Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 27, 2013
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Notifications
Highlights / Catch Notes
Income Tax
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Valuation of shares - Difference between value of share on the date of its allotment and the price of warrant paid as per letter of allot - proviso (iv) of section 48 not applicable - AT
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Reopening of assessment - The prime requirement for the validity of a notice issued under section 148 is that the reasons recorded should have a live link or nexus with the material on record. - HC
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There is no need to discuss provisions of sections 70, 71 & 32(2) elaborately as the CIT erred in coming to the conclusion that current year's depreciation cannot be allowed to be set off against capital gains. - AT
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Residential status - foreign going vessel - he was outside Indian territory for 230 days and the requirement of section 6 for being outside India for 182 days, he become 'non-resident'. - AT
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Transfer of the merchant banking business - nature of the transfer does not attract the provision of section 50B in relation to slump sale also as there is no transfer of an undertaking by the assessee. - AT
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Bad debts / business loss - The loans given to staff has been written off since the same are irrecoverable in view of transfer of the merchant banking business. - deduction allowed - AT
Customs
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Valuation - import of replicators - purchase of DVDs from India - the licence fee and royalty paid by the respondent to the licensor is includable in the value of the goods purchased from the replicator(s). - AT
Service Tax
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As the data is being retrieved or access by the applicants to their own database which were in US, UK and India, therefore, it cannot be prima facie held as import of services - AT
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Free call services provided to employees by cellular companies - pre deposit ordered by the CESTAT to the extent of Rs. 80 crores reduced to Rs. 25 crores. - HC
Central Excise
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Refund claim rejected as time bared - the amount deposited by the appellant during the investigation can never be construed as a duty - it is held as deposited under protest - refund allowed - AT
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Abatement of duty - Rule 10 of the Pan Masala Packing Rules – Just because the Superintendent s remark regarding sealing does not mention the time of sealing, it cannot be presumed that on 4th April 2009 and 3rd July 2009, the factory had operated. - AT
VAT
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U.P. Value Added Act, 2008 - every dealer holding registration certificate under the erstwhile Act, as a dealer, is deemed to be registered under the new Act - non-obtaining of biometrics data, as in the instant case, will not invalidate the registration certificate. - HC
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Petitioner is not personally liable to pay the outstanding dues under the U.P. Trade Tax/Sales Tax Act of the Private Limited Company but under CST he is liable to pay the dues - HC
Case Laws:
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Income Tax
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2013 (5) TMI 616
Re opening of assessment - write back of any provision is deductible provided the same is added back while computing taxable income of the year in which it was created which was not done in the case of the assessee during the course of assessment proceedings - Held that:- the conclusion of the Assessing Officer, which was recorded in the reasons, was borne out from the verification of the case record. Further, as pointed out by the counsel for the petitioner, in the return filed by the petitioner for the assessment year 2005-06 clearly the statement of total taxable income included the deduction of provision of written back of Rs.52.22 crores. Such provision was explained in the notes forming part of the income-tax return, in which it was clarified that such amount was being written back of excess provision for doubtful debts as per RBI Prudential Norms and provision for contingencies made in the earlier years, which are not in the nature of income and not liable to tax under Section 41(1) of the Act. If the AO did not have the accounts for the earlier year, surely during the course of assessment, he could have called for such details. Having chosen not to do so, his attempt to reopen the just assessment after a period of four years from the end of relevant assessment year, must fail. Thus AO belief that the income chargeable had escaped assessment lacks validity. In favour of assessee.
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2013 (5) TMI 615
Disallowance of interest u/s 36(1)(iii) - whether interest free funds were available at the time of making investments is a pure question of facts which can be analysed by taking into consideration the day-to-day cash flow statement? - CIT(A) allowed the claim - Held that:- The assessee’s share capital, reserves and surplus as on the first day of the accounting year is Rs.33.50 crores and investment in assets is only to the tune of Rs.27.05 crores it cannot be inferred that a sum of Rs.6.45 crores is available with the assessee. There is a possibility that the assessee might have purchased raw material, etc. and there may not be any cash available as on the first day of the accounting year. The current year’s profit is not an item available throughout the year and it cannot be a fixed sum. Ordinarily, the amount available with the assessee is recycled or utilised in purchase of raw material, etc. Even at the end of the year current year’s profit may not be available with the assessee since it would have been utilised for different purposes. In fact CIT(A) mentioned that the assessee maintained cash credit accounts in the ‘consortium of banks’ which are required to be looked into as to whether in a particular bank account the assessee had deposited any money or not and whether common funds, i.e. interest free funds and interest bearing funds are available in that account and if the assessee is able to prove that from the said common funds investments were made, then certainly the decision of CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] can be applied in principle. Since these facts were not properly brought on record, in the interest of justice it reasonable to set aside the matter to the file of the AO with a direction to call for details and after analysing the consortium of accounts as well as daily cash flow statements decide the issue in accordance of law - appeal filed by the Revenue is treated allowed for statistical purpose.
