Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 9, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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The hire charges received by the assessee under the hire purchase agreement is an interest on loan and liable to tax under Interest Tax Act, 1974 - HC
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Power to invoke section 263 - revision - The word “examine the record“ means the material available on record at the time of assessment and not the material which has been obtained subsequent to the assessment order - HC
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Business income OR STCG - Sale of shares – purchases as well as turnover are continually increasing and the assessee has regularly dealt in purchase and sales of shares - Profit motive is also clearly evident - held as business income - HC
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Proviso to section 113 of the Act is curative in nature and it merely clarifies that for a relevant date for applicability of the financial year would be the year in which the search is initiated u/s 158BC - surcharge is payable by the assessee - HC
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Validity of authorization u/s 132A - AO held that there were inherent contradictions in the stand of the assessee regarding the source of the asset - matter has already tested – any challenge cannot be entertained - HC
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Ownership of trademark did not rest wholly or partly with the Assessee and the payment were of enduring benefit and capital is in nature and therefore it was neither allowable u/s 37(1) as Revenue expenditure nor qualified for depreciation u/s 32(1) - AT
Customs
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Rate of Duty - Classification of ‘Split betel nuts’ - The product could only be certified as safe food as u/s 3(q) of the F.S.S. Act, 2006 in which ‘Safe food’ means assurance that food is acceptable for human consumption according to its intended use - AT
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Whether an importer can be penalized for not having claimed exemption under Notification No. 29/2010-Cus at the time of importation by refusing to grant refund under Notification No. 102/2007 - Held no - AT
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Seizure of Gold - Extension of period for issuance of show-cause notice – the requirement of Section 124 and principles of natural justice can be considered as fulfilled - AT
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Leviability of penalties – SEZ unit - An approval given by the Development Commissioner to outsource a material by trading does not mean that permissions required by other controlling departments was not required as the fulfillment of export obligation is also supervised by Customs - AT
Service Tax
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Rejection of refund claim - Appellate remedy to file an appeal before tribunal - Jurisdiction of tribunal - The view taken by the Registry of the CESTAT is plainly erroneous; the CESTAT is directed to hear and decide the appeal - HC
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Extension of stay order - automatically vacation of stay order after one year - recovery of dues - The notice issued u/S.87(b) of the Finance Act, 1944 dt.21.1.2014 and further action debiting the petitioner’s Bank account dt.22.1.2014 quashed - HC
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Service Tax Voluntary Compliance Encouragement Scheme, 2013 - assessee contended that amount deposited on 8.3.2013 i.e. after the cut-off date on 1.3.2013 - Such amount, therefore, would also qualify under the Scheme of 2013 - benefit of VCES allowed - HC
Central Excise
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Modvat/ Cenvat Credit - exempted by-products - Accepting the argument of the appellant would amount to equating by-product and final product thereby obliterating the difference though recognised by the legislation itself. - SC
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If the assessee has paid excess payment, the excess payment should be adjusted towards the amount due and after deduction, no duty is payable or no interest is payable, the question of imposing penalty would not arise at all - HC
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Under Valuation - The demands confirmed on different ground which was never an allegation in the show cause notice is fatal to the case of Revenue - AT
VAT
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Rate of Tax - “High Mast poles” - the product of the petitioner could be defined under entry No.30 (v) of Part II of Schedule II of “Iron and Steel”, which also includes Steel tubes, both welded and seamless of all diameters and lengths, including tube fittings - HC
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Even though bolts and nuts generally might have fallen in under Entry 119 of I Schedule, once customised for use in motor vehicles as parts and accessories, the same would only fall under Entry 3 of the First Schedule - HC
Case Laws:
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Income Tax
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2014 (5) TMI 264
Non-grant of deduction u/s 54F of the Act – Capital gain on landed property – Details of expenses on construction not furnished - Held that:- The provisions of section 54F are that if the assessee being an individual or HUF, the capital gain arises from transfer of any long term capital asset not being a residential house and the assessee has, within a period of one year before or two years after the date on which the transfer takes place, purchases or, has within a period of three years after that date constructed a residential house, the capital gain will not be charged to the extent of cost of new asset if the entire net consideration is invested or proportionate to the extent of new asset bears to the net consideration if the conditions laid down u/s. 54F are fulfilled the assessee is entitled for deduction u/s. 54F - the onus is on the assessees to prove that the claim made by them u/s 54F is in accordance with law - there is lack of enquiry from the side of the AO – thus, the matter is remitted back to the AO for fresh examination – Decided in favour of Assessee.
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2014 (5) TMI 239
Disallowance of Trade discount - Held that:- As far as the component of insurance paid to the insurance company, with regard to the various vehicles sold by the assessee, it has been paid per account payee cheques, and there is no material brought on record to doubt the genuineness - The insurance premium was paid by the assessee as a business policy and since was for business consideration, it is allowed as allowable deduction to the assessee - the balance amount of disallowance out of trade discount, the assessee has filed copies of discount vouchers, which bear the signature of the payee also - the assessee could not prove the genuineness of the entire cash payment of Rs.17,24,944/- claimed to have been paid as trade discount to the customers - The possibility of inflation in the figure of trade discount could not be ruled out. The trade discount disallowance also includes the amount written off due to short recoveries from the customers - The claim of the assessee of short recovery could not be supported by the assessee with any evidence on record - it is highly unusual that the assessee shall deliver the vehicles to its customers without receiving full sale proceeds - there is no justification for disallowing the entire trade discount claimed by the assessee, but some disallowance due to various defects pointed out in the order is called for - the disallowance out of trade discount claimed by the assessee is restricted inclusive of the amount written off by the assessee as irrecoverable as against disallowance confirmed by the CIT(A). Disallowance of RTO taxes – Held that:- The assessee has paid RTO taxes to the Government Department of Road Transport and there is no material brought on record to doubt the genuineness of the said payment - The assessee has explained that a scheme was devised to attract customers, the assessee bore expenses relating to RTO and registration charges of the customers purchasing tractors from the assessee - Necessary entries were passed in the account book of the assessee and expenditure was for the business purpose only – thus, allowable u/s 37of the Act – Decided in favour of Assessee. Disallowance 25% of the demonstration expenses – Held that:- Adhoc disallowance was made for want of complete details regarding the meetings, number of attendance etc. - the assessee has claimed that the customers for tractor were illiterate persons of remote area and the tractor brand sold by the assessee was new - the assessee has to give demonstration so as to explain the features and benefits of the product dealt by the assessee – thus, the amount is allowed - Decided in favour of Assessee. Disallowance is Out of salary expenses – Held that:- The payment was to the employees of principal company by way of reimbursement made to the field staff appointed directly by the principal company - CIT(A) has not disputed the basic facts, but confirmed disallowance by invoking the provision of section 40(a)(ia) of the Act, which is not applicable to the facts and circumstances of the case – thus, the deduction is allowed – Decided in favour of Assessee. Disallowance of 25% of the petrol expenses – Held that:- There is no justification for any disallowance out of the petrol expenses pertaining to the employees of the assessee - 25% of the petrol expenses relating to the partners is justified - the disallowance at 25% of the petrol expenses is sustained pertaining to the partners – Decided partly in favour of Assessee.
