TMI Tax Updates - e-Newsletter
May 30, 2013

Case Laws in this Newsletter:

Income Tax Customs Law of Competition Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Services tax - main contractor discharged the entire ST liability - ST can not be demanded again from the sub-contractor - demand and penalty set aside - Tri

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• Service tax liability - AO has shown sympathy to the persons who is liable to pay the tax - Notice given to AO to explain his role - HC

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Articles

1. VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013 (Part – II)

   By: Dr. Sanjiv Agarwal

2. SECITION 115JB- CASE OF DCW LTD -SOME RELEVANT IMPORTANT LEGAL PROVISIONS AND CONTENTIONS WHICH NEED TO BE RAISED TO TURN LOST CASE INTO A THUMPING WINNING of DCW before High Court.

   By: DEVKUMAR KOTHARI

News

1. Auction for Sale of New Inflation Indexed Government Stock of 10 Years

2. Rejection of service tax returns filed for the period prior to the dates of registration of the assessees

Notifications

Customs

1. CORRIGENDUM - dated 30-4-2013 - ADD

Corrigendum to Notification no. 51/2012-Customs(ADD), dated 3rd December, 2012

2. 56/2013 - dated 28-5-2013 - Cus (NT)

Amendments in the Customs Notification No. 61/1994(NT) dated 21/11/1994

VAT - Delhi

3. F. 3(352)/Policy/VAT/2013/231-241 - dated 28-5-2013 - DVAT

All the dealers registered under the DVAT Act, as on 31-03-2013, shall furnish the information online on or before 30.06.2013, using their login ID and password. For this purpose, Form DP-1 annexed with this Notification shall be used. This Notification shall come into force with immediate effect

Circulars / Instructions / Orders

VAT - Delhi

1. F.3(33)/P-II/ VAT/ Misc./2006/206-216 - dated 27-5-2013

DVAT 51 reconciliation return Qtr 1 to 4 of 2011-12 extended to 10/06/2013

DGFT

2. 03/2013 - dated 28-5-2013

Online application and issue of Registration Certificates for export of various commodities with effect from 1st July, 2013

Highlights / Catch Notes

Income Tax

• High Court Upholds Validity of Transferring Search Assessment Proceedings for Coordinated Investigation u/s 127(2.

  Case-Laws - HC : Transfer of search assessment proceeding to the ACIT-Visakhapatnam u/s 127(2) - The notice had indicated the reason for transfer as 'centralisation' for 'co-ordinated investigation' - transfer is valid - HC
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• High Court Invalidates Reassessment u/s 147 Due to Lack of Clarity on Alleged Bogus Transactions by AO.

  Case-Laws - HC : Reassessment - bogus entries - The reasons recorded by the AO do not disclose the AO’s mind as to what was the nature and amount of transaction or entries - proceedings u/s 147 not valid - HC
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• High Court: Expired Limitation Period Doesn't Erase Liability u/s 41(1) of Income Tax Act.

  Case-Laws - HC : Addition u/s 41(1) - Although, enforcement of a debt being barred by limitation does not ipso facto lead to the conclusion that there is cessation or remission of liability - HC
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• High Court Confirms ITAT Cannot Rectify Tribunal's Decision Allowing Depreciation on 8% Profit.

  Case-Laws - HC : ITAT's power of rectification - In the present case, decision of the Tribunal to allow depreciation on 8% profit was a conscious decision. - ITAT not allowed to rectify - HC
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• High Court Rules Forward Contract Cancellation Loss is Tax-Deductible as Business Loss.

  Case-Laws - HC : Forward contract cancellation loss - In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank. - allowed as business loss - HC
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• Section 245: Respondent Can Adjust Tax Refunds, But Must Follow Procedures in the Act.

  Case-Laws - HC : Adjustment of refudn with tax u/s 245 - No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. - HC
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• High Court Rules No TDS on Freight Payments with Form 15-I u/s 194C of Income Tax Act.

  Case-Laws - HC : TDS on payment of freight u/s 194C - the owners of the truck actually hired had furnished Forms No.15-I - no authority on the part of the assessee to deduct any tax. - HC
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• ITAT Grants Absolute Immunity to Assessee, Exempting Disclosure of Foreign Exchange Remittance Source Identity.

  Case-Laws - HC : Additions - cash credit - receipt of remittances of foreign exchange - assessee claimed immunity that he is not bound to disclose the name of the person who remitted the amounts - immunity granted by ITAT was absolute - HC
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Corporate Law

• Competition Commission of India dismisses allegations of abuse of dominant position in tech and telecom sales arrangement.

  Case-Laws - Commission : Abuse of Dominant position - (Apple/Airtel/Vodafone) - distribution/ sales arrangement between Apple and Airtel/Vodafone - there is no anti-competitive effect of the tie-in arrangement as alleged by the Informant - CCI
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Indian Laws

• Police Officers Can Testify in NDPS Cases; Lack of Independent Witnesses Doesn't Undermine Prosecution's Case.

