Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 24, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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MAT - Agriculture income - sale of tea plant - Since these two items are of agricultural income it should be allowed as deduction while computing income u/s. 115JB being book profit - AT
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Re-assessment - No addition is made rather from the records the information available was used for making disallowance - the order of reopening is quashed - AT
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Performance incentive paid to employees - tds - the estimated TDS deducted in a bona fide manner as per the settled legal position cannot be faulted with. - AT
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Disallowance of expenditure in computing the income under the head capital gains - cost of making the title complete and perfect can be treated as the 'cost of acquisition' falling u/s. 48. - AT
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True, genuine and bona fide transactions, even if made below par, the fair market valuation would not have any tax implication, being only undertaken in the normal course of business and in its interest.l - AT
Customs
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Rejection of transaction value and enhancement of assessable value has to be on the basis of some evidences on record. - NIDB data cannot be made the basis for enhancement of value - AT
Corporate Law
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The CLB has, under the garb of doing substantial justice, granted extreme directions under Section 402, enabling the Respondents to achieve indirectly a virtual veto right on all issues and the ability to paralyze the functioning of the Company - HC
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Amalgamation - u/s 391 the C. Govt. & IT Authority do not have any powers to intervene or to be heard on any scheme which is filed seeking sanction of the Court - HC
Central Excise
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Since the Director of the appellant-company was actively involved in the day to day activity of the appellant-company penalty on him under Rule 26 has been correctly imposed. - AT
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In absence of direct or indirect involvement of the Managing Director in the clandestine removal of the goods no personal penalty under Rule 26 is imposable on him. - AT
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Cenvat Credit denied - galvanization does not amount to the manufacture - The duty paid on the G.P. Coils etc., is more than Cenvat Credit taken and needs to be adjusted against the demand of the Cenvat Credit. - AT
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Extended period of limitation - in cases of intention to evade duty relevant date for computation of extended period for show cause is the date of knowledge - AT
VAT
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Guilty of willful omission - in the normal course, there would be no reason for the selling dealer to doubt the declaration made by the purchasing dealer, in the Form ST-1 - HC
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Expression tax due as appearing in section 27(1) has to be read in conjunction with provisions of section 21(3) and interest u/s 27(1) is payable only on the tax due according to the return filed - HC
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Trade tax on mushroom - mushroom has been excluded from category of fresh fruits and green vegetables. - not exempted - HC
Case Laws:
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Income Tax
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2013 (5) TMI 561
Depreciation Claim – As per AO assessee failed to furnish the evidence in support – Held that:- From the order of CIT(A), it is clear that evidences that these machineries were put to use as on 31.03.2005 were filed before him for the first time and these are not filed before the tribunal. Thus, the matter is remitted back to AO. Therefore, issue is set aside to file of AO and assessee will provide evidence before him to substantiate its claim that these machineries were put to use on or before 31.03.2005. Deletion of addition on account of cess on green leaf – Held that:- Issue is squarely covered in favour of the assessee and against the revenue by the decision of jurisdictional High Court in the case of AFT Industries Ltd. Vs. CIT (2004 (7) TMI 81 - CALCUTTA High Court). The petition is, therefore, dismissed. Restriction of income at Rs.4,58,302/- instead of the income assessed by AO at Rs.10,91,762/- on account of profit from purchase of green leaf – Held that:- Assessee has given a working to arrive at profit earned out of sale of tea processed out of purchased green tea leaves and on plucked tea green leaves and in view of this working the CIT(A) restricted the disallowance at Rs.4,58,302/- instead of computed by AO at Rs.10,91,762/-. As the Ld. Sr. DR could not point out any defect in computation of income, order of CIT(A) is upheld. Deletion of addition on account that sale of tea plant is not agricultural income and does not come under declared objective of the assessee company and also allowed deduction being agricultural income from Book Profit u/s. 115JB – As per AO the book profit does not indicate the total taxable income of the assessee – Held that:- Assessee before the AO as well as before CIT(A) has produced the evidences in the shape of agricultural receipts on account of sale of tea plants, which are agricultural income. We agree with the findings of CIT(A) that this sale of tea plants treated by assessee as agricultural receipts exclusively out of agricultural activity. As to composite income of sale proceeds to tea plant at 60% of book profit Rs.30,12,347/- is in the nature of agricultural income which is exempt u/s. 10(1) of the Act. Since these two items are of agricultural income it should be allowed as deduction while computing income u/s. 115JB of the Act being book profit of the assessee company. Thus, the order of CIT(A) is upheld.
