th April, 2013. - Notification
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• New Exchange Rates for Foreign Currencies Effective May 22, 2012 Under Customs Regulations: Tax Implications Alert.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 22nd May, 2012. - Notification
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• Anti-Dumping Duty on Chinese Zinc Oxide Imports Extended to Protect Domestic Market from Unfair Pricing Practices.

  Notifications : Continuation of anti-dumping duty on imports of ‘Zinc Oxide’, originating in, or exported from, China PR. - Notification
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• CHA License Suspension Under Reg 20(2) Faces Contradiction with 2010 Board Circular on Limitation Periods.

  Case-Laws - AT : Suspension of CHA licence - Regulation 20(2) of the 2004 Regulation - Board's circular dt. 18.4.2010 - period of limitation of 15 days or 30 days - contradiction in circular and regulations
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FEMA

• New Guidelines for Risk Management and Interbank Dealings Under FEMA: Enhancing Compliance and Stability in Financial Markets.

  Circulars : Risk Management and Inter Bank Dealings. - Circular
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Corporate Law

• Companies Must Comply with Companies Act, 1956: Key Updates and Alerts on Legal Requirements and Regulation Changes.

  Circulars : Compliance of the provisions of Companies Act, 1956 and the Rules made there under. - Circular
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Indian Laws

• Tax Officers Must Balance Fair Collection with Taxpayer Rights: Adhere to Legal Guidelines and Ensure Transparency.

  Articles : For benefit of revenue: Care required by revenue officers. - Article
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• India's White Paper Proposes Legal Reforms and Global Cooperation to Combat Black Money and Tax Evasion

  News : White Paper on Black Money.
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• Review Tax Returns for AY 2011-12: Agency Business or Commission Income Filers u/s 44AD Advised to Amend.

  Articles : Persons carrying on agency business or earning commission income should revise their return for A.Y 2011-12, if original return filed u/s 44AD - Article
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• Supreme Court Upholds Madhya Pradesh Stamp Duty Amendment for Non-Relative Agents' Powers of Attorney, Validating Market Value Basis.

  Articles : STAMP DUTY -AMENDMENT IN MP- POWER OF ATTORNEY TO AGENTS NOT BEING SPECIFIED RELATIVES,IS A VALID CLASSIFICATION – LEVY OF STAMP DUTY ON MARKET VALUE IS UPHELD BY THE SUPREME COURT. - Article
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Service Tax

• Eligibility of Cenvat Credit for Outdoor Catering Services u/r 2(l) of CENVAT Credit Rules, 2004 Examined.

  Case-Laws - AT : Cenvat Credit - Outdoor catering - input services - Rule 2(l) of the CENVAT Credit Rules(CCR), 2004 – statutory obligation under the Factories Act
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• Coal Movement in Mines Exempt from Cargo Handling Service Tax; Loading Alone Not Enough for Tax Obligation.

  Case-Laws - AT : Cargo handing service - Movement of coal from mine surface to tip head within the mine area. - Mere loading of coal within the mining area does not amount to Cargo Handling Service
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• Service tax refund claim allowed under Notification No. 09/2009-S.T for services before March 3, 2009, if tax paid after.

  Case-Laws - AT : Refund claim of service tax - Notification No. 09/2009-S.T dated 03.03.2009 - aeven if the services were rendered prior to 03.03.2009 but the recipient has paid the service tax on or after 3.3.2009, he can avail service tax refund as provided for in the Notification.
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Central Excise

• Company Registers Non-Manufacturing Unit for Excise Due to Space Constraints in Main Facility.

  Case-Laws - AT : Storage of manufactured goods to non manufacturing unit - due to shortage of space in their manufacturing unit, they took Central Excise registration for Unit III but no manufacturing activity was undertaken in the said Unit III - AT
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• Eligibility for Cenvat Credit on SAD: Is Loading Software on ADSL Modems a Manufacturing Activity?

  Case-Laws - AT : Cenvat Credit of additional duty (SAD) - process / activity on the modems imported - loading of software/software patches on ADSL - whether manufacturing activity or not - AT
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• CENVAT Credit Reversal Required for Waste from Packing Material in Excise Duty Case on Scrap Handling.

  Case-Laws - AT : Duty on waste and scrap – packing of intermediate/final goods - packing material has become waste - reversal of cenvat credit - AT
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• Job worked goods consumed by principal manufacturer not covered under Valuation Rules 10A(i), 10A(ii), or Rule 8.

  Case-Laws - AT : Job work - valuation under central excise - Rule 10A(i) or (ii) or Rule 8 of the Valuation Rules will not apply in respect of job worked goods consumed by the principal manufacturer
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Case Laws:

• Income Tax

• 2012 (5) TMI 320
  Levy of interest u/s 234B - held that:- Even if any provision of law is mandatory and provides for charging of tax or interest, the view taken in Ranchi Club Ltd. is that such charge by the assessing officer should be specific and clear and assessee must be made to know that the assessing officer has applied its mind and has ordered charging of interest. The mandatory nature of charging of interest and the actual charging of interest by application of mind and the mention of the proviso of law under which such interest is charged are two different things. - Decided in favor of assessee. Investment allowance under section 32A (1) - machinery installed in Hotel - Industrial Undertaking - held that:- Matter remanded back.

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• 2012 (5) TMI 319
  Difficulty and harassment in relation of PAN card - inconvenience and harassment without any palpable advantage or benefit to the Department. - Appeal admitted and notices issued.