  Case-Laws - SC : NDPS - As there is no absolute rule that police officers cannot be cited as witnesses and their depositions should be treated with suspect therefore, the prosecution case cannot be doubted for non-examining the independent witnesses. - SC
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Service Tax

• Service Tax Demand on Sub-Contractor Unjustified; Main Contractor Already Paid, Demand and Penalty Overturned.

  Case-Laws - AT : Services of cargo handling - main contractor discharged the entire service tax liability - ST can not be demanded twice from the sub-contractor - demand and penalty set aside - AT
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• Court Rules No Intentional Tax Evasion in Computer Training Services Case, July 2004-March 2005, Under Vocational Training Category.

  Case-Laws - AT : Computer training services - vocational traning - service tax liability for the period July 2004 to March 2005 - There is no evidence indicating any malafide suppression or mis-statement with an intent to evade duty on the part the appellant. - AT
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• High Court Reviews Assessing Officer's Leniency in Service Tax Case, Demands Explanation for Lack of Enforcement Accountability.

  Case-Laws - HC : Service tax liability - AO has shown sympathy to the persons who is liable to pay the tax - Notice given to AO to explain his role - HC
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Central Excise

• Appeal Dismissed for Non-Compliance; Individual Assessment Required for Stay Applications and Separate Orders Needed.

  Case-Laws - HC : Dismissal of appeal for non compliance of stay order - The stay applications of individual appellants, having regard to their peculiar circumstances, should be considered individually and separate orders should be passed - HC
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• Supreme Court Affirms Denial of Duty Exemption for Non-Compliance with 2001 Rules' Actual User Condition.

  Case-Laws - SC : Exemption notification - Concessional rate of duty - actual user condition - As the procedure set out in the 2001 Rules has not been followed, the appellant was not entitled to exemption - SC
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VAT

• Tamil Nadu Legislature to Classify Chilly, Coriander, and Turmeric with Their Powders as Identical Goods under TNGST Act.

  Case-Laws - HC : The intention of the legislature under the TNGST is to treat chilly and chilly powder, coriander and coriander powder, and turmeric and turmeric powder as one and the same goods - HC
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• High Court Remands Case on Tax Penalties for Reconsideration After Party Claims Valid Reason for Late Deposit.

  Case-Laws - HC : Failure to deposit tax before furnishing returns or alongwith the returns - imposition of penalties confirmed - revisionist held that there was reason - matter remanded back for reconsideration - HC
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Case Laws:

• Income Tax

• 2013 (5) TMI 692
  Transfer of search assessment proceeding to the ACIT-Visakhapatnam under sub-section (2) of Section 127(2) - centralization of cases for post search and seizure operations for the co-ordinated investigation - single judge quashed transfer orders - Whether the present appeals are maintainable? - whether the transfer orders are invalid]? - Held that:- In this case, a search was held at different places and documents were seized. It is necessary to see them together before passing the order of assessment. The transfer order is for administrative convenience for making co-ordinated investigation. The authority is exercising administrative and not judicial power. The judicial power is to be exercised after co-ordinated investigation, while passing search assessment orders. Thus the authority while passing the transfer orders, did not exercise judicial power. It is an administrative order and not a quasi judicial order, then the writ appeal would be maintainable quashing the order passed under Section 127 of the Act. The Department has transferred the cases to Visakhapatnam as-the main factory of flagship company was situate there most of documents were seized there and it was under the DIT-Hyderabad, under whose supervision, the search took place. In the transfer order, it is also mentioned that after search, assessment orders the assessee could seek de-centralisation after the search assessment order is passed, they could seek de-centralisation and the further appeals may be filed in the same way as they were filed earlier. There is no prejudice to them The notice had indicated the reason for transfer as 'centralisation' for 'co-ordinated investigation'. It is for this reason that order for transfer were made. There was no denial of reasonable opportunity to the Assesses. The word 'co-ordinated investigation' is not vague. The transfer orders transferring the cases to the ACIT-Visakhapatnam are valid. It has a definite meaning and the transfer order can not be set aside merely on the ground that the transfer has been done on vague terms.

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• 2013 (5) TMI 691
  Re opening of assessment - bogus entries/transactions - Tribunal held the proceedings as invalid - Held that:- AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi that assessee company was involved in giving and taking bogus entries/transactions but nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The reasons recorded by the AO do not disclose the AO’s mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. Thus no addition can be made to those reasons - initiation of proceedings u/s 147 was not valid - in favour of assessee.