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2014 (5) TMI 238
Interpretation of term “Total turnover” – Purpose of enactment of section 80HHC of the Act – Scrap sale - Whether the sale proceeds from the scrap should have been included in the ‘total turnover’ as the assessee was also selling scrap and that was also part of the sale proceeds – Held that:- The term ‘turnover’ would show the sale effected by a business unit - It may happen that in the course of the business, in addition to the normal sales, the business unit may also sell some other things - the word “turnover” would mean only the amount of sale proceeds received in respect of the goods in which an assessee is dealing in - the sale proceeds of the scrap cannot be included in the term ‘turnover’ for the reason that the assessee’s-unit is engaged primarily in the manufacturing and selling of steel utensils and not scrap of steel - the proceeds of scrap would not be included in ‘sales’ in the Profit and Loss Account of the assessee. The intention behind enactment of Section 80HHC of the Act was to encourage export so as to earn more foreign exchange - If the purpose is to bring more foreign exchange and to encourage export, the legislature would surely like to give more benefit to persons who are making an effort to help our nation in the process of bringing more foreign exchange - once the Government decides to give some benefit to someone who is helping the nation in bringing foreign exchange, the Revenue should also make all possible efforts to encourage such traders or manufacturers by giving such business units more benefits as contemplated under the provisions of law – HC was correct coming to the conclusion that the proceeds generated from the sale of scrap would not be included in the ‘total turnover’ – Decided against Revenue.
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2014 (5) TMI 237
Chargeability of hire charges – Interest Tax Act, 1974 - Interest on loans and advances - Whether the hire charges received by the assessee under the hire purchase agreement was in fact interest on loans and advances – Held that:- Following Commissioner of Income Tax-Ii Versus M/s. Commercial Motors Finance Ltd. [2013 (12) TMI 848 - ALLAHABAD HIGH COURT] - the hire charges received by the assessee under the hire purchase agreement is an interest on loan and liable to tax under Interest Tax Act, 1974 – Decided against Assessee.
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2014 (5) TMI 236
Power to invoke section 263 of the Act – Valuation of property – Compliance of section 50C of the Act - Held that:- The Tribunal is right in saying that the CIT in its order has referred the contents of the notice and details relating to the valuation of the property and the reply of the assessee and the valuation report dated 26.06.2009 and has not given any reason as to why the order is erroneous and prejudicial to the interest of revenue – there was substance in the contention of the assessee that the order which has been cancelled u/s 263 was the order passed u/s 147/148 wherein after the re-opening of the assessment it was found that there was compliance of section 50C - There was no issue relating to the determination of the long term capital gain and the exemption u/s 54F -the language of Section 263 provides that the Commissioner may call far and examine the record - The word "examine the record" means the material available on record at the time of assessment and not the material which has been obtained subsequent to the assessment order, the said material cannot be said to be part of the record and cannot be examined for invoking the provision section 263 - reliance placed on the valuation report dated 26.06.2009 for invoking the provision of section 263 is also not justified – thus, there was no error in the order of the Tribunal – Decided against Revenue.
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2014 (5) TMI 235
Loans provided to the bank - Disallowance of bad debts u/s 36 of the Act – Held that:- Providing the loans to company involved in the business and manufacturing of soft drinks beverages was in the nature of the business of the assessee – it was incidental to the business of the assessee – the amount of loan was provided to M/s Dhillon Kool Drinks and Beverages Limited - it cannot be said that the interest on the loan amount provided by the assessee company was not incidental to the business of the assessee – Relying upon Mohanmeakin Ltd. vs. C.I.T. [2011 (5) TMI 243 - DELHI HIGH COURT] - section 36(1)(vii) is premised upon treating the income as business income as is evident from the specific reference to section 28 - Once the revenue had the option of not treating the amount as business income, as it did in 1999-2000, it cannot give the background of circumstances in this case in a later year and refuse to treat the interest income as business income and interdict the assessee from exercising its right u/s 36(1)(vii) – as such no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 234
Deemed dividend u/s 2(22)(e) of the Act – Advance interest on loan – Held that:- The Tribunal was clearly in error in allowing the appeal on the ground that the first part of the ingredient of the exclusionary provision of section 2(22)(e) namely clause (ii) was not fulfilled - The basis of the reasoning of the Tribunal is clearly erroneous - The Tribunal has misapplied the legal test in holding that since the companies did not carry on money lending business, the advances which were made to the assessee would not be in the ordinary course of its business - the Tribunal has not considered the issue as to whether the second ingredient of clause (ii) was duly fulfilled, thus, the matter is required to be remitted back to the Tribunal for fresh evaluation – Decided in favour of Assessee.
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2014 (5) TMI 233
Rejection on condonation of delay – Delay of 282 days – Sufficiency of cause - Held that:- The application is as vague as it can be - The date when the Chief Manager of the Bank had been transferred has not been mentioned and how long the office of the Chief Manager remained vacant has also not been mentioned - a nationalised bank, which has its own systems and processes, is surely not dependant on the availability or non-availability of an officer for filing an appeal before the Tribunal – Relying upon Chief Post Master General Vs. Living Media India Limited [2012 (4) TMI 341 - SUPREME COURT OF INDIA] - there is no need to accept the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural red-tape in the process - the Tribunal has furnished good and cogent reasons for declining to entertain the appeal holding that sufficient cause was not shown – Decided against Assessee.
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2014 (5) TMI 232
Expenses on payment of lease rental incurred – Disallowance of interest expenses – Held that:- The Tribunal rightly held that disallowance of interest expenditure was not justified - the assessee had sufficient interest free funds available - Merely giving advances at the rate lower than the rate on which borrowings are made, cannot justify disallowance – thus, no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 231
Restriction of disallowance u/s 37(1) of the Act – Held that:- CIT(Appeals) followed the judgement of the same assessee delivered by the Tribunal - the assessee had advertised the exchange offer in the newspaper and the commission earned from ICICI Bank was also disclosed - Out of the total number of persons to whom discount was offered, some of them also had given notarised affidavit - it directed to treat only the part of income as unexplained expenses - both the CIT(A) and the Tribunal adjudged the issue based on factual matrix – thus, no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 230
Recovery of arrears from third party - Revenue Proceeded against the property – Held that:- The petitioner is not an assessee nor is he indebted to the Income Tax Department - The property purchased by the subsequent purchaser in the year 2006 could only be the remaining property after the purchase effected by the petitioner in the year 2002 - it is always open for the concerned respondents to proceed against the said extent, without touching the property owned, possessed and enjoyed by the petitioner - the petitioner is set at liberty to approach the second respondent/Tax Officer, Range-I, by filing a proper application(stay petition) in this regard – Decided in favour of Assessee.
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2014 (5) TMI 229
Claim of income as STCG – Business income OR STCG - Sale of shares – Held that:- The Tribunal rightly held that the true nature of transaction can be understood from the intention of the assessee at the time of purchase - the profit motive is also relevant but this is also not conclusive because even an investor may earn profit by way of appreciation - the transactions of purchase of shares, and thereafter selling it within few days and most of the time within a month, with a view to earn profit, reflects motive of the assessee as a trader and not an investor - purchases as well as turnover are continually increasing and the assessee has regularly dealt in purchase and sales of shares - Profit motive is also clearly evident in making the transaction – Relying upon The Commissioner of Income Tax Versus Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] – thus, there was no infirmity with the findings of the Tribunal – Decided against Assessee.