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• 2012 (5) TMI 318
  Disallowance of interest - capitalization - Explanation 8 to sec. 43(1) - business from a rented premises - held that:- Through this ground, the assessee is contending that if deduction of interest amounting to Rs. 6.57 lakhs is not allowed, then such amount should be allowed to be capitalized to the cost of office/godown and depreciation may be allowed on the same. We accept this ground partly to the extent of allowing capitalization of this amount of interest to the cost of office/godown. However, we are not inclined to grant any depreciation on it for the reason that the said office and godown have not admittedly been put to use for the current year. This additional ground is, therefore, partly allowed. Unaccounted sale - shortage in goods - held that:- The return for the said assessment year 2004-05 was scrutinized by the AO and assessment order was passed u/s. 143(3). Page no. 161 to 164 of the paper book is a copy of the assessment order for assessment year 2004-05, from which it can be seen that no addition on account of shortage was made. Thus, it becomes evident that the shortage of 2.93% has been accepted by the Revenue for the assessment year 2004-05. In that view of the matter, there is no reason to reject lower net shortage of 2.17% for the current year. In view of the foregoing reasons, we are of the considered opinion that the authorities below were not justified in making and sustaining the addition of Rs. 29.22 lakhs on this count, which is hereby ordered to be deleted. These grounds are, therefore, allowed.

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• 2012 (5) TMI 317
  Transfer pricing - international transactions - selection of comparable - TPO rejected the CUP method - held that:- the first appellate authority was wrong in basing his decision on the fact that RBI has granted permission. This is not a ground to allow an appeal. Every remittance would bear the approval of RBI. The ground that the TPO has not brought out any evidence on record that part of the money paid to AEs was returned back to the assessee is also not a basis contemplated under T.P. provisions. The fact that expenses were audited and payments were through banking channels are not issues that determine the transfer pricing adjustment. These are not grounds on which a transfer pricing adjustment could be deleted. Hence the CIT(A) was wrong on basis in his decision on these findings. Nevertheless as the TPO has not given any reason as to why the method adopted by the assessee i.e., CUP method is not acceptable as the most appropriate method and as the Assessing Officer has not adopted any of the methods prescribed under the Act and has method adopted by the TPO cannot be called TNMM prescribed under the Act and Rules, we have to necessarily uphold the Order of the first appellate authority, though for different reasons. - Decided in favor of assessee.

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• 2012 (5) TMI 316
  Exchange of residential flat - exemption from capital gains u/s 54 - held that:- the assessee had exchanged old flat with new flat to be constructed by the builder under development agreement which amounts to transfer under section 2(47) of the Act. - Thus, the only other condition which is required to be satisfied is that assessee either purchases a new residential flat within the prescribed limit or constructs a new residential flat within a period of 3 years from the date of transfer. The acquisition of a new flat under a development agreement in exchange of the old flat amounts to construction of new flat. - Decided in favor of assessee. Taxability of compensation of Rs. 7,01,460/- received by the assessee for alternate accommodation during the period of construction of property for 18 months. - held that:- displacement compensation is not related to any capital asset. - he compensation had been paid in connection with the alternate accommodation given to the assessee to facilitate construction of the flat. Since the actual rent paid by the assessee for the alternate accommodation was lower than the amount received, there was net income to the assessee which has been rightly taxed as income from other sources. - Addition confirmed - Decided against the assessee.

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• 2012 (5) TMI 315
  Taxability of an amounted received after an order of High Court in an interim order - accrual of income - held that:- the impugned receipt will have to be brought to tax as trading receipt in this assessment year and if and when the assessee pays the said impugned amount back to the concerned party, it would be entitled to claim deduction for the assessment year during which the amount ought have been paid/ refunded to the said party. - Decided in favor of revenue.

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• 2012 (5) TMI 314
  Transfer pricing - arm's length price - extraordinary expense - selection of comparable - held that:- Since the adjudication on this issue has resulted in operating margin of the assessee at 17.80% which is higher than the operating margin of 17.09% earned by the comparable companies selected by the TPO, international transactions undertaken by the assessee satisfies the arm's length criteria. - In such scenario, as agreed by both the counsel, adjudication of another Transfer Pricing issue in this regard is infructuous. Expenditure on activity of the shifting of office versus re-establishment of business - held that:- The said expenses incurred on relocation of the office are essentially revenue expenses in as much as it did not result in enduring benefit in the capital field - allowed as revenue expenditure. Recruitment expenses - revenue or capital - held that:- the assessee incurred an aggregate amount of Rs. 20,70,000/- as recruitment expenses, being expenses incurred in relation to hiring of employees, which were paid to consultants and for advertisement and other incidental expenses as revenue expenditure. We agree that the aforesaid expenditure are essentially on revenue account and did not result in either an enduring benefit in capital filed or creation of capital assets - Decided in favor of assessee.

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• 2012 (5) TMI 313
  Deduction u/s 80HHC - Whether Explanation (e) to sub-sec. (3) to section 80HHC can override the clause (b) to section 80HHC(3) of the Income-tax Act, 1961 - held that:- only indirect costs attributable to export have to be reduced for computing the deduction u/s 80HHC in respect of export of trading goods and not all costs other than direct costs. In other words, first, attribution of indirect costs to the export of trading goods is to be made and then only scaling down in proportion is to be resorted to.