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2013 (5) TMI 614
Valuation of shares - section 48 - Difference between value of share on the date of its allotment and the price of warrant paid as per letter of allotment - whether be treated as Long Term Capital Gain - CIT(A) deleted the addition - Held that:- AO not only wrongly interpreted the provisions of the I.T.Act, but also over extended the meaning of the same, so as to bring the amount in dispute into the taxable income of the assessee without any legal basis. The conversion of warrant into shares by paying the remaining 90% amount was neither any extinguishment nor relinquishment of any rights in the assets. It may be observed that the assessee had purchased the warrants by paying 10% of the pre-determined price of the shares. There was an option for the assessee to get the said warrants converted into shares by paying 90% of the amount within the stipulated period, the non-payment of which would have resulted in forfeiture of the money. While computing the income of the assessee, the AO has wrongly and illegally interpreted proviso (iv) to section 48 of the I.T. Act. A bare perusal of the said proviso reveals that the same is attracted in case the shares, debentures or warrants are transferred by the assessee to some other person without receiving any consideration in terms of money and in that event market value of the asset on the date of such transfer is deemed to be the value of consideration received as a result of transfer. In the case in hand, the assessee has not transferred any warrant or share to any other person rather he has just exercised his option to purchase the shares at a stipulated rate by paying the remaining 90% amount, which in clear term falls in the definition of investment and not in the definition of sale or transfer on his part. - Decided in favor of assessee.
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2013 (5) TMI 613
Penalty u/s 271(1)(c) - disallowance made u/s 40(a)(ia) - Held that:- Disallowance omade by the AO due to non-payment of TDS in time which is technical in nature. Hence, the same does not amount to concealment of income or furnishing of inaccurate particulars of income by the assessee. Further, the addition account of disallowance of expenses was made on estimate basis. It is also settled law that addition made on estimate basis does not attract penalty. The CIT(A) on proper appreciation of facts has rightly deleted the penalty made by the AO on both the above issues. DR also has not produced any material on record to controvert the findings of the learned CIT(A). As decided in case of M/s. Lucky Star International [2012 (5) TMI 344 - ITAT, Ahmedabad] it is a bonafide lapse at the end of the assessee. There is no deliberate attempt to conceal the particulars of income. In favour of assessee.
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2013 (5) TMI 612
Reopening of assessment - commission income was not declared in the return of income filed by the assessee - extended period of limitation invoked - a list was sent by the Additional Director of Investigation-VI, New Delhi revealed that the assessee had provided a large number of accommodation entries to other beneficiaries from its bank account - ITAT quashed reassessment proceedings - review petition - Held that:- Once it is conceded on behalf of the revenue that the list was not produced before this Court at the time of the hearing of the appeal and is only being produced along with the review petition after locating the same in other files subsequently, then there is no merit in the review petition. This Court had perused the reasons recorded but the list was not found to be part of the assessment record which was seen by this Court. This Court had also noted – “shockingly” – that the assessment record did not contain even the forwarding letter alleged to have been written by the ADIT to the assessing officer. It was open to the revenue to produce the list when the appeal was heard by this Court, though it would have been even then a matter of debate as to whether, in the absence of the list in the assessment record of the assessee, the reasons for reopening the assessment can be said to have been properly recorded by relying on a list which is not found in the assessment record. The prime requirement for the validity of a notice issued under section 148 is that the reasons recorded should have a live link or nexus with the material on record. This Court on an examination of the assessment record did not find therein the list on the basis of which the reasons were recorded. No merit in the review petition
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2013 (5) TMI 611
Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted the addition - Held that:- The assessee was having total interest free income of 1,10,59,410/- whereas the investment in shares was of Rs. 1,06,00,670/-. Thus the interest free funds available with the assessee were in excess of the investment made in shares from which dividend income which is exempt in nature were received. CIT(A)found after perusal of the assessment orders of earlier years that there was no disallowance of interest by the assessing officer in the earlier years on the basis of which an inference could be drawn that the interest bearing funds of all the earlier years have been utilized for making investment in shares which has generated exempt income and thereby raised the issue of disallowance u/s 14A. In the light of these undisputed facts of CIT(A) had held that this was not a fit case in which provisions of section 14A were attracted placing reliance on the decision of CIT vs. M/s Lubi Submersibles Ltd [2011 (7) TMI 519 - Gujarat High Court] wherein held that there was a sufficient surplus fund available with the assessee to invest and there was no nexus that could be established with the expenditure incurred by the assessee for earning the dividend income. In favour of assessee.