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2014 (5) TMI 228
Eligibility for the benefit u/s 80IB(10) of the Act - Held that:- Following Commissioner of Income-tax Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - Both the CIT (A) as the Tribunal was of the view that the risks and costs relating to the project were on the assessee and not on the owner of the land - the assessee had full authority and responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members etc. - the risk element was entirely that of the assessee - the deduction u/s 80IB(10) is available to an assessee who is engaged in the business of developing and building a housing project. Prescribed limit exceeded or not - Whether part of the approved project pertaining to Villas or Bungalows exceeded the prescribed limit in Built-up Area – Held that:- Both the CIT(A) and Tribunal was of the view that four row houses have been built upon the area exceeding 1500 sq.ft, were not part and parcel of the housing project, for which the deduction was claimed and that the assessees had not claimed deduction for those four Bungalows - the claim of the assessees for the buildings other than the four row houses was in consonance with the condition stipulated in Section 80IB (10) of the Act – no substantial question of law arises for consideration - Decided against Revenue.
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2014 (5) TMI 227
Validity of notice u/s 147/148 of the Act – Held that:- The considerable latitude given to the revenue to reopen a settled assessment is premised on the entertainment of the Assessing Officer’s opinion (“reasons to believe”), based on objective materials, which he is subsequently made aware of, which can possibly lead to conclusion that income had escaped assessment, due to non-disclosure of material facts by the assessee – Relying upon Commissioner of Income Tax v Kelvinator India Ltd [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the allegations of ownership stood rebutted through the sworn deposition of Shri Khanna and the documents, which unequivocally showed his ownership and not that of the assessee, whose connection with it was as a tenant for about two years - the assessee had a telephone installed in the premises during that period - he disclosed his address as the New Friends Colony property is but natural, because he lived there at that time – the court can only surmise that either the AO is driven by fear, or is party to what the complainant ultimately wishes- in either case, his persistence with reassessment proceedings being devoid of any legal sanction - Such insistence - one may even add obdurate insistence- is the hallmark of whimsicality and a far cry from the reasonable basis for exercise of power u/s 147/148 which the court would be bound to uphold. All the facts were revealed to the AO - He made no attempt to say that the materials revealed were false, or incomplete, there was no material, save an unsubstantiated allegation by the complainant that the assessee had acquired the property and concealed all facts relating to it, during the assessment year – thus, the AO had acted unreasonably in persisting with the reassessment notice, which also could not be said to have been based on tangible material, given the statement of Shri Khanna and lack of any tangible material supporting the allegations - Sustaining the notice and reassessment proceedings would amount to condoning what is clearly oppression and harassment – the notice for reassessment and proceedings are set aside – Decided in favour of Assessee.
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2014 (5) TMI 226
Deletion made – Documentary evidences ignored - Addition made on the basis of seized documents u/s 132(4) of the Act – Only statement of the broker taken into consideration and no other corroborating evidences – Held that:- It could be noticed from the statement recorded of the Director and others that the middleman had ensured the company to get the land at the rate of Rs.2.80 lakhs per bigha - on realizing that he needed to surreptitiously pocket the huge amount of money in the deal, the purchase was made directly from the owners by the company - the price at which it purchased in fact had come on the record - The Tribunal rightly noted the essential fact that purchase of land was directly from the farmers – no other evidence of on-money payment, as also in absence of any suggestion of the market value of the land purchased by the assessee being far more than what had been reflected in the sale deed - the registered documents had been executed at 'Jantri' value - There was no reference to the Valuation Officer to point out that the value of the land was below the market price – the issue is based on the factual matrix, thus, no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 225
Validity of notice u/s 148 of the Act – Re-opening of assessment - Bar of limitation – Held that:- The notice of reopening is beyond the period of four years, it is incumbent upon the AO to have the reasonable belief that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for the purpose of assessment - It is emerging clearly from the reasons recorded while issuing the notice of reopening, no mention is made to the fact that on the basis of any new material, the AO had any reason to believe that the petitioner had not fully and truly disclosed all material facts – the notice is based on the material which was very much available before the AO and he had examined the very issue threadbare while framing original assessment. Relying upon Sun Pharmaceutical Industries Ltd. v. Dy. CIT [2012 (10) TMI 403 - Gujarat High Court] - the notice of reopening of an assessment must be adjudged on the basis of the reasons recorded while issuing the notice - Reasons other than those on the basis of which notice was issued cannot be considered while examining the validity of such notice and the same essentially and materially requires to be dealt on the basis of recorded reasons - there was no failure of the assessee in furnishing the information at the time of original assessment, where the transactions were treated in the nature of capital gain after making the detailed inquiry - in absence of any failure of disclosure of fully and truly of all the material facts on the part of the assesee, issuance of notice of reopening u/s 148 of the Act is not sustainable – Decided in favour of Assessee.
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2014 (5) TMI 224
Deletion of disallowance of sundry debtors – Debtors not disclosed during the search – Bogus transactions – books/ accounts not maintained u/s 36(1)(vii) of the Act – T.R.F. Ltd., v. CIT [2010 (2) TMI 211 - SUPREME COURT] not considered - Held that:- It is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable - It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - the AO has not examined whether the debt has, in fact, been written off in the accounts of the assessee – thus, the order of the Tribunal is set aside and the matter is remanded to the Appellate Authority for fresh adjudication – Decided in favour of Revenue. Point of levy of surcharge u/s 113 of the Act - Deletion of levy of surcharge by the AO – Held that:- Following CIT v. K.C. Puttaswamy Gowda [2011 (7) TMI 572 - KARNATAKA HIGH COURT] – the proviso to section 113 of the Act is curative in nature and it merely clarifies that for a relevant date for applicability of the financial year would be the year in which the search is initiated u/s 158BC - surcharge is payable by the assessee – Decided in favour of Revenue. Condonation of delay of three months – Charging of interest u/s 158BFA(1) of the Act – Held that:- Following CIT v. K.L. Srihari [2009 (7) TMI 858 - KARNATAKA HIGH COURT] - the Tribunal is clearly in error in directing the deletion of the interest part on the tax amount as ultimately determined but for the period during which there is a delay in filing the return – Decided in favour of Revenue.
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2014 (5) TMI 223
Validity of authorization u/s 132A of the Act – Seizure of cash – Held that:- There was no reason to interfere in the order – as the Court has already held that the same matter has already tested – thus, any such challenge cannot be entertained. Refusal of the prayer to release cash u/s 132B of the Act – Held that:- The assessee has been taking contradictory stand regarding the source of the amount - Before the police authorities, he had stated that the amount was out of his personal savings and income from brokerage of diamonds –but, before the Department, he stated that the amount was received from his father and other relatives to enable him to set up his business – the assessment was not completed – the AO found that the cash cannot be released in terms of section 132B(1)(i) of the Act - expression "the nature and source of acquisition of any such asset is explained to the satisfaction of the AO" is therefore crucial - the AO held that there were inherent contradictions in the stand of the assessee regarding the source of the asset - the source of the asset was not explained as required under the first proviso to section 132B(1)(i) of the Act – thus, there was no infirmity in the order – Decided against Assessee.