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• 2013 (5) TMI 690
  Addition on account of purported cessation of liability - ITAT deleted the addition - Whether while considering provisions of section 41(1) the net liability that after providing for receivables is to be considered or is relevant? - Held that:- In order to attract the provisions of Section 41(1) it is necessary that there should have been a cessation or remission of liability. As held in the case of J. K. Chemicals Ltd. (1966 (2) TMI 73 - BOMBAY HIGH COURT) cessation of liability may occur either by the reason of the liability becoming unenforceable in law by the creditor coupled with debtor declaring his intention not to honour his liability, or by a contract between parties or by discharge of the debt. In the present case, the assessee is acknowledging the debt payable to M/s Elephanta Oil & Vanaspati Ltd. and there is no material to indicate that the parties have contracted to extinguish the liability. Thus, it cannot be concluded that the debt owed by the assessee to M/s Elephanta Oils & Vanaspati Ltd. stood extinguished. Although, enforcement of a debt being barred by limitation does not ipso facto lead to the conclusion that there is cessation or remission of liability, in the facts of the present case, it is also not possible to conclude that the debt has become unenforceable. It is well settled that reflecting an amount as outstanding in the balance sheet by a company amounts to the company acknowledging the debt for the purposes of Section 18 of the Limitation Act, 1963 and, thus, the claim by M/s Elephanta Oil & Vanaspati Ltd. can also not be considered as time barred as the period of limitation would stand extended. Even, otherwise, it cannot be stated that M/s Elephanta Oil & Vanaspati Ltd. would be unable to claim a set-off on account of the amount reflected as payable to it by the assessee. Admittedly, winding up proceedings against M/s Elephanta Oil & Vanaspati Ltd. are pending and there is no certainty that any claim that may be made by the assessee with regard to the amounts receivable from M/s Elephanta Oil & Vanaspati Ltd. would be paid without the liquidator claiming the credit for the amounts receivable from the assessee company. Thus admittedly, no credit entry has been made in the books of the assessee in the previous year relevant to the assessment year 2008- 2009. The outstanding balances reflected as payable to M/s Elephanta Oil & Vanaspati Ltd. are the opening balances which are being carried forward for several years. The issue as to the genuineness of a credit entry, thus does not arise in the current year and this issue could only be examined in the year when the liability was recorded as having arisen, that is, in the year 1984-1985. The department having accepted the balances outstanding over several years, it was not open for the CIT (Appeals) to confirm the addition of the amount on the ground that the assessee could not produce sufficient evidence to prove the genuineness of the transactions which were undertaken in the year 1984-85. No substantial question of law arises.

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• 2013 (5) TMI 689
  Maintainability of appeal - Held that:- In view of Instruction No. 2 of 2005, where the net tax effect is less than Rs. 4 lakhs, no appeal is maintainable before this court. In that view of the matter, this appeal, which is filed subsequent to the said circular is not maintainable. Appeal dismissed only on the ground of the net tax effect being less than the monetary limit prescribed without going into the merits of the case.

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• 2013 (5) TMI 688
  Maintainability of appeal - revenue appeal against ITAT allowing the interest u/s 244A on payment of taxed under section 140A - Held that:- It could not enable the Revenue to ignore the conditions of the circular dated 9.2.2011 and file appeal which is other-wise not envisaged in the said circular. This Court in case of CIT v. Concord Pharmaceuticals [2008 (8) TMI 344 - GUJARAT HIGH COURT] held that the instructions issued in the said circular dated 9.2.2011 are binding on the department. Thus an appeal which is filed ignoring said directives would not be maintainable. Such is the view taken by various High Courts. In the result, tax appeal is dismissed only on this ground.

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• 2013 (5) TMI 687
  ITAT's power of rectification - working-out depreciation after computing profit at the rate of 8% - Held that:- As in the original order, the Tribunal estimated the profit at the rate of 8% before depreciation, salary and interest to the partners on the basis of decision CIT vs. Jain Construction co. and ors. (1999 (9) TMI 26 - RAJASTHAN High Court) where the precise question was, whether while applying the profit rate of 8% u/s 44AD can depreciation still be claimed thereafter where the High Court had answered the question in favour of assessee. When the Tribunal, therefore, applied such a decision and specifically provided for working-out depreciation after computing profit at the rate of 8%, there was no ambiguity or uncertainty. Simply because the assessee himself had declared profit at 8.13% on such parameters, would not permit the Tribunal to change such a directive in exercise of rectification powers. Power of rectification can be exercised for correcting an error apparent on the face of the record and not for reviewing an order. In the present case, decision of the Tribunal to allow depreciation on 8% profit was a conscious decision. Thus such a view could not have been changed in exercise of power of rectification. On this short ground, we are prepared to reverse the Tribunal’s order under challenge.

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• 2013 (5) TMI 686
  Forward contract cancellation loss - whether be treated as business loss - Held that:- As decided in CIT vs. Friends and Friends Shipping Pvt. Ltd [2013 (5) TMI 458 - GUJARAT HIGH COURT] as relying on Badridas Gauridu (P) Ltd. [2003 (1) TMI 61 - BOMBAY High Court] & Soorajmull Nagarmull case [1980 (9) TMI 69 - CALCUTTA High Court] the expenditure would not be covered under section 43(5) of the Act as speculative transaction. Assessee was not a dealer in foreign exchange therefore, foreign exchange contracts were booked only as incidental to the assessee's regular course of business. Under section 43(5) “speculative transaction” has been defined to mean a transaction in which a contract for the purchase or sale of commodity is settled otherwise than by the actual delivery or transfer of such commodity. However, as state above, the assessee was not a dealer in foreign exchange. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank. However, the export contracts entered into by the assessee for export in some cases failed. Thus the assessee was entitled to claim deduction as a business loss. In favour of assessee.

