Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 6, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Disallowance of loss on account of alleged share transactions - the link established between the assessee and these companies was important in considering the question whether the transactions of shares were genuine or not.the Tribunal grossly erred in completely ignoring the aspect of inter linked entities and overlooking the perspective outlined by the AO. - HC
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Validity of assessment order under Section 143(3) - assessment is void ab initio since the notice under Section 143(2) of the Act was issued beyond the period of limitation - HC
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Entitlement to the benefit of renewal of recognition under Section 80G - it is mandatory that if the application is not disposed of within six months from the date on which the application is made, the Commissioner has no jurisdiction either to pass an order granting the approval or rejecting it - HC
Service Tax
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Levy of Penalty u/s 78 - Waiver u/s 70 - the appellants rendered the service of construction of residential complexes Blue Mount and for the East Crust received the payment from the clients. - Therefore, the appellants cannot plead for innocence for invoking Section 80 - AT
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The deposit insurance activity undertaken by the appellant, Deposit Insurance and Credit Guarantee Corporation, falls within the taxable service category of general insurance business service and is liable to service tax - AT
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Refund claim - realization of export proceeds at different location - conception of the adjudicating authority is erroneous in law because wherever foreign exchange is realized makes no difference to law since that has come to India and that establishes the export of service from India - AT
Central Excise
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Shortage of finished goods and raw material - Clandestine removal of goods - retraction of statement in reply to the show cause notice is not corroborated with any evidence and therefore, it can not be accepted in the eye of law. - AT
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Whether appellant being principle manufacturer is liable to pay duty on waste and scrap generated at job workers end where job charges forms the part of value of waste and scrap or not - Held No - AT
VAT
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Levy of VAT on third point of sale of liquor of foreign origin in the State at the rate of 14.5% - Constitutional validity - The petitioners, who are clubs and hotels, cannot be compared with the retail outlets of TASMAC. The customers of the TASMAC and the petitioners form two distinct and different categories based upon their respective socio-economic status - HC
Case Laws:
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Income Tax
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2015 (5) TMI 125
Disallowance of loss on account of alleged share transactions - shares of certain companies purchased and further the loss claimed on account of diminution in value of those shares - whether ITAT accepting the genuineness of the loss as declared in respect of shares purchased and sold or held as stock-in-trade is perverse? - Held that:- The Tribunal proceeded on an erroneous footing that all shares have been “bought through the recognised stock exchange through the main broker of the exchange”. There was no evidence to indicate that all shares were bought through the stock exchange. The assessee also did not claim this; the assessee had claimed before the AO that all shares were “bought from the broker of Gauhati Stock Exchange” None of the material produced by the assessee could be relied upon to indicate the market value of the shares. The certificates issued by the Gauhati Stock exchange for the previous years 1997-98 and 1998-99 certified the “traded prices of the shares.. as intimated by a member as off the floor transactions”. This, clearly, indicated that: (a) the transactions were not conducted through the stock exchange but merely reported as off market transactions; and (b) the transaction was reported by a singular member - thus, the transaction did not involve any other broker. Further the dates and quotations certified, clearly pertained to the transactions involving the assessee and or related companies as parties. The dates of the memos of confirmation and the date of transaction reported to the stock exchange are the same in almost all instances. Thus, these certificates, which only certify the prices at which transactions in question were reported cannot prove that the transactions were executed at market value. Since these transactions in question were not done in open market, but between related concerns and no other transactions in those shares were reported, any price at which the assessee transacted would, obviously, be reflected as a quotation by the Gauhati Stock Exchange. The AO had found that the assessee and the companies whose shares purchased were related. It was pointed out that those companies were promoted by Mr Modi who had disclosed that he had used his undisclosed funds to promote those companies. The assessee had argued that the fact that undisclosed funds were used in promoting companies did not mean that the companies did not carry on its business or were not genuine. However, it was apparent that Mr Modi was the prime mover of the companies in question. The assessee had booked losses in respect of shares of certain companies. The close link between the said companies and the assessee was clearly established. In our view, the link established between the assessee and these companies was important in considering the question whether the transactions of shares were genuine or not.the Tribunal grossly erred in completely ignoring the aspect of inter linked entities and overlooking the perspective outlined by the AO. Insofar as the loss in relation to shares of Mather & Platt India Ltd. is concerned, there is no allegation that the assessee is related in any manner to the said company. In this view, the losses as claimed by the assessee in respect of Mather & Platt India Ltd. cannot be rejected. The losses claimed by the assessee, except the losses relating to the shares of Mather and Platt India Ltd. i.e. ₹ 56,650/- in the assessment year 1997-98, ₹ 1,12,500 in the assessment year 1998-99; and ₹ 67,500/- in the assessment year 1999-00, are liable to be disallowed. - Decided in favour of the Revenue.
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2015 (5) TMI 124
Exemption u/s 10(23C)(vi) rejected - Held that:- Object Nos. 3, 4 & 5 of the Memorandum of Association seem to be ancillary for educational purposes and the main object of the society still remains as educational purpose. Since, the only consideration required is as to whether assessee is for education purpose and is not indulged in profit making object and Object Nos.3, 4 & 5 are ancillary to educational purposes and none of the object seems to be for profit making purpose, therefore, rejection of the application moved under Section 10 (23C) (vi) seems to be totally unjustified. - Decided in favour of assessee.