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2013 (5) TMI 560
Income from undisclosed sources – Appeal is related to two assessment years - AO made additions in income sustained by Ld. CIT(A) - Addition in income made u/s 153A of the Act - Held that:- Assessee in his statement recorded u/s.132(4) has offered the amount of Rs. 4,21,000/- as his income from undisclosed sources. Further, during the course of assessment proceedings the assessee in his letter addressed to the AO has accepted for the addition to be made in his hands. Under these circumstances and in view of the detailed reasoning given by the Ld. CIT(A) grounds raised by the assessee are dismissed. Levy of interest u/s.234A, 234B and 234C – Held that:- Levy of interest is mandatory and consequential in nature. Thus, appeal is dismissed.
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2013 (5) TMI 559
Re-assessment - Reopening of assessment – As per revenue assessee understated / concealed its income, particularly did not disclose correct income from her proprietary concern SAAJO a beauty parlour. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the AO proceeded to reduce the claim of deduction u/s 80HH and 80-I which as per our discussion was not permissible. Held that:- In the case of CIT Vs. Jet Airways (I) Ltd. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and Ranbaxy Laboratories Ltd. Vs. CIT [2011 (6) TMI 4 - DELHI HIGH COURT] Court held that the reassessment is not permissible wherein items of income said to have escaped assessment on which reassessment proposed not added but other deductions reduced. If during the course of the proceedings the Assessing Officer comes to the conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. For every new issue coming before the AO during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice u/s 148. The facts and circumstances are exactly identical here that there is no addition on the basis of the complaint received that the turnover of M/s. Saajo and M/s. Savoy Imaging System, the proprietary concern are not disclosed. No addition is made rather from the records the information available was used for making disallowance i.e. ad hoc disallowances expenses namely, advertisement, telephone charges, electricity charges, motor car expenses, travelling expenses and repair and maintenance. Thu, the order of reopening is quashed assessee's appeals, is allowed.
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2013 (5) TMI 558
Assessment proceedings – What is the monetary limit for filing of appeal before ITAT - The only issue remains is that the appeal of the revenue is below the prescribed limit of tax effect in view of the Board's Instruction issued from time to time revising the monetary limits for filing of appeals by the Department before ITAT and other superior courts – CBDT circular has fixed the limit of Rs. 3 lacs - Held that:- Ld. DR could not point out any of the exceptions as provided in the Circular, therefore this being a tax effect case, the appeal filed by revenue is dismissed.
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2013 (5) TMI 557
Performance incentive - non deduction of TDS - whether be considered as part of salary for the purpose of computation of exemption u/s 10(13A) in respect of HRA paid to the employees - CIT(A) allowed the claim by deleting the demand raised u/s 201(1) - Held that:- Considering the principle laid down consistently by the Jurisdictional High Court in the case of Nestle India Ltd (2000 (1) TMI 35 - DELHI High Court), Delhi Public School (2011 (10) TMI 17 - DELHI HIGH COURT) and Maruti Udyog Ltd.(2011 (12) TMI 103 - DELHI HIGH COURT) & in the facts of the present case where no case has been made out by the Revenue to show that the assessee has acted dishonestly and/or in a mala fide manner. The impugned order deserves to be upheld. The fact that there is a short deduction of tax in the present case where it was linked with the performance incentive paid to the employee on the basis of achievement of fixed percentage, the estimated TDS deducted in a bona fide manner as per the settled legal position cannot be faulted with. There being no allegation of even an iota of mala fide on the part of the assessee, the relief granted by the CIT(A) though on different reasoning is sustained. In favour of assessee. Non deduction of TDS on link charges as technical services u/s 194J - demand raised u/s 201(1)/201(1A) - CIT(A) allowed the claim by deleting the demand raised u/s 201(1) - Held that:- Admittedly the payments are made to MTNL & BSNL etc. for providing space for transmission of date for carriage of voice and for availing the service of inter-communication, port access for which as per the settled uncontested legal position is that no human intervention is necessary. Nothing has been placed on behalf of the department to show that the facts have not been correctly appreciated in the case of the assessee. The lack of human intervention in making use of the service provided by BSNL and MTNL etc domains and in the fact as they stated the finding cannot be faulted with. Accordingly, being satisfied by the reasoning and finding arrived in the impugned order, ground of the department is also dismissed. In favour of assessee.
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2013 (5) TMI 556
Maintainability of appeal - assessee stated that that tax effect in this appeal of the revenue is below the prescribed monetary limits for filing of appeal before ITAT and other superior courts - Held that:- Since this appeal filed on 06.05.2009, the same will be covered by Instruction No. 3/2011 issued on 09.02.2011 i.e. the revised monetary limit for filing of appeal before ITAT, whereby the CBDT has fixed the limit of Rs. 3 lacs. whereas the amount in dispute involved is Rs.6,50,000/- on which tax demand to be raised on the assessee is Rs.2,38,875/-. DR could not point out any of the exceptions as provided in the Circular that this is a loss case having tax effect more than the prescribed limit, which should be taken into account, or is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions,or there is other year pending as disputed on the singular issue, or that in the case of revenue, where constitutional validity of the provisions of the Act or I.T. Rules 1962 are under challenge or that Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge - appeal of the revenue is dismissed.