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• 2013 (5) TMI 685
  Adjustment of the refund against sum payable by an assessee - whether the respondent is empowered to adjust the refund amount automatically without complying with the provisions of Section 245 - Held that:- It is crystal clear that the AO Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner Vin lieu of payment of the refund, set-off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section. On a perusal of the entire material documents including the impugned order, it is clearly evident that there is no intimation in writing to the petitioner-assessee before making such an adjustment of refund. No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. It is conspicuous from the records that there is no intimation in writing to the petitioner before making such adjustment of refund. As the respondent has not followed the procedures prescribed under the provisions of the Act while adjusting the refund amount with the outstanding amount, the impugned order is vitiated in law and is liable to be set aside. The impugned order is set aside - Writ Petition is allowed and the matter is remanded back to the respondent for compliance of Section 245.

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• 2013 (5) TMI 684
  Non deduction of TDS on payment of freight - The assessee replied by stating that the owners of the truck actually hired had furnished Forms No.15-I - Held that:- Payment accrued to the truck owners whose trucks were actually hired for the purpose of transportation of the goods. It is not in dispute that the trucks indicated in the Form No.15-I submitted by the assessee were in fact used for the purpose of transportation of goods. There was, as such, no authority on the part of the assessee to deduct any tax. Unable to find any question of law involved in the case. Accordingly, the appeal is dismissed.

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• 2013 (5) TMI 683
  Re opening of assessment - receipt of remittances of foreign exchange, thus assessee claimed immunity that he is not bound to disclose the name of the person who remitted the amounts - ITAT allowed the immunity by deleting the addition made by on account of unexplained cash credit in the assessee's bank account - Held that:- A reading of clause (C) of section 3(1) of the Act leaves no room for doubt that the fact that the recipient has received a remittance shall not be taken into account and shall be inadmissible in evidence in any proceedings relating to any offence or the imposition of any penalty under any such law. Such remittance has been made inadmissible in evidence in any proceeding it shows the intention of legislature to provide the complete immunity to the recipient from inquiry. The Central Board of Direct Taxes has also issued a circular no.611 dated 30th September, 1991 prefaced with the remark that the identity of the NRI/OCB would not be required to be disclosed at all, and, in fact, must not be disclosed.Thus immunity granted by ITAT was absolute - in favour of assessee.

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• Customs

• 2013 (5) TMI 682
  Condition for release the goods - exemption from Additional Duty of Customs (CVD), under Notification No.30/2004-CE, dated 9.7.2004 - Held that:- Considering the subject matter of goods are lying for a long time, the writ petition stands disposed of with a direction against the respondents to release the subject matter of goods concerned in respect of the above said Bill of Entry subject to the condition that the petitioner furnishing a bank guarantee to the entire value of Additional Duty of Customs (CVD) to the satisfaction of the second respondent, which should be kept alive till adjudication process is completed. It is made clear that as and when the bank guarantee is furnished, the respondents shall forthwith release the goods. See Shiv Shanti Exim Pvt. Ltd., Versus Commissioner of Customs [2011 (7) TMI 306 - MADRAS HIGH COURT].