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2015 (5) TMI 123
Income from the property transaction - business income or capital gains - Revenue contented that merely because the assessee was a student, the Tribunal ought not to have come to the conclusion that she could not have indulged in any business activity - Held that:- A careful look at the order of the Tribunal would show that the assessee got the property by way of settlement. Thereafter, she entered into a promoter's agreement on 18.12.2007 and a construction agreement on 30.3.2008. It was in pursuance of those agreements that the assessee was compelled to sell undivided shares in the land, over a period of three assessment years namely 2008-09, 2009-10, etc. The assessee also filed a return of income for the assessment year 2008-09 under the head 'long term capital gain'. Therefore, the Tribunal rightly concluded that the transaction of sale of undivided shares in the land merely started crystallizing from the assessment year 2008-09 onwards and what is important is that the Revenue accepted the stand of the assessee. Therefore, it was clearly a case of change of opinion and it is now well settled that on the basis of the change of opinion, the power under Section 143(3) cannot be invoked. The assessee did not acquire any land for the purpose of development and sale as part of any business venture. She got this property by way of a settlement and she merely wanted to sell it. The better method of selling it was found to be to entrust it to a developer. Once an agreement for sale is entered into in the manner in which a developer wanted, there is no way the assessee would have had control over the period of time, within which, the entire transaction would have been concluded. Therefore, this is not a fit case calling for our interference. - Decided against revenue.
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2015 (5) TMI 122
Disallowance u/s 40(a)(ib) - deduction of STT claimed by the Assessee - ITAT allowed the claim - Held that:- The requisite details of the clients have been provided by the assessee clearly. If the parties are clients of the assessee and from whom brokerage is collected by raising bills, then, there is no dispute that it is this very tax which is collected by the assessee. In the circumstance, the Tribunal's order on this point does not raise any substantial question of law. Even in relation to the second question we do not find that the Tribunal, in any manner, concluded the matter. The Tribunal merely invited attention of the parties that the claim of error trade has not been examined either by the Assessing Officer or by the Commissioner of Income Tax (Appeals). The assessee's advocate had no objection to sending back the matter to the assessing officer for necessary verification. Thereafter the Tribunal found that the matter requires fresh examination and in case loss is found to have occurred on account of error trade conducted by assessee on behalf of clients, then the claim will have to be accepted as business loss if the law laid down by the Tribunal in the case of Parker Securities Ltd. (2006 (5) TMI 110 - ITAT AHMEDABAD-B ) applies. Such direction far from concluding the matter only highlights the aspects of the case and particularly in relation to non consideration of the claim of error trade. If that is the issue which has been restored to the assessing officer for necessary examination, then, it would be open for the revenue to point out that the loss if any has not occurred on account of error trade and conducted by the assessee. No substantial question of law. - Decided against revenue. Disallowance u/s 14A and Rule 8D - Held that:- The issue is squarely covered by the case of Godrej and Boyce Mfg. Co. Vs. Deputy Commissioner of Income Tax (2010 (8) TMI 77 - BOMBAY HIGH COURT ). Disallowance of charges paid to Stock Exchanges - non deduction to tax at sources - ITAT allowed claim - Held that:- The judgment of this Court in case of Commissioner of Income Tax vs. Kotak Securities Ltd. ( 2011 (10) TMI 24 - Bombay High Court) covers the question. The party with which we are concerned is the Stock Exchange and transaction charges paid by the assessee being in the nature of fees for technical services, that this question need not detain us. It stands answered in terms of the judgment of this Court in Commissioner of Income Tax vs. Kotak Securities Ltd. - Decided against revenue.
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2015 (5) TMI 121
Revision u/s 263 - a complete consideration of the record would reveal that the expenditures claimed were in respect of payments made to related party transactions which had not been taken into consideration at the original assessment stage - Held that:- CIT's order does not address the appellant's objections both as to the assumption of jurisdiction as well as the merits. As is evident from the operative portion of the CIT's order itself, the merits were remitted for consideration to the AO. However, as regards the assessee's objections against the Show Cause Notice under Section 263 was concerned, there are no findings. Given these facts, the ITAT's order upholding assumption of jurisdiction could not have been made. In that sense, the assessee is correct in contending that the remand on the question of deciding objections had been rendered academic. Thus the impugned order is modified; it is open to the assessee to contend both on the correctness and legality of assumption of jurisdiction as well as the merits of the items sought to be taxed in the revisional proceedings - Decided in favour of assessee.