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• 2012 (5) TMI 312
  Capital gains in the hands of the Foreign Company - assessment in the hands of an agent under Section 163 - held that:- - Under sub-Section (3) of Section 149 if the person on whom a notice is issued under Section 148 is a person treated as the agent of a non-resident under Section 163 and the assessment, re-assessment or re-computation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant Assessment Year - The notice under Section 163 is in aid of the action of the Revenue in bringing to tax the capital gains arising out of the transfer of shares of the Bermudian Company because according to the Revenue, this involved the transfer of a capital asset in India - the plain consequence of the provisions of Section 149(3) is that no assessment, re-assessment or re-computation can take place after 31 March 2008 - Decided in favor of the assessee

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• 2012 (5) TMI 311
  Allegation of fictitious sale of shares - held that:- Once the purchase of shares is not doubted, then in our considered view, the sale of same shares should not have been doubted. If assessee has invested his own money under the garb of fictitious sale of shares then where the actual shares purchased by assessee which were duly demated have gone. - since the purchase of shares is genuine, the sale of the same shares should have been treated as genuine. - Decided in favor of assessee. Unexplained jewellery - held that:- This is a case of jewellery found relating to many persons in the family. - If all these facts are taken into consideration, then we are of the view that the addition of Rs. 1,50,000 is sustained and the remaining addition is deleted.

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• 2012 (5) TMI 310
  Short term capital gain or business income - dealing in shares and securities - held that:- The detail of such investment through computer itself shows that assessee smartly but intentionally switched over its trading business to the investment business to have undue advantage of lower tax rate provided for short term capital gain - the intention of the assessee appears to be whimsical. - Purchases in the same scrip on the same day has been divided into speculation and investment - the only intention of the assessee in the impugned case is just to reduce the tax liability by treating a part of the profit as short term capital gain - Decided against the assessee

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• 2012 (5) TMI 309
  Reopening - Exemption under s. 10B - reconstruction of old unit - requirement of plant and machinery - only needles and scissors are required for cutting, finishing and packing. - held that:- In the present case, there had been no business in the old unit of the assessee for over five years before the start of production by the new EOU - it is seen that for eligibility for deduction under s. 10B of the Act, it is nowhere the requirement of the section that plant and machinery must be used for manufacture or production of goods or articles - s. 10B of the Act is a provision directed towards encouraging industrialization by permitting an assessee to set up a new industrial undertaking to claim relief from tax to the extent prescribed The next objection of the Department is that the assessee has utilized the infrastructure of its sister concern - assessee has maintained that the opening stock of raw materials lying with the company was very old and obsolete and was of no use to the new EOU of the company; and that such stock was also actually never used in the business of the new undertaking - The process carried on by the assessee, as such, definitely amounts to manufacture - held that the learned CIT(A) has gone wrong in sustaining the non-allowance of the exemption claimed by the assessee under s. 10B of the Act, with regard to the assessee's new EOU - Decided in favor of the assessee

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• 2012 (5) TMI 308
  Validity of block assessment - Legality of search and seizure - jurisdiction of the AO - no warrant of authorization in the individual name of the assessee - jurisdiction to pass the order u/s. 158BC - held that:- no individual warrant of authorisation was issued and warrant of authorisation of search was in the joint names, therefore keeping in view the ratio laid down in the aforesaid referred to cases, we are of the view that in the present case the assessment framed u/s. 158BC is not maintainable - Decided in favor of the assessee

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• 2012 (5) TMI 307
  Deduction u/s. 80I - 4th stage of expansion of unit - Held that:- unless the deduction is withdrawn or rejected in the initial assessment year, the same cannot be withdrawn in the subsequent assessment years - Decided in favor of the assessee

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• 2012 (5) TMI 306
  Depreciation - cost of acquisition of cement unit - Explanation 3 to section 43(1) of the I.T. Act - Held that:- The registered valuer also valued the assets as on 01.11.1999, the price of which was considered to be the cost of fixed asset acquired and the balance to the current assets including the current liabilities. - no reason to invoke Explanation (3) as the A.O. nowhere stated that the main purpose of such a valuation was for reduction of liability to tax. - Decided in favor of the assessee. Lump-sum payment - Deferred revenue expenses - assessee was entitled to benefit over a period of three years - held that:- lump-sum prepayment premium for restructuring of loan resulting in deduction on rate of interest is allowable as interest and that section 43B(d) also permits such deduction of payment. Depreciation on intangible goods - whether excess amount paid is goodwill - held that:- the nature of payment has to be considered and terminology used in the books of account does not determine the allowability of claim. - held that:- assessee has made a vague claim. On the one hand it states the excess payment made, over and above the value of tangible asset acquired, is for licences, quotas, business rights etc. and whereas on the other hand it states the excess amount should be taken as that paid for factors like locational advantage, contracts with dealers and customers attached to the business etc. This second limb, in our view cannot be a business or commercial right but only goodwill. While stating facts, alternate or without prejudice stand cannot be taken. The assessee is supposed to know exactly the purpose for which the amount is paid. While tangible assets were valued, intangible assets were not valued in this case - held as goodwill - decided against the assessee.

