TMI Tax Updates - e-Newsletter
June 12, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. Best Practice to Avoid disputes

   By: Madhukar N Hiregange

News

1. India’s Foreign Trade: May, 2014

2. RBI Reference Rate for US $ and Euro

3. Union Finance Minister Holds his Pre-Budget Consultation Meeting with Economists; Priority of The Government Would be Restoring the Economic Growth, Curbing Inflation, to Follow the Path of Fiscal Consolidation and Create an Environment for Higher Employability

4. Three notifications regarding Companies Act

Notifications

Companies Law

1. F. No. 1/11/2013-CL-V - G.S.R. 390(E) - dated 9-6-2014 - Co. Law

Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2014

FEMA

2. 303/2014-RB - dated 21-5-2014 - FEMA

Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2014.

Circulars / Instructions / Orders

Companies Law

1. 16/2014 - dated 11-6-2014

Applicability of PAN requirement for Foreign Nationals

Highlights / Catch Notes

Income Tax

• High Court Rules Automatic Rectification u/s 154 Not Granted If AO Misses Limitation Period.

  Case-Laws - HC : Contention of the assessee that if the AO failed to pass order within the period of limitation prescribed u/s 154, the rectification deemed to have been granted is not correct - no relief can be given - HC
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• High Court Quashes Notice u/s 148; Reassessment Based on Explanation Deemed Change of Opinion by AO.

  Case-Laws - HC : Reassessment u/s 147 - AO initiated such proceedings of reopening solely on ground of insertion of explanation and it is to be held as mere change of opinion - notice issued u/s 148 quashed - HC
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• High Court Rules: Lack of Title or Registration Doesn't Bar Claiming Depreciation if Asset Used in Business.

  Case-Laws - HC : Whether merely because title or registration under the Indian Registration Act has not passed, would it be fatal to disallow depreciation - depreciation allowed - HC
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• High Court Rules Technical Error in E-Filing Shouldn't Deny Income Tax Exemption u/s 10B.

  Case-Laws - HC : Assessee was eligible for an exemption u/s 10B - a typographical error crept in while e-filing the return and it was mentioned as u/s 80-IB instead of section 10B - it is a technical mistake - exemption cannot be denied- HC
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• High Court Clarifies Non-Deduction of Tax u/s 195; Technical Services Contextualized in Section 9(1)(vii.

  Case-Laws - HC : Non-deduction of tax u/s 195 of the Act – Retrospective effect of section 9(1)(vii) - Section 9 (1) (vii) deals with technical services and has to be read in that context - The agreement of procuring orders would not involve any managerial services - HC
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• Interest on Agricultural Land Compensation u/s 10(37) of Income Tax Act: Taxable or Exempt?

  Case-Laws - AT : Taxability of interest awarded – Exemption u/s 10(37) - C how the amount would become taxable if it is forming integral part of the compensation, when transfer is of the agricultural land - AT
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• Cost of Land for Solid Waste Tank Disallowed as Revenue Expenditure in Profit and Loss Account.

  Case-Laws - AT : Disallowance of proportionate cost of land out of solid waste tank expense – cost of land debited by the Assessee in Profit and Loss account is not allowable as revenue expenditure - AT
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• Reference to DVO Incorrect as FMV Exceeds Declared Value for LTCG; AO's Belief in Underreporting Required.

  Case-Laws - AT : LTCG - valuation - reference could be made to DVO only if the value declared by the assessee is in the opinion of AO less than its fair market value - in this case FMV as on 1.4.1981 is more - Reference to DVO is not correct - AT
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• Commissioner of Income Tax's Revision Upheld: Assessee Didn't Prove Officer Examined Deduction Details u/s 80IB(10.

  Case-Laws - AT : Validity of revision by CIT u/s 263 - assessee has failed to show that the assessing officer has examined the various details relating to the deduction u/s 80IB(10) - order of revision upheld - AT
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• Seized funds count as advance tax from seizure date for interest calculation u/ss 234A and 234B.

  Case-Laws - AT : Computation of interest u/s 234A and 234B of the Act - the seized amount shall be treated as payment of advance tax on the date of seizure itself. - AT
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Customs

• Port Custodian Faces Duty Demand Over Pilferage; Revenue Must File FIR and Obtain Police Report for Proof.

  Case-Laws - AT : Duty demand from the port custodian for shortage of goods - Pilferage of the imported goods takes place while the goods were in the custody of the custodian which has to be established by Revenue by way of an FIR and a police report. - AT
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• Court Rules Exported Rice Met Standards, Not Prohibited for Export Under DGFT Notification.

  Case-Laws - AT : Confiscation of goods - basmati rice or not - Exporter has acted on the basis of notification issued by DGFT and the goods presented conformed to the prescribed standards, we are of the view that these goods cannot be considered as goods prohibited for export - AT
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Service Tax

• Clarification on Processing Facility Classification: Not a 'Transport Terminal' for Service Tax on Construction Services.

  Case-Laws - AT : Commercial and Industrial Construction Service - Onshore Terminal - In any processing facility, material has to be received and dispatched but that would not make the processing facility as ‘Transport Terminal'. - AT
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Central Excise

• High Court Approves Refund for Duty Paid Under Protest, Citing Unjust Enrichment and Uniform Pricing Issues.

  Case-Laws - HC : Refund claim - Unjust enrichment - price inclusive of duty of excise - maintaining uniformity of price - duty paid under protest - refund allowed - HC
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• Court Disputes Revenue's Claim on Cenvat Credit Denial Over GP Sheets Use in Manufacturing Process.

  Case-Laws - AT : Denial of Cenvat credit - Revenue establishing a fact that in the normal course GP sheets are not used for manufacture of OE parts, cannot lead to inevitable conclusion that the appellants have not used the said GP sheets in the manufacture of their final product. - AT
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• Units with area-based exemption under Notification No. 56/2002-CE can't use BED credit for education cess payments.

  Case-Laws - AT : Area based exemption - A unit availing of exemption under Notification No.56/2002 –CE cannot utilize BED credit for payment of education cess and S & H cess which are not exempted under this notification - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 298
  Denial of registration u/s 12AA of the Act – Held that:- The effect of non-consideration of the application for registration within the time fixed by section 12AA(2) would be a deemed grant of registration – there was no reason to make the assessee suffer because the IT Department is not able to keep its officers under check and control, so as to take timely decisions in such simple matters such as consideration of applications for registration even within the large six month period provided by s. 12AA(2) of the Act - Commissioner does not pass any orders even after six months from receipt of Tribunal’s order remitting the matter to him - The registration will be deemed to have been granted – thus, the preliminary objection raised by the assessee is upheld and the Commissioner is directed to issue approval of registration – Decided in favour of Assessee. Denial of approval u/s 80G of the Act – Held that:- As the registration u/s12AA is granted - The very foundation for denial of approval u/s 80G thus ceases to hold good in law – Decided in favour of assessee.

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• 2014 (6) TMI 297
  Application for rectification of order u/s 154 - AO has passed the order after a lapse of six months – Bar of limitation - Unabsorbed depreciation for quantification of relief u/s 80HHD of the Act – Held that:- u/s 154 of the Act, it is mandatory requirement that the Assessing Authority has to pass the order within a period of six months from the date of receipt of the application - in the circular bearing No.73 dated 7-1-1972 issued by the CBDT it was clarified that if the Assessing Authority do not dispose of the application within the time specified under sub-Section 7 of Section 154, it may be disposed of by that authority even after expiry of the statutory time limit on merit in accordance with law. With regard to the contention of the assessee that if the Assessing Authority failed to pass order within the period of limitation prescribed and the rectification deemed to have been granted is concerned, there is no such provision under the Act. Hence no relief can be given. Further, set off of brought forward loss is not challenged in the appeal. The circular issued by the CBDT is binding on the authorities concerned. - thus, there was no infirmity in the order - the assessee is not entitled for any relief in the appeal – Decided against Assessee.