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2015 (5) TMI 120
Suppression of production by showing excess scrap - ITAT deleted the addition - Held that:- When the Assessing Officer did not reject the books of accounts and / or did not point out any defects in the books of accounts regularly maintained by the assessee and when considering the fact that the Excise Department also fully verified and checked the records for the raw materials and the finished goods, the learned Tribunal has rightly deleted the additions made by the Assessing Officer on scrap generation at the rate of 15%. We are in complete agreement with the view taken by the learned Tribunal in so far as deleting the additions made by the Assessing Officer for the respective Assessment Years i.e. 1999-00, 2000-01 and 2001-02 on scrap generation at the rate of 15%. - Decided in favour of the assessee. Validity of assessment order under Section 143(3) - ITAT held the assessment as void ab initio by observing that notice under Section 143(2) of the Act was issued beyond the period of limitation i.e. beyond the period of 12 months - Held that:- It is required to be noted that the return was filed by the assessee on 31/12/1999 and notice under Section 143(2) of the Act was served upon the assessee on 25/08/2001. Under the circumstances, when notice under Section 143(2) of the Act was issued beyond the period of one year considering the decision of the Hon’ble Supreme Court in the case of Assistant Commissioner of Income Tax and Anr. Vs. Hotel Blue Moon reported in [2010 (2) TMI 1 - SUPREME COURT OF INDIA] question is held against the revenue - Decided in favour of the assessee. Penalty under Section 271(1)(c) - ITAT deleted penalty - Held that:- Tribunal has correctly observed that since the addition made by the Assessing Officer of the scrap generation at the rate of 15% has been deleted, there is no question of imposition of penalty arising - Decided in favour of assessee. Disallowance of interest expenses claimed under Section 36(1)(iii) - ITAT allowed claim - Held that:- Tribunal has observed that the assessee was having interest free funds available with it. Also that the advances were given by the assessee to various parties to the extent of ₹ 2,62,48,341/- during the Financial Year 1996-97. Even the assessee was having interest free funds to the extent of ₹ 3,93,65,572/- as on 31/03/2002. It is required to be noted that in the earlier preceding year no disallowance was made out of the interest claimed by the assessee. Considering the aforesaid facts and circumstances of the case, the learned Tribunal has rightly deleted the disallowance on interest expenses - Decided in favour of assessee. Addition under Section 40A(2)(b) - addition sustained is 1/3rd by CIT(A) & ITAT - Held that:- We are in complete agreement with the view taken by the learned CIT(A) confirmed by the learned Tribunal. As such, taking into account the larger business benefits accruing to the assessee and the connectivity between the assessee and the recipient, the learned CIT(A) has held that commission of ₹ 1 per kg would be reasonable and balance 0.5 per kg is considered as excessive withing the meaning of Section 40A(2)(b) of the Act.No substantial question of law arises so far as deleting the addition under Section 40A(2)(b) of the Act to the extent of 2/3rd of ₹ 10,78,930/- is concerned. - Decided in favour of assessee.
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2015 (5) TMI 119
Appeal admitted by the High Court on the following grounds: (1) Whether on the facts andin the circumstances of the case and in law, the ITAT was right in holding that notional sales tax exemption amount of ₹ 38,62,33,200/- is a capital receipt not liable to income tax? (2) Whether on the facts and in the circumstances of the case and in law, the ITAT was right in allowing as a revenue deduction the contribution of ₹ 40,25,388/- made by the Assessee Company to various clubs ran by and meant for the staff and their families at various places even though such expenditure was not allowable under section 40A(9) of the Income Tax Act?"
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2015 (5) TMI 118
Lease rental on the lease of certain assets - Addition made to chargeable interest under Section 2(7) of the Interest Tax Act - ITAT deleted addition - Held that:- Considering the various clauses in the agreement entered into between the assessee and the lessee reproduced hereinabove and the intention of the parties and the observations made by the Hon'ble Supreme Court in the case of Asea Brown Boveri Ltd. (2004 (10) TMI 325 - SUPREME COURT OF INDIA) we are of the opinion that the transaction by the assessee - lessor and lesseee is in substance a financial lease/transaction and therefore, the assessee is liable to pay the interest tax on the interest component. The learned Tribunal has materially erred in not treating/considering the transaction between the lessor and lessee as a financial lease/finance transaction and consequently, materially erred in holding that the assessee is not liable to pay the interest tax on the interest component. Thus ITAT has materially erred in treating the transaction entered into by the assessee in the form of agreement as a Lease Agreement. As observed hereinabove, in substance, the transaction is a financial transaction and the agreement is a Finance Agreement and therefore, the assessee is liable to pay the Tax on interest as defined under Section 2(7) of the Act on the finance interest component which even according to the assessee would be ₹ 1,03,47,165/-.- Decided against the assessee.
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2015 (5) TMI 117
Entitlement to the benefit of renewal of recognition under Section 80G - Tribunal upholding the order of Director of Income Tax (Exemptions) that the appellant activity is in the nature of trade, commerce or business and hence is not entitled to renew the recognition under Section 80G of the Act? - whether an order passed beyond the period prescribed under the law is valid? - Held that:- Reading of Rule 11AA of the Income Tax Rules makes it clear that the Commissioner shall pass an order either granting the approval or rejecting the application within six months from the date on which such application was made. Therefore, it is mandatory that if the application is not disposed of within six months from the date on which the application is made, the Commissioner has no jurisdiction either to pass an order granting the approval or rejecting it. It is not in dispute that the Commissioner did not pass any order within the period prescribed. He has passed an order on 06.10.2008 i.e., beyond the period prescribed under the aforesaid rule. Therefore, on the date the order was passed, the Commissioner had no jurisdiction. Therefore, it is an order passed without jurisdiction. This aspect has not been properly considered and appreciated by the authorities. Liberty is reserved to the assessee to make a fresh application for benefit of Section 80G of the Act. - Decided in favour of the assessee
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2015 (5) TMI 116
Depreciation and investment allowance - Tribunal allowed that any amount of depreciation and investment allowance could be deducted - whether there was no material to show that the machine was used for production and manufacturing? - Held that:- On a reading of the evidence before it, if the Tribunal has come to the conclusion that the machine having been installed before the end of the financial year and used for trial in terms of the certificate of factory manager, we are of the view that it is a plausible view that the machine having been used for the purpose of business cannot be interfered with. Moreover such an aspect is pure question of fact. We do not think, it would be appropriate for this Court to interfere with such a finding when the conclusion as drawn by the Tribunal is not perverse or such which cannot be drawn by any reasonable person or authority on disclosed state of facts. The power of the High Court to interfere with the factual findings of the Tribunal is well settled. See Ishwar Dass Jain Vs. Sohan Lal [1999 (11) TMI 863 - SUPREME COURT]. Thus it is not a case, when material or relevant evidence was not considered. That apart, it is also not the case of the appellant-revenue that the finding of fact has been arrived at by the Tribunal, relying upon the inadmissible evidence. The off shoot of the above discussion is that machine has been duly installed and was in a working condition before the end of the previous year. - Decided in favour of assessee.