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2013 (5) TMI 555
Undisclosed income out of suppression of closing stock - CIT(A) deleted the addition - Held that:- Addition was deleted by CIT(A) on this basis that this amount of closing stock as on 31.03.1999 cannot be added separately because this is appearing as opening stock as on 01.04.1999 and it has been considered for working out amount of sales from 1.4.99 to the date of search and addition on this aspect of Rs.27.58 lacs was duly confirmed by him and, therefore, no separate addition on account of this difference in value of stock is called for - no interference is called for in the order of CIT(A) - Against revenue. Unexplained expenses claimed - CIT(A) deleted the addition - Held that:- Addition was deleted by CIT(A) on this basis that the assessee deserves the benefit of the telescoping against addition confirmed by CIT(A) of Rs.30.90 lacs. Under these facts no interference is called for in the order of CIT(A) on this issue also. Accordingly, ground No.2 of the revenue is also rejected. Against revenue.
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2013 (5) TMI 554
Disallowance of expenditure in computing the income under the head capital gains - Held that:- From the proposition of law laid down in Rama Gowda Vs. M. Varadappa Naidu [2003 (12) TMI 583 - SUPREME COURT] and considering the facts of the present case where the title is defective, incomplete or imperfect, the cost of making the title complete and perfect can be treated as the 'cost of acquisition' falling u/s. 48. Even adverse possession is a possession having attached rights. The rights are in the nature of occupation and in case the landlord wants to vacate it he has to take legal recourse. In such circumstances, claim of the assessee allowed as deductible u/s. 48. Appeal of assessee is allowed.
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2013 (5) TMI 553
Disallowance u/s. 14A r.w.r. 8D - Asst. Years 2006-07 & 2007-08revenue appeal against part relief granted by CIT(A) - Held that:- With regard to indirect expenditure, it is in agreement with the assessment of the same by the Revenue at 0.5% of the average value of the investments held during the year. However, as indicated above, rule 8D being not mandatory, the said average value would have to be worked out with reference to the assessee's accounts, reflecting the timing of the said investment rather than in a presumptive manner by according equal weight to the opening and the closing values of the investment. The matter would therefore require being set aside back to the file of the FAA for adjudication afresh in accordance with law per a speaking order. Entire expenditure stands carried over in the form of work-in-progress (WIP) for the relevant years. As such, no disallowance for the current year/s would arise, as the disallowance would only result in reduction of the WIP to the extent of the amount/s disallowed. Merit in this alternate argument, which of course would be required to be verified at the end of the A.O. Assessment Year 2008-09 - disallowance u/s.14A. with reference to rule 8D - Held that:- Rule 8D being mandatory for the current year. This is as the assessee has not been able to substantiate its claim that no expenditure whatsoever stands incurred in relation to the tax-free investments, which in fact have again witnessed an increase for the current year, i.e., at an average of Rs.871.76 lakhs, as against at Rs.579.88 lakhs for the immediately preceding year. Considering large scale movement in funds during the year & Not only has the investment portfolio witnessed a (net) increase of approximately Rs.2 crores, the interest expenditure stands reduced to a mere fraction, i.e., to Rs.8.72 lakhs (for the current year) from Rs.67.82 lakhs for A.Y. 2007-08, signifying retirement of debt to a substantial extent. Under the circumstances, therefore, the interest disallowance on a generalized basis, particularly considering that the assessee has not made out any case, cannot be faulted with. The disallowance is, therefore, confirmed.
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2013 (5) TMI 552
Income from share transaction - capital gains v/s income from business - Assessee, an individual is a trader in yarn and dealing in Securities - Held that:- The facts of the case are that assessee has shown the Capital Gains from the sale of shares in his return of income. While passing the order, AO has not discussed the reasons as why the income returned under the head 'Capital Gain' should be treated as 'Business Income'. He has not taken into consideration the criteria laid down by the CBDT. Not a single instance has been quoted by the AO about the frequency of shares, holding period of shares, entries in the Books of Accounts and other relevant factors. FAA has dealt issue at length and has deliberated upon all the relevant facts which are decisive for settling the issue. Shares can be held as trader and as an investor also. Similarly, Profit/loss arising from share activities can be assessed under the head 'Business Income' or 'Income from Other Sources'. CBDT vide its Circular No. 4/2007 has indicated a few parameters to be investigated before deciding the issue. Now, it is universally accepted that a single parameter cannot decide the nature of the shares sold and resultant sale proceeds. FAA has dealt in details about the STCG transactions as well as LTCG & has analysed the period of holding and intention of the assessee. He has also taken into consideration that no borrowed funds were utilised by the assessee for making investment in shares & had reached to a logical conclusion that transactions carried out by the assessee were not in the nature of business activity. In favour of assessee.