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2013 (5) TMI 610
Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted the addition - Held that:- The issue is concluded in favour of the assessee inasmuch as, as held by Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg Co Ltd VS DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT), rule 8 D is not retrospective in nature and would only apply from the assessment year 2008-09 onwards. That is precisely what the Commissioner (Appeals) has held, thereby, rejected AO's reliance on rule 8 D in computing disallowance u/s 14A. Therefore no need to disturb the well reasoned findings of the CIT(A). In favour of assessee. Disallowance of depreciation on "non compete territory rights" - CIT(A) deleted the addition - Held that:- The disallowance of depreciation thus seems to have reached finality. The law is fairlv well settled that once AO accepts a particular position by not challenging the same in further appeal, it cannot be open to him to disturb the position having so reached finality, by appeal in another year. No doubt there is no res judicata in income tax proceedings but principles of consistency do play an important role in all walks of life as much as in the income tax proceedings. See Parashuram Pottery Works Ltd Vs ITO (1976 (11) TMI 1 - SUPREME Court). As there is not even a whisper of the reason for coming to the conclusion, on merits, as to why the depreciation on the intangible assets in question has been declined, thus approve the conclusion arrived at by the CIT(A) and decline to interfere in the matter. In favour of assessee.
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2013 (5) TMI 609
Jurisdiction power u/s 263 by CIT(A) - CIT(A) directing AO to disallow deduction of brokerage expenses - Held that:- On the basis of the documents placed on record before the CIT and also here the service charges are claimed in the course of regular business transactions for helping the assessee in sale of the property and 2% commission is reasonable when compared to the other quotations placed on record. Further, there is no prejudice caused to the Revenue as the same amount was offered to tax in the hands of the M/s. Ovira Logistics Pvt. Ltd. therefore, unable to agree with the findings of the CIT and his direction in this regard to disallow the entire amount. Claim of depreciation allowed by the AO was found to be not correct as there being a business loss even current year's depreciation was not liable to be set off against STCG and the same is liable to be carried forward - Held that:- With reference to the issue of claim of unabsorbed depreciation and the findings of the CIT order of the CIT is erroneous in the eyes of law. As the AO did examined the claim of depreciation and allowed set off according to the provisions of the Act. The CIT's reliance on section 32(2) is not only misleading and wrong but also against the provisions of sections 70 & 71 which allows such set off. As decided CIT vs. RPIL Signalling Systems Ltd. [2008 (9) TMI 583 - Madras High Court] wherein held that the assessee was entitled to set off the unabsorbed depreciation brought forward against the capital gains. There is no need to discuss provisions of sections 70, 71 & 32(2) elaborately as the CIT erred in coming to the conclusion that current year's depreciation cannot be allowed to be set off against capital gains. Therefore the observations and directions of the CIT are against the provisions of law itself. Thus no hesitation in cancelling the order u/s 263 and allowing the grounds raised by the assessee.
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2013 (5) TMI 608
Unaccounted loan transactions of Rs.2,00,000/- - Held that:- The assessee explained that there is clerical mistake whereas the fact is that the loan was given on 02.12.2005 through banking channel. This fact is supported by an affidavit of depositor and her bank account. On perusal of bank account, the assessee has proved the creditworthiness of depositor as there was sufficient bank balance out of which the loan was given. The identity and genuineness of the transactions are also proved. Thus, the assessee discharged the burden in this regard. Under the circumstances, addition of Rs.2,00,000/- is not warranted. Therefore, the same is deleted. In favour of assessee. Unsecured loan of Rs.5,09,000/- - CIT(A) deleted the part amount - Held that:- As the assessee has furnished sufficient material to discharge burden in this regard, identity, creditworthiness and genuineness of the transactions including bank balances out of which loans were given. Under the circumstances, the addition of Rs.5,09,000/- sustained by the CIT(A) is not warranted, therefore, the same is deleted. In favour of assessee.
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2013 (5) TMI 607
Penalty u/s 271(1)(c) - source of fresh capital introduced held to be unexplained/bogus - CIT(A) deleted part penalty - Held that:- Admitted facts of the case are that the A.O. made addition of Rs.3,50,000/-. The assessee furnished necessary explanation but the I.T.A.T. has found reasonable explanation to the extent of Rs.1,75,000/-. I.T.A.T. sustained the addition on the basis of estimation. In the case of estimation, it cannot be said that the assessee has concealed particulars or furnished inaccurate particulars of income. Also, it cannot be said that the explanation furnished by the assessee was found false. Under these facts it is not a fit case for penalty under section 271(1)(c) - appeal filed by the assessee is allowed.