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Customs
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2015 (5) TMI 131
Confiscation of goods - Imposition of redemption fine - Betel nuts confiscated on doubt of being smuggled - Whether the impugned goods were of foreign original and were smuggled - Held that:- It is seen that betel nuts are not notified under Section 123 of the Customs Act, 1962. Consequently, the onus to prove that the goods are of foreign original and are smuggled is squarely on Revenue and this onus cannot be discharged merely on the basis of suspicion. Neither in Show Cause Notice nor in adjudication order any evidence has been produced as to from where the goods have been smuggled and what is the origin thereof. It is seen that Shri Maqsood Alam has confirmed that the goods were sent by him to M/s. RK Enterprises, who has also confirmed having placed the order therefor. M/s. Bahubali Attractions Pvt. Ltd. has accepted having supplied the goods to Shri Maqsood Alam and has also claimed along with the evidence of cash memos that they had bought almost 46 tons of betel nuts under various cash memos (on payment including VAT) from two cooperative societies, which in turn had bought the goods from NCCF and the cooperative societies have mentioned the invoice numbers of NCCF under which the goods were bought by them (i.e., the cooperative societies). Opinions that the goods are of foreign origin based on visual examination are totally insufficient to quasi judicially arrive at a finding that the goods are of foreign origin. Further being of foreign origin in itself does not mean that the goods are smuggled for which positive evidence is to be produced by Customs authorities to establish the smuggled nature of goods. We find that the Customs has not even attempted to produce any such evidence in the present case. As regards the marking "Triveni, Kolkata in transit to Nepal" found on a few bags, in the case of CC (Preventive) Vs. Dugarmal Mohata (2006 (5) TMI 92 - HIGH COURT AT CALCUTTA), the Kolkata High Court observed, "No reliance can be placed regarding inscription" Biratnagar, Nepal, Transit to Calcutta to Nepal" which were found on some of the seized bags". It may be mentioned here that mere suspicion based on circumstances is not sufficient to sustain the allegation of smuggling. - Customs have failed to establish that the goods were smuggled. Once the allegation of smuggling is held to be unsustainable, no penalties and redemption fine survive - Decided in favour of assessee.
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2015 (5) TMI 130
Penalty u/s 114 - Penalty on importer of goods - Held that:- No penalty can be imposed on the appellant who is not the importer, as per admitted facts in the impugned order, under Section 114A. In this view of the matter, we set aside the impugned order so far as the appellant is concerned.
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2015 (5) TMI 129
Benefit of exemption Notification No. 12/12-CE dated 01.03.2012 - Held that:- Respondents imported external Hard Disc Drives and filed various Bills of Entry during the month of April and May, 2013. They claimed benefit of exemption Notification No. 12/12-CE dated 01.03.2012 (S. No. 255) under Customs Tariff 84717020. The adjudicating authority held that the respondents are not eligible for the benefit of exemption notification. The Commissioner (Appeals) set aside the adjudication order. The Ld. Advocate appearing on behalf of the respondents submits that the Tribunal in the case of CC (Acc & Import), Mumbai Vs. IBM India Pvt. Ltd. - [2010 (1) TMI 984 - CESTAT MUMBAI], on the identical situation, rejected the stay application filed by the Revenue. - following the decision of the Tribunal in the case of IBM India Pvt. Ltd. (2010 (1) TMI 984 - CESTAT MUMBAI), we reject the application filed by the Revenue.
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Corporate Laws
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2015 (5) TMI 128
Application under Sections 391 and 394 of the Companies Act, 1956 read with Rules 6 & 9 of the Companies (Court) Rules, 1959 - Dispensation of convening the meetings of their equity shareholders, secured and unsecured creditors - Held that:- All the equity shareholders and unsecured creditor of transferor company and transferee company have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditor of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. - The application approved.
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2015 (5) TMI 127
Application under Sections 391 and 394 of the Companies Act, 1956 read with Rules 6 & 9 of the Companies (Court) Rules, 1959 - Dispensation of convening the meetings of their equity shareholders, secured and unsecured creditors - Held that:- All the equity shareholders & secured creditor of the transferor company and transferee company have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the equity shareholders of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is unsecured creditor of the transferor & transferee company, as on 31st July, 2014. - The application approved.
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Service Tax
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2015 (5) TMI 145
Wilful suppression of the value of taxable services - Simultaneous Penalty u/s 76 & 78 - Held that:- Even when penalty under Section 76 of the Finance Act, 1994 has been imposed, penalty under Section 78 of the Finance Act, 1994 is also imposable. - Tribunal has come to an erroneous conclusion that once penalty is imposed under Section 76 of the Finance Act, 1994, there is no necessity for imposition of penalty under Section 78 of the Finance Act, 1994 - The above view of the Tribunal runs contrary to the law laid down on the subject - Following decision of Dhandayuthapani Canteen - Vs - CESTAT [2015 (1) TMI 812 - MADRAS HIGH COURT] - Decided in favour of revenue.