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• 2012 (5) TMI 305
  Deduction u/s. 35(2AB) - weighted deduction - in-house research and development facility - held that:- expenditure on clinical trial though the same is an integral part of scientific research will be eligible for weighted deduction under section 35(2AB) only if the expenditure is incurred on an in-house research and development facility. The expenditure incurred on trial conducted outside the in-house R and D facility will not be eligible for weighted deduction under section 35(2AB). - Decision in the matter of Concept Pharmaceuticals (2010 (11) TMI 147 (Tri)) followed. - Decided against the assessee.

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• 2012 (5) TMI 304
  Method of accounting - Assessing Officer observed in his order that that the assessee has not shown work-in-progress with profit and loss Account for the relevant previous year ended with 31.03.2004 - Held that:- The choice of the method of accounting lies with the assessee - the accounting policy consistently followed by the assessee wherein all the income and expenses were wholly accounted for and offered as such in the profit and loss account as and when it was received or incurred, there arises no work-in-progress with relation to expenses incurred on the on-going projects as the whole is offered as income/expenses - Matter remanded back. Regarding addition u/s 69 - bogus purchase - transactions were in remote areas where proper banking facilities and trading channels were not present. - assessee has transferred the amounts from his accounts with UCO Bank,Barakka Branch to the account of Mr. S. Das with the same Branch - The black wire purchase details/quantity were also mentioned. It clearly establishes that this money from the assessee's account went to Mr. S. Das who acted as an agent for the assessee in procuring black wire from the local market which has been sufficiently explained to the satisfaction of the authorities. - Decided in favor of assessee. Regarding retention money - Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1996 - TMI - 5626 - SUPREME Court - Income Tax) which permits the Tribunal to admit the additional ground as it does not require any investigation of facts and it can be adjudicated upon - Appeal is allowed by way of remand to AO

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• 2012 (5) TMI 294
  Search and Seizure - block assessment - authorization u/s 132A - Held that:- action under section 153C of the Act was initiated on the basis of information received by the Additional CIT, Range IV, Kanpur on 22.12.2004 which is not permissible under the law. The right course available with the Revenue if they intends to initiate action on the basis of information received from some person, they could initiate action under section 153A of the Act requiring the assessee to furnish the requisite information, but action under section 153C of the Act is not permissible under the law. Therefore, we are of the considered opinion that action initiated by the Assessing Officer under section 153C of the Act by issuing notice under section 153C read with section 153A of the Act is not sustainable in the eyes of law.

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• 2012 (5) TMI 287
  Reopening of an assessment u/s 147/148 - Depreciation - possession - hire purchase of the machinery - held that:- while for one year it had accepted the transactions as a genuine one, viz., 1998-99, in respect of assessment years 1995-96 to 1997-98, it took a different stand that it is a colourable transaction. On a perusal of the documents produced, we have no hesitation in confirming the order of the Tribunal, both on the question of jurisdiction to reopen the assessment for the assessment year 1995-96 and on the merits of the claim in respect of the three assessment years viz., 1995-96 to 1997-98. - Decided in favor of assessee.

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• 2012 (5) TMI 286
  Business expenditure - payment of commission - payment to relatives - Provisions of Section 40A(2)(b) of the Act. - held that:- Assessment Officer has examined various statements of the brokerage which were furnished by the assessee before him and in the case of investors, the assessee has net shown any payment of brokerage to the investor concerned and it has only shown payment of brokerage to his family members. It has been found by the Assessment Officer that it has been done to divert his income to his family members which would have otherwise become taxable in his own hands. Shri Uttam Chand Jain and Smt. Sunita Jain were having huge brought forward loss. The income was also diverted as against the huge loss. Provisions of Section 40A(2)(b) of the Act has been attracted. - Addition upheld - Decided against the assessee.

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• 2012 (5) TMI 285
  Disallowance on account of non deduction of TDS u/s 40(a)(ia) - loading and unloading charges - sub contractors - Circular No. 715 - Job work - outsourcing - reimbursement - held that:- Except for the observation of the AO that the business of the assessee is continuous, nowhere has the AO proved that the assessee had bound himself in contracts with outsourced third parties. We are in complete agreement with the submissions of the AR that at best the business done by the assessee for whom he hires trucks/lorries/containers would amount to job work because whatever he receives from his customers are paid to the out sourced lorry owners, that too on his own risks and perils and also where the out sourced transporters are not binding the assessee’s customers. - Decided in favor of assessee.

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• 2012 (5) TMI 284
  Garnishee notice - Section 226 (3) - attachment orders - held that:- Having regard to the facts and circumstances of the case, we are of the opinion that it is just and proper to grant stay of the impugned garnishee order, and the subsequent attachment orders pending disposal of the appeal before the CIT(A) subject to condition the petitioner pays 50% of the demanded tax at the rate of Rs.2 crores per month commencing from May 2012 payable by 5 th of every month. The Commissioner of Income Tax (Appeals)-IV is directed to dispose of the appeal as expeditiously as possible preferably within a period of 3 (three) months from today.