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2013 (5) TMI 606
Residential status - foreign going vessel - Receipt of salary treated by assessee as exempt u/s. 10(6)(vii) - CIT(A) deleted the addition made by AO - whether 130 days when assessee was in Indian vessel but it was outside Indian territorial water and also was in foreign vessel in foreign territorial water, the assessee will be treated as 'Non-Resident' in such situation? - Held that:- In the present case the facts are clear that assessee for 100 days was in foreign vessel in other territorial water and for 130 days he was outside the Indian territorial water i.e. he was outside Indian territory for 230 days and the requirement of section 6 for being outside India for 182 days, he become 'non-resident'. Accordingly order of CIT(A) confirmed and the appeal of revenue is dismissed.
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2013 (5) TMI 605
Slump sale - transfer of undertaking - Transfer of intangible assets of merchant banking business - revenue v/s capital receipt - Held that:- Clause 2.2 of the Transfer of Business Agreement suggests that the assessee has received Rs.2.5 million (Rs.25 lacs) as consideration for transfer of the business. Non justifiable reason on the part of the authorities below to consider the transaction as sham which involves colourable device. The impugned receipt is capital in nature and not in the nature of compensation received during the course of business as has been found by the CIT(A) as the assessee has received the impugned receipt for the transfer of its business of merchant banking in the form of employees, contracts in the form of customer and client relationship, a list of ten largest clients and certain know-how related to merchant banking business of the assessee, which necessarily qualify impugned receipt for the transfer of the said intangible assets in the category of 'capital nature' as the subject matter of transfer has resulted in the loss of enduring trading assets. Regarding the possibility of taxing the said impugned capital receipt under the head of capital gains, since no cost of acquisition is involved by the assessee for these assets, the same cannot be taxed under the head capital gains also. It is needless to emphasis that the nature of the transfer does not attract the provision of section 50B in relation to slump sale also as there is no transfer of an undertaking by the assessee. Accordingly, ground no A in favour of the assessee. Non-compete fees - revenue v/s capital receipt - Held that:- The perusal of the materials indicate that in the case of the assessee, the sole and main business or revenue earner i.e. merchant banking has been discontinued. The reasoning that of the authorities below that since the agreement is only for a period of 3 years and not absolute is not a relevant factor to determine the receipt as revenue in nature as generally all the non-compete agreements are limited in point of time which prescribes the period of non-competition. In view of that matter, we decide this ground in favour of the assessee and delete the impugned addition. Disallowance of bad debts - Held that:- Since these debts are on sale of leased assets i.e. in the course of business the same should be allowed as a business loss in view of the decision of CIT v. Anjani Kumar Co. Ltd. (2002 (7) TMI 44 - RAJASTHAN High Court) wherein it has been held that advance for acquiring land to set up factory being lost, is allowable as business loss. With respect to the bad debt pertaining to expenses incurred for the companies promoted by it & since these companies have not started any activity and is in the process of winding up, the amount is claimed as bad debts qualifies as a business loss under section 28 of the Act. Interest charged for default in the payment of lease rentals could not be recovered from the party written off as bad debts. Advisory services have been rendered to Business India Publication Private Limited for which an amount of Rs.3,00,000/- was billed to the client as consultancy fees. As the interest and advisory fees charged from the clients have been offered for tax in earlier years, the conditions of section 36(2) are fulfilled. As the debts have also been written off, the same should be allowed as a deduction u/s 36(1) in view of the decision of the TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT). The loans given to staff has been written off since the same are irrecoverable in view of transfer of the merchant banking business. The said loans are not taken over by M/s. Arthur Anderson. All the employees had either been taken over or resigned. Since these expenses have been incurred in the normal course of business,the said expenses qualifies as a business loss under section 28. Disallowance on account of pre-paid expense - Held that:- It is an admitted fact that the assessee has discontinued the merchant banking business and has also sold off the intangible assets pertaining to the said business. Since these expenses are pertaining to the said business, the Ld.CIT(A) has correctly upheld the impugned addition as there is absolutely no basis for claim of deduction in respect of existing business of the assessee in the absence of any nexus with it. Against assessee. Disallowance of membership and subscription fees - Held that:- Once the assessee paid the amount to a club for membership it is a payment once and for all resulting in an enduring benefit to the institution. The mere fact that assessee's representative, like the Managing Director's participation in the club promoted the assesse's business did not change the character of the payment which was made once and for all. See Punjab State Industrial Development Corporation Ltd. vs. CIT [1996 (12) TMI 6 - SUPREME Court] . In these circumstances the expenditure was allowed under section 37(1). Moreover neither the AO nor the CIT(A) has gone into the factual matrix of the case for disallowing the claim of the assessee - the matter can be re- examined by the AO after obtaining the details and examining the justification in claiming the impugned expense as business expenditure. In favour of assessee for statistical purpose. Disallowance of depreciation on residential flats - Held that:- The issue is covered against the assessee in A.Y. 1998-99 in his own case where the claim of the assessee for depreciation has been rejected. As the assessee has not brought any material differentiating the facts in relation to the assessment year under consideration ground is dismissed. Addition on account of income from house property - Held that:- he issue is covered against the assessee in A.Y. 1998-99 in his own case where the claim of the assessee for depreciation has been rejected. As the assessee has not brought any material differentiating the facts in relation to the assessment year under consideration ground is dismissed.