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2014 (5) TMI 222
Addition u/s 36(1)(va) PF deposited beyond the time prescribed Scope of section 43B of the Act Permission for delayed payment as to Employer s contribution OR employee s contribution Held that:- Relying upon Allied Motors (P) Ltd. vs. CIT [1997 (3) TMI 9 - SUPREME Court] - the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues - to put a check on the claims/deductions having been made, the provision was brought in to curb the activities - the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income u/s 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income - Sec.43B starts with a notwithstanding clause would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Till the provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the amounts were not deposited - the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income u/s 139(1) of the Act thus, where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income u/s 139(1), cannot be disallowed u/s 43B or u/s 36(1)(va) of the IT Act Decided against Revenue.
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2014 (5) TMI 221
Disallowance of deduction u/s 80IB(10) of the Act – Conditions not fulfilled – Held that:- Following M/s. Satsang Developers Versus ACIT, Circle-2(2), Baroda [2014 (5) TMI 184 - ITAT AHMEDABAD] - what is sought to be purchased by the buyer is the ownership of the specified unit and registration of flat in semi-finished condition is only to facilitate the convenience of the parties and agreement for development and completion of balance work in relation to the flats is only an incidental formality and this cannot be viewed as fatal to the claim of the assessee for deduction u/s.80-IB(10) of the Act - the entire work from the stage of the commencement to the stage of making the residential unit habitable have been carried out by the assessee only – thus, the assessee is eligible for deduction u/s.80-IB(l 0) of the Act – Decided in favour of Assessee. Allowability of deduction u/s 80IB(10) of the Act – Legal relationship between assessee and the end user of the units was that of works contract not appreciated – Held that:- Following CIT vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - the assessee was entitled to the benefit u/s 80-IB (10) even where the title of the lands had not passed on to the assessee and in some cases, the development permissions may also have been obtained in the name of the original land owner - ownership of land is not a necessary condition for claiming the deduction u/s 80IB(10) - Assessee has acquired dominant control over the land, Assessee is responsible for incurring all the expenses and taking all the risks involved - Assessee is not a contractor - Revenue could not controvert the findings of CIT(A) – thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 220
Deletion made u/s 40(a)(ia) of the Act - Disallowance of Royalty expenses - Payment of TDS not made – Held that:- CIT(A) was rightly of the view that while deleting the addition has noted that Assessee had deducted the TDS on the last day of previous year and the entire amount of TDS was deposited in bank before the due date of depositing TDS - no amount can be disallowed under the provisions of Section 40(a)(ia) of the Act with respect to amounts on which TDS was deposited in time - the deposit of TDS in bank was through cheques and the cheques were not dishonoured - Revenue could not controvert the findings of CIT(A) – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue. Disallowance of building repair and maintenance expenses – Majority expenses pais through cheques – Held that:- CIT(A) rightly upheld the addition made by AO and noted that Assessee had failed to give the proof of expenditure before AO - the Assessee has failed to prove that the expenditure has been incurred wholly and exclusively for the purpose of business and the expenditure is not in the nature of capital expenditure - in the absence of any material on record to support the Assessee’s claim, there was no reason to interfere with the order of CIT(A) – Decided against Assessee. Disallowance of depreciation on trade mark – Depreciation not allowed on entire amount – Held that:- CIT(A) perused the agreement entered by the Assessee with J.M. Advertising and Marketing Ltd and has noted that the ownership of trademark did not rest wholly or partly with the Assessee and the payment were of enduring benefit and capital is in nature and therefore it was neither allowable u/s 37(1) as Revenue expenditure nor qualified for depreciation u/s 32(1) of the Act - the amount of depreciation claimed did not match with the additions made and he therefore directed the AO to verify the figures and if needed rectify the mistake – as such no material has been brought on record by Assessee to controvert the findings of CIT(A) – thus, there was reason to interfere with the order of CIT(A) – Decided against assessee.
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Customs
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2014 (5) TMI 244
Rate of Duty - Classification of Imported goods – ‘Split betel nuts’ - CTH 0802 8020 or CTHCTH 0812 9090 of the Customs Tariff – Violation of DGFT Notification – Mis-declaration - Liability for Confiscation of imported goods - Reduction of Redemption fine – Suitability for immediate consumption - Whether redemption fine should not exceed the market price of the goods confiscated, less in the case of imported goods, less the duty chargeable thereon – Imposition of Penalty – Held that:- Merely sulfuring, heat treatment etc. for additional preservation, will not alter their classification - Various test reports viz. Plant Quarantine Laboratory in its report dated 03.12.2012 and 27.11.2012 reported that recommended for release (for consumption purpose only) and Central Food Laboratory in its report dated 10.12.2012 mentioned that ‘SO2 present within limit approved for nuts and opined the sample is found not adulterated in respect of tests mentioned above’ - CFL in its report dated 27.01.2014 clarified that ‘conclusively the product was declared safe food’ on the basis of food safety parameters under its rules and regulations, 2011 - The product could only be certified as safe food as u/s 3(q) of the F.S.S. Act, 2006 in which ‘Safe food’ means assurance that food is acceptable for human consumption according to its intended use - These reports have not been challenged by Ld. Advocate. It is found that the sample of the imported goods are not unsuitable for immediate consumption and therefore they would merit classification under CTH 080280 and not under CTH 0812 and chargeable to duty @ 100% BCD and 4% Additional duty - Since the declared CIF value is less than Rs.75/-, their import is not free in view of the DGFT Notification - Accordingly the imported goods are liable for confiscation u/s 111(d) as they are imported in violation of the provisions of D.G.F.T. regulation - They are also liable for confiscation u/s 111(m) as they were mis-classified by assessee along with the mis-declaration regarding their suitability for immediate consumption in the state in which they were imported. The goods were sold @ Rs.70/- to 84/- per kg. and therefore considering the above facts the market price of imported goods works out to Rs.3.00 Crores(approx.) as against the declared CIF value of Rs.2,00,00,524/- declared in the Bills of Entry - The duty involved in the present case has been worked out to be Rs.2,16,00,566/- - Therefore, the order of the adjudicating Commissioner is modified to the extent of reduction in the amount of redemption fine from Rs.1.25 Crore to Rs.1.00 Crore only - As regards the confirmation of the duty and imposition of penalty order of the adjudicating Commissioner is uphold i.e. differential duty of Rs.1,42,09,369/- and penalty of Rs.50.00 Lakhs – Decided partly in favour of assesse.
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2014 (5) TMI 243
Claim under Exemption Notification – Penalty for non-claiming of Exemption - Operation of Double notifications - Whether an importer can be penalized for not having claimed exemption under Notification No. 29/2010-Cus at the time of importation by refusing to grant refund under Notification No. 102/2007-Cus, when both the notifications were in operation on the date of importation and date of claiming refund – Held that:- Judgment in CCE Vs. Narayan Polyplast [2004 (11) TMI 112 - SUPREME COURT OF INDIA] followed - The decisions of the courts are to the effect that an assessee cannot be forced to avail any particular exemption – In the case of Central Excise duty there is a consequence in paying duty on exempted goods because assessee will be able to pass on the duty incidence on the raw material and capital goods to the next stage by paying duty whereas such incidence cannot be passed on if the goods are exempted - Thus there is an adverse consequence to revenue when excise duty is paid on an exempted product. On 13-05-2005, the Legislature introduced the sub-section (1A) in section 5A of Central Excise Act, 1944 - But no such explanation has been inserted in section 25 of Customs Act, 1962 - Further in case of SAD, payment at the time of importation and claiming refund at a later point of time can cause financial disadvantage to the importer and no such consequence to Revenue - Therefore, appeals filed by the Revenue on the above grounds are not maintainable – Decided in favour of Revenue. Grant of Refund – Held That:- In respect of two Bills of Entries rejected by original adjudicating authority for the reason that the goods were imported through Sea Customs, Chennai but refund claim was filed before authorities in Air Customs Chennai - The Commissioner (Appeal) noted that the refund claims were not returned promptly by the authorities in Air Customs – Relying upon CCE Vs. AIA Engineering Ltd [2012 (4) TMI 515 - CESTAT AHMEDABAD] - If the respondent file claim before the appropriate authority the claim should be processed by excluding the period for which the claims remained with Air Customs Authorities – No reason found to interfere with the order of Commissioner (A) – Decided against Revenue.