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• 2014 (6) TMI 296
  Validity of assessment u/s 148 of the Act – Effect of Explanation to section 80IA of the Act with effect from April 01, 2000 – Whether the reassessment proceedings can be initiated only on the basis of insertion of Explanation which had been substituted by the Finance (No.2) Act, 2009 with retrospective effect from April 01, 2000 - Held that:- Following Katira Construction Ltd. Versus Union of India & 2 [2013 (3) TMI 416 - GUJARAT HIGH COURT] - introduction of the explanation did not amount to introduction of a new provision of law with retrospective operation - The assessee was given the benefit of deduction considering the then explanation which was introduced with effect from 1.4.2007, which according to the Court was substantially the same and any attempt on the part of the Revenue – thus, to reopen the assessment would be in the nature of second opinion. The claim made for deduction under section 80IA of the Act, which was allowed by the AO in scrutiny assessment - on the reassessment proceedings were initiated only on account of the addition of explanation - if the explanation is added to a statute for the removal of doubts, the implication is that the law was same from the beginning and the same is further explained by way of addition of the Explanation - it is not a case of introduction of new provision of law by retrospective operation, but when all the materials regarding activities of the assessee if are available on record and the benefit of the provision is already made available to such assessee, reassessment proceedings cannot be initiated only on account of addition of such Explanation. The AO on a detailed scrutiny had explained the claim made by the AO u/s 80IA(4) of the Act - Explanation clarified that the deduction u/s 80IA of the Act would not be admissible in the case of an assessee carrying on business in the nature of works contract – the AO initiated such proceedings of reopening solely on ground of insertion of explanation and it is to be held as mere change of opinion – the assumption of jurisdiction on the AO shall need to be interfered by way of writ jurisdiction – thus, the notice u/s 148 of the Act is to be set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 295
  Condonation of delay – Delay of 1270 days – Sufficient cause present or not - Held that:- Assessee had produced three certificates from "Mannarkkad Ayurvedic Clinic" which indicate, between what period, he was under treatment on three occasions - it was not continuous treatment and there was break in between, and the break was not a short spell but duration of 6 to 12 months - none of the Certificates indicated that he was required to be admitted to hospital as in-patient - the inordinate delay of 1270 days is not explained with sufficient and convincing material and the treatment at Ayurvedic Clinic was not as in-patient and there was enough time for assessee to approach Tribunal - It is not a case where the assessee was ignorant of what was happening on account of his illness, but the entire situation now faced is only on account of negligence in taking the matter before the appellate authority at the relevant point of time – Decided against Assessee.

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• 2014 (6) TMI 294
  Reassessment u/s 147 - Notice issued u/s 143(2) of the Act not served – Validity of assessment - Held that:- The assessee submitted the return which he had already submitted on 31.10.2000 with the intention of opting for having the assessment completed based on the return that he had already filed - return was accepted and acted upon by the Department - revenue cannot now be allowed to contend that the assessee did not file a return in response to Section 148 and there was no necessity to issue a notice u/s 143(2) of the Act. Validity of belated return filed in response to notice u/s 148 - Held that:- The notice under Section 148 was issued to the assessee on 4.12.2006. By this notice, the assessee was called upon to file the return within 30 days of service of the notice. This notice was served on the assessee on 7.12.2006. The assessee did not request for extension of time, nor was any extension granted for complying with the notice. The assessee did not file any return within the 30 days specified in the notice also and instead, filed the return submitted on 30.10.2000, only on 15.10.2007. Such a return belatedly filed by the assessee, is an invalid one in view of the provisions contained in Section 139 of the Act. The assessee had already filed a return u/s 139 as early as on 31.10.2000 and therefore calling upon the assessee to file a return u/s 142(1) does not arise - notice u/s 142(1) issued to the assessee on 5.10.2007 could have been only to call upon the assessee to produce accounts or documents and not for filing a return - in a proceedings initiated u/s 148, the provision does not come into operation whatsoever – thus, the return filed by the assessee on 15.10.2007 was not a valid return, which could have been acted upon by the AO entitling the assessee for a notice u/s 143(2) of the Act – thus, the order of the Tribunal that in the absence of a notice u/s 143(2) the assessment is illegal cannot be sustained – thus, the matter is remitted back to the Tribunal – Decided in favour of revenue.

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• 2014 (6) TMI 293
  Disallowance of loss of foreign exchange fluctuation – Held that:- The Tribunal was rightly of the view that the increase or decrease in the value of the foreign loan would also be taken into account to modify the figure of actual loan in the year in which the increase or decrease in the loan arises on account of fluctuation in the rate of exchange – the assessee is entitled to the deduction of the foreign exchange loss as claimed by the assessee - the assessee has offered the income arising out of the money lent as its business profit - The case of the assessee is that the money was advanced to a sister concern which has in fact been supplying 97% of its raw material - It was as such an advance made for the purpose of running the business more profitably – the finding of the learned Tribunal was not challenged – Relying upon CIT Versus M/s Woodward Governor India P. Ltd. & M/s Honda Siel Power Products Ltd. [2009 (4) TMI 4 - SUPREME COURT] - Closing stock is also an asset – there was no merit in the contentions of Revenue – Decided against Revenue. Value of consideration of sale of shares – Held that:- Tribunal was of the view that in the absence of anything to show that the assessee has received anything more than what is disclosed in respect of the shares sold to its related concerns, no addition can be made to such value for the purpose of computing capital gains – Following CIT Versus George Henderson & Co. Ltd. [1967 (4) TMI 18 - SUPREME Court] - when the legislature wanted to make a departure a specific provision was introduced - Reference in this regard can be made to Section 50C - the AO was wrong in taking the view that the capital gain has to be assessed not on the basis of the consideration actually received but on the basis of the consideration receivable based on market rate – Decided against Revenue.

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• 2014 (6) TMI 292
  Claim of depreciation – All assets and liabilities transferred – Whether merely because title or registration under the Indian Registration Act has not passed, would it be fatal to disallow depreciation - Held that:- Possession over the property is being enjoyed by the assessee and no claim of reclaiming the assets have been made by the State Government subsequent to transfer - merely because title is not transferred or registration under the Indian Registration Act is not obtained, depreciation cannot be disallowed. Relying upon Mysore Minerals Ltd. v. CIT [1999 (9) TMI 1 - SUPREME Court] - Section 32(1) states about owning of the properties owned would not mean by way of a registration by way of title deed - value of assets has to be recognised where transfer is by way of gift or inheritance and here in the case, assets have been transferred by the Government of Rajasthan to the assessee-society and for that purpose value has been adopted as the value to the previous owner and this explanation also supports the claim of the assessee - the assessee-society had rightly been allowed depreciation by the CIT(A) and the Tribunal as the assessee-society became the owner of the assets and was actually using the property in its own right as an owner on and from the date of order of the Governor and formation of the society – thus, there was no infirmity in the order of the Tribunal – Decided against Revenue.