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Customs
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2013 (5) TMI 603
Valuation - Rule 2(2) of Customs Valuation Rules, 1988 - inclusion of license/royalty in the invoice value - Whether licence fee and royalty paid by the respondent to the licensor is includable in the value of the goods purchased from the replicator(s) – Respondent is importing replicators as designated by the licensor from time to time pursuant to their agreement. Respondent was also locally purchasing DVDs from replicators/vendors in India. Thus there were two sets of transactions, first with the licensor under the license agreement and second with the vendors by means of purchase orders. Held that:- The ratio of decision in CCE, New Delhi vs. M/S. Living Media (India) Ltd. [2011 (8) TMI 41 - SUPREME COURT OF INDIA] squarely applicable to the facts of the present case. In the said case it was held that Customs duty is liable to be paid not only on the cost of the media but also on the value including the contents of the media. It is for the contents of the VCD/DVDs that the respondent is paying licensee fee/royalty to the licensor. Thus, it may be seen that the value for the purpose of levy of Customs duty is not only the cost of the media but also the cost of matter contained in the media, that is, the content of the media. Since a replicated CD contains the artistic intellectual inputs, the cost of the same has to be considered while charging Customs duty. It is not the case of respondent herein that the cost of the contents has already been included in the value charged by the replicator. If that was so, there was no need for payment of licence fee/royalty to the Licensor separately. Thus, the licence fee and royalty paid by the respondent to the licensor is includable in the value of the goods purchased from the replicator(s). Therefore, the impugned order is set aside and the appeal is allowed.
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2013 (5) TMI 602
Penalties imposed u/s 112(a) - appellants charger for mid-declaration of the goods as synthetic polyester fabrics (100% non texturised) - Held that:- No test was conducted on the impugned goods as the goods were assessed on the basis of test report of the Textile Committee. In these circumstances, the allegation of mis-declaration or suppression of facts, fraud are not sustainable against the assesses. When the allegation of mis-declaration or suppression of facts, fraud are not sustainable against the assesses, the extended period of limitation is not invokable. In this case, admittedly, the goods were assessed on 13.2.2003 and show-cause notice has been issued on 4.9.2003 which is beyond the normal period of limitation. Therefore, the impugned show cause notice is barred by limitation. As the proceedings against the assesses are barred by limitation, therefore, there is no question of demand of duty and penalties against the assesses. Thus set aside the impugned order and allow the appeals of the assesses.
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FEMA
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2013 (5) TMI 604
Untrue declaration - Petitioners had failed to repatriate export proceeds to the extent of Rs.24.18 Crores from overseas buyers within the stipulated period of one year - Power to compound contravention - Held that:- As Petitioners states that they have no objection to pursuing the compounding applications in the manner as indicated by the communications of the Reserve Bank. The letters issued by the Reserve Bank on 28 March 2013 intimate to the Petitioners that they would in the first instance have to apply through the Panaji Regional Office of the bank to the Foreign Exchange Department of the Bank upon which, a decision would be taken. The learned Senior Counsel appearing on behalf of the Reserve Bank states that in the event that the Petitioners submit a complete set of documents within a period of one week from today to the Panaji Regional Office, a decision thereon shall be taken by the Foreign Exchange Department within a period of four weeks thereafter and that the application for compounding shall thereupon be processed and decided in accordance with law within a period of three months. Insofar as the adjudication proceedings are concerned, since the Petitioners are pursuing an application for compounding the contravention before the Reserve Bank, the Director and the Special Director of the Directorate of Enforcement informs the Court that without prejudice to the rights and contentions of the Department in the notice to show cause, the adjudication proceedings shall not be pursued for a period of four months from today in order to enable the Reserve Bank of India to take a final decision on the application submitted by the Petitioners. The Petitioners shall in the meantime file a reply to the notices to show cause within a period of four weeks from today & the adjudication proceedings shall not be pursued for a period of four months in order to enable the Reserve Bank to take a decision in accordance with law on the application for compounding.