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• 2012 (5) TMI 283
  Transfer pricing - Challenge to the order passed by the Dispute Resolution Panel (DRP) u/s 143(3) read with sec. 144C - Most Appropriate Method (MAM) - Resale Price Method (RPM) or Transaction Net Margin Method (TNMM) - Selection of comparable - held that:- assessee has followed the internal CUP method for arriving at ALP for the import of raw material, where as the TPO, in his order, has mentioned that the assessee has adopted the external CUP method. Similarly, for the royalty payment, the assessee has adopted the external cup method and it was a single payment, whereas the TPO observed at page 21 of his order that it is recurring payment. There were many flaws in the TPO's order which demonstrate that the facts of the case have not been properly appreciated by the TPO while making the TP study analysis. - Matter remanded bact. Disallowance of warranty provisions - business of desk tops and lap tops from IBM - held that:- Hon'ble Supreme Court in the case of Rotork Controls India (P.) Ltd., (2009 (5) TMI 16 (SC)) has held that when a product is sold with a warranty provision, it cannot be held that the assessee has no obligation for the said warranty but for making a provision for the said warranty a reliable estimate should be made on the amount of obligation and a scientific method should be used. - Matter remanded back for reconsideration. Revenue or capital expenditure - marketing support agreement - held that:- it is for efficient running of the business and deriving revenues there-from. In such circumstances, we are inclined to hold that the fees paid by the assessee for marketing support services rendered by IBM, is clearly revenue in nature and is allowable as deduction u/s 37 of the Income-tax Act. Taking over the business - discharge of the liability of the predecessor - held that:- held by the Hon'ble Supreme Court in the case T. Veerabhadra Rao, K. Koteswara Rao & Co. (1985 (7) TMI 2 (SC)), the successor of a business steps into the shoes of its predecessor and is liable to meet any claims against the predecessor. - Decided in favor of assessee.

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• 2012 (5) TMI 282
  Deduction u/s 10A - Reduction of expenditure incurred towards communications expenses as well as travelling, boarding and conveyance expenses from the total turnover while computing deductions under Section 10A of the Act. - held that:- no error committed by the Tribunal in following the judgments rendered in the context of Section 80HHC in interpreting Section 10-A when the principle underlying both these provisions is one and the same. Therefore, we do not see any merit in these appeals. The substantial question of law framed is answered in favour of the assessee and against the revenue.

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• 2012 (5) TMI 281
  Investment allowance u/s 32A - Whether article or thing, viz., alcohol including rectified spirit and denatured spirit manufactured by the assessee-company do not come under the ambit of Eleventh Schedule of the I.T.Act, 1961? - held that:- Respectfully following the reasoning in Sangrur Vanaspati Mills and Sraya Industries (2006 (11) TMI 197 (HC)) we hold that the assessee cannot be denied investment allowance. - Decided in favor of assessee.

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• 2012 (5) TMI 280
  TDS u/s 194H - distributors on sale of Prepaid cards - SIM cards - Demand u/s 201(1) and 201(1A) - held that:- The decision rendered by the Hon’ble Delhi High Court in the case of Idea Celular Ltd (2010 (2) TMI 24 (HC)) is directly on the issues agitated before us. Hence, we are inclined to follow the same. In that case, the Hon’ble Delhi High Court held that the transaction between the assessee, a cellular operator and the prepaid market associates (PMAs) appointed by it whereby SIM cards/recharge coupons are ultimately sold to the subscribers through the latter does not amount to ‘sale’ of goods and, therefore, the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS u/s 194H. - Decided against the assessee. Applicability of provisions of sec. 194J on roaming charges paid by the assessee to other operators - held that:- decision of Skycell (2001 (2) TMI 57 (HC)). - held that:- this issue could be resolved if there is proper understanding of the technical details concerning the functioning of Home circle cellular operators and Outside circle operators. From the arguments of the Ld A.R, we understand that the case of the assessee is that the Home circle cellular operator does not actually provide airtime usage facility to the subscriber, once he moves out of the Home circle to an outside circle. The airtime usage in those Outside circles is actually provided by the operators of concerned outside circles. With regard to the billing, the understanding between the cellular operators is that the charges for the usage in Outside circles shall also be collected by the Home circle cellular operator, who in turn, shall pass it on to the concerned outside circle operator. - matter remanded for reconsideration.

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• 2012 (5) TMI 279
  Deduction u/s 80IB(10) - completion certificate - housing projects - the only contention of the AO for rejecting the claim of appellant for all these six AYs is that there is no completion certificates in respect of above mentioned three housing projects issued by the Corporation - The Municipal Corporation had issued the completion certificate on 18.06.2010, 23.06.2010 and 24.06.2010 in respect of Permission No. 3737/27.03.2001, 299/04.09.1999 and 580/02.11.1999 respectively - The Municipal authority has not pointed out any defect and irregularity in the assessee's application dated 26.11.2007 submitted for issuance of completion certificate of all the said projects - Decided in favor of the assessee

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• 2012 (5) TMI 278
  Minimum Alternate Tax (MAT) - Interest u/s 234C - deferred payment of advance tax - Section 115JB(5) - held that:- Under s. 115JB of the Act, sub-s. (5) clearly states that other provisions of the Act shall apply to every assessee being a company, save as otherwise provided in the said section. In this context, Circular No. 13 of 2001 has also been issued by the CBDT as per which companies covered by the provisions of s. 115JB are liable to pay advance tax and consequently, ss. 234B and 234C of the Act are applicable. Decision in Kwality Biscuits Ltd.(2006 (4) TMI 121 (SC)) in which SC dismissed the appeal against the decision of HC in (1999 (11) TMI 48 (HC)) distinguished. - Decided against the assessee.

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• 2012 (5) TMI 277
  Allegation of transfer of property in the guise of lease agreement - Long term capital gain - held that:- It is stated that the said property is sold subsequently. - However, he has neither mentioned the year in which it is sold and the agreement entered in respect of the said sale. - the documents filed by assessee is not sufficient to accept the contentions of the assessee. The facts narrated by the assessee are not in corroboration with the documents placed by assessee. - Matter need re-verification and therefore remitted back to AO.