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2013 (5) TMI 551
Valuation of flats sold - assessee, a company in the business of construction of property sold flats to its directors and principal shareholders - sale to a related party - assessee for the purpose of accounting follows project completion method - whether Assessing authority has competence to disturb the sale consideration as reflected in the assessee's regular books of account maintained in respect of the transactions of the business carried on by him during the relevant year - Held that:- On going through the facts of case there is the vast difference between the stamp valuation as per the Stamp Duty Authorities and the price at which the sales have been made. As such, though in agreement in principle with the AO that the assessee's declared sale rate is artificial and totally unexplained, so that it cannot find acceptance, yet cannot, in the absence of complete details, also accede to the AO's estimation thereof, and the matter is indeterminate and requires a composite review. True, genuine and bona fide transactions, even if made below par, the fair market valuation would not have any tax implication, being only undertaken in the normal course of business and in its interest. The caveat in the foregoing proposition, however, is extremely important, and it is this which remains to be satisfied in the facts and circumstances of the case. The transaction is between related parties, being only to the directors and principal share-holders of the assessee-company, and the difference in values is significant. Under the circumstances, therefore, it is fit and proper to, while setting aside the impugned order, restore the assessment back to the file of the AO to make a fresh assessment of the profit qua the three flats constructed from 2001 to 2005, and sold during the relevant previous year, by taking all the relevant facts and circumstances of the case into account, per a speaking order, and after allowing the assessee a proper opportunity of hearing. The assessed sale consideration for the flats on the first five floors, though, stands confirmed. Revenue's appeal is partly allowed and partly allowed for statistical purposes.
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Customs
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2013 (5) TMI 550
Penalty under Section 112A - allegation of transaction relating to import of car allegedly by mis-declaring the year of manufacture leading to evasion of Customs duty - Held that:- In the case of import transaction, the statutory requirements relate to carrier of the goods, the importer, for the CHA. A person who has merely handed over the import documents to a CHA has no statutory obligation cast on him to attract any penal consequences for any violation. As the documents have been handed over to CHA and it is the CHA who is required to do the act under the law. If the CHA is not guilty of any commission or omission, the person who handed over the documents cannot be said to be responsible for commission or omission. Therefore, no legal basis for imposition of penalty - appeal allowed.
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2013 (5) TMI 549
Enhancing the transaction value - department has rejected the transaction value on the ground that it is not the true commercial value of the goods - Held that:- Rejection of transaction value and enhancement of assessable value has to be on the basis of some evidences on record. Contemporaneous imports have to be considered with reference to quality, quantity and country of origin with the imports under consideration. It has been held in a number of decisions that NIDB data cannot be made the basis for enhancement of value. Commissioner (Appeals) has relied Eicher Tractors Ltd. v. CC (2000 (11) TMI 139 - SUPREME COURT OF INDIA) in support of his finding that transaction value cannot be rejected without clear and cogent evidence produced by the department with regard to quality, import of origin and place and time of import. As revenue has not advanced any such evidences to support their case no reason to interfere with the impugned order of Commissioner (Appeals). Revenue’s appeal is accordingly rejected.
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Corporate Laws
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2013 (5) TMI 548
Ambit and scope of the powers conferred on the Company Law Board - Company was directed to amend its Memorandum and Articles of Association so as to give Respondents proportional representation on the Board of Directors of the Company - Held that:- The powers of the CLB under Section 402 of the Companies Act, 1956 are wide in nature. However, there must be some nexus between the complaint made and the relief granted. The exercise of the powers by the CLB cannot be divorced from the case for alleged oppression made out by the Petitioner before the CLB and other existing circumstances which may necessitate such directions being issued. It is equally trite law that there must be some basis for the CLB to issue directions in proceedings under Section 397 of the Companies Act. The Appellants are correct in their submission that in the present case, the following circumstances militate against the directions issued in the impugned order as the alleged case of the Respondent as regards 'oppression' was demonstrably false and untenable, there were no other circumstances whatsoever (pleaded or otherwise) which would have necessitated the grant of the said extreme and drastic directions by the CLB and at the hearing before the CLB, all the reliefs sought in the Petition except prayer 'c' were expressly given up by the Respondents. Therefore, once the Respondents expressly gave up all prayers in the Petition except prayer 'c', it was not open to the CLB to pass the drastic and extreme directions which went far beyond the limited relief sought by the Respondents and which would have the effect of creating a deadlock in the affairs of the Company where