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• 2014 (6) TMI 291
  Entitlement for deduction u/s 10B of the Act – Typographical error – Section 10B inadvertently types as 80IB of the Act – Held that:- Following Goetze (India) Limited Versus Commissioner of Income-Tax [2006 (3) TMI 75 - SUPREME Court] - the assessee-company was under the bona fide belief that there was no mistake in the return, hence no revised return was filed but after knowing the clerical/computerized mistake that the claim was wrongly mentioned as u/s 80-IB instead of section 10B - since the AY 2004-05, the assessee did not have any taxable income after adjusting the unabsorbed depreciation and the tax was being paid u/s 115J and the deduction u/s 10B was being claimed in computation of income - the mentioning of section 80-IB was only clerical mistake and with all fairness as per the facts and circumstances and as per the previous claims in tax calculation u/s 115J, the assessee was legally entitled for the benefit - the spirit behind this statement must be that the assessee should have claimed the exemption in his return and filed the same within due date and the assessee clearly shows that the claim was duly made but the section was inadvertently wrongly mentioned and the fact came to the notice of the assessee at a later point of time when pointed out by the AO - the purpose of the assessment proceedings before the taxing authorities was to assess the income correctly and the tax liability of an assessee in accordance with law. The CIT(A) had plenary power in disposing of an appeal - The scope of his power was co-terminus with that of the ITO - In the absence of any statutory provision, the appellate authority was vested with all the plenary powers which the subordinate authority might have in the matter - as the assessee has filed a revised computation, it holds good as except the change of section from 80-IB to 10B, all other supporting material remained the same including the audit report claiming exemption – Relying upon CIT v. Prabhu Steel Industries P. Ltd. [1987 (1) TMI 17 - BOMBAY High Court] - where a claim for special deduction was made by the assessee not in his return but in the course of the assessment proceedings and the AO failed to consider the same, it was open to the appellate authority to entertain the claim. Once the assessee was found eligible for an exemption u/s 10B, it having been allowed such exemption and merely because a typographical error crept in while e-filing the return and it was mentioned as u/s 80-IB instead of section 10B, this being a technical mistake, should not come in the way by disallowing the otherwise allowable/eligible exemption – there was no infirmity in the order of the Tribunal – no substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (6) TMI 290
  Deletion of disallowance of Non-deduction of tax u/s 195 of the Act – Retrospective effect of section 9 (1) (vii), read alongwith the explanation introduced by Finance Act, 2010 w.e.f. 1.6.1976 of the Act – Disallowance of payment u/s 40(a)(ia) of the Act – Commission paid to agents – Violation of section 9(1)(vii) r.w. section 95 of the Act – Held that:- Following CIT v. M/s Model Exims, Kanpur, Income Tax Appeal [2013 (9) TMI 742 - ALLAHABAD HIGH COURT] - AO did not bring anything on record, which could demonstrate that non-resident agents were appointed as selling agents, designers or technical advisers - payment of commission to foreign agents did not entitle such foreign agents to pay tax in India and thus the TDS was not liable to be deducted u/s 195 of the Act - The disallowance made by AO u/s 40 (a) (i) for non-deduction of tax at source u/s 195 were not justified. The fact situation did not contemplated or clarified in the explanation added by Finance Act, 2010 is applicable as the agents appointed by the assessee had their offices situate in a foreign country and that they did not provide any managerial services to the assessee - Section 9 (1) (vii) deals with technical services and has to be read in that context - The agreement of procuring orders would not involve any managerial services - The agreement did not show the applicability or requirement of any technical expertise as functioning as selling agent, designer or any other technical services – Decided against Revenue.