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2015 (5) TMI 144
Levy of Penalty u/s 78 - Waiver u/s 70 - Industrial or Commercial Construction Service - Service tax collected but not remitted to Government account - Held that:- The appellants have already paid the entire demand along with interest, and the same was appropriated in the OIO. On perusal of the records, I find that it is clearly brought out in the show cause notice as well as in the adjudication order, the appellants have collected service tax amount on the taxable service rendered by them and failed to remit the same and also suppressed the facts in their half yearly return filed for the period September, 2005. They have filed nil return for the said period mentioning that they have not rendered any taxable service. Whereas, it is established that the appellants rendered the service of construction of residential complexes Blue Mount and for the East Crust received the payment from the clients. Therefore, the appellants cannot plead for innocence for invoking Section 80 - Following decision of Kedia Business Centre [2009 (3) TMI 85 - CESTAT MUMBAI] - Decided against assessee.
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2015 (5) TMI 143
General Insurance Business - deposit insurance services rendered by DICGC - DICGC is a subsidiary of RBI - exemption from service tax - Finance Ministry, who issued a clarification vide letter dated 24/2/2009 to the effect that the charges collected by DICGC are not taxable under the taxable service of General Insurance Service - CBEC, vide letter dated 20/9/2011 clarified that the insurance activity of DICGC falls within the ambit of section 65(105) (d) of Finance Act,1994 and is chargeable to service tax under general insurance business - Invocation of extended period of limitation - Suppression of facts - Imposition of penalty - Whether the activity undertaken by the appellant, DICGC, is insurance business or not and if so, does it fall within the ambit of general insurance business as defined in Section 65 (49) read with 65 (105) (d) of the Finance Act, 1994. Held that:- From the Annual Report of the Corporation (a document placed before the Parliament), there cannot be any doubt that Deposit Insurance is a social welfare measure to provide financial stability to the banking system in the country. The Corporation is engaged in the business of deposit insurance and credit guarantee functions assigned to it and is run on a commercial basis. The Corporation is assessed to Income Tax as a company. Thus the Corporation functions as an Insurer, the insured are the various banks who pay the insurance premium and the beneficiaries are the depositors of the insured banks. Thus when the appellant (through its annual report), the legislature (through the Statement of Objects and Reasons and the Pre-amble) and the law (through the various provisions of the enactment), have, clearly, unambiguously and loudly, stated that the activity undertaken by the appellant is insurance , there cannot be any scintilla of doubt in this regard. Any contention to the contrary has to be rejected outright and in toto and we do so. - deposit insurance comes within the scope of miscellaneous insurance business. As per section 65 (49) of the Finance Act, general insurance business has the meaning assigned to it in clause (g) of section 3 of the General Insurance Business (Nationalisation) Act, 1972. As per section 65 (105)(d), taxable service means any service provided or to be provided to a policy holder or any person by an insurer or re-insurer, carrying on general insurance business in relation to general insurance business . In the preceding paragraphs, we have held that DICGC is in the business of providing deposit insurance service to banks on payment of insurance premium. Nowhere in section 65(49) or 65(105)(d) is there any restriction placed that such service should be provided by an entity as defined in the Insurance Act, 1938 or Companies Act, 1956. In the absence of any such stipulation, the said provisions cannot be construed or interpreted in a restrictive manner. - deposit insurance undertaken by the appellant falls within the ambit of general insurance business as defined in section 65(49) read with 65(105)(d) of the Finance Act, 1994 Whether the activity of deposit insurance undertaken by the appellant is a sovereign/statutory function not amenable to service taxation or is it a commercial activity which can be subjected to tax - Held that:- only those functions of the State where the State cannot be sued in a court of law can be called sovereign functions. All other activities of the State which are undertaken by the State or the corporations established by the State to achieve various socio-economic objectives cannot be regarded as sovereign functions and are therefore amenable to civil and criminal laws, including taxation. Further section 3 (1) of the DICGC Act, 1961 provides that Deposit Insurance Corporation shall be a body corporate having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold or dispose of property and to contract, and may, by the said name, sue or be sued . In view of this explicit provision in law, we find no merit in the contention that the activity of deposit insurance is a sovereign/statutory function not amenable to service taxation. Whether deposit insurance is a contract of insurance/contract of indemnity or a contract of guarantee - held that:- deposit insurance activity undertaken by the appellant falls within the scope and ambit of general insurance business as defined in section 65(49) read with 65(105)(d) of the Finance Act, 1994. Even if we take the criteria laid down by the appellant to qualify as a contract of insurance, the activity of deposit insurance meets all the criteria. The first criterion is contractual relationship between the parties . The same exists between the DICGC and the insured bank. The contract need not always be written or explicit. It can be oral and implicit. The second criterion is there should be some event the happening of which is uncertain. In other words there should be some risk for which insurance is being sought. The uncertain event in the deposit insurance is liquidation or winding up of the insured bank. One of the essential ingredients of an Insurance contract is that the insured must have an insurable interest in the subject matter of the contract. Insurance without insurable interest would be a mere wager and as such unenforceable in the eyes of law. The subject matter of the Insurance contract may be a property, or an event that may create a liability but it is not the property or the potential liability which is insured but it is the pecuniary interest of the insured in that property or liability which is insured. There is no scintilla of doubt that deposit insurance like other insurance is a contract of indemnity and is amenable to the provisions of the Indian Contract Act. Merely because it has been made compulsory under the DICGC