none existed earlier. In the present case, by issuing unwarranted, drastic and extreme directions in the impugned order, the CLB has without any basis whatsoever placed the control of the Company in the hands of the minority i.e. the Respondent Group, thus enabling the Respondents to achieve indirectly a virtual veto right on all issues and the ability to paralyze the functioning of the Company. In this context, it may be reiterated that the Respondents have never participated in the management of the affairs of the Company and have at all times refused to provide personal guarantees or to pledge their shares in order to raise finances for the Company. Such a position would enable the Respondents to arm twist the Company on every issue and thereby ensure that there is a deadlock on every issue. By the impugned order, the CLB has created a situation for a potential deadlock where none existed earlier. It is once again reiterated that the directions have been passed by the CLB in a case where (I) the allegations of the Respondents as regards alleged 'oppression' are demonstrably false and incorrect; and (ii) all the prayers except prayer 'c' in the Petition were expressly given up by the Respondent. Therefore, far from being in the interest of the Company, the said directions of the CLB are extremely detrimental and prejudicial to the interest of Appellant No.1 Company and are therefore not permissible under Section 402 of the Companies Act, 1956. Respondents’ Petition is based on false and frivolous allegations and is without merit and the Petition deserves to be dismissed. The CLB has, under the garb of doing substantial justice, granted extreme directions under Section 402 which as explained hereinabove places control of the Company in the hands of the minority i.e. the Respondents Group, thus enabling the Respondents to achieve indirectly a virtual veto right on all issues and the ability to paralyze the functioning of the Company. In view thereof the Appeal is allowed and the impugned order is set aside. Respondents be directed to sell their shares to Appellant Nos. 2 to 7 at a value to be ascertained by a Valuer on the basis of the balancesheet for the year ending 31st March, 2006. M/s. V.B. Haribhakti and Company having their office at 42, Free Press House, Nariman Point, Mumbai400 021 are therefore appointed as Valuers to value the shares of the Company.
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2013 (5) TMI 547
Maintainability of Petition - Amalgamation - scheme sanctioned by the Court - intervention by the Income Tax authorities on the ground that it would entail huge losses to the revenue – Demand notice was issued u/s 166 of the IT Act. Held that:- under the provisions of Section 391 the Central Government and the IT Authority do not have any powers to intervene or to be heard on any scheme which is filed seeking sanction of this Court u/s 391 of the Companies Act. - The ratio of S.R.F. Ltd. v. Garware Plastics & Polyesters Ltd. [1995 (3) TMI 87 – Supreme Court] cannot be applied in the present case as the said case relate to question that which fell for consideration before the Apex Court was whether the board had a right to be heard. Thus in our view, the learned Single Judge has rightly come to the conclusion that the application for intervention is not maintainable and the order passed by the learned Single Judge is confirmed. Both these appeals are dismissed.
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Service Tax
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2013 (5) TMI 564
Claiming abatement - Notification No. 32/2004-ST - The issue involved in this case is regarding the differential service tax liability that has been demanded and confirmed against the appellant for availing ineligible abatement of 75% of the value of the freight charge by the GTA services under Notification No.32/04. Held that :- In the case of Commissioner of Service Tax, Ahmedabad Vs. Cadila Pharmaceuticals Ltd. [2013 (1) TMI 353 - GUJARAT HIGH COURT] an identical issue has settled the law, the issue in this case is squarely covered in favour of the assessee. As regards the finding of the non mention benefit of Notification No.12/03-ST, the judgment of the coordinate bench in the case of Indian Oil Corporation Ltd. [2010 (12) TMI 786 – CESTAT Mumbai], holding, that said notification will apply only to the service provider, while in this case the appellant is not a service provider but a manufacturer and the service tax liability under GTA has been fastened on him by way of reverse charge mechanism. Thus, appeal is allowed.
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2013 (5) TMI 563
Refund claim rejected - Time barred u/s 11B - Appellant erroneously paid service tax on rents received from the Central Excise Department for their finding, which is exempted from Service Tax. As per appellant this is a mere deposit and it cannot be treated as tax and therefore the limitation prescribed u/s 11B of the Central Excise Act would not apply - Held that:- Following the case of Natraj and Venkat Associates Vs. Asstt. Commissioner of Service Tax [2009 (10) TMI 36 - MADRAS HIGH COURT] power of the Central Excise officers is confined within the statute of the Central Excise Act, 1944. Hence, both the authorities have rightly rejected the refund claim which is beyond the stipulated period. Thus, appeal is rejected.
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2013 (5) TMI 562
Cenvat credit denied - Demand of interest/penalty - Reversal of entire credit by appellant before issuance of SCN - Held that:- Perusing the records, it is seen that the appellant availed CENVAT credit and the amount was paid by the service provider. Thus, there is no suppression of fact with intent to evade payment of tax also that the appellant paid the tax before issue of SCN. There is sufficient cause for failure to reverse the credit. Thus, Section 78 cannot be invoked. The demand of CENVAT credit which has already been paid along with interest is upheld.