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• Law of Competition

• 2013 (5) TMI 681
  Abuse of Dominant position - (Apple/Airtel/Vodafone) - distribution/ sales arrangement between Apple and Airtel/Vodafone - violation of Section 4 r.w.s. 3 of the Competition Act, 2002 - Price bundling strategy - secret exclusive contracts/agreements for sale of iPhone in India, even prior to its launch as a result of which an exclusive selling rights has been gained for undisclosed number of years - Informant has categorically claimed that the information is in regard to a particular variant of iPhone - 3G/3GS, manufactured by OP1, an American multinational corporation that designs and markets consumer electronics, computer software and personal computers - Held that:- As it is found that a consumer interested in buying an iPhone is tied to one of the two mobile networks i.e. Airtel or Vodafone. It is worth noting that at the time of launch of iPhone in India, Apple did not have an outlet to sell its iPhone, a high-end smartphone. Instead of investing money on creating sales and service outlet and incurring advertisement expenditure, Apple's strategy was to have tactical agreement with network operators, possibly the best partners for selling mobile handsets. This arrangement also helped Apple in gauging the public perception for iPhone before actually selling iPhone through its own retail stores. The mobile network companies who spent money on creating distribution channel and incurring advertisement expenditure wanted the iPhone to be locked-in for some period so that they would be able to recoup their investment over a period of time. To assess the alleged anti-competitive effect of the tie-in arrangement between Apple and Airtel/Vodafone in line with Section 19(3), the Commission relying on the market share statistics of smartphones in India provided by the DG observed that Apple had a share of less than 6% in the market of smart phones during the period 2008-11. Furthermore, share of GSM subscribers using Apple iPhone to total GSM subscribers in India is miniscule (less than 0.1%). Similarly,data provided on mobile service provider, no operator has more than 35% market share in an otherwise competitive mobile network service market. As none of the impugned operators (OP3 / OP4) have market-share exceeding 30%, that smartphone market in India is less than a tenth of the entire handset market and that Apple iPhone has less than 3% share in the smartphone market in India, it is highly improbable that there would be an AAEC in the Indian market. A consumer having a mobile handset (smartphone or otherwise) is free to exercise his choice for availing network services without any restrictions. Furthermore, the network operators do not require any particular handset to be purchased by the customer in order to avail its network services. Moreover, the lock-in arrangement of iPhone to a particular network was for only for a specific period and not perpetual, a fact known to prospective customer. It is difficult to construe consumer harm from the 'tie-in' arrangement between the opposite parties. The Commission observes that there is no restriction on consumers to use the network services of OP3 and OP4 to the extent that the network services can be availed on any mobile handset, even an unlocked iPhone purchased from abroad. Also, a consumer who has purchased a locked iPhone in India and paid the unlocking fees is free to choose the network operator of his choice. Thus none of the OPs have a position of strength to affect the market outcome in terms of market foreclosure or deterring entry, creating entry barriers or driving any existing competitor out of the market and within the theoretical framework of tying arrangement, the anti-competitive concerns in terms of section 3(4) violations does not hold. On the other hand, Commission has reasons to believe that the distribution arrangement between the impugned parties helped create a market for iPhone in India wherein domestic consumers got an opportunity to purchase a contemporary handset which was otherwise available through the grey market. Thus no evidence to show that entry-barriers have been created for new entrants in the markets i.e. smartphone market and mobile services market by any of the impugned parties. Similarly, nothing has been brought to the notice of the Commission to reveal that existing competitors have been driven out from the market or that the market itself has been foreclosed. Under these circumstances Commission opines that there is no anti-competitive effect of the tie-in arrangement as alleged by the Informant or dominant position in their respective relevant market to establish violation of Section 4(2), (a), (b), (c), (d) and (e). No appreciable adverse effect on competition in the market of smart-phones and/or mobile service has been established, there is no contravention of Section 3 (4) of the Act. Accordingly, the case is ordered to be closed.

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• Service Tax

• 2013 (5) TMI 701
  Penalty u/s 76 – simultaneous penalty – held that:- Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Central Excise Vs. First Flight Courier Ltd. (2011 (1) TMI 52 - High Court of Punjab and Haryana) taking into consideration the amending provision, has specifically answered whether penalty under sec. 76 as well as sec. 78 can be imposed simultaneously for the period prior to the amendment of said provisions. - the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act.

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• 2013 (5) TMI 697
  Services of cargo handling - service tax demand - appellant took a categorical stand that they are providing different category of manpower to M/s AAI, for doing the job of loading, unloading packing, unpacking etc. under the supervision and control of M/s AAI - They also contested the demand on the point of limitation - Adjudicating Authority did not impose any penalty - Held that:- As decided in OIKOS vs. CCE, Bangalore III [2006 (10) TMI 379 - CESTAT BANGALORE] taking note of Board’s Circular dated 7/10/98 as also Delhi Commissionerate Trade Notice No. 53/CE (ST)/97 dated 4/9/97 held that as the main service provider has discharged the duty liability, no separate service tax can be confirmed against the sub-contractor. Also see Viral Builders vs. CCE, Surat (2010 (11) TMI 312 - CESTAT, AHMEDABAD),Newton Engg. & Chemicals vs. CCE, (2007 (8) TMI 293 - CESTAT AHMEDABAD) and Vijay Sharma & Co. vs. CCE, Chandigarh(2010 (4) TMI 570 - CESTAT, NEW DELHI) By applying the ratio of the above decisions to the facts of the present case, it is found that in as much as the payment of service tax on the full cargo handling service does not stand disputed by the Adjudicating Authority, second time confirmation of service tax on that part of the services, which stands further delegated to the appellant, cannot be upheld. There are certificates given by M/s AAI indicating that they have paid service tax on the full considerations and the job contract given to the appellant is in the nature of sub-contractor at a lump-sum rate - thus set aside the confirmation of demand of duty - Revenue’s appeal for imposition of penalty on the assessee does not survive. In favour of assessee.

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• 2013 (5) TMI 696
  Activity of bottling of liquor - whether amounts to manufacture so as not to treat the same as packaging activity leviable to service tax? - Held that:- Commissioner (Appeals) has granted the relief to the respondents by relying upon decision of Som Distilleries Pvt. Ltd. and other vs. Union of India [2008 (3) TMI 313 - MADHYA PRADESH HIGH COURT] wherein held that the activity of bottling of liquor amounts to manufacture. Also see Kedia Castle Delleon Industries Ltd. vs. CCE, Raipur [2010 (1) TMI 630 - CESTAT, NEW DELHI] & Daurala Sugar Works vs. CCE, Meerut. [2011 (2) TMI 465 - CESTAT, NEW DELHI] - In favour of asessee.