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2014 (5) TMI 242
Reduction of Redemption Fine & Penalty - Intention of Mis-declaration - Confiscation of imported computer parts viz. RAMs, Microprocessors and Hard Disk Drives – Variation in the quantity – Sections 111(l) & 111(m) and 112(a) of the Customs Act - Held That:- Original adjudicating authority himself admits that there was no intention of deliberate mis-declaration - There is no challenge or verification of the claim made by appellant that mistake happened at the end of the supplier - No verification was made with another customer to whom the goods were meant and as to whether there was deliberate mis-declaration or not - No doubt in terms of Section 112 rendering the goods liable to confiscation is sufficient - Nevertheless, the importer claimed that it was a mistake and it happened because of the supplier and another customer which has not been gone into and considered at all - Accordingly, the penalty imposed on the appellant is reduced to Rs. 10,000/- (Rupees Ten thousand only). Once the goods are liable for confiscation, the redemption fine could be upto the market value - Even though learned counsel submits that profit margin should be taken into account, statutorily the same is not required - In the absence of verification and having considered the fact that goods were lying more than 2 months from the date of import and that importer cannot be held entirely responsible for the mis-declaration the redemption fine is required to be reduced - Accordingly, the redemption fine is reduced to Rs. 50,000/- (Rupees Fifty thousand only) to meet the ends of justice – Decided partly in favour of assessee.
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2014 (5) TMI 241
Seizure of Gold - Extension of period for issuance of show-cause notice – Whether former show-cause notice u/s 124 giving all the details was required in this case or not – Held that:- Impugned order is sustainable because there is no prejudice caused to the appellant by the impugned order - He is not the owner of the gold and the owner of the gold did not even cooperate with the investigation during the relevant period - On merits appellant has no case since he is not at all prejudiced by the impugned order and in any case he has been given an opportunity to attend the personal hearing. If there is no indication to show whether the appellant wanted more details and details given in the personal hearing notice was not sufficient - A decision to extend the show-cause notice has to be taken only in the last month i.e. 5th or 6th month since fact that show-cause notice cannot be issued within time would be known only by that time and time would not be available for issue of detailed show-cause notice, await reply and issue order - More so, issue order has to be passed before six months from seizure - Commissioner cannot be found fault with for issuing of combined notice of personal hearing giving the reasons for extension of show-cause notice issued therein so that the appellants can utilize the opportunity and explain their side of the story and if necessary get the detailed reasons given by the investigating officers and during personal hearing contest the same - Having regard to the facts and circumstances because of which the period for issue of notice was extended, the requirement of Section 124 and principles of natural justice can be considered as fulfilled – Decided against assessee.
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2014 (5) TMI 240
Leviability of penalties – Liability of exported “Castor oil’ to confiscation - Whether penalties can be imposed upon assessees u/s 113 (d) of the Customs Act 1962 – SEZ Schemes – Necessity of Development Comm. permission - Procurement and exportation directly from Domestic Tariff Area (DTA) units without following procedure - Section 11 (1), FTDR Act 1992 r/w para 18 (c) of Appendix 14 II of EXIM Policy 2002–07 and CBEC Circular No. 26/2003–cus dated 1.4.2003 - Sec. 2 (33), Sec 113(d) , 114 of Customs Act 1962 - Held that:- Procuring the goods by outsourcing from DTA units is not a routine procedure and is required to be allowed by the appropriate authority in genuine cases - Such outsourcing was to be used for fulfilling the export obligation of the appellants and has to be a category of Castor Oil being manufactured on sub-contracting from a DTA unit - An approval given by the Development Commissioner to outsource a material by trading does not mean that permissions required by other controlling departments was not required as the fulfillment of export obligation is also supervised by Customs - Taking of permission required to be taken under the Customs Act and the procedure prescribed thereunder, will amount to imposition of a prohibition for the purpose of Sec. 2 (33) of the Customs Act 1962. Relying upon M/s Eurasian Equipments & Chemicals vs. Commissioner of Customs and Other [1979 (7) TMI 101 - HIGH COURT AT CALCUTTA (FULL BENCH)] - In that case the issue was whether or not goods exported in violation or prohibition/restriction imposed u/s 12 (1) of the Foreign Exchange Regulation Act 1947will be deemed to be violation leading to penalty, w.r.t. goods already exported, u/s 114 - In that case as it was argued by the appellants that penalties u/s 114 can only be imposed w.r.t. ‘export goods’ which are not yet exported - The above case law was not brought to the knowledge of the Chennai Bench while deciding the case of K Kamla Bai vs. Commissioner of Customs and Central Excise, Trichy [2004 (12) TMI 238 - CESTAT, CHENNAI] which is thus distinguishable - In view of the law laid down by Calcutta High Court, confiscation of goods under Sec 113 (d) is an independent act from the penalties imposable u/s 114 (i) - Penalty u/s 114 (i) is attracted, on an act committed by the exporter, w.r.t. goods liable to confiscation, as soon as the goods are brought into a customs area for export in violation of the prohibitions/restrictions - An offence is thus committed by assessee and can not be wiped away by the fact that attempts of the appellants were successful - Therefore, penalties u/s 114 (i) have been rightly imposed – Decided against assesse.
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Service Tax
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2014 (5) TMI 263
Rejection of refund claim - Appellate remedy to file an appeal before tribunal - Jurisdiction of tribunal - Refund of service tax under mistake of law - rending of immovable property - period of limitation - Held that:- amendment to Section 83 by making a specific reference to Section 35EE of the Central Excise Act, did not make any difference to the nature of jurisdiction exercisable by the CESTAT under Section 86; it continued to possess jurisdiction to decide on matters pertaining to rebate and refund. For this reason, the question of law is answered in favour of the assessee/appellant and against the revenue. Since CESTAT did not decide the matter on merits, its decision ‘ holding that it lacked jurisdiction- is set aside. The view taken by the Registry of the CESTAT is plainly erroneous; the CESTAT is directed to hear and decide the appeal preferred before it by the present petitioner on its merits after hearing the parties in accordance with law. - Decided in favor of assessee.
