TMI Tax Updates - e-Newsletter
June 15, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. LAW OF LIMITATION BINDS EVERYBODY INCLUDING GOVERNMENT.

   By: DR.MARIAPPAN GOVINDARAJAN

2. RECENT CHANGES IN CHAPTER V OF FINANCE ACT, 1994 .

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. RBI monthly Bulletin

2. Data on ECB/FCCB for the month of April 2012

3. Export Stood at US $ 25.68 Billion in May 2012.

4. CCI issues Order against Chemist & Druggist Association, Goa for following anti-competitive practices.

5. Index Numbers of Wholesale Prices in India (Base: 2004-05=100) Review for the month of May, 2012 .

6. Text of the Speech of the Union Finance Minister Delivered During his Meeting with the Chairmen of Public Sector Insurance Companies.

7. Gross Direct Tax Collection Figures for April-May 2012-13 is Up by 3.62 Percent at Rs. 52,232 Crore as Against Rs. 50,407 Crore in the Same Period in F.Y.2011-12.

Notifications

Customs

1. 39/2012 - dated 12-6-2012 - Cus

Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods.

Circulars / Instructions / Orders

Income Tax

1. 03/2012 - dated 12-6-2012

Supplementary Memorandum Explaining the Official Amendments Moved in the Finance Bill, 2012 AS REFLECTED IN THE FINANCE ACT, 2012.

Customs

2. 15/2012 - dated 13-6-2012

Review of Risk Management System (RMS) – regarding.

3. 16/2012 - dated 13-6-2012

Procedure followed for import of Indian vessels and filing of Import General Manifest, Bill of Entry – regarding.

Highlights / Catch Notes

Income Tax

• India-Japan DTAA: Liaison Office Not a Permanent Establishment Unless Activities Exceed Permitted Functions or Show Business Conduct.

  Case-Laws - AT : DTAA between India and Japan - Whether Liasion Office constitutes its Permanent Establishment - LO cannot be taken to be a PE unless its activities exceed the permitted activities or the department lays hand on any concrete material or evidence to state that any substantive business activity has been carried on from this place. - AT
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• Tax Dispute: Co-op Housing Society Challenges Expense Disallowance, Cites Mutuality Principle for Hall Rentals and Services Income.

  Case-Laws - HC : Principle of Mutuality - Co-operative Housing Society, deriving income for hiring of hall, catering services, commission etc - dis-allowance of expenses on ground that income is derived from “other sources” - dis-allowance of transfer fee - HC
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• Amalgamation Reserve Transfer Not Taxable as Benefit or Perquisite u/s 28(iv) of Income-tax Act.

  Case-Laws - AT : Income taxable under section 28(iv) – amalgamation - treatment of sum transferred by the assessee to its General Reserve - not in the nature of any benefit or perquisite and thus, not taxable u/s 28(iv) of the Income-tax Act, 1961. - AT
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• Court Rules Demolition and Repairing Charges Are Admissible as Revenue Expenditure for Assessee.

  Case-Laws - HC : Revenue or capital expenditure - "demolition charges" and the "repairing charges", were held to be admissible to the assessee.- HC
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• Section 40A(2)(a) of Income Tax Act Unjustly Invoked Without Evidence of Tax Avoidance Intent in Sister Concern Purchases.

  Case-Laws - AT : Purchases from sister concern - applicability of section 40(A)(2)(a) of the Act - The AO has not been able to bring any material on record to show as to how and in what manner the assessee intended to avoid payment of tax before invoking the provisions of Section 40A(2)(a) of the Act. - AT
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• Finance Act 2012: Key Amendments to Income Tax Regulations Explained in Supplementary Memorandum for Better Compliance and Efficiency.

  Circulars : Supplementary Memorandum Explaining the Official Amendments Moved in the Finance Bill, 2012 AS REFLECTED IN THE FINANCE ACT, 2012. - Circular
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• Court Rules Accrued Interest on Non-Performing Assets Should Be Deleted Following Companies' Liquidation Confirmation.