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• 2013 (5) TMI 695
  Computer training services - non discharge of service tax liability during the period July 2004 to March 2005 - appellant contended that during the said period computer training was covered under vocational training being exempted from service tax vide notification No. 9/2003-S.T. 12-06-2003 read with subsequent notification No. 24/2004-ST dated 10-09-2004 - Held that:-The demand in the present case stand raised for the period July 2004 to March 2005 by way of issuance of show cause notice on 22-09-2010. During the relevant period all the decisions of the Tribunal were in favour of the assessee, laying down that a computer training institute is covered by the expression vocational training institute and as such, was exempted from service tax - no fault can be found on the part of the assessee to interpret the law in the same manner and not to pay service tax on the computer training services. It is only subsequently that the law declared by the Tribunal was reversed by in the case of Sunwin Techno Solutions Pvt. Ltd. [2010 (9) TMI 71 - SUPREME COURT OF INDIA] as such there was a bonafide belief on the part of the assessee not to pay service tax on the computer training services provided by them. There is no evidence indicating any malafide suppression or mis-statement with an intent to evade duty on the part the appellant. Thus demand stands raised against the appellant by invoking the longer period of limitation, is not justifiable. In favour of assessee.

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• 2013 (5) TMI 694
  Service tax liability - petitioner submitted that he is not liable to pay any service tax and even if noticee is liable to pay service tax, penalty and interest, such liability cannot be fastened upon the petitioner without being any notice of assessment upon the petitioner. AO has shown sympathy to the persons who is liable to pay the tax, big brother, i.e., DVC, CTPC, Chandrapura - Held that:- Before consideration of the matter in detail, it will be appropriate to give notice to the AO -Rajiv Kumar Mishra, Additional Commissioner, Central Excise, Ranchi so that certain allegations may also be examined against the officers whether the order in question has been passed in bonafide exercise of power under the Statutory provision or it is something else, which would be adequately answered by the said officer himself, who has right to be heard before any observation. Meanwhile the operation of the impugned order in these petitions shall remain stayed.

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• Central Excise

• 2013 (5) TMI 700
  Dismissal of appeal for non compliance of stay order - held that:- The Tribunal had to necessarily go into the facts of each appellant’s case and all the relevant questions, such as the existence or otherwise of a prima facie case, the balance of convenience and irreparable hardship, if any, and indicate with clarity the amount they were required to deposit for the whole or part of liability. The omission to do so has led to the present situation, which is not the first of its kind. We notice that this kind of grievance has been voiced earlier also, which the Tribunal would be well-advised to avoid. The stay applications of individual appellants, having regard to their peculiar circumstances, should be considered individually and separate orders should be passed, rather than making an order that has to depend on the outcome of some other appellant’s compliance with the terms of order in his (or its) case. - Tribunal to rehear the case - Decided in favor of assessee.

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• 2013 (5) TMI 680
  Valuation - non-inclusion of the cost of moulds in the final product manufactured and cleared - There is a Cost Accountants certificate which indicate that the cost of moulds has been amortized while arriving at the value of final products on which the Central Excise Duty is discharged. - held that:- both the lower authorities have not considered this issue in proper perspective and came to the summarary conclusion, which is not on consonance with the law. Both sides agree that the cost accountants certificate should be seen and if the department is advised, may appoint their own Cost Accountant to find out whether the cost of moulds has been amortized or not. - matter remanded back.

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• 2013 (5) TMI 679
  Cenvat credit of service tax paid on maintenance of garden inside the factory premises - Held that:- As decided in Commissioner Vs Millipore India Pvt. Ltd. [ 2011 (4) TMI 1122 - KARNATAKA HIGH COURT] credit has been allowed on maintenance of garden - in favour of assessee.

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• 2013 (5) TMI 678
  Non-compliance of orders of pre-deposit and provisions of Section 35F - allegation of modvat credit on G.P. sheets fraudulently availed - appellants submission that the order of the Commissioner (Appeals) rejecting the appellant’s plea for modification unsustainable as without providing the appellant a reasonable opportunity for submitting justification for seeking modification - Held that:- In the circumstances no application for review of the said order, even if filed as an application for modification could have been entertained, as the Commissioner (Appeals) lacks jurisdiction to review his order. If the order rejecting the appellant application for modification is set aside on the ground of violation of principles of natural justice, it would revive the appellant’s application for modification which is not maintainable, for lack of jurisdiction to review, conferred on the appellate authority. The order dated 07.08.2012 (rejecting the appeals), is also unassailable since the appellant failed to comply with the order dated 06.07.2011, directing deposit of the specified amount as the condition for grant of waiver of pre-deposit. Thus appeal dismissed.