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2014 (5) TMI 262
Extension of stay order - automatically vacation of stay order after one year - recovery of dues - Held that:- it is the settled principles of law and which is consistent and recognized that where a case is not considered because of multiplicity of business of the Court the party ought not to be prejudiced by that delay and when an act of the Court can prejudice no man, ditto would be for an omission in keeping with the aforesaid principles that if the matter has not been taken up for consideration on a given date at least the litigant cannot be left to suffer for suchreason over which he has no control. Knowing it fully well that application is coming up before the Tribunal on 23.1.2014 such hasty steps by service of notice u/S.87(b) of the Finance Act, 1944 on 21.1.2014 freezing the bank account of the petitioner pursuant to notice dt.3.1.2014 and to recover the amount by debiting the petitioner's bank account on 22.1.2014 i.e. a day prior to the date i.e.23.1.2014 on which date the application for extension was coming up before the Tribunal cannot be appreciatedand ittantamount to overreaching the process of law which cannot be approved by this Court. The notice issued u/S.87(b) of the Finance Act, 1944 dt.21.1.2014 and further action debiting the petitioner’s Bank account dt.22.1.2014 are hereby quashed and set aside and the respondents are directed to refund the amount which was debited on 22.1.2014 from the petitioner’s bank account within two weeks. - Decided in favor of assessee.
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2014 (5) TMI 261
Refusal of application for rectification of mistake by the tribunal - levy of penalty for late payment of service tax - security services - raising additional grounds / evidence in appeal - Held that:- Rule 5, if examined closely, permits under certain circumstances, the Commissioner (Appeals) to take on record and examine additional evidence produced before it and, once those circumstances exist for so permitting evidences, the only requirement would be to allow a reasonable opportunity to the other side to produce any evidence in rebuttal. Both, Commissioner (Appeals) and the Tribunal have committed error in not considering the additional grounds raised by the appellant before it. As it could be noted very clearly that these were the legal grounds which could have been raised at an stage before any authority as laid down in the decision rendered in case of Sanghvi Reconditioners Pvt. Ltd. v. Union of India (2010 (2) TMI 6 - SUPREME COURT) on which the Commissioner (Appeals) sought to rely upon and the said proposition hardly requires any further elaboration and yet both the authorities having failed to entertain these new legal grounds for which already the facts were existing on record, the appellant has succeeded in convincing us of a need to interfere with the orders of both the authorities by answering the question framed in its favour. Matter remanded back to Commissioner (Appeals) for consideration of these issues afresh - Decided in favor of assessee.
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2014 (5) TMI 260
Demand of service tax - Business Auxiliary Service - Held that:- Prima facie discern textual complexities in the several provisions of Section 66 A of the Act, which for the nonce are not susceptible to any easy or coherent exposition. These provisions and their legal import must await the disposal of the appeal - quantum of service tax liability confirmed under the adjudication order pertains to the periods 2006 – 07 to 2010 – 11 and proceedings were initiated pursuant to the show cause notice dated 13.10.2011, invoking the extended period of limitation under the proviso to Section 73 (1) of the Act. - Decided conditionally in favour of assessee.
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2014 (5) TMI 259
Demand of service tax - Photographic service - Held that:- Following decision of Aggarwal Colour Advance Photo System Vs. CCE, Bhopal reported in [2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)] - service tax under section 67 is leviable on the gross value of the photographic service which included the value of chemicals and components which are consumed on the process of the service provided - Decided in favour of Revenue.
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2014 (5) TMI 258
Waiver of pre deposit - demand of Service Tax - Business Auxiliary Service - Held that:- Prima facie the activity of MKCL is not in the nature of business. Therefore, the service rendered by the applicant prima facie does not fall under Business Auxiliary Service. Accordingly, we waive the requirement of pre-deposit of entire amount of Service Tax, interest and penalty and stay recovery thereof during the pendency of the appeal - Stay granted.
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2014 (5) TMI 219
Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - assessee has paid the tax dues amount prior to enactment of Voluntary Compliance Encouragement Scheme i.e. before 10.05.2013. - assessee contended that amount of ₹ 31.51 lakhs was deposited after 8.3.2013 i.e. after the cut-off date on 1.3.2013. Such amount, therefore, would also qualify under the Scheme of 2013. Held that:- Combined reading of section 106 with section 105(1)(e) would make it clear that the position of a declarant vis-a-vis his service tax dues would have to be ascertained as on 1.3.2013. If any proceedings for determination of the tax dues of a person have been initiated before 1.3.2013, declaration of such a person would not be accepted. Likewise, arrear of tax which could be declared in such declaration would be the service tax due or payable for the period between 1.10.2007 to 31.12.2012 and which sum is not paid before 1.3.2013. In plain terms, therefore, if any service tax is due and payable by a person for the aforesaid period, the same would be included in the definition of the expression "tax dues" if the same has not been paid as on 1.3.2013. If the intention of the legislature was to exclude any tax deposited before the framing of the scheme, the same could have been provided in plain language. On the contrary, the legislature excluded from the purview of declaration only those taxes which were already paid by 1.3.2013. The period between 1.3.2013 and 10.5.2013 would, by necessary application of the provision of the scheme, be covered for declaration under the Scheme itself. In our understanding, for a valid declaration two of the essential conditions were that the proceedings for either declaration or recovery of the tax dues should not be pending on 1.3.2013 and secondly that the tax should not have been deposited before the said date. In the present case, both the conditions were fulfilled. Validity of CBEC circular dated 8.8.2013 - Held that:- It is well settled in law that an authority cannot, through a circular or clarification, override the provisions of the statute. In the present case, till the Scheme was framed the amount thus remained with the department by way of a deposit. Once the scheme was framed, the petitioners made a declaration and even included such sum of ₹ 35.51 lakhs by way of a declaration of their tax dues. Thus the admission on the part of the petitioners that the service tax was short-paid, came only by way of declaration under the Scheme. The clarification thus even for this reason would not cover the situation on hand. The said authority shall, therefore, issue a fresh acknowledgment or amend the acknowledgment forwarded to the petitioners under communication dated 31.12.2013 so as to include the said additional sum of ₹ 31.51 lakhs as tax dues declared in addition to ₹ 10,24,656/- for which such acknowledgment has already been issued. Petition is allowed. - Decided in favor of assessee.
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Central Excise
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2014 (5) TMI 253
Modvat/ Cenvat Credit for the use of inputs in the manufacture of final products which are exempt or subject to nil rate of duty and the requirement of the assessee to maintain separate accounts - by-product - sulphuric acid was cleared to fertilizer plants under exemption - exemption of the finished goods subsequent to availment of cenvat credit - whether the Respondents are liable to pay 8% excise duty - Held that:- Technologically, commercially and in common parlance, sulphuric acid is treated as a by-product in extraction of non-ferrous metals by companies not only in India but all over the world. That is the reason why the department accepted the position before the Tribunal that sulphuric acid is a by-product. It was submitted that the extraction of zinc from the ore concentrate will inevitably result in the emergence of sulphur dioxide as a technological necessity. It is not as though the Respondents can use lesser quantity of zinc concentrate only to produce the metal and not produce sulphur dioxide. In other words, a given quantity of zinc concentrate will result in emergence of zinc sulphide and sulphur dioxide according to the chemical formula on which respondents have no control. On these facts this court is inclined to accept the version of the respondents that the ore concentrate is completely consumed in the extraction of zinc and no part of the metal is forming part of sulphuric acid. - Once we proceed keeping in mind the aforesaid factual, technological and commercial position available on the records, it has to be accepted that the respondents have consumed the entire quantity of zinc concentrate in the production of zinc. The respondents maintained the inventory of zinc concentrate for the production of zinc and we agree with the submission of the respondents that there was no necessity and indeed it is impossible, to maintain separate records for zinc concentrate used in the production of sulphuric acid. - the requirements of 57CC were fully met in the way in which the Respondent was maintaining records and inventory and the mischief of recovery of 8% under Rule 57 CC on exempted sulphuric acid is not attracted. Furthermore, the provisions of Rule 57CC cannot be read in isolation. In order to understand the scheme of Modvat Credit contained in this Rule, a combined reading of Rule 57A, 57B and 57D alongwith Rule 57CC becomes inevitable. - It can be easily discerned from a combined reading of the aforesaid provisions that the terms used are 'inputs', 'final products', 'by-product', 'waste products' etc. We are of the opinion that these terms have been used taking into account commercial reality in trade. In that context when we scan through Rule 57 CC, reference to final product being manufactured with the same common inputs becomes understandable. Accepting the argument of the appellant would amount to equating by-product and final product thereby obliterating the difference though recognised by the legislation itself. - Following decision in GAIL [2007 (11) TMI 276 - SUPREME COURT], decided in favor of assessee.