Act, 1961, it does not cease to be a contract of insurance. Whether the appellant is eligible for the benefit of tax exemption under notification No. 22/2006-ST dated 31-5-2006 - Held that:- Since the exemption is available to the taxable services rendered by RBI, the exemption clause has to be strictly interpreted to see as to whether DICGC will fall within the said exemption. Since DICGC is both legally and functionally distinct and different from RBI, it will not be eligible for the exemption under notification 22/2006-ST. The said difference exists even in the case of direct taxes. While RBI is exempt from payment of income tax under section 48 of the RBI Act, no such exemption from income tax is available in the case of DICGC, which is admittedly paying income tax under the Income Tax Act, 1961 since 1987-88 as stated in para 12 of the Annual Report for 2013-2014. Whether the appellant could be alleged to have suppressed facts with an intent to evade tax and whether extended period of time could be invoked to confirm the service tax demand - Held that:- The audited financial report of the appellant is put on the public domain and can be freely downloaded from the appellant s web-site. In these circumstances, we are unable to accept the contention of the Revenue that the appellant suppressed/withheld information from the department with an intent to evade service tax. Consequently, the invocation of extended period of time for demand of service tax cannot be sustained in law and we hold accordingly. Imposition of penalty is not justifiable in matters involving interpretation and classification. In any case, section 80 of the Finance Act, 1994 provides for waiver of penalty on sufficient cause being shown. In our considered view, the facts of the present case warrant invoking the discretion provided under section 80 and we do so. - Decided partly in favour of assessee.
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2015 (5) TMI 142
Refund claim - realization of export proceeds at different location - whether the service provided in Coimbatore shall provide the jurisdiction to the respondent for claim of refund thereat - Held that:- adjudicating authority held that because the foreign exchange was received in Mumbai, the respondent should have sought refund of the service exported, in Mumbai jurisdiction - conception of the adjudicating authority is erroneous in law because wherever foreign exchange is realized makes no difference to law since that has come to India and that establishes the export of service from India. Therefore, learned appellate authority is correct in para 7 of his order to hold that there is no question of treating the Mumbai unit of the respondent as well as Coimbatore unit to be distinct. Respondent provided service in Coimbatore and taxable event occurred thereat. The authority of Coimbatore has jurisdiction over the issue of refund for which he should rightly entertain the refund application. - Decided against Revenue.
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Central Excise
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2015 (5) TMI 137
Cenvat Credit on capital goods - goods were not used in the captive mines of the assessee - Held that:- Tribunal is the final fact finding authority in the hierarchical chain. A perusal of the order under challenge would reveal that the facts, which are relevant for deciding the appeal, have not been discussed at all and as to how the decision of the Supreme Court and the Tribunal are applicable to the facts of the case. No reasons have been recorded by the Tribunal to arrive at the finding. This Court wishes to point out that the Tribunal could have been a little more explicit and clear while allowing the appeal by recording reasons, which are relevant to the case. It is not a case where the Department has conceded that the decisions of the Supreme Court or that of the Tribunal applies to the facts of the case. Such being the case, recording of reasons is of paramount necessity in all judicial and quasi-judicial orders. - Matter remanded back - Decided in favour of Revenue.
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2015 (5) TMI 136
Shortage of finished goods and raw material - Clandestine removal of goods - Hed that:- Authorised signatories of assessee company admitted shortage of the goods and agreed to pay the duty leviable thereon - They also accepted that there is difference in recording of production in two registers, in RG-1 and Daily Progress Report Register. - appellant in their reply to show cause notice retracted the statements. I find that after the visit of the officers, the appellant had accepted the Panchnama in their various statements recorded on various occasions. It is seen that the Panchnama was signed by the Authorised Signatory of the assessee Company who had not disputed preparation and authenticity of the Panchnama at any point of time. Retractions of statement in reply to the show cause notice is not corroborated with any evidence and therefore, such a retraction can not be accepted. So I agree with the findings of the lower authorities that there is no requirement of cross-examination. Shri N.K. Surana in his statement admitted the shortage of the raw materials. It is noted that shortage of raw material for various resins. There is no material available on record that the raw materials were clandestinely removed. The appellant contended that the shortage of raw material was consumed in the finished goods, removed clandestinely and the demand of duty was confirmed. There is no requirement of one-to-one co-relation of input and finished goods in the CENVAT scheme. Hence the demand of duty on the shortage of raw materials used in the manufacture of final product, against which demand of duty raised, is not justified. Director and the Authorised Signatory of the assessee had admitted the authenticity of the register in various statements. They have not disowned this register at any point of time, before filing of the reply to show cause notice. It is already observed stated that retraction of statement in reply to the show cause notice is not corroborated with any evidence and therefore, it can not be accepted in the eye of law. Hence I agree with the findings of the lower authorities in respect of demand of duty in the Daily Progress Report Register. Regarding the imposition of penalty on the Director of the Company, I find that he has stated in his statement that he was not aware of the maintenance of Daily Progress Report Register in their factory. The findings of the lower authorities that the Director was aware of clandestine removal of the goods, is without any basis. Hence, imposition of penalty on the Director of the assessee is not proper. Having considered the peculiar facts and circumstances of the case, I find that it is not a fit case for confiscation of plant and machinery and raw materials, and imposition of redemption fine is not warranted. - Decided partly in favour of assessee.