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• 2013 (5) TMI 677
  Clandestine removal - Duty on coating charges along with interest and imposition of penalty - as per dept. duty on the bare pipes was paid by the appellant without shifting the bare pipes from the factory premises and the fact that bare pipes had never left the factory and it was only after CTE coating pipes were cleared from the factory was suppressed by the appellant from the department - assessee contention against invoking of extended period of limitation - Held that:- As from the invoices of bare pipes, no details of transport are shown which means the goods did not move outside the factory premises. On the other hand, the goods which were cleared from the factory were coated pipes and in the invoices issued by the appellant for coated pipes, transport vehicle numbers were clearly mentioned. From these observations, it can be concluded that bare pipes have never gone out of the factory premises and appellant merely shifted pipes from SW Division to SPEC Division for the purpose of coating and the goods which were removed outside the factory were in fact the coated pipes given to M/s IOCL. Since the bare pipes had never gone out of the factory and the coating was done within the factory premises, and the goods finally cleared were coated pipes, duty is required to be paid on the coating charges also in the light of decision in the case of Sidhartha Tubes Lt Vs CCE, Indore (2005 (12) TMI 92 - SUPREME COURT OF INDIA). The appellant’s contention that show cause notice is hit by time limit is not acceptable as the activity of coating was done on the bare pipes manufactured by the appellants themselves was never brought to the notice of the department. Moreover, the fact that figures of coating pipes shown in the excise records were not in respect of the bare pipes received from outside for coating was never brought to the notice of the department. This is also seen from fact of entering two separate contracts with M/s IOCL on the same date was also not brought to the notice of the department. This action shows that this was a deliberate attempt to evade duty on the coating charges. Thus the extended period is rightly invokable in this case. Against assessee.

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• 2013 (5) TMI 676
  Extended period of limitation - suppression of facts - appeal against the order of tribunal [2003 (1) TMI 580 - CEGAT, NEW DELHI] - held that:- Having perused the declarations, for the periods ending 31st March, 1994 to 31st December, 1998, we are convinced that the finding referred by the Tribunal, namely, that the process of manufacture had been disclosed in the declarations cannot be faulted. - Against paragraph 9 of the said declarations, the process of manufacture has been stated as “Billet/Steel - Cutting - Heating - Rolling - Cutting - Hole”. Therefore, the Tribunal was justified in reversing the finding recorded by the Commissioner (Appeals) to the effect that the process of manufacture had not been disclosed in the declarations. - no demand - decided in favor of assessee.

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• 2013 (5) TMI 675
  Exemption notification - Concessional rate of duty - actual user condition - Chapter X procedure - Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 - time gap between expiry of earlier certificate and beginning of new certificate - held that:- The language of Rule 192 of Chapter X of the Rules is clear that for availing concession from excise duty on excisable goods used in a specified industrial process, a person must obtain a registration certificate from the Collector and that “the concession shall, unless renewed by the Collector, cease on the expiry of the registration certificate”. Admittedly, the registration certificate of the appellant expired on 31-12-1995. Hence, the exemption granted under the notification ceased on 31-12-1995. The fresh registration certificate in favour of the Ahmedabad Electricity Company Ltd. was issued on 26-6-1996 and we find on a reading of the copy of the CT-2 certificate annexed as Annexure P5 that the registration certificate was not for any period prior to 26-6-1996. As the procedure laid down in Rule 192 of Chapter X of the Rules has not been complied with, the appellant is not entitled to avail the exemption of excise duty under the exemption notification during the period from 1-1-1996 to 25-6-1996. Procedure under 2001 rules - held that:- Rule 3(1) makes it amply clear that the manufacturer, who intends to use subject goods for specified use at concessional rate of duty, shall make an application in quadruplicate in the Form at Annexure-1 to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be. Admittedly, no such application was made by Indo Gulf Corporation Limited in the form at Annexure-1 to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise. As the procedure set out in the 2001 Rules has not been followed, the appellant was not entitled to exemption on the Naphtha cleared from its factory for supply to Indo Gulf Corporation Limited for manufacture of fertilizer. - decided against the assessee.