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Service Tax
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2013 (5) TMI 619
Import of service - Online information and data base access or retrieval service through computer network service - application for waiver of pre-deposit of service tax, interest and penalties - Held that:- As per the provision section 65(75) the service is to be provided to any person in electronic form through a computer network. In the present case, as per the argument of the Revenue, M/s Equant Pte Ltd. are the provider of Virtual Private Network facility. As per the argument of the Revenue, the applicants are the beneficiary through this network facility inasmuch as the same enables the foreign offices of SBI to access to this besides updating the same on regular basis. As the data is being retrieved or access by the applicants to their own database which were in US, UK and India, therefore, it cannot be prima facie said that the applicants have received the services. Thus the applicants have made out a case in their favour. stay granted.
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2013 (5) TMI 618
Free call services provided to employees - Pre-deposit demand of a sum of ₹ 80 crores out of a tax demand of ₹ 118,70,19,472/- as also a penalty in the amount of ₹ 125 crores - chargeability of service tax on the free calls which are provided by the appellant to its employees - As per assessee any service provided free of charge cannot be the subject matter of service tax as per Circular dated 13.10.1997 issued by the Central Board of Excise and Customs by way of a clarification - Held that:- The appellant would be entitled to partial relief at this stage as the period in question for which the demand has been raised is 2004-09. Even agreeing with the respondents that the CBEC Circular dated 13.10.1997 was superseded by the later Circular dated 23.08.2007, it would imply, prima facie, that the earlier Circular dated 13.10.1997 held the field till 23.08.2007. It is in this context learned counsel was asked to bifurcate the tax demand of approximately ₹ 118 crores between the two periods, i.e., from 2004 upto 23.08.2007 and from the latter date till the end of the relevant period in 2009. Therefore, considering the entire period 2004-09 and the tax demand of approximately ₹ 118 crores, the period prior to 23.08.2007 would entail, if at all, a tax demand of approximately ₹ 70 crores. Thus the requirement of predeposit of ₹ 80 crores does not appear to be reasonable and be reduced to ₹ 25 crores. The said amount be deposited by 31.05.2013. In case the said deposit is made, the rest of the demands including the penalty would be stayed till the pendency of the appeal before the Tribunal.
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2013 (5) TMI 617
Condonation of delay appeal - Held that:- There is no evidence attached in any form as to the reasoning given by the appellant for the delay in filing appeal before the Tribunal. There is various decisions taken by the higher fora regarding condonation of delay and in this case no justifiable reason has been given for condonation of delay. Dismissed.
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Central Excise
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2013 (5) TMI 600
Penalty - Revenue’s prayer is for enhancement of the penalty amount to the extent of 100% of the duty amount.Held that:- Appellant had deposited the entire duty alongwith penalty of Rs. 15,000/-. In terms of the proviso to Section 11AC, if an assessee deposit the entire dues alongwith 25% penalty within 30 days of the passing of the order the penalty is required to be reduced to 25%. Thus, if the appellant have deposited the entire dues including 25% of the penalty, the penalty shall stand restricted to 25% of Rs. 50,145/-. The revenue’s appeal is dismissed.
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2013 (5) TMI 599
Refund claim rejected as time bared - amount deposited by the appellant during the investigation - Held that:- An amount of Rs.1,00,000/- deposited by the appellant even under panchanama cannot be considered as a duty deposited worked out by the Central Excise Officers. The said amount can be at the most an amount deposited by the appellant to pursue his legal rights to the show cause notice and being heard by the higher judicial for on the issue. Judgment of Shree Ram Food Industries (2002 (9) TMI 646 - GUJARAT HIGH COURT) very specifically dealt with this point that payment made by an assessee in pursuant to the direction of the lower authorities is not a voluntary payment and to be treated as a payment under protest - the amount deposited by the appellant during the investigation can never be construed as a duty as the amount which has been for which the show cause notice was issued clearly indicates that the amount, deposited needs to be appropriated against the duty liability if any, will indicate that it is a deposit. In favour of assessee.
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2013 (5) TMI 598
Waiver of duty/penalty – Held that:- In the instant case, de novo adjudication is directed for a second time. The learned Commissioner will have due regard to the relevant observations of tribunal and proceed to undertake de novo adjudication of the case in accordance with law and the principles of natural justice. Therefore impugned order is set aside and appeal is allowed by way of remand.