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2015 (5) TMI 135
Denial of MODVAT Credit - Bogus invoices - MODVAT Credit was denied on the basis of evidence to the extent of the report of RTO that the vehicle numbers mentioned in the invoices are incapable to carry of such huge quantities of the material - Held that:- There is no dispute in the Central Excise invoices are genuine and the goods were cleared from the supplier of inputs accompanied with Central Excise invoices. It is evident from the statements of the supplier of inputs that the goods were transported through the broker/transporter. The statements of the transporters were heavily relied upon, but they did not turn up for cross-examination and therefore, such evidence cannot be relied upon. The applicability of RTO report in respect of all the consignments is doubtful. It is not clear from the RTO report that it would be applicable in respect of 66 consignments. There is no evidence that the goods were diverted by the Appellant. It is important to note that the supplier of input categorically stated that the goods were transported through the agents/broker of the transporter and the vehicle numbers were mentioned in the invoices at their instance. In such situation, MODVAT Credit cannot be denied merely on the basis of report of RTO. - denial of MODVAT Credit alongwith interest and imposition of penalties cannot be sustained on merit, without going into the submission on limitation of the Appellants. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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2015 (5) TMI 134
Demand of interest on the differential duty - Penalty under Rule 25(1) (a) of CER, 2001 - Interest under Rule 7(4) of CER, 2002 - Provisional assessment - held that:- Appellants paid differential duty on the amount of escalation of price and raised supplementary invoices to their customers - Respondents are liable for payment of interest and accordingly the impugned order is liable to be set aside to the extent. However, taking into the overall facts of the case and also in view of the conflicting decisions of various judicial forms for and against the interest payment till it was settled by the Apex Court in the order the respondents are not liable for any penalty By respectfully following the Apex Court judgment [2009 (7) TMI 6 - SUPREME COURT] and also the Tribunal s decision in the respondents own case [2015 (5) TMI 115 - CESTAT CHENNAI], Revenue’s appeal is rejected and the impugned order is upheld - Decided partly in favour of assessee.
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2015 (5) TMI 133
Compounded levy scheme - Rule 96 ZO (3) of Central Excise Rules, 1944 - Re-determination of duty liability - Short payment of duty - Tribunal reduced the imposed penalty - Held that:- Departmental officers came to know about short payment in course of scrutiny of the RT-12 returns for the relevant period. From this it is clear that the fact of payment of duty on actual production basis during the period from December 1999 to March 2000 had been disclosed by the appellant in their RT-12 returns. In view of this, the Departments plea that short payment was deliberate with malafide intention is incorrect. Moreover, we find that the penalty in this case equal to the duty demand confirmed has been imposed under the proviso to Rule 96 ZO (3) according to which penalty equal to duty payable is imposable when the duty in respect of a month not paid by the due date or is short paid, but this penal provision has been held to be unconstitutional by the judgment of Honble Punjab & Haryana High Court in the case of Bansal Alloys and Metals Pvt. Ltd. vs. Union of India (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT). - Decied against assessee.
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2015 (5) TMI 132
Demand of duty - Duty on scrap generated at job worker's end - whether appellant being principle manufacturer is liable to pay duty on waste and scrap generated at job workers end where job charges forms the part of value of waste and scrap or not - Held that:- Tribunal in the case of Fag Engineers India Ltd. (2011 (1) TMI 95 - CESTAT, AHMEDABAD) wherein this Tribunal has held that duty is being demanded by treating them as a manufacturer of waste and scrap which is factually incorrect. In fact, manufacturer of waste and scrap is the job worker. Therefore, duty cannot be demanded from the principle manufacturer. - appellant is not required to pay duty on waste and scrap generated at job workers end. Consequently, impugned order is set aside. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (5) TMI 141
Whether the respondent-Revenue could resile from a settlement entered into with the assessee on the basis of which the appellant has already paid and settled his dues under the Act - Held that:- Plain reading of Section 45 of the Act would indicate that the legislature has vested the power of remission of tax only with the Commissioner and subjected the exercise of said power in accordance with such circumstances and conditions as prescribed by the State Government under the Bombay Sales Tax Rules, 1959 (for short, “the Rules”). The proviso to the provision specifies that the remission of tax amount if exceeds ₹ 2000/- ought to be made by the Commissioner after obtaining sanction of the State Government. The Section neither speaks of any power to enter into a settlement for such purposes by the State Minister of Finance nor prescribes exercise of powers by the Commissioner in light of any such settlement. The statute herein clearly and expressly provides for the limitation on exercise of powers of remission by the Commissioner and mandates them to be exercised only “in such circumstances and subject to such conditions as may be prescribed.” Section 2(21) of the Act provides that “prescribed” under the Act would mean as prescribed under the Rules and herein, the Rules being silent on any settlement of the nature allegedly entered into between the appellant and the State Government, the external circumstances including a settlement cannot be considered by the Commissioner while exercising power of remission of tax under the Act. - The convoluted mesh of facts and the extremely protracted proceedings which span over three decades, at the instance of appellant, indicate that the basis of case made out by the appellant does not exist in either the statute law or, in fact, any law applicable to the present proceedings. The settlement, if any, reached between the appellant and the State Government for part payment of tax liability by the partner of an assessee-Firm would not fall under the four corners of the Act or the Rules as has been claimed by the appellant since the beginning of the proceedings under the Act. - High Court has rightly examined the issues before it and the judgment and order passed by it does not suffer from any error - Decided against assessee.