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• 2012 (5) TMI 276
  Agricultural income Vs. Business income - Sale of palm oil - activity of extracting crude palm oil from palm pericarp (fruit portion excluding the kernel) and also from the kernel - Rule 7 of the Income-tax Rules, 1961 - mechanical and other process - held that:- activity carried out by the appellant in the extraction of oil from the fruit/ from the kernel is an industrial activity and, therefore, income from such activity is assessable as its "profits and gains of business" under Section 28 of the Income Tax Act. - Decided against the assessee. Double taxation - payment of state tax on agriculture income and central income tax - held that:- eligible relief can be considered only in the writ petition pending and not in these statutory appeals filed by the appellant under Section 260A of the Income Tax Act wherein we have considered the substantial question of law arising from the orders of the Tribunal.

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• Customs

• 2012 (5) TMI 303
  Refund - amendment of bill of entry in terms of Section 17 or Section 149 of the Customs Act, 1962 - After clearance they found that the goods were eligible for concessional rate of duty under notification No.25/98-Cus and 69/04. Accordingly, they filed refund claim for the customs duty paid under the aforesaid bill of entry - contention of the Revenue is that the respondent has at no stage challenged the assessment order, therefore, the refund claim was rightly rejected by the lower adjudicating authority – Held that:- in the case of Priya Blue Industries (2004 - TMI - 47045 - SUPREME COURT OF INDIA – Customs), proper course for claiming the benefit of the notification was by way of filing appeal against the assessment order, Commissioner (Appeals)'s order is set aside and Revenue's appeal is allowed

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• 2012 (5) TMI 302
  Refund - exchange rate was wrongly mentioned in Euro instead of US $. In this manner they paid duty in excess and on realizing - lower adjudicating authority rejected their refund claim on the ground that they have not challenged the assessment order – Held that:- case is remanded to lower adjudicating authority to decide the case afresh by allowing the amendment under Section 154 and in case the refund is allowable, the same should subject to question of unjust enrichment, appeal is disposed of

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• 2012 (5) TMI 301
  Confiscation of 3.6 MTs of diesel – stock in the vessel - smuggled goods – goods released provisionally against band and bank guarantee - Held that:- Commissioner ought to have confiscated the entire quantity (147 + 3.6 MTs) under Section 120(2) without splitting the stock in the manner he did, confiscation of this quantity of diesel is liable to be upheld, major part of the above stock was legally acquired by the appellant and no duty thereon was demanded by the Revenue, fine of Rs.1,00,000/- will be fair and justifiable. After deducting the aforesaid fine of Rs.50,000/- already paid by the appellant, appeal is disposed of

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• 2012 (5) TMI 275
  Suspension of CHA licence - Regulation 20(2) of the 2004 Regulation - Board s circular dt. 18.4.2010 - period of limitation of 15 days or 30 days - contradiction in circular and regulations - held that:- This appears to be an internal guideline issued by the Board. - this instruction contained in the circular is not part of the Regulation made by the Board. The statute has authorized the Board to make Regulations and the Regulations so made have statutory force. The instructions issued over and above the Regulations cannot be put on the same footing as statutory regulations nor would it be proper for the Tribunal to grant relief treating the instructions to be statutory Regulations which they are not. As such, when the impugned suspension order has been issued within the time limit of 15 days prescribed under the Regulation, the required post-decisional hearing has also been granted by the Commissioner on 28.10.2011, and necessary order for continuing the order of suspension has been passed on 11.11.2011, it is not legally possible nor it is desirable for the Tribunal to set aside the impugned suspension order. - Decided against CHA.

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• 2012 (5) TMI 274
  Export under DEEC scheme - misdeclaration of goods - held that:- the test reports are very clear and categorical with regard to the grade of the SS used in the manufacture of utensils/ kitchenware that were exported in the past. In the absence of any report contrary to the findings of Metallurgical expert, the bald allegations, that goods exported in the past were not made of AISI 304 Grade are not sustainable. The only ground taken by the department is that the same adjudicating Commissioner has taken a different view in two other cases. As pointed out by the Ld. Advocate, the other two cases were different and in those cases, duty benefits were taken by making duty free imports under the respective advance licences, whereas in the present case, SI have not made import of any goods under the three advance licences listed earlier and since the said licences have expired, the same cannot be used. - Decided in favor of assessee in respect of 17 Shipping Bills. Confiscation and redemption fine - in respect of other shipping bills - held that:- the goods which are not available cannot be ordered to be confiscated and no redemption fine can be imposed. - The appellants are, therefore, liable to penal action for such misdeclaration. The only point in their favour is that the misdeclaration has not led to any misuse of DEEC scheme or duty free import under the impugned advanced licences and there has been no consequent revenue loss. - Taking the same into consideration, while holding that the appellants are liable for penal action, I reduce the penalty from Rs. Two lakhs to Rs. One lakh.