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2014 (5) TMI 252
Claim of interest on delayed refund - appellant claimed interest from the date of deposit - amount was deposited in pursuance of the search - Tribunal has allowed the interest at the rate prescribed under the law after three months from the date of filing of refund application till the date of payment. - Held that:- Before the Tribunal the only question for consideration was whether the petitioner was entitled to claim interest on the refund amount after three months from the date of filing of the application or not. - The petitioner has not enclosed any grounds of appeal before the Tribunal, therefore, such plea cannot be entertained at this stage. Rate of interest - Held that:- The interest @ 12% has been provided by Hon'ble Supreme Court, there is no reason that the petitioner may not get interest @ 12%. No direction in regard is necessary to be issued. - writ petition dismissed - Decided against the assessee.
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2014 (5) TMI 251
Restoration of appeal - ex-parte order of tribunal dismissing the appeal - service of notice of hearing - principle of natural justice - whether the order is cryptic & perfunctory order? - Whether demand on the basis of mere entry in balance sheet can be raised? - Held that:- The Tribunal had adjudicated the issue exparte as counsel for the appellant had failed to appear inspite of the fact that an application was filed giving plausible explanation for non-appearance on 30.7.2012. The Tribunal had refused to recall its earlier order dated 30.7.2012 vide which the lis between the parties was decided on merits. The fact that Rule 21 does not expressly state that an order on an appeal heard and disposed of ex-parte can be set aside on sufficient cause for the absence or the respondent being shown does not mean that CEGAT has on power to do so. Rule 41 gives CEGAT wide powers to make such orders or give such directions as might be necessary or expedient to give effect or in relation to its order or to prevent abuse of its process or, most importantly, to secure the ends of justice. The records show that the notice had been sent to the respondent but the same had been returned back with the remarks that "there is nobody in the factory" implying that the factory is closed. The endorsement by the postal authority that "there is nobody in the factory" cannot tantamount to the refusal of the appellant nor that can be read as factory is closed as has been read by the Tribunal. The Tribunal committed error in rejecting the application of the appellant. Admittedly, the order was passed without hearing the appellant, hence we are satisfied that there was sufficient cause for recall of the order dated 3.2.2011 - matter remitted before the tribunal for fresh decision - decided in favor of assessee.
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2014 (5) TMI 250
Penalty u/s 11AC - benefit of reduced penalty, if the payment of penalty as determined is paid within the time stipulated therein - adjustment of excess tax paid towards liability of reduced penalty - Held that:- it is clear that non-payment of duty attracts interest and equal amount of penalty. But if there is prompt payment of duty and interest, within the time prescribed under the proviso to Section 11AC of the Act, the assessee has the benefit of reduced payment of penalty as stipulated therein. Whether assessee is entitled to the said benefit is a question of fact which has to be gone into on the basis of the materials placed by the assessee before the authorities. Here the Tribunal was in error in refusing to look into the said material on the ground that the High Court has issued a direction to consider the case keeping in mind the judgment of the Apex Court in the Dharamendra's Textiles Processors (2007 (7) TMI 307 - SUPREME COURT OF INDIA) case, as extracted above. If the assessee has paid excess payment, the excess payment should be adjusted towards the amount due and after deduction, no duty is payable or no interest is payable, the question of imposing penalty would not arise at all. Penalty is leviable only for non payment of duty and interest and in terms of the orders of assessment. If the excess paid amount is taken into account, adjusted towards the duty, the question of imposing penalty would also not arise. - matter remanded to the Tribunal for fresh consideration - Decided in favor of assessee.
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2014 (5) TMI 249
Stay - recovery of demand during the pendency of stay petition filed along with appeal - Job Work - Notification No. 214/86 - Cenvat Credit - allegation that principal manufacturer has not filed the requisite declaration with the Departmental authorities having jurisdiction over the petitioner-company - eligible inputs - Held that:- Along with the appeals, stay petitions have also been filed before the Appellate Tribunal, and since no orders are passed in the stay petitions and as the petitioner apprehends initiation of recovery proceedings, it is appropriate for this Court to direct the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, to take up the stay petitions. - there shall be an order of status quo as on today, to be maintained by the parties.
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2014 (5) TMI 248
Waiver of pre-deposit - tribunal granted stay of 2/3rd amount - valuation - job work - Held that:- Insofar as point relating to the assessee is concerned, as to whether the assessee is the principal-manufacturer by itself or manufacturer on behalf of someone else. Ongoing into the merits of the matter and on a perusal of the order of the Tribunal does show that the Tribunal had taken this aspect into consideration and also examined the financial position of the assessee and on the other hand, had found there is no financial hardship, which had been pleaded by the assessee. - Order of tribunal sustained - amount to be deposited as per stay order - decided against the assessee.
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2014 (5) TMI 247
Writ petition against the order of the tribunal dismissing the appeal of the assessee for non-deposit of amount as per ex-parte stay order - alternative remedy - Held that:- Where the alternative remedy is not definite, but subject to the satisfaction of the High Court of involvement of a substantial question of law, a writ application should, in my view, not be rejected on the sole ground of existence of an alternative remedy of appeal. Moreover, it is doubtful whether any substantial question of law is involved in the instant case. The impugned order cannot be sustained in law and the same is set aside and quashed. The writ application is, accordingly allowed. The learned Tribunal shall consider the Miscellaneous Application afresh in the light of the observation made above without granting unnecessary adjournment but upon compliance with the requisite provisions of law with regard to service of notice of dates of hearing.
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2014 (5) TMI 246
Under-valuation - clandestine removal of goods - Quantification of duty - Held that:- In view of the fact that the matter involves huge stakes of revenue for both sides and even if we take a view on other issues, where these documents and details may not be relevant, the matter in any case would have to be remanded in respect of issues where these documents would be relevant, we consider that it would be appropriate to make an open remand at this stage itself even though this is being done with great reluctance. - matter remanded back.