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2015 (5) TMI 140
Denial of refund claim - Denial on the ground that some reassessment proceedings have been initiated - Held that:- As per the assessment orders passed by the appropriate authority for the Financial Years 1999-00 and 2000-01, the petitioner is entitled to the refund of ₹ 9,95,749/- and ₹ 12,66,765/-. However, thereafter on the basis of the recommendation of the pre-audit department the reassessment proceedings are initiated, which are pending since 2004. No reasons whatsoever has been given for not deciding the reassessment proceedings, which are pending since 2004. Under the circumstances, to deny the refund, which the petitioner is entitled to as per the assessment orders for the Financial Years 1999-00 and 2000- 01 solely on the ground that the reassessment proceedings are pending since many years is absolutely illegal and most arbitrary. Hence, subject to the outcome of the reassessment, if at all it is permissible now, the petitioner is entitled to refund of the amount, which the petitioner is entitled to as per the assessment orders passed by the appropriate authority for the Financial Year 1999-00 and 2000-01. As such there is no delay on the part of the petitioner at all. If at all there is any delay, there is a delay on the part of the appropriate authority to decide the reassessment proceedings, which are pending since 2004. There is no reason forthcoming for not concluding the reassessment proceedings, which are pending since 2004. If that be so, it is not open for the the State to take a plea of delay. - Refund granted.
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2015 (5) TMI 139
Revised return - Fresh assessment - Circular dated 07.07.2008 - Ignorance of circular - reassessment not done - Period of limitation - Held that:- Circular issued by the Commissioner would be binding on the Department. It is also not been disputed that the KVAT Act came into effect from 1st April 2005, prior to which Karnataka Sales Tax Act, was applicable. Thus, it can safely be said that with the change in regime of tax, the Commissioner of Commercial Taxes had issued the Circular to iron out the teething problems faced by the assessees. - order of assessment was passed totally ignoring the Circular of the Commissioner, inasmuch as, for the months of February and March 2006, which were within the period of limitation of six months, the Assessing Officer rejected the revised returns filed by the assessee, which could not have been done so. - No reason to interfere with the order passed - Decided against Revenue.
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2015 (5) TMI 138
Levy of VAT on third point of sale of liquor of foreign origin in the State at the rate of 14.5% - Constitutional validity - Whether the Amendment Act No.25 of 2012 Entry 2 of Second Schedule and Explanation No.1 of the Tamil Nadu Value Added Tax Act, 2006 is violative of Articles 14 and 19(1)(g) of the Constitution of India - Held that:- When a challenge is made to an enactment on the ground of Article 14 being violated, it must be demonstrated that there is an element of negation of equality. A mere discrimination per se cannot be termed as arbitrary, as a classification is meant for providing benefits to a group of persons. A differentiation must distinguish a group of persons or things identified as such from the things left out. While dealing with the classification, an accurate one is not possible. Revenue and economic considerations in taxing statute are permissible classifications. An objective must be a just one. It is a sine qua non for classification. A valid classification is a valid discrimination. A classification without reference to the object sought to be achieved would be hit by Article 14. Such a classification should not be arbitrary, artificial or evasive While dealing with the classification qua the constitutional validity of a statute, a Court of law is required to deal with the facts which made the legislation in classifying a group. However, when the object of the classification itself is discriminatory, then there is no need to go into the classification. Courts are required to afford larger latitude to the legislature in its exercise of classification. In other words, what is reasonable is a question of practical approach. While testing the policy underlying the statute, the intended object is to be ascertained. Goods that are specified in the Second Schedule are not vatable. A combined reading of Section 3(5) of the Act and the Second Schedule would make the said position very clear. Section 3(5) of the Act has not been put into challenge. The impugned Explanation 1 to the amended Entry 2 of the Second Schedule speaks only about the turnover as such. The classification made is perfectly in order. The petitioners, who are clubs and hotels, cannot be compared with the retail outlets of TASMAC. The customers of the TASMAC and the petitioners form two distinct and different categories based upon their respective socio-economic status. The petitioners are not prevented from doing their business. Therefore, there is no violation of Article 19(1)(g) involved. When the petitioners are selling liquor at a higher price than the TASMAC, they cannot seek parity. Having availed a set-off on the second point of sale, the petitioners cannot compel the respondents to extend the benefit at the third point of sale. With no grievance against the point of levy, the petitioners cannot challenge the manner in which it is imposed. The inclusion of certain goods including liquor in Second Schedule has not been put into challenge. Therefore, we are of the view that the petitioners cannot seek protection under Article 19(1)(g) of the Constitution of India. - Decided against assessee.
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Indian Laws
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2015 (5) TMI 126
Assessment/reassessment of entertainment tax under Section 9(3) of the Gujarat Entertainment Tax Act, 1977 - Compounding of offense - Held that:- petitioner has not been served with any notice calling upon the petitioner to show cause as to why the order under Section 9(3) of the Act may not be passed. It appears that the department issued and served the show cause notice upon the petitioner calling upon the petitioner to show cause as to why the prosecution as provided under Section 18 of the Act may not be launched. In view of the above, the impugned order passed by the Mamlatdar and Appellate Authority / Revisional Authority confirming the order passed by the Mamlatdar passed under Section 9(3) of the cannot be sustained and same deserves to be quashed and set aside and the matter is to be remanded to the Mamlatdar - Decided in favour of appellant.
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