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• Corporate Laws

• 2012 (5) TMI 288
  Section 138 of the Negotiable Instruments Act, - Dishonour of cheque - cheque was drawn by respondent No. 3, Mr. Ravi Gupta in his capacity as a partner of M/s Sunlit Securities - The firm has not been impleaded by the complainant - Held that:- respondent No. 1/complainant has also not been able to indicate from the record that any specific amount was mentioned as having been received from respondent No. 3 (Accused No. 2) for dropping him from the case. cheque in question was issued by the respondent No. 3 (Accused No. 2), who respondent No. 1/complainant has decided not to prosecute, on account of his having received some undisclosed amount from the said respondent, respondent No. 1/complainant now cannot be permitted to continue prosecuting the complaint against the petitioner alone, more so when there was no specific allegation levelled in the complaint against her. complaint filed by respondent No. 1/complainant against the petitioner is not maintainable. petition is allowed

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• 2012 (5) TMI 273
  Allegation of oppressive management - transactions detriment to the shareholders etc. - By an application filed under regulation 46 r/w 44 2nd petitioner-company had sought for impleadment of 15th respondent-another company on the premise that some of the assets of the 1st respondent-company had been transferred in favour of the proposed respondent and therefore, the proposed respondent was a necessary party to resolve the main company petition in a satisfactory manner. - held that:- it proper to set aside the order of the Company Law Board dated 30.09.2011, allow this appeal and allow company application No. 49/2011 filed in Company Petition No. 46/2008 before the Company Law Board, Additional Principal Bench, Chennai.

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• Service Tax

• 2012 (5) TMI 293
  Import of services - liability to discharge Service Tax under the reverse charge mechanism on the appellant for export sale commission paid by them to the foreign agent. - CBE&C has also issued a circular F.No.276/8/2009-CX8A, dt.26.09.2011 and clarified that the Service Tax liability will not arise on the recipient of services prior to 18.4.06. - Decided in favor of assessee.

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• 2012 (5) TMI 292
  Cenvat Credit - Outdoor catering - input services - Rule 2(l) of the CENVAT Credit Rules(CCR), 2004 – Held that:- they had a statutory obligation under the Factories Act to provide canteen facility to their employees. original authority did not have occasion to verify the strength of employees in the respondent's factory as it proceeded on the premise that outdoor catering service was not covered by the definition of 'input service'. Though the appellate authority held the service to be a input service, it did not advert to the statutory obligation, if any, of the respondent under the Finance Act. These are the circumstances which warrant remand of the case to the original authority. appeal and cross-objection are allowed by way of remand

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• 2012 (5) TMI 291
  Whether service tax is leviable on the freight paid by the appellants to truck owners for carriage of tobacco from auction-yard to godowns - assessees cannot be held to have availed GTA service. In this connection, reliance is placed on a series of judgments of this Tribunal viz. Commissioner Vs. Kanaka Durga Agro Oil Products Pvt. Ltd. 2009 (15) S.T.R. 399, Salem Co-operative Sugar Mills (2010 - TMI - 77283 - CESTAT, CHENNAI - Service Tax) decision in favour of appellants

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• 2012 (5) TMI 290
  Cargo handing service - Movement of coal from mine surface to tip head within the mine area. - held that:- Reading of relevant clauses of agreement extracted in show cause notice does not throw light that loaders were let out by appellant with the concurrent obligation of loading of coal. When there was no letting out of loaders, entire activity was to discharge the obligation of loading of coal within the mining area as is observed-aforesaid. Mere loading of coal within the mining area does not amount to Cargo Handling Service as has been held in the case of Sainik Mining & Allied Services Ltd. (2007 (11) TMI 90 (Tri) ) and there is no instruction from Revenue whether that order of Tribunal has been reversed or stayed by any higher court. - Decided in favor of assessee.

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• 2012 (5) TMI 289
  Refund claim of service tax - Notification No. 09/2009-S.T dated 03.03.2009 - appellant is SEZ status holder for generation of electrical energy - held that:- the only requirement for claiming refund is that service tax on the services should have been paid on or after 03.03.2009. It is immaterial when the services had been rendered. In other words, even if the services were rendered prior to 03.03.2009 but the recipient has paid the service tax on or after 3.3.2009, he can avail service tax refund as provided for in the Notification. Therefore, the argument of the department that the service tax refund will be available only for the services rendered on or after 03.03.2009 does not appear to have any legal basis. - Decided in favor of assessee. Services outside SEZ unit - held that:- any service rendered to a SEZ unit in an export and, therefore, the procedure prescribed by the Board in Circular dated 19.01.2010 in respect of exports can be reasonably applied to the case under consideration and there is nothing wrong in the Assistant Collector adopting the same procedure. In any case, it is an internal matter of the department how they should verify the eligibility to the refund claim. In the instant case, the refund sanctioning authority has directed the appellant to produce the C.A certificate and on that basis he has sanctioned the refund. The appellant herein cannot be faulted for following the procedure directed by the refund sanctioning authority. - Decided in favor of assessee.

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• Central Excise

• 2012 (5) TMI 300
  Storage of manufactured goods to non manufacturing unit - due to shortage of space in their manufacturing unit, they took Central Excise registration for Unit III but no manufacturing activity was undertaken in the said Unit III except for certain minor activities such as checking and inspecting the raw materials received in respect of the quality. - held that:- for mere storage of imported goods/excised goods, the appellants cannot claim Central Excise registration under Rule 9 of the Central Excise Rules, 2002. - Penalty confirmed - Registration invoked.