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2013 (5) TMI 597
Appeal u/s 35A/Stay petition – Rejected - Refusal by the concerned officer to perform duties under Central Excise Act, 1944 – Held that:- Order in original is not served upon the appellant on the date as mentioned and it was bounden of the first appellate authority to consider the date of service as 17.02.11 and proceed ahead and dispose the matter on merits. Instead doing so, the first appellate authority has rejected the stay petition and appeal u/s 35A without assigning any reasons. Accordingly, the impugned order is set aside and the appeal is remanded back to the first appellate authority to reconsider the issue afresh.
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2013 (5) TMI 596
Condition for availing Abatement of duty - Under Rule 10 of the Pan Masala Packing Rules – Held that:- In terms of the provisions of Rule 10 of the Pan Masala Packing Rules, for claiming abatement one condition is that the intimation regarding the closure of the factory has to be given at least three days in advance and other condition is that the period of abatement shall not be less than 15 days and that during the period of closure there will be no manufacturing whatsoever of the specified goods whatsoever and no removal of the goods. In this case, there is no dispute that the period of abatement is more than the specified limit and the intimation regarding closure of the factory had been given at least three days in advance. On first occasion, the appellant had intimated on 25/3/09 that they would be closing the factory from 4th April 2009 and on second occasion on 23/6/09 the appellant had intimated they would be closing the factory from 3rd July 2009. There is also no dispute the machine was sealed on 4th April 2009 and 3rd July 2009. Just because the Superintendent s remark regarding sealing does not mention the time of sealing, it cannot be presumed that on 4th April 2009 and 3rd July 2009, the factory had operated. The same view had been taken by the Tribunal in the case of CCE, Indore vs. Sai Pan Products [2012 (12) TMI 380 - CESTAT, NEW DELHI] Thus, the impugned order denying the abatement of duty is not sustainable.
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CST, VAT & Sales Tax
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2013 (5) TMI 621
U.P. Value Added Act, 2008 - applications dated 12th February, 2008 in Form VII and VIII purporting to be under section 17(5) of the U.P. VAT Act, 2008 for validation of registration certificate issued under the erstwhile Act filed by widow of deceased who was a registered dealer under the U.P. Trade Tax Act, 1948 - claim under scheme of Group Insurance for all registered dealers by the name of Traders Accident Insurance Scheme denied - Maintainability of writ - Held that:- Once the registration certificate is granted by the Registering Authority, it relates back to the date of enforcement of U.P. VAT Act, 2008, in view of specific provision contained in section 17(9). Consequently, Anil Kumar Kesarwani, the deceased, was a registered dealer on the date of enforcement of the U.P. VAT Act, 2008, till his death on 4-6-2009. Question of grant of registration certificate and satisfaction regarding fulfilment of requirements under the Act is a matter between the dealer and the Registering Authority and the insurer has no right to question the wisdom of the Registering Authority. There is also no prohibition under the Act for grant of formal registration certificate to a dealer posthumously. Rather it was the necessity in law, as Anil Kumar Kesarwani who was a registered dealer under the erstwhile Act and was liable to pay tax under the new Act, was under statutory obligation to apply for being registered under the Act and reciprocal duty being cast upon the Registering Authority to grant such certificate to him. Thus, even otherwise, there was no illegality in the action of the Registering Authority in registering Anil Kumar Kesarwani by granting registration certificate dated 18th September, 2010. As such, the first objection by the Insurance Co. that the registration certificate having been granted 15 month after the death of Anil Kumar Kesarwani is invalid, cannot be sustained. A bare perusal of provision of erstwhile Act and the new Act will show that the requirement of obtaining biometric data is not the prerequisite for registering a person under the Act. Rather section 17(3) read with section 17(5) states that every dealer holding registration certificate under the erstwhile Act, as a dealer, is deemed to be registered under the new Act only upon making an application in Form VIII accompanied by certain documents and requisite fee without getting biometric verification done. Thus non-obtaining of biometrics data, as in the instant case, will not invalidate the registration certificate. Contention of the respondent's counsel that the petitioner is not entitled to any relief because he has not challenged the order of the Insurance Co. declining his claim is not sustainable in law as it contains the same grounds which were communicated to the petitioner by the Dy. Commissioner, Trade Tax, Division-13, Allahabad vide letter dated 23rd June, 2011 & admittedly, petitioner has already challenged the letter of respondent no. 3 which itself contains the reason given by the Insurance Co. for declining the claim of the petitioner. Thus, refusing relief to the petitioner on the said ground will amount to taking a hyper technical view, which is not called for. As decided in K.N. Guruswamy v. State of Mysore [1954 (5) TMI 19 - SUPREME COURT] if the State or its instrumentalities acts in a arbitrary manner even in the matter of contract, an aggrieved party can approach the Court by of writ under Article 226 of the Constitution. The claim for insurance can be enforced through a writ petition. Thus writ petition succeeds and is allowed & insurance Co., respondent no. 2 is directed to forthwith settle the claim of the petitioner.