  Case-Laws - AT : Income - accrual - interest on sick advances - NPA - The apprehension or the situation foreseen by the assessee has been vindicated by the subsequent developments i.e. all the companies have gone into liquidation. Addition made on account of accrued interest income is directed to be deleted. - AT
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• Commission to Managing Director with 39.9% Shares Not Reclassified as Dividend Despite No Dividend Distribution.

  Case-Laws - AT : Commission to Managing Director holding 39.9% of shareholding - Distribution of dividends is one component. It does not give the meaning that if an assessee failed to distribute the dividend, then payment of any commission would take the colour of dividend - AT
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• Tribunal Invalidates Section 148 Notice; No Legal Basis for Action u/s 147 Based on Authority Directions.

  Case-Laws - AT : Validity of notice u/s 148 – When the particular direction/liberty has been quashed by the Tribunal such a direction no longer survives. no provision in law to take action u/s 147 under the direction of any authority or Court. - AT
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• Neon and glow sign installations are revenue expenses, not capital assets, due to their non-permanent nature.

  Case-Laws - HC : Capital vs revenue expenditure - by putting the neon signs and glow signs, no asset of permanent nature is created. Simply because self-life of such neon signs is more, may not be of any significance once - HC
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Customs

• Importing Indian Vessels: File Import General Manifest & Bill of Entry for Customs Compliance and Smooth Clearance.

  Circulars : Procedure followed for import of Indian vessels and filing of Import General Manifest, Bill of Entry – regarding. - Circular
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• Customs Sector Updates Risk Management System to Boost Efficiency and Compliance in Trade Operations.

  Circulars : Review of Risk Management System (RMS) – regarding. - Circular
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• Amendment to Notification 12/2012: Updates on Customs Duty Rates for Imported Goods Highlighted with Annotations and Alerts.

  Notifications : Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Notification
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Indian Laws

• Government Raises MSP: 16% Increase for Paddy, Up to 37% for Pulses and Oilseeds.

  None : Govt hikes paddy MSP by 16pc; pulses, oilseeds by up to 37pc
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• India's exports in May decreased by 4.16% to USD 25.68 billion.

  None : India's May exports declined by 4.16 per cent to USD 25.68 billion.
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• Delhi High Court affirms citizens' right to access info on President's donations under RTI Act.

  None : Under RTI Act, every citizen is entitled to know the donations given by the President of India. – Delhi HC
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Service Tax

• Third-party toll collection for NHAI is taxed under Business Auxiliary Services as per service tax rules.

  Case-Laws - AT : Business Auxiliary Services - business of toll collection - if NHAI engages somebody else to collect toll charges on its behalf and pays them remuneration, the service so rendered would appear to merit classification under 'Business Auxiliary Service'. - AT
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• Amendment to Rule 6(3) of Service Tax Rules, 1994: Excess Tax Payments Can Offset Future Liabilities.

  Case-Laws - AT : Adjustment of excess payment of service tax - Sub-rule (3) of Rule 6 of the Service Tax Rules, 1994 have been amended providing for adjustment of excess payment against future tax liability under rule 6(4A) and 6(4B) of the Service Tax Rules, 1994. - AT
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• Service Tax Exemption for RBI Extends to Agent Canara Bank, Ensuring No Tax on Direct RBI Activities.

  Case-Laws - AT : If RBI were to undertake the activity there would have been no question of levy of service tax. Therefore, we hold that the benefit of exemption available to RBI would be available to the agent i.e. Canara Bank. - AT
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Central Excise

• Timely Duty Payment Crucial: Non-Compliance u/r 8 (3A) May Lead to Seizure and Confiscation of Goods.

  Case-Laws - AT : Default in payment of duty - Rule 8 (3A) of C.E. Rules, 2002 - The major consequence is that such goods would have been liable to seizure and confiscation under Rule 25 of C. E. Rules. - AT
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• Section 11D of Central Excise Act: Two Conditions for Liability and Excess Duty