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• 2012 (5) TMI 299
  Cenvat Credit of additional duty (SAD) - process / activity on the modems imported - loading of software/software patches on ADSL - whether manufacturing activity or not - held that:- the appellant had entertained a bonafide belief that the activity carried out by them on such modems were, in fact, amounting to manufacture. - If the appellant had entertained a bonafide belief that they were carrying out manufacturing activity and discharged Central Excise duty, there cannot be any error or intentions attributable on their part for availing credit of CVD paid on modems, when they were imported. - Extended period of limitation is not invokable - Decided in favor of assessee.

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• 2012 (5) TMI 298
  Waiver of pre-deposit of penalty - appellant has availed inadmissible credit of the basic custom duty and special additional customs duty which they were not entitled to take - appellant submits that the appellant are public sector undertaking and there is no intention of the appellant to evade payment of duty or to take inadmissible CENVAT credit – Held that:- appellant is not entitled to take CENVAT credit on basic excise duty and special additional customs duty which they have availed without any authority of law, option given to the appellant to pay 25% of duty as penalty within 30 days of the communication of this order, appeal as well as stay application are disposed of

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• 2012 (5) TMI 297
  Application for restoration of their appeal - condonation of delay in filing restoration application - petition for stay on recovery - appellant plead that the notices for hearing and the orders passed by the Tribunal dismissal their appeal were never received by them which is clear from the fact that all the communications were returned undelivered by the postal authorities – Held that:- appellant for delay in filing of application for restoration of appeal are genuine and hence delay is condoned, appeal for non-compliance to the provisions of Section 35F is recalled and the appeal filed by the appellant is restored to its original number. The appellant are given the time of four weeks from the date of this order to deposit the amount, miscellaneous application and the application for condonation of delay and ROA stand disposed of

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• 2012 (5) TMI 296
  Demand of duty on clearance of re-processed goods - respondents had received back certain products manufactured by them on being rejected, for further processing – Held that:- processes carried out by the respondent on the duty paid finished goods which were received back by them being rejected would not amount to manufacture and hence no duty was payable by the respondent on the reprocessed goods, appeal dismissed

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• 2012 (5) TMI 295
  Duty on waste and scrap – packing of intermediate/final goods - packing material has become waste - Held that:- if assessee has availed cenvat credit on such packing material, he is liable to pay duty on such waste. - From the facts of this case, it is not coming out that how much waste has been arisen on account of packing materials of raw materials i.e. inputs and how much packing materials have been procured by the assessee on payment of duty. - matter remanded back for re quantification.

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• 2012 (5) TMI 272
  Interest on Delayed refund (rebate claim) under central excise - Section 11B - held hat:- in regard to Central Excise Law, there is specific provision for grant of interest under Section 11BB and there is no reason why the same should not be followed. The matter has also been dealt with at length in the case of Ranbaxy Laboratories Ltd. (2011 (10) TMI 16 (SC)) wherein the Hon ble Supreme Court has categorically ruled that interest has to be paid beyond the delay of 3 months from the date of filing the claim. - Decided in favor of assessee.

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• 2012 (5) TMI 271
  Job work - valuation under central excise - held that:- Rule 10A(i) or (ii) or Rule 8 of the Valuation Rules will not apply in respect of job worked goods consumed by the principal manufacturer and not sold. It was further held that Rule 11 will apply in such cases and Revenue can take recourse to provisions of rule 11 which talks about using reasonable means consistent with the principles and general provisions of the Valuation Rule read with sub-section (1) Section 4 of the Central Excise Act, 1944. Keeping this in mind, the ratio laid down by the hon'ble Supreme Court in the case of Ujagar Prints will squarely apply, that is, to ascertain the assessable value on the cost of raw materials plus processing charges. - Decided in favor of assessee.

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• 2012 (5) TMI 270
  Cenvat credit – stay - demand of interest - wrongful credit - Appellant availed the credit in respect of the capital goods which were sent to job-worker for re-conditioning or modification – Held that:- Appellants had not reversed the credit and the demand is in respect of interest on such credit, as per provisions of Rule 14 of CENVAT Credit Rules if the credit has been taken wrongly the manufacturer is liable for interest. The Appellants only contested the demand of interest on the ground that the same was not utilized, no merit in the contentions of the Appellants hence the Appeal is dismissed. Stay Petition is also dismissed

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• 2012 (5) TMI 269
  Natural justice - stay application – Held that:- appellant sought an adjournment which was considered and the matter was fixed on 28/10/2009 but unfortunately before that date the appellants met with an accident on 18/10/2009 wherein both the legs were fractured and these facts have been communicated to the Commissioner well in advance along with supporting evidence i.e. photographs, medical certificates, etc. and the Commissioner failed to consider the contention of the appellants for adjournment of the case and did not grant any further adjournment in the case. Thereafter, after two months, he passed the adjudication order. If the Commissioner had given an opportunity after two months to the appellants, the appellants could not have pleaded before this bench that no reasonable opportunity was given to the appellants.Therefore, we are of the opinion that principles of natural justice has been violated by the Commissioner while passing the order, matter remanded back to the Commissioner, appeal as well as the stay applications are disposed of

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• 2012 (5) TMI 268
  Waiver of pre-deposit of duty – Held that:- waiver has been made out by the assessees as, sub-clause (iii) in condition No. 86 which is required to be fulfilled in the case of supply of goods required for setting up of mega power project was deleted from Notification No. 21/02-Cus. by Notification No. 49/06-Cus. dated 26-5-2006. We therefore waive pre-deposit and stay recovery of amounts in dispute pending the appeal.

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