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2014 (5) TMI 245
Under Valuation - allegation that they were showing only a part of the actual consideration in their invoices and collecting the remaining amount in cash - Held that:- the adjudicating authority has not recorded any acceptable reasoning as to how he came to such a conclusion. - the reasoning given by the adjudicating authority seems to be incongruous in as much as all these dealers from whose premises the price lists were recovered did in the initial stages stated that these are the price lists of the main appellant but on cross-examination, clearly stated that the price lists were their own price lists and not the price lists of the appellant. The adjudicating authority, after examining the records and the statements recorded and the cross-examination, found that the statements which indicated under valuation of the goods were effectively nullified by the cross-examination. The demands confirmed on different ground which was never an allegation in the show cause notice is fatal to the case of Revenue - the demand of duty liability does not survive and is unsustainable, we find no reason for visiting the main appellant as well as all other appellants with penalties. - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2014 (5) TMI 257
Rate of Tax - “High Mast poles” whether covered under the Entry No.64 of Part II of Schedule-II of the VAT Act or under residuary clause - Held that:- Judgment in INDIAN METALS & FERRO ALLOYS LTD. Versus COLLECTOR OF CENTRAL EXCISE [1990 (11) TMI 143 - SUPREME COURT OF INDIA] and State of Maharashtra Versus Bradma of India Ltd. [2005 (2) TMI 518 - SUPREME COURT OF INDIA] followed -the principle is that in the process of manufacturing of iron poles the product do not cease to be pipes and tubes and it is not much different from pipes and tubes - the product of the petitioner could be defined under entry No.30 (v) of Part II of Schedule II of “Iron and Steel”, which also includes Steel tubes, both welded and seamless of all diameters and lengths, including tube fittings - It would not be just and proper to charge the product in accordance with residuary entry - resort has to be had to the residuary heading only when by a liberal construction the specific heading cannot cover the goods in question – Decided in favour of assessee.
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2014 (5) TMI 256
Rate of Tax - Classification of Fasteners - Item 2 or Item 3 of the Fifth Schedule to the Tamil Nadu General Sales Tax Act, 1959 – As part of motor vehicle - Held that:- Judgment in Mukesh Kumar Aggarwal & Co., Vs. State of Madhya Pradesh [1987 (12) TMI 55 - SUPREME COURT OF INDIA] followed - with the finding of the fact that they are automobile parts, there is no ground to accept the plea of the assessee that the item in question would fit in to fall under only Entry 119 and not under Entry 3 - The concept of specific entry under Entry 119 in the face of Entry 3 fails in its application in this case, since a reading of the Entry 119 would show that it applies to all nuts and bolts of general nature - When Entry 3 makes a specific reference to articles (excluding batteries), used as spares of motor vehicles, one has to give the necessary emphasis to this phrase "the parts and accessories", which are adapted for the use in automobiles - Even though bolts and nuts generally might have fallen in under Entry 119 of I Schedule, once customised for use in motor vehicles as parts and accessories, the same would only fall under Entry 3 of the First Schedule. The Sub Entry is a user oriented entry for the purpose of fixing the liability - In contrast to the normal theories available in the matter of interpretation of the entry, particularly, the entries relating to the general goods, when Entry 3 under I Schedule is clear that nuts and bolts as part and accessory are manufactured for use in automobiles excluding batteries and brought under Entry 3, this court do not subscribe to the contention of the assessee that Entry 119 is a specific entry and hence, nuts and bolts, parts manufactured by the assessee, even though they are automobile parts, would nevertheless fall under Entry 119 – Thus, there is no hesitation in rejecting the assessee's appeal - Accordingly, Revision No.2308/2008 stands dismissed. Rate of Tax - Classification of ‘bolts and nuts’ - Sl.No.35(iii) of Part D or Entry 13(ii) of Part DD or Entry 6 of Part D of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 - As part of motor vehicle - Held that:- Question raised is identical one as raised before this Court as that of the earlier mentioned tax case - Tribunal in the said cases, following the earlier order in assessee's own case rejected the assessee's appeal - Hence, following the order passed by us in T.C.(R).No.2308 of 2008, we have no hesitation in rejecting the revisions - Accordingly, T.C(R).Nos.64 and 65 of 2011 are also dismissed – Decided against assessee.
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2014 (5) TMI 255
Whether Tribunal has erred in not classifying the top hat sections sold by assessee under Serial No.4(v) of the Second Schedule to the TNGST Act, 1959, in view of the words "Other Rolling Sections" found in that Entry – Rate of Tax - Classification - "Other Rolling Sections" – Held That:- In the absence of restrictive words in the entry relating to steel structurals as relatable to steel structurals used in building works or building structures alone, No justifiable ground found to treat the top hat section sold by the assessee could be treated as I Schedule goods as automobiles parts by reason of sale to the automobile manufactures – Relying upon INDIAN METALS AND FERRO ALLOYS LIMITED v. COLLECTOR OF CENTRAL EXCISE [1990 (11) TMI 143 - SUPREME COURT OF INDIA] the circumstances that certain processes are applied to the structurals or that to identify the particular type of tube one uses, different names are given is not sufficient to treat the article dealt with by the assessee, as automobiles component - So too the use to which the top hat section has been put into cannot be taken as a decisive factor for the purpose of understanding the width of the entry which is general in character - It is hold that the item in question is taxable as declared item under Entry 4 - The fact that the assessee had admittedly sold the top hat section to the automobile industries would not in any manner be a decisive test for the purpose of understanding the entry and rate of tax to be applied to the case on hand - Going by the entry, order of the Tribunal is set aside. Levy of penalty – Held that:- even though the Tribunal upheld the levy of penalty upto 75%, admittedly, the same was with reference to other heads of taxation - The Tribunal had cancelled the levy of penalty with reference to the non-inclusion of the turn over relating to top hat section - The penalty thus imposed at 75% instead of 150% however stands confirmed as no serious dispute is raised on this aspect -Revision) is allowed – Decided in favour of Assessee.
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2014 (5) TMI 254
Whether Tribunal by omitted to consider relevant evidence and renderred findings based on no evidence – Omission of evidence – Stock Variation – Suppression of turnover - Non-maintenance of account - Held that:- Inspection report reveals that as a manufacturer, the assessee had not maintained the manufacturing account, nor had it shown the purchase of materials made locally as well as from other States which are sold in the State either as fabric or as readymade garments - Given the fact that the assessee is not just a trader alone, but a manufacturer too, the basic document that one has to maintain is the manufacturing account, since the verification as to the correctness of the claim starts only from thereon - Thus, the admitted case that the assessee had not maintained the manufacturing account, clearly pointed out to the difficulty in arriving at the stock variation. When the Revenue admits that the materials purchased could not be said as with reference to sale of readymade garments alone, in fairness to the claim of the assessee, AO as well as Tribunal should have adverted to this fact while arriving at the stock variation - Thus, while confirming the reasoning of the Appellate AC, it is hold that in arriving at the stock difference, instead of Rs.32,16,462/- as unaccounted stock available, the Officer should have taken note of the stock of finished goods at Rs.25,36,344/- to arrive at the stock difference for the purpose of working out the liability - Except for this modification, order passed by the Appellate Assistant Commissioner is confirmed - Thus, order of Tribunal is set aside and thereby remand the matter back to AO to arrive at the stock difference, taking the actual stock at Rs.25,36,344/- and the stock difference at Rs.34,22,639/- and assessment order passed thereon. Levy of Penalty – Held that:- In arriving at the penalty u/s 12(3)(b) at 50%, AO shall, however, exclude the additional tax portion, since the provision regarding the levy of penalty on additional sales tax was introduced in the statute book in the year 1997 - Hence, the same was not available during the material assessment year 1991 – Decided partly in favour of assessee.
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