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Central Excise
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2013 (5) TMI 568
Duty exemption under Notification No. 50/2003-C.E. denied - Personal penalty on director - extented period of limitation invoked - Held that:- As decided in Indian Aluminium Co. Ltd. v. Thane Municipal Corporation (1991 (9) TMI 162 - SUPREME COURT OF INDIA) that when the exemption notification is subject to observance of some condition and non-observance of that condition is likely to facilitate commission of fraud and introduce administrative inconveniences, the exemption would not be available if the condition has not been fulfilled and such condition cannot be treated as mere a procedural condition. Unless the officers have advance intimation about the assessee’s intention to avail of this exemption the correctness or otherwise of the claim for exemption cannot be checked. Condition (1) regarding filing of declaration as prescribed in the para 1 of the notification is a condition meant to prevent misuse of this exemption and its non-observance would only facilitate the misuse of this notification and cause administrative inconveniences. Therefore non-filing of declaration shall result in denial of exemption. As regards question of limitation, it is not disputed that the appellant before availing of the exemption had neither applied for registration nor intimated the department about nature of activity therefore extended period under proviso to Section 11A has been correctly invoked. Since Shri Shantanu Sangi, Director of the appellant-company was actively involved in the day to day activity of the appellant-company penalty on him under Rule 26 has been correctly imposed. This is not the case for total waiver from requirement of pre-deposit thus appellant-company directed to deposit entire amount of duty demand confirmed against them within eight weeks from the date of this order. Appellant Shri Shantanu Sangi, Director of the appellant-company is directed to deposit an amount of Rs. 1 lakh within eight weeks from the date of this order.
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2013 (5) TMI 567
Shortage of goods - Penalty - Personal penalty on director - show cause notice issued alleging clandestine removal of the goods in absence of reasonable explanation on the shortage of inputs and finished stocks - Held that:- Mere shortage of finished goods or raw materials in the stock cannot by itself construed that the said goods were removed clandestinely by the assessee. The department has to adduce positive evidences of such removal of goods clandestinely demonstrating the intent to evade payment of duty. In the present case even though it was explained by the Managing Director that shortage of goods could be attributed to the fact of theft that might have taken place during the closure of the factory, the department had not carried out any further investigation to ascertain the correctness of the said statement. In absence of any contrary evidence no force in the argument of the A.R. that the goods must have been clandestinely removed. No merit in the submission of the A.R. that the penalty under Section 11AC is invocable against the respondent. However, the respondent is required to pay duty involved on such shortages which could not be explained and the respondent are liable for general penalty for the said discrepancy. Since no penal provision is invoked in the Show Cause Notice other than Section 11AC, no penalty could be imposed on that count. Thus in absence of direct or indirect involvement of the Managing Director Shri A.K. Agarwal in the clandestine removal of the goods no personal penalty under Rule 26 of the Central Excise Rules, 2002 is imposable on him.
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2013 (5) TMI 546
Cenvat Credit denied - galvanization does not amount to the manufacture - Held that:- Taking note that under Cenvat Credit Rules, the inputs can be cleared as such or after being partially processed on reversal of amount equivalent to credit availed on such inputs. That means if credit has been taken by the appellants on the inputs i.e. C.R. Coils then the Coil can be cleared as such or after some processing after reversal of the Cenvat Credit availed on the C.R. Coils. In the present case appellants have taken the Cenvat Credit and cleared the finished goods after paying duty through the Cenvat account entries and payment of duty may be more than the credit attributable to such inputs. As decided in Commissioner of Central Excise Vs. Delta Corporation as reported 2013 (2013 (2) TMI 31 - GUJARAT HIGH COURT) credit could not be denied on the ground that no manufacturing activity was carried on by the assessee - in the present case the demand has been raised for disallowing the Cenvat Credit on C.R. Coils and Zinc. Demand is unsustainable as Rules allow the clearance of inputs as such or after partially proceeding on reversal of the Cenvat Credit availed on these inputs. The duty paid on the G.P. Coils etc., is more than Cenvat Credit taken and needs to be adjusted against the demand of the Cenvat Credit. Therefore the demand of Cenvat Credit is not sustainable against the appellants.