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• CST, VAT & Sales Tax

• 2013 (5) TMI 699
  Reassessment - Masala powder, turmeric powder, chilli powder and coriander powder - taxability - as pleaded by assessee that by virtue of G.O.(D) No.383, Commercial Taxes Department, dated 22.10.1998 and the clarification dated 9.12.2002 issued under Section 28-A of the TNGST Act, the goods continued to enjoy the exemption & would continue even under Act 32/2006 - Held that:- As interpreting the word substitution to mean that the intention of the legislature was to replace the Old Serial No.18 of Part-B of Fourth Schedule with New Serial No.18 to have effect for the period 1.1.2007 and 31.3.2008. The understanding of the department prior to coming into force of Act 32/2006 and from 1.4.2008, the date of coming into force of Act 32/2008, to state the obvious, is that the powder form of chilly, turmeric and coriander continues to be exempted goods for all purposes. If during the interregnum period, namely from 1.1.2007 to 31.3.2008, there appears to be an omission, that omission is sought to be corrected by way of substitution. This Court clearly holds that substitution has the effect of replacing the old Serial No.18 of Part B of Fourth Schedule of Act 32/2006 and the substitution will therefore entail goods described in Serial No.18 of Part-B of Fourth Schedule of Amending Act 32/2008 the benefit of exemption as is applicable from the inception of Act 32/2006. The new replaces the old and that is substitution and as a consequence, exemption becomes inevitable. The department's plea that the exemption will not apply to the period from 1.1.2007 to 31.3.2008 cannot be accepted, as substitution in this case will have to relate back to 1.1.2007 itself, when Act 32/2006 came into force. It needs no further clarification to state that even in terms of the decision Namputhiris Pickle Industries v. State of Kerala and another [1998 (3) TMI 594 - SUPREME COURT OF INDIA] the powder form of chilly continues to be one and the same item. This statement is made only to amplify that despite substitution by way of Act 32/2008, the petitioners are entitled to exemption in respect of the powder form of chilly, turmeric and coriander on the mere entry in Serial No.18 of Part-B of Fourth Schedule to Act 32/2006. When there is no differentiation between the two forms of the goods, the substitution is more in the nature of clarification of a pre-existing right which has accrued to the petitioners, that is to say that the powder form of chilly, turmeric and coriander are no different from chilly, turmeric and coriander. It is evident that the intention of the legislature under the TNGST Act as well as the Act 32/2008 is to treat chilly and chilly powder, coriander and coriander powder, and turmeric and turmeric powder as one and the same goods & continue to enjoy the benefit of exemption despite their being a specific omission of the powder form 1.1.2007 to 31.3.2008. The benefit of exemption granted based on returns filed is in order. As in this case returns were filed in terms of Section 22 of Act 32/2006 and accepted by the competent authority. The exemption was sought and granted. It is only thereafter that the proceedings were initiated under Section 27 of Act 32/2006 on the ground of escaped assessment for penalty. On the face of it, such a plea cannot be accepted because there is no question of escaped assessment or a false statement or misstatement, as all the records are already before the competent authority. In favour of assessee.

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• 2013 (5) TMI 698
  Failure to deposit tax before furnishing returns or alongwith the returns - imposition of penalties confirmed - revisionist held that there was reasonable cause for failure to deposit tax on time as tax due in respect of the subject monthly turnovers were in relation to sales effected to southern States and due to calamity, their payments were delayed. Attempt made to obtain additional working capital loan from its bankers also did not materialize - Held that:- There is no finding that payment in respect of the turnover for the month in question was used during the month in question or even in the subsequent months, but prior to payment of tax due in regard thereto for purchase of goods. This factual aspect is required to be ascertained and, at the same time, it has to be ascertained, whether due to natural calamity, there was, in fact, delay on the part of the buyers to pay the dues on time and, whether delay in receipt of payment in the backdrop of natural calamity can be treated as reasonable cause for failure to deposit tax on time - revision applications allowed by remitting back the matter to the Assessing Authority for reconsideration.

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• Indian Laws

• 2013 (5) TMI 693
  Guilty of the offence under Section 15 of the Narcotic Drugs and Psychotropic Substances Act, 1985 - on search of the bags of appellant it was found that those contained 64 Kgs. of poppy straw powder packed in 32 bags of polythene - appellant contested that in the absence of corroboration from independent witnesses the evidence of only police officials should not have been given credence to - Held that:- It is noticeable that the evidence of PW-7, namely, Ritesh Kumar, has been supported by Balwant Singh, PW-5, as well as other witnesses. It has come in the evidence of Ritesh Kumar that he had asked the passerby to be witnesses but none of them agreed and left without disclosing their names and addresses. On a careful perusal of their version nothing by which their evidence can be treated to be untrustworthy. On the contrary it is absolutely unimpeachable. As there is no absolute rule that police officers cannot be cited as witnesses and their depositions should be treated with suspect therefore, the prosecution case cannot be doubted for non-examining the independent witnesses. Non-compliance of Section 50 of the NDPS Act - Held that:- In the case at hand 32 bags of poppy straw powder weighing 64 Kgs. had been seized from two bags. It has not been seized from the person of the accused-appellant. It has been established by adducing cogent and reliable evidence that the bags belonged to the appellant. As relying on Madan Lal v. State of H.P.[2003 (8) TMI 474 - SUPREME COURT] and State of H.P. v. Pawan Kumar [2004 (9) TMI 602 - SUPREME COURT] applying the interpretation of the word “search of person” to facts of present case, it is clear that the compliance with Section 50 of the Act is not required. Therefore, the search conducted by the investigating officer and the evidence collected thereby, is not illegal. Consequently, no merit in the contention of appellant as regards the non-compliance with Section 50 of the Act. Appeal rejected.

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