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2013 (5) TMI 620
Liability of sales/trade tax dues - Recovery certificate against the petitioner, Director in the Private Limited Company, for the dues of the Company which has been wound up by the order passed by the Delhi High Court - proprietorship concern was converted into Private Limited Company - application under Section 4-A(2-B) of the U.P. Trade Tax Act for claiming exemption from payment of trade/sales tax for remaining period rejected - Held that:- Here appears to be no pleading of fraud in the counter affidavit. So far the dues under the U.P. Trade Tax/Sales Tax are concerned, in the absence of proper pleading, it is not appropriate to examine the plea of fraud. Contention of the petitioner that the outstanding trade tax dues/sales tax of the Private Limited Company cannot be recovered personally from the petitioner is well founded in view of decision in M/s Meekin Transmission Ltd. (2008 (2) TMI 406 - ALLAHABAD HIGH COURT). Thus for the assessment years 1990-91, 1991-92 and 1992-93, the trade tax/sales tax dues under the U.P. Trade Tax Act/Sales Tax Act cannot be recovered from the personal assets of the petitioner. Recovery of CST - A bare perusal of the Section 18 it can be concluded that the liability of the petitioner to pay central sales tax dues of the Private Limited Company is on him as a director of Private Limited Company in Liquidation is jointly and severally liable to pay central sales dues of a Company in Liquidation. To this extent, his plea that he is not liable to pay outstanding central sales tax of the company has got no force and the same is hereby, rejected.
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Indian Laws
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2013 (5) TMI 601
Sale of secured assets by bank - contradiction to the conditional bid submitted by the plaintiff and accepted by the defendant Bank - Held that:- The offers/bids were invited in sealed cover. It can thus safely be assumed that the offer dated 20th January, 2010 of the plaintiff comprising aforesaid of a single sheet was contained in a sealed envelope. The said sealed envelopes were to be opened only on 27th January, 2010 at 3.00 PM. The defendant Bank itself till the stage of opening of the sealed envelope submitted by the plaintiff had no occasion to know that the offer of the plaintiff was a conditional one and was well entitled to presume that the offer contained in the sealed envelope was in accordance with the Sale Notice. Had the plaintiff been desirous of making a conditional offer, the plaintiff ought to have besides the sealed envelope containing its bid and EMD, given an open letter to the defendant Bank setting out its condition and only in which eventuality, the defendant Bank prior to the opening of the sealed offers/bids could have had notice of the bid/offer of the plaintiff being not confirming to the terms of the Sale Notice and would have had the opportunity to reject the same. At the outset, the contention of the plaintiff that the bid stood accepted on the fall of hammer is again contrary to the sale condition supra, of the highest bid being subject to approval of the Authorized Officer of the defendant Bank. The bid was thus not to be accepted on the fall of hammer but only on approval of the Authorized Officer of the defendant Bank. Since the plaintiff as per the Sale Notice was required to be present at the time of opening of the bids, for inter se bidding if any required and has admitted such presence inasmuch as the amount of Rs.13,50,000/- was paid on the same day, it follows that the minutes aforesaid were drawn in the presence of the plaintiff. The admission, during admission/denial of documents by the plaintiff, of the said minutes is also indicative thereof. Thus, the argument of the plaintiff of the defendant Bank having accepted his conditional offer cannot be believed. Not only so, the letter dated 27th January, 2010 also was not issued “thereafter” but before the plaintiff left the office of the defendant Bank. The said letter is in fact the approval of the bid of the plaintiff by the Authorized Officer of the defendant Bank. The said acceptance again, save for varying the date of payment of the balance sale consideration, reiterates the other conditions of the Sale Notice. The plaintiff is shown to have personally accepted the said letter on 27th January, 2010 itself. The plaintiff appears to have changed his mind subsequently. It is significant that the first communication from the plaintiff after 27th January, 2010 is of 19th February, 2010. The plaintiff therein as well as in the plaint has falsely represented that the letter dated 27th January, 2010 was received by him “thereafter”. As aforesaid, the said letter was personally received by the plaintiff on 27th January, 2010 itself and signed in acceptance of the terms therein. The right of the defendant Bank to forfeit is otherwise not under challenge and neither any pleading has been made by the plaintiff in that regard nor any issue claimed. There is thus no merit in the suit the same is dismissed.
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