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2013 (5) TMI 545
Extended period of limitation - Waiver of pre-deposit of penalty - appellant states that the duty is demanded in respect of invoice issued on 05.04.2004 and the show cause notice is issued on 24.04.2009 and therefore the duty is time barred - Held that:- Armature Shafts supplied under invoice dated 05.04.2004 are tailor made and they were as per drawing and specification of M/s. Chittaranjan Locomotive Works. The applicants have explained that the said goods were purchased by them from M/s. Primax Pipes i.e. their sister concern. It is evident in this case that their sister unit is not having any manufacturing facility. Besides Shri Shyamal Kr. Mukherjee has categorically admitted in his statement that the excise duty was not paid at the time of clearance of the said goods thus the clearance under trading invoicing were made with intention to evade duty. As decided in Commissioner of C.Ex., Visakhapatnam Vs. Mehta & Co. (2011 (2) TMI 2 - SUPREME COURT OF INDIA) in cases of intention to evade duty relevant date for computation of extended period for show cause is the date of knowledge. Accordingly show cause notice in this case is not time barred. Against assessee.
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2013 (5) TMI 544
Imposition of penalty/redemption fine - confiscation - As per revenue appellant made removal of goods without payment of duty - Held that:- The mobile cranes, in question, had been manufactured by M/s. Omega Construction, and the factories of M/s. Omega and M/s. Gulati are owned by same person and that M/s. Gulati Industrial Fabrication and M/s. Omega Construction are adjacent units separated only by a road. At the time of offence the units of M/s. Omega Construction and M/s. Gulati Industrial though owned by the same person, were having separate central excise registration and as such, one unit could not clear the goods to other without payment of duty and without observing central excise formalities. Appellant plead that the two mobile cranes, in question, was not in fully furnished condition, it is seen that at the time of their detention, this fact had not been pointed out. Looking to the overall facts and circumstances of the case, appellant’s contravention of the central excise law is only of technical nature and as such, the level of redemption fine and penalty imposed on them is on much higher side. Accordingly, while upholding the confiscation of the goods, redemption fine is reduced to Rs.50,000 and penalties on M/s. Omega Construction and M/s. Gulati are reduced to Rs.25,000 and Rs.10,000 respectively.
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2013 (5) TMI 543
SSI Exemption – Benefit denied – Commmom brand name - clubbing of clearance - brand name of Maharaja - Notification No.175/86 - Held that:- it was not the case of the Revenue in the SCN to club the clearance of the units. - In fact the demand stands confirmed against each unit separately by the adjudicating authority himself. Thus establishing their separate identity. - all the units being registered separately, manufacturing different goods though identical and located at different places, having complete machinery to manufacture goods cannot be held to be related parties, merely because the Directors or partners or proprietors are relative of each other. - club of clearance is not valid. M/s Hindustan Machines had declared the value of clearances in the year 1987-88 as Rs.9.50 lakhs approximately. There being no evidence to show that the said figure of clearance was not correct, therefore the same has to be hold as the correct clearance value. If that be so, he was entitled to SSI exemption Notification No.175/86-CE during the succeeding financial year, 1988-89 and thereafter. In as much as the brand name owner M/s Hindustan Machines has been held to be entitled to the benefit of Notification, the other units using the said brand name would become entitled to the benefit of SSI exemption Notification as they are not hit by para 7 of the Notification. Thus, conformation of demand against the M/s Hindustan Machines as also other manufacturing units by denying them the benefit of SSI Notification is unsustainable. The said part of the demand is accordingly set aside along with setting aside of the penalties on the said ground. Clandestine removal of the good – Held that:- charges of clandestine removal cannot be made on the basis of assumptions and presumptions and on the basis of documents recovered from third person’s premises, without their being any evidence of actual manufacture of the excess quantity, which required corroboration of procurement of raw material, the labour as also electricity consumption etc. - In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of same, a finding cannot be based on the contents of loose chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product. Therefore, confirmation of demand against the appellants on the allegation of clandestine removal is unsustainable. Under valuation – Whether the advertisement and publicity expenses incurred by M/s Technocrat Marketing are required to be added in the assessable value of the appellants final product or not? - Held that:- The issue stands decided by the Hon’ble Supreme Court’s decision in the case of M/s Phillips India reported in [1997 (2) TMI 120 - SUPREME COURT OF INDIA] on the basis of same the advertisement expenses or publicity charges incurred by the marketing company cannot be included in the assessable value of the goods manufactured by the respective manufacturing units. Confiscation of seized goods – Appellants contended that the said goods were in semi-finished condition and were yet to be recorded in the RG-I register, that is why some of the goods were only detained and not seized. Adjudicating authority has not dealt with the above plea of the appellants. It seems that the order has been passed with pre-determined mind to confiscate the goods. There is no statement appearing that the same were meant for clandestine removal. Thus, the confiscation of the said goods is not warranted. Imposition of penalty – Held that:- In as much as the demands have been set aside, the penalties imposed upon them under various provisions of Central Excise Act, 1944 and the Central Excise Rules are also set aside. Further in as much as the appeals of manufacturing units stands allowed, the imposition of penalties upon individuals, who are either Directors/Partners of the said units are also set aside.