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• 2014 (6) TMI 289
  Validity of notice u/s 148 of the Act - Reasons for reopening the assessment not considered – Held that:- The notice was issued on March 23, 2012 – it was received by the assessee on March 26, 2012 - on the date of issuance of notice, no reasons for issuing such notice were recorded - Requirement of recording reasons flows from the statutory provisions of section 148(2) of the Act- Sub-section (1) of section 148 as is well known pertains to issuance of notice where income has escaped assessment - sub-section (1) of section 148 pertains to such a notice to be issued by the AO before making the assessment, reassessment or re-computation of income u/s 147 of the Act - Sub-section (2) of section 148 provides that the AO shall, before issuing any notice under the section, record his reasons for doing so - When such essential requirement of issuance of notice under sub-section (1) of section 148 was not fulfilled, the notice itself would be rendered ineffective - issuance of notice the Commissioner's approval was also obtained on March 19, 2012 - If the AO had not recorded reasons, the Commissioner cannot persuaded himself to authorize issuance of notice – thus, the notice set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 288
  Taxability of interest awarded – Exemption u/s 10(37) - Compensation paid for acquisition of land – agriculture land - Held that:- The assessee is entitled to get 30% amount under the head of “Solatium” and also entitled to get 9% interest for the first year and thereafter at the rate of 15% for the second year upto depositing of the awarded amount - Court has also ordered for 12% increase from the date of publication of the notification u/s.4 i.e. 13.08.1992 to the date of award i.e. 10.04.1995 passed by the Land Acquisition Officer as provided u/s 23(1)(A) of the Act - all these amounts form part of the compensation – Relying upon in the view of the judgement of Hon’ble Supreme Court in the case of CIT vs. Ghanshyam (HUF)[2009 (7) TMI 12 - SUPREME COURT] - since the case is transfer of agricultural land, therefore, this amount is exempt u/s.10(37) of the Act. The authorities ought to have given a clear finding as to how the amount would become taxable if it is forming integral part of the compensation, when transfer is of the agricultural land - the claim was not made before the authorities, but arising from the material available before the AO, requires fresh adjudication by the AO – thus, the claim of the assessee is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 287
  Deletion of unexplained expenses u/s 69C of the Act – Held that:- CIT(A) was rightly of the view that the assessee has been able to show on the basis of evidence that there was longevity yield on processing of Nylon cloth and that the analysis made by the AO on information obtained from M/s. Pioneer Syntex Private Limited was not correct as it did not consider opening and closing stock with the said concern - even otherwise the addition made by the AO on account of unaccounted purchases was not correct – assessee on its own has offered the full value of sales as income and not claimed purchases against them in the books - assessee is engaged in manufacturing and trading of synthetic cloth - no material could be brought on record by the Revenue to show that the assessee had actually made any investment in purchases which was not recorded in its books of account - In absence of any material, there was no reason to interfere with the order of the CIT(A) – Decided against Revenue. Deletion of unaccounted stock found in survey – Held that:- There was excess stock of Rs 2,02,129/- which was explained by the son of the assessee as return of goods at the time of the survey - The assessee was not in the station at the time of the survey - the statement of the assessee which was recorded u/s. 131 of the Act was rejected by the AO without making any attempt to verify the genuineness of the same - No material was brought on record by the AO to show that there was any error in the statement of the assessee recorded u/s 131 by making due inquiry - the AO was not justified in rejecting a plausible explanation without making necessary inquiry – Revenue could not point out any error in the finding of the CIT(A) which was to the effect that the trial balance prepared at the time of the survey itself shows that some job work charges which were also actually paid by the assessee before survey were not properly recorded in the books of account – thus, there was no reason to interfere with the order of the CIT(A) – Decided against Revenue. Deletion of interest expenses u/s 40A(2)(b) of the Act – Held that:- The assessee claimed deduction for interest payment to five parties on loans taken from them at the rate of 12% - the interest paid by the assessee at the rate of 12% was quite reasonable as the Income Tax Department itself pays interest at the rate of 15% per annum on the refund granted to the assessee after the completion of the assessment u/s 244 of the Act – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue. Restriction of disallowance of various expenses – Held that:- The AO made an estimated disallowance of 20% out of the various expenses claimed by the assessee which was restricted to 10% by the CIT(A) - No material was brought on record by the revenue to show that the estimation made by the CIT(A) for disallowance of expenditure at 10% was unreasonable and that actually an amount more than 10% of the expenditure disallowed by the CIT(A) was required to be disallowed – there was no reason to interfere with the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 286
  Restriction of addition u/s 68 of the Act – Unexplained cash credit – Held that:- The AO has given a finding that in all the cases the cash has been deposited one or two days before issuing the cheques and has suspected about the authenticity of the explanation given by the assessee - CIT(A) was of the view that out of 17 creditors, either appeared before the AO in remand proceedings and confirmed the loan to the assessee - all the creditors have enclosed their balance-sheet along with return of income reflecting capital - loan was received by cheque and has also been returned through banking channel. When full particulars, inclusive of the confirmation with name, address and PAN Number, copy of the Income Tax Returns, balance sheet, profit and loss accounts and computation of the total income in respect of all the creditors/lender were furnished and when it has been found that the loans were received through cheques and the loan account were duly reflected in the balance sheet, the AO was not justified in making the addition – These finding of CIT(A) has not been controverted by the Revenue by placing any material on record – there was no infirmity of the orders of CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 285
  Addition of entire subsidy amount received from Govt. – Held that:- The Assessee had shown subsidy as revenue in the books of accounts and had followed mercantile system of accounting – assessee had followed this practice consistently on matching principal of accounting - The expenses from Solid Waste Tank had been debited by the Assessee proportionately on the basis of quantity of dumping of Solid Waste Disposal - assessee had followed the same account principal on subsidy as well as expenditure on the basis of quantity of dumping of Solid Waste Disposal – Relying upon Madras Industrial Investment Corporation Limited Versus Commissioner of Income-Taxd [1997 (4) TMI 5 - SUPREME Court] - CIT(A) was not right to confirm the addition made by the AO – thus, the AO is directed to to booked subsidy as income proportionately for the years to which it pertain – Decided in favour of Assessee. Disallowance of proportionate cost of land out of solid waste tank expenses – Held that:- The land is not deprecitable and entire is not a cost of assessee’s business having revenue nature. It generally fetches appreciation in future – Following The Green Enviornment Servicves Co. Op. Services Ltd. Versus The ITO, Ward 6(4), Ahmedabad [2014 (4) TMI 1003 - ITAT AHMEDABAD] - CIT(A) has rightly observed that the science is changing fast - There could be some device in future to make use of the said lands also - land being fixed asset and only fetches appreciation in future, it cannot be said such property purchase to be treated as a revenue expenditure - CIT(A) has rightly dismissed the appeal filed by the assessee – cost of land debited by the Assessee in Profit and Loss account is not allowable as revenue expenditure - thus, there was no illegality in the order of the CIT(A) – Decided against Assessee. Invocation of explanation 10 to section 43(1) of the Act – Reduction in accumulated amount of member’s contribution from the written down value of plant and machinery – Held that:- Accumulated amount of contribution made by the members is pertained to earlier years also which cannot be reduced from the cost of plant and machinery under the year of consideration as per Section 43(1) - The actual cost means the actual cost of the assets to the Assessee reduce by that portion of cost as has been met directly or indirectly by any other person or authority - The appellant is getting contribution from the members as reimbursement of the cost of plant and machinery during the years - whatever contribution received by the Assessee in respective assessment years should be allowed to be reduced from the actual cost of plant and machinery and thereafter depreciation is to be allowed on remaining cost of the plant and machinery by the AO – thus, the AO is directed to verify the actual cost of plant and machinery in each year as opening written down value of the plant and machinery addition made during the year minus cost met from the contribution of the members year wise – thus, the matter is directed to AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 284
  Additions regarding non-furnishing of complete details on account of concealed income – Held that:- No return of income had been filed by the assessee for the year under consideration, contending that his income for the year under consideration was below the taxable limit - CIT (A) restricted the addition on the basis of the material available on record - after accounting for the cash deposits and the cash withdrawals, the source of the amount of Rs. 1,77,000/- as on 5.6.04, remained unexplained - CIT (A) treated this amount of Rs. 1,77,000/- as the assessee’s income from undisclosed courses – the figure was seen to work out to a profit rate of 14.9% on a turnover of Rs. 11,88,000 - This was found to be much higher than the presumptive rate of net profit applicable in terms of the provisions of Section 44AF of the Act - Revenue has not been able to successfully refute the facts duly taken into consideration and discussed in detail by the CIT (A) in the order - the approach of the CIT (A) in adopting the peak of the deposits and withdrawals during the year, to be well justified – Decided against Revenue. Deletion of penalty u/s 271(1)(c) of the Act – Held that:- CIT (A) was of the view that since no return of income had been filed, despite the assessee having taxable income as determined by the AO, the whole of the income determined by the AO represented the concealed income of the assessee and that therefore, penalty u/s 271 (1)(c) of the IT Act had rightly been imposed on the assessee - CIT (A) restricted the undisclosed income of the assessee to Rs. 1,77,000 – the CIT (A) has rightly directed the AO to re-compute the amount of penalty after giving effect to the CIT(A)’s appeal order in the quantum case - The penalty to the extent of Rs. 3,14,754/- has been rightly deleted - the provisions of Section 271 (1)(c) of the Act are not attracted – Decided against Revenue.

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• 2014 (6) TMI 283
  LTCG – Lower Cost of acquisition adopted as on 1.4.1981 – Validity of reference made to DVO u/s 55A of the Act – Held that:- Following CIT V/s Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] - Section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the DVO only when the value adopted by the assessee was less than the fair market value - the value adopted by the assessee of the property at Rs.35.99 lakhs was much more than the fair market value of Rs.6.68 lakhs even as determined by the DVO – the AO referred the issue of valuation to the DVO only because in his view the valuation of the property as on 1981 as made by the assessee was higher than the fair market value - the invocation of Section 55A(a) of the Act is not justified. The Parliament has not given retrospective effect to the amendment - Section 55A(a) of the Act as existing during the period relevant to the AY 2006-07 - reference could be made to DVO only if the value declared by the assessee is in the opinion of AO less than its fair market value – thus, the order of CIT(A) is upheld in deleting the addition made by the AO on account of LTCG relying on the report of DVO by holding that the reference made by AO to the DVO u/s 55A of the Act itself was bad in law – Decided against Revenue.

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• 2014 (6) TMI 282
  Deletion of bad debts u/s 36(2) of the Act – Failure to furnish details - Genuineness of the debts not proved - Held that:- Following CIT vs. Kohli Brothers Colour Lap Pvt. Ltd. [2009 (11) TMI 3 - ALLAHABAD HIGH COURT] - assessee had failed to furnish the information regarding persons with reference to whom bad debt written off was claimed - it is not obligatory on the part of the Assessee to prove that the bad debt written off by the Assessee is indeed a bad debt for purpose of allowance u/s 36(1) (vii) - there is no obligation on the part of the Assessee to prove the debt became bad subject to provisions of Section 36(2) of the Act - Assessee cannot be questioned to demonstrate debt became bad under the amended provision – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 281
  Validity of revision by CIT u/s 263 of the Act – Claim of deduction u/s 80IB of the Act – Held that:- Following Grasim Industries Ltd. V CIT [2010 (2) TMI 4 - BOMBAY HIGH COURT] and CIT Vs. Toyota Motor Corporation[2008 (4) TMI 231 - DELHI HIGH COURT] - the assessment order is a cryptic one and it does not contain any discussion about the deduction claimed by the assessee u/s 80IB(10) of the Act - the order passed by the AO should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law - the assessment order was cryptic one and it did not contain any discussion about the deduction allowed to the assessee u/s 80IB of the Act - the assessee has placed all the details / documents before the assessing officer, nothing was brought on record to show that the assessing officer did apply his mind on those materials before allowing the deduction u/s 80IB of the Act - the assessment order passed without application of mind on the details / documents furnished by the assessee would be rendered erroneous - The question whether the deduction is allowable to the assessee or not has got tax implications. The assessee has failed to show that the assessing officer has examined the various details relating to the deduction u/s 80IB(10) of the Act - certain factual aspects like the date of completion of the project, the details relating to commercial establishments etc. are required to be verified - Apparently these points should have been examined by the AO before allowing the deduction claimed by the assessee u/s 80IB(10) of the Act - CIT was within his power to pass the impugned revision order, since the assessment order is rendered erroneous and prejudicial to the interests of revenue in view of lack of application of mind on the part of the AO - the assessee has got every right to put forth his arguments before the AO in respect of those issues – thus, the order of the CIT is modified and the CIT is directed the AO that he should examine various issues relating to the deduction claimed u/s 80IB(10) of the Act without being influenced by the views expressed by CIT, i.e., the AO should examine the claim independently by duly considering the various contentions put forth by the assessee – Decided partly in favour of Assessee.

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• 2014 (6) TMI 280
  Computation of interest u/s 234A and 234B of the Act - Credit of the amount seized as advance payment of tax Held that:- Following S.Duraipandi S.Thalavaipandian Vs. ACIT [2013 (12) TMI 998 - ITAT CHENNAI] - seized amount shall be treated as advance tax paid provided the assessee authorizes the department to appropriate the seized amount towards such tax liability - the seized amount shall be treated as payment of advance tax on the date of seizure itself. The contention of the assessee regarding date of intimation to treat the seized amount as advance tax is concerned, the assessee has placed on record copies of the communication dt.16-11-2010 and 30-11-2010 along with photocopies of Department inward register - A perusal of same shows that both the intimations were received in the office of Revenue thus, the matter is remitted back to the AO for verification of intimation and its acknowledgement, before granting the aforesaid relief Decided in favour of Assessee.

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• 2014 (6) TMI 279
  Transfer pricing - determination of ALP - Rejection of working capital adjustment – Held that:- Assessee has claimed before the TPO regarding working capital adjustment, but the TPO denied on the ground that assessee failed to provide the details - AO has disregarded the submissions of the assessee - The DRP also considered the working capital adjustment only with respect to the comparables submitted by the assessee - It did not analyse the same with respect to the data of the assessee company – thus, the matter is required to be remitted back to the TPO to the issue of working capital adjustment as claimed by the assessee – Decided in favour of Assessee. Selection of comparables - ACI Infocom Ltd. not considered as comparable – Held that:- The TPO and DRP are correct in observing that the net worth of the company is eroding the data of the past years of the assessee consistently making losses certainly point out the abnormal working conditions and hence, this company cannot be taken as cogent comparable - assessee has sold its plant and machinery and substantial land and buildings also indicate that assessee is not operating any normal circumstances - assessee has claimed that manufacturing division was sold off, but the trading division continues to function - no segmental data has been provided for consideration – thus, there is no infirmity in the order – Decided against assessee. Determination of arm’s length adjustment - International transaction from AEs - Enhancement of returned income – Opportunity of being heard – Held that:- TPO has rejected 8 out of the 10 comparables submitted by the assessee - The TPO has mentioned in show cause notice his observations on the lack of comparability of 8 comparables - assessee’s submissions and objections in this regard has not been brought in TPO’s order - TPO has only mentioned that he has considered the assessee’s objections and submissions and thereafter TPO has again reproduced his original observations mentioned in the show cause notice - The DRP against assessee’s objections has laconically upheld the order of the TPO - assessee has claimed that Priya Ltd. and Savex Computer Ltd. which has been rejected the year were earlier approved by the DRP in earlier years – thus, the matter is required to be remitted back to the TPO for examination of comparability of the comparables rejected earlier – Decided in favour of Assessee.

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• 2014 (6) TMI 278
  Order being time barred u/s 158BFA(2) of the Act – Levy of penalty - Held that:- The categorical finding of CIT(A) that Tribunal’s order was received for the first time on 20-07-2009 by the CIT concerned has not been controverted by the assessee by placing any material on record to the contrary, CIT(A) was justified in holding that the penalty order u/s. 158BFA(2) was passed within the prescribed statutory time limit - During the course of search of gold jewellery weighing 1576.1 gms was found from assessee’s possession out which AO accepted 939 gms as explained on the basis of preliminary statement of assessee and his wife recorded at the time of search - Matter reached upto Tribunal and jewellery weighing 191.1 gms remained unexplained and it was considered to be acquired out of undisclosed income Rs. 95,550/- and the figure was arrived at by giving benefit of doubt to the assessee in all respects i.e. due credit was given for possession of jewellery of all family members including married daughter, inheritance or parents and in view of CBDT Instruction No. 1916 – there is no need to interfere with the order passed by CIT(A) in confirming the action of AO in levying penalty u/s. 158BFA(2) of the Act – Decided against Assessee.

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• Customs

• 2014 (6) TMI 302
  Duty demand from the port custodian for shortage of goods - appellant contended that argued that the provisions of Section 45 (3) are applicable only when the goods after being unloaded in a Customs Area have been pilfered - Whether the custodian M/s Gujarat Adani Port Ltd is liable to pay duty with respect to the shortage of 457.588 MT of Crude Petroleum Oil detected when against the quantity of 5221MT shown in the Import General Manifest a quantity of 4722.040 MT was received in on shore tank from vessel M T Argoat - Held that:- In view of the provision of Section 45 (3) duty can be demanded from the custodian of the goods if after importation and unloading, the imported goods are pilfered - adjudicating authority has held that the goods were unloaded in the Customs area. However, adjudicating authority is silent about the fact whether 100% of the manifested goods were received in the on shore tank and also whether the goods were pilfered after unloading in the Customs area. Pilferage of the imported goods takes place while the goods were in the custody of the custodian which has to be established by Revenue by way of an FIR and a police report. None of above twin requirement has been brought on record. In the present proceedings, a shore outturn report was jointly prepared by the surveyor, terminal operator, in the presence of Customs officers and the custodian on 30.04.004. A protest was also lodged by the appellant within half an hour of the discharge of cargo on 27.04.2004. Based on the facts and circumstances available on record, it cannot be said that the entire quantity of the imported goods as shown in the Import General Manifest was received by the custodian. Further, as per the procedures prescribed by the Revenue under Circular No.96/2002-Cus, dt.27.12.2002 also even duty has to be demanded from the importer for the quantity of liquid cargo received in ‘shore tanks’ and not on the basis of ullage Survey report. In the absence of any establishing report of pilferage of imported goods, when the goods were under the custody of the appellant, no duty liability can be upheld against the present appellant. - Decided in favour of appellant.

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• 2014 (6) TMI 301
  Confiscation of goods - whether the appellant herein who had carted the consignment of rice and filed shipping bills as the same to be basmati rice and claimed the benefit of DGFT Notification No.55(RE-2008)/2004-2009, dt.05.11.2008 as amended by Notification No.57/2009/14, dt.17.08.2010 are basmati rice or otherwise - Held that:- all the consignments which were carted in for export, had conformed to the specification of average length and the ratio of length to breadth as per notifications claimed by the appellant. We find that the said notifications had only the conditions which are reproduced hereinabove and does not indicate any other condition to be satisfied for coming to a conclusion whether the consignment of rice is basmati or non-basmati rice. It is to be noted that the said notification even does not indicate any admixture to be considered for the purpose of getting benefit of the said notification. On the face of such clear notification, the Revenue authorities have held that though the export consignments meet the specification of the length and the ratio of length to breadth, has failed the admixture content, as the admixture content is more than limit. We do not find any such condition put in the notification, hence the Revenue’s argument on point of admixture is incorrect. Exporter has acted on the basis of notification issued by DGFT and the goods presented conformed to the prescribed standards, we are of the view that these goods cannot be considered as goods prohibited for export and therefore we are of the view that the confiscation of the goods under Section 113(d) of the Customs Act is not maintainable. Therefore, we set aside the impugned order confiscating the goods and imposing the penalty - Decided in favour of assessee.

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• 2014 (6) TMI 300
  Valuation - Classification of payment made - determination of nature of payment for the purpose of inclusion - whether the payments made under the head “R&D fees” pertains to design and development of imported components as claimed by the Revenue or it has nothing to do with the imported goods as claimed by the appellant - Held that:- Held that:- In case there is a nexus in respect of both these payments to the imported components, what are the amounts that are attributable/apportionable to the imported goods. Since the payments are made on the basis of the invoices raised by the foreign supplier, these documents need to be examined carefully to see for what purpose the payments were made. Secondly, in respect of all these payments, prior approval of the RBI/Govt. of India was necessary. Therefore, the documents submitted to these agencies for remittance of foreign exchange needs to be examined and verified. As regards, the payments made for the drawings and designs, the invoices raised for the same and examination of the said drawings and designs so as to establish any nexus with the imported product, if need be, with the assistance of technical experts needs to be undertaken. If these exercises reveal any linkage with the imported goods, then the quantum of payment attributable to the imported goods have to be determined. From the orders passed by the lower authorities, no such study seems to have been undertaken nor the appellant has led any evidence to prove that the payments made has no nexus with the imported goods, except for a bald statement to that effect - Matter remanded back - Decided in favour of assessee for remand purposes.

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• 2014 (6) TMI 299
  Smuggling of goods - Penalty u/s 114 - Duty evasion - Jurisdiction of authority - Burden of proof - Held that:- appellant is situated in Mumbai and not anywhere else. The cause for investigation originated in Mumbai with the detaining of the post parcels and the subsequent seizure of the same and adjudication proceedings connected therewith - The Managing Director of the appellant firm Mr. N.P. Jajodia, has clearly admitted that the goods supplied to M/s. Cadilla were brought through carriers in their baggage by mis/non-declaration. If that be so, it is only reasonable to presume that the goods were smuggled through passenger baggage through Mumbai air-port. Mr. Jajodia has not divulged any details regarding the carriers or when or how they arrived with the goods. When pressed for the details in this regard, he refused to divulge the details as can be seen from his statements recorded under Section 108 of the Customs Act. Therefore, the appellant cannot take the plea now that the cause of action took place elsewhere - cause of action arose in Mumbai and as per the admission of the Managing Director of the appellant firm, the goods were smuggled through passenger baggage of carriers. Therefore, we do not find any infirmity in the Commissioner in charge of Mumbai Airport adjudicating the matter - Following decision of K.P. Abdul Majeed v. Collector of Customs & Central Excise, Cochin, [1995 (7) TMI 76 - HIGH COURT OF JUDICATURE AT MADRAS]. Onus to prove - Held that:- Department had clearly established the smuggled nature of the goods by conducting a thorough investigation. The claims made by Mr. Jajodia with respect to procurement of DSP from Indian sources were thoroughly verified and found to be bogus. Then the onus is on the appellant to prove that they have licitly procured the goods which they failed to do. The goods were smuggled at their behest and on their behalf and they sold the smuggled goods. The bill for the supply of smuggled goods were issued in the name of M/s. LCPL and it is LCPL who received the proceeds for the supply/sale of goods. Therefore, they are liable to discharge the duty liability in respect of the smuggled goods procured by them and we hold accordingly. Once the duty liability is upheld, the liability to pay interest is automatic and consequential. Investigation has been conducted and evidence unearthed only in respect of 24 kgs. of Mifepristone and 187 kgs. of Dexamethasone Sodium Phosphate supplied to M/s. Cadilla Healthcare Ltd. No such investigation has been conducted in respect of other 8 items supplied to various parties. Therefore, it cannot be automatically presumed that they are all smuggled goods. No doubt there is an admission by Mr. N.P. Jajodia that they are also smuggled and he is willing to pay the duty thereon. However, the department to discharge the initial burden cast on them to prove that the said goods are of foreign origin and smuggled. Therefore, the value of these items has to be excluded for determination of duty and consequential imposition of penalty. If that is done, the value for the purpose of determination of duty would come down from Rs. 2,78,25,987/- to Rs. 2,45,38,009/- and it is only on this value duty demand can be made. Penalty u/s 114A - section provides for imposition of penalty equal to the duty or interest determined in cases where the duty was not levied or was short-levied or the interest was not charged or paid or was part paid or the duty or interest was erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts. In the present case the charge of smuggling has been clearly established against the appellant. Therefore they are liable to penalty under the said section. However since the penalty has been imposed on the appellant under Section 114A equal to the duty demanded, the same would also undergo change depending on the revised duty determined. However, matter remanded back for re-determination of the value and quantum of duty and thereafter consider the quantum of penalty imposable under Section 114A - Decided against assessee.

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• Service Tax

• 2014 (6) TMI 314
  Cenvat credit of service tax - renting of immovable services - cenvat credit on input services used in the construction of immovable property - Held that:- prima facie assessee is entitled to the Cenvat credit of service tax paid on input services used in the construction of immovable property. Regarding duty demand - adjudicating authority has confirmed the demand based upon the bills raised by them instead of quantifying the same on the amount received by them. If the rent amount received is taken into consideration, the total duty liability would come to Rs.24,94,797/-. Out of the said demand, they have deposited Rs.8,36,521/- from their Cenvat credit account and Rs.4,94,245/- by cash. The same stands informed to the jurisdictional Supdt. under the cover of letter dated 18.10.2013. As regards the balance amount, he submits that their tenant had approached the Hon’ble Delhi High Court and subsequently Hon’ble Supreme Court and in terms of the interim order passed by the Hon’ble Supreme Court 50% of the service tax, required to be deposited. The same stands deposited by their tenant. As such, he submits that no more dues are required to be deposited in respect of the said demand - stay granted.

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• 2014 (6) TMI 313
  Discharge of service tax liability - renting of immovable property services - the period of 2007-08 to 2011-12 - Held that:- post October 2011, the appellant has started paying the service tax liability as per the Apex Court’s direction and for the period prior to October 2001, and the appellants service recipient M/s. Orpat Marketing Pvt. Ltd. has deposited 50% of the amount of the rent and executed a surety bond of 50%. He relies upon the letter written by the said M/s. Orpat Marketing Pvt. Ltd. for his proposition. On perusal of the records, we find it so. It seems that lessee is following the direction of Apex Court in its correct spirit, we find that the appellant has made out the case for the waiver of the pre-deposit of balance amounts involved - Stay granted.

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• 2014 (6) TMI 312
  CENVAT Credit - Management Consultancy Service, Maintenance and Repair Service and Renting of Immovable Property Service - Held that:- There is a need for fresh appreciation of Balance Sheet, Profit & Loss Account and documents and evidence which the appellants have produced to consider whether the tax liability arises prior to 1.6.2007 and whether reimbursable expenses can be considered as expenditure category, etc. Each and every submission made by the appellant is required to be dealt with and we find that both the lower authorities failed to do so. Since we find that the appellant’s claim that substantial income from ‘Renting of Immovable Property’ was not leviable to tax and further expenses like electricity charges, water charges, insurance and property tax of the building, etc. incurred should not suffer service tax, in our opinion, an amount of more than Rs. 10 lakhs deposited by the appellant is sufficient for the purpose of pre-deposit and since we feel that in view of the above observations, the matter should be remanded to the original adjudicating authority so that the evidence and documents produced by the appellants are appreciated properly and conclusion is arrived at. Accordingly, the impugned order is set aside and the matter is remanded to the original adjudicating authority, keeping all the issues open, with a request to ensure that all the submissions, documents and evidences made by the appellant are considered and dealt with and conclusion is arrived at in accordance with law. Needless to say that the appellant shall be given reasonable opportunity to present their case, documents and evidence. - Decided in favour of assessee.

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• 2014 (6) TMI 311
  Demand of service tax - Commercial and Industrial Construction Service - Whether the "Onshore Terminal" developed by M/s Reliance Industries Ltd at Pedda Gadimoga Village, near Kakinada, Andhra Pradesh could be considered to be as "Transport Terminal" for the purpose of exclusion from levy of service tax under the category of "Commercial and Industrial Construction Service." - Held that:- there is no arrival from different destination and dispersal to different destination. Movement of gas is unidirectional and is fixed. Here there is just one item. There is no arrival of freight. Extracted fluid is received. Processed dry gas is sent to distribution pipeline - Recovered MEG is processed and again pumped to sub-sea facility. TEG is used in the OT for processing. We find that the said Article speaks about various transport terminals but does not talk of transport terminal for gases. Thus, in our view, the concept of transport terminal is relevant for transportation by air, sea, road and not for transporting gases through pipelines. In any processing facility, material has to be received and dispatched but that would not make the processing facility as ‘Transport Terminal'. In our view, transportation is only incidental to the processing facility. After all the fluid received is for extraction of dry gas and thereafter the dry gas is required to be sold to its customers and therefore there has to be facility to receive and transport the same. Even the owner of the facility calls the facility as ‘Onshore Terminal' and does not call it ‘Transport Terminal'. This itself indicates that even the owner does not recognize the facility as ‘Transport Terminal'. We have no hesitation in holding that the facilities available at the onshore terminal at Gadimoga cannot be termed as ‘Transport Terminal'. There is no requirement that the transport terminal should be owned by a public authority alone. However, since we have held that the onshore terminal at Gadimoga cannot be considered as transport terminal, this argument though in favour of the appellant does not help in the present situation. Extended period of limitation - Held that:- Proviso to Section 73 has been invoked and penalty also has been imposed under Section 78 of the Finance Act. We find from the impugned order that the appellant was of the view that immediately on receipt of mobilization advance that the service tax is required to be paid and there have been exchange of letters between the appellant and their client about the same. However, later on instead of collecting the service tax from the customers, started requesting a comfort letter from their client which was also not received by them. Under the circumstances, it is a clear cut case where the appellant knew their service tax liability but still chose not to collect and pay, but started asking comfort letter. This is clear cut suppression of facts, contravention of provision of service tax law with willful intention and therefore the extended period is rightly invoked. Penalty under Section 76, Section 77 and Section 78 of the Finance Act, 1944 has also been correctly imposed. Demand alongwith interest and penalty confirmed - Decided against assessee.

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• 2014 (6) TMI 310
  Demand of service tax - erection, commissioning and installation - composite work contract for installing a new plant that involve fabrication, erection, commissioning as well as civil work - Held that:- Service Tax is not commodity taxation. When the fabrication work is very clear from the work order, that does not submit to any taxable entry as the law exists. Had the fabrication been brought to any taxable entry, Revenue would have a case. In absence of such taxable entry, the erection, Commissioning or installation does not embrace fabrication for bringing the appellant to the fold of Section 65(39a) of Finance Act, 1994. Therefore, on such preliminary observation of the law, the appellant should succeed when paras 2 & 3 of the show cause notice has not made any effort to bring out service element involved in Sl. No. 1, 3 & 6 of the work order to the ambit of taxation - since law does not warrant the commodity to be taxed under the provision of Finance Act, 1994 - demand set aside - Decided in favour of assessee.

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• 2014 (6) TMI 309
  Demand of service tax - Commercial and industrial construction service - Assessee contends that owner of the building carried out charitable activity for which the construction activity carried out by the appellant shall not be liable to service tax - Held that:- following the Board's Circular No. B2/8/2004-TRU, dated 10-9-2004 and also considering the time-bar issue pleaded, there shall be waiver of pre-deposit during pendency of the appeal - Stay granted.

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• Central Excise

• 2014 (6) TMI 308
  Refund claim - Unjust enrichment - price inclusive of duty of excise - maintaining uniformity of price - duty paid under protest - Held that:- Admittedly, till January 2001, the assessee was paying excise duty at a lower rate. For the months of January and February 2001, the assessee was forced to clear the goods under heading 2404.90 at a higher rate. This was done under protest. The assessee also established that the sale price of the goods, despite this change in the duty rate that the assessee charged from the consumers, remained the same. This aspect has been gone into by the Tribunal at a considerable length. In the impugned judgment, the Tribunal compared the different invoices for the period between January-February 2001 and immediately before that. The Tribunal found that despite assessee paying considerably higher rate of excise duty and correspondingly higher duties of special excise and additional excise duties, the price inclusive of taxes remained the same. This aspect the assessee established to the satisfaction of the Deputy Commissioner and the Commissioner also. Even these authorities did not dispute that despite increase in the Excise duty and corresponding increase in the additional duties, the goods were sold by the assessee to the consumers exactly at the same price as were being sold prior to January 2001. - considering additional material on record, the assessee, as held by the Tribunal, had succeeded in establishing that the burden of higher duty was not passed on to the consumers. The Deputy Commissioner and Commissioner both simply brushed aside the evidence on record by holding that merely because the price structure has not changed, the burden on the assessee cannot be stated to have been discharged. When we find that in addition to such constant price structure there were other factors having a bearing on the issue, the said authorities could not have rejected the refund claim. The assessee having discharged the burden of establishing the necessary requirement, if the Departmental authorities desired to examine the issue from any other angle or required additional material to satisfy whether the uniformity in the price structure is attributable solely to the assessee absorbing the additional burden of duty or on some other fortuitous circumstances independent of the question of the assessee absorbing such burden, the authority could and ought to have made further inquiries with the assessee. The decision of the Supreme Court in case of Allied Photographics India Ltd. (2004 (3) TMI 63 - SUPREME COURT OF INDIA) does have application to the case on hand, in view of other additional facts and circumstances, the Tribunal committed no error in allowing the assessee's appeal.Decided against Revenue.

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• 2014 (6) TMI 307
  Denial of refund claim - Bar of limitation - payment of duty under mistake of law - Held that:- Hon'ble Court has laid down that the suit cannot be instituted for refund of claim based on discovery of mistake of law and Section 72 of the Contract Act, 1932 and provisions of Section 17(1)(c) of the Limitation Act has no application in such a claim for refund. Further while dealing with the pending litigations, the Hon'ble Court provided for time to make such application seeking refund, however, it further ruled that if proceedings have already been taken for refund and the parties have failed, they would not be entitled to the benefit of the said direction. The suit filed by the plaintiff seeking refund of excise duty paid on blended yarn for a period 14.9.1966 to 15.3.1972 was not maintainable before the civil court and was clearly barred by limitation. As admittedly, the plaintiff had approached the Superintendent, Central Excise by way of application seeking refund and the Collector (Appeals) by way of appeal against the rejection of its application seeking refund and had failed - Following decision of Mafatlal Industries Ltd. v. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA] - Decided in favour of Revenue.

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• 2014 (6) TMI 306
  Denial of Cenvat credit - Bar of limitation - Revenue entertained a view that the appellant has taken credit on the GP sheets, which were not capable of being used in the manufacture of their final product. As such, the Revenue further entertained a view that the appellant has sold the said procured GP sheets and has used the other procured HR/CR sheets in the manufacture of their final product. - Held that:- Impugned orders stands passed by the lower authorities in terms of the remand proceedings by the Hon’ble High Court vide their order dated 21.8.2008. Ongoing through the said order of the Hon’ble High Court, I find that the appeal does not stand disposed of by the Hon’ble High Court on the merits of the case, as is clear from the re-produced part of the order, it stand remitted to the lower authorities, preliminary on the ground that the entire material collected by the Revenue was not supplied to the assessee. There is virtually no evidence produced by the Revenue inasmuch as no buyer of the GP sheets stands identified nor is there any documentary evidence to establish that the procured GP sheets were cleared by the appellant in the market. Further, the Revenue has also miserably failed to show as to from where the appellants have procured the HR/CR sheets. Admittedly, without the use of the raw materials, may it be GP sheets or HR/CR sheets, their final product cannot be manufactured. In the absence of any evidence produced by the Revenue, the burden of countering and rebutting the evidence does not get shifted to the assessee. The number of search conducted on the google is not indicative of a process being commercially viable or not. On one hand the adjudicating authority has observed that de-galvanisation exists and on the other hand he is rejecting the appellants stand that there is no technical literature to show that de-galvanisation actually exists. He has also observed that the Show Cause Notice has referred to and relied upon circumstantial evidences to show that it is not possible to use GP sheets in the manufacture of tractor component. The Revenue establishing a fact that in the normal course GP sheets are not used for manufacture of OE parts, cannot lead to inevitable conclusion that the appellants have not used the said GP sheets in the manufacture of their final product. This is specifically so as the Revenue has failed to produce any evidence on record to establish that the said GP sheets stand cleared by the appellant in the open market and also to establish that the appellants have procured the HR/CR sheets from any other source. Extended period of limitation - Held that:- Admittedly the credit on the GP sheets was being availed by the appellant by reflecting the same in the statutory records. The requisite returns were being filed with the Revenue along with invoices, which indicated the description of the material as GP sheets. The said invoices were being regularly defaced by appellant’s jurisdictional Central Excise authorities, who never objected to the use of the GP sheets in the manufacture of OE parts. The RT-12 returns filed by the appellants were also being finally assessed. In such a scenario, I really fail to understand as to how any mis-statement or suppression etc. with an intent of mala fide can be attributed to the assessee so as to justifiably invoke the longer period of limitation - Bar of limitation - Decided in favour of assessee.

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• 2014 (6) TMI 305
  Waiver of pre deposit - Held that:- matter was listed earlier also on several occasions i.e. 16/05/2012, 21/06/2012, 09/08/2012 and today. On all the occasions, none appeared on behalf of the applicants. In view of these observations, we find that the applicants have nothing to say in support of their stay applications - Conditional stay granted.

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• 2014 (6) TMI 304
  Area based exemption - Cash refund scheme - payment of education cess and S & H cess using BED Credit - Whether a manufacturer availing of exemption under Notification No. 56/2002 - CE - Held that:- manufacturer availing of notification 56/02-CE cannot utilize BED credit for payment of education cess and S & H cess as, it will amount to the indirect refund of education cess and S & H cess, which is not permissible. The payment of education cess and S&H cess through BED credit is in conflict with the scheme of this exemption which does not exempt the education cess and S&H cess and which is available only in respect of the duties mentioned in it subject to following of condition of para 1A of the notification. Thus, while the Cenvat credit of the various duties/taxes mentioned in Rule 3(7) (b) can be used only for payment of the respective duties/taxes, there is no such restriction for utilization of credit of other duties i.e. BED credit, AED (GSI) credit, etc. In our view, in case of a manufacturer availing of exemption under Notification No.56/02-CE, while the restriction on utilization of Cenvat credit of duties/taxes as mentioned in Rule 3(7) (b) would be applicable, there would be one more additional restriction on utilization of credit of duties/taxes other than those mentioned in Rule 3(7) (b), i.e. credit of BED, AED (GSI) etc. and this restriction is that this credit cannot be used for payment of duties not exempted under this notification, as, as discussed above, if this is permitted, this would result in refund of duties like education cess, S & H cess, NCCD etc. which is not permitted under this notification, while it is well settled law that what is not permissible directly cannot be allowed indirectly. Therefore, in order to ensure that an assessee availing of exemption under this notification does not end up availing this exemption in respect of education cess and S & H cess also, he cannot be allowed to use BED credit for payment of education cess and S & H cess, though this may be permitted under the provision of Rule 3(4) of the Cenvat Credit Rules, 2004. The provision of Rule 3(4) of the Cenvat Credit Rules are after all a facility and the extent to which the same are in conflict with the condition of Notification No.56/2002-CE, the same would not be applicable, as it is the condition of notification which would prevail. It is pertinent to note that education cess and S & H cess have been levied vide Section 91 of Finance Act, and 136 of Finance Act, 2007 respectively and the object behind this levy is to generate funds to finance and provide infrastructure for promoting education in the country. If the argument of the respondents is accepted, then by adopting the practice of paying education cess and S & H cess from the Cenvat credit (BED) the assessee would indirectly get the refund of aforesaid cess which is not permissible under law as held by the Guwahati High Court in the matter of Dharampal & Satyapal (2011 (8) TMI 99 - GAUHATI HIGH COURT). - A unit availing of exemption under Notification No.56/2002 –CE cannot utilize BED credit for payment of education cess and S & H cess which are not exempted under this notification - Extra BED paid through PLA on account of diversion of BED credit for payment of education cess and S & H cess would not be refundable under Notification No. 56/2002 - CE - Decided in favour of Revenue.

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• 2014 (6) TMI 303
  Waiver of pre-deposit of duty - availment of cenvat credit on inputs without receiving the input materials or processed materials from the job workers - equal amount of penalty under Section 11AC - Held that:- that none of the job workers were found to have been engaged by the applicant. The applicant did not dispute this allegation of the Department. The number of workers were only five, is also not in dispute. The inspection carried out by the Chartered engineer was in the presence of the Director, Shri Ashok Kumar Kar. Is also not in dispute. During investigation, the Director admitted that he would not issue any challan for sending goods to job workers and the goods after finishing were directly sent to customer’s premises from the job worker as is clear from the reply to question Nos. 17 to 20 respectively. The inspection of Chartered Engineer shows that the machines/machineries are old and rusted, there was very low consumption of electricity, workers as low as five in number and the diesel engine was not operating condition. Admittedly, the Director of the Company was present during inspection. Thus, prima-facie, it is revealed that the applicant indulged in irregular availment of cenvat credit on inputs without receiving the input materials or processed materials in their factory for manufa cture of finished goods and passed the same purported credit to various consignees in the guise of duty paid on their finished final products, when the goods were neither manufactured in their factory nor manufactured through job workers. The applicant did not follow the procedure prescribed under Notification 214/86– CE dated 25.3.1986. In these circumstance's , the applicant is not able to make out a prima– facie case for total waiver of pre–deposit. - stay granted partly.

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