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2013 (5) TMI 542
Cenvat credit denied - invoices on which the CENVAT Credit was availed were issued in the name of Head Office and not in appellant/assessees factory address - Held that:- Judgment of DNH Spinners [2009 (7) TMI 130 - CESTAT, AHMEDABAD] will cover the issue in favour of the assessee. Therefore, both the lower authorities were in error in not allowing the credit of Service Tax paid by the CHA.
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CST, VAT & Sales Tax
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2013 (5) TMI 566
Guilty of willful omission - claim for deduction of sales against prescribed Forms ST-1, furnished by the purchasing dealer in respect of goods found during enquiry by the Assessing Authority, not specified in the Registration Certificate of the purchasing dealer - Held that:- A bare perusal of Rule 8 ST-1 Forms are printed under the Authority of the Commissioner and are issued by the Assessing Authority of the purchasing dealer on an application made to him by the purchasing dealer. An application for issuance of forms may also be rejected by the Assessing Officer, if is satisfied that the declaration forms have not been used bonafide or if the conditions in sub-rule (4) of Rule 8 of the Rules are not satisfied. Further, the declarations made in the ST Forms are unequivocal and the purchaser is liable to be subjected to punitive action if the same are found to be untrue. Thus, in the normal course, there would be no reason for the selling dealer to doubt the declaration made by the purchasing dealer, in the Form ST-1. In the present case too, the petitioner has relied upon such Forms and there is no material on record to suggest that the petitioner accepted the ST-1 Forms with the knowledge that the declarations made thereunder by the purchasing dealer were wrong, thus, unable to agree with the view that there was any “willful omission” on the part of the petitioner in making his return or that the return was made by the petitioner knowing that the particulars in the ST-1 Forms on the strength of which deduction in the taxable turnover was claimed were inaccurate. Thus, the answer to the first question whether the petitioner is guilty of willful omission must be answered in the negative. Admissibility of claim for deduction of sales against prescribed ST-1 Forms furnished by the purchasing dealer, in respect of goods which are not specified in the Registration Certificate of the purchasing dealer - Held that:- Third proviso to section 4(2) makes an express provision for collecting tax from the purchaser, in the event goods are purchased by him for the purposes mentioned in Section 4(2)(a)(v) but are not so utilized by him. Thus, whereas in the case of misutilization of goods by the purchaser, the amount of tax payable can be collected from the purchaser, there is no such provision in the Act which enables collection of tax from the purchaser, in the event, he makes a false declaration regarding holding of registration certificate with respect to the goods so purchased. Unable to agree with the contention of the petitioner that the interest of the revenue can be protected by the imposition of penalty for offence of misrepresentation under Section 50(1)(d) of the Act. The provision to take punitive action and impose penalty cannot be equated to collecting the tax payable.Thus, the second question must be answered in the affirmative and the petitioner would be disentitled to reduce his taxable turnover in respect of sale of goods made to a dealer who does not hold a registration certificate in respect of goods purchased by him. Whether the petitioner is liable to pay interest under section 27 of the Act from the date of submission of the return, on the amount of tax assessed under section 23 of the Act? - Held that:- Expression “tax due” as appearing in section 27(1) of the Act has to be read in conjunction with provisions of section 21(3) of the Act and interest under section 27(1) is payable only on the “tax due according to the return filed”. The tax which is finally assessed becomes due on assessment and if the demand in relation to the same is not satisfied, interest will become payable by virtue of section 27(2) of the Act. The issue whether the petitioner is liable to pay interest on the taxes assessed under Section 23 of the Act from the date of submission of the return is thus covered by the decision of this court in the case of Pure Drinks (New Delhi) Ltd. (2013 (5) TMI 149 - DELHI HIGH COURT) and has to be answered in the negative - impugned order requiring the petitioner to pay interest under section 27(1) is set aside.
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2013 (5) TMI 565
Trade tax on mushroom - petitioner claims that the mushroom purchased is exempted from payment of trade tax being fresh vegetable - reopening of assessment - Held that:- The said survey dated 29th November, 2010 is not relevant for the assessment year 2006-07. So far as, the notification dated 10th April, 1999 is concerned, it is find that the mushroom has been excluded from category of fresh fruits and green vegetables. The view taken in the impugned order holding that mushroom is excluded from category of fresh fruits and green vegetables is justified. Whether the mushroom sold by the petitioner was in sealed container or it was packed mushroom is a question of fact which will be examined by the Assessing Authority during reassessment proceedings. It is not appropriate to say anything in this regard at this stage of proceedings. Time and again, it has been said that where there is material in possession of the department to form an opinion that turnover has escaped assessment, proceedings for reassessment can be initiated. However, it shall be open to the petitioner to place all such materials before the Assessing Authority in support of his case that there is no escapement of turnover - NO merit in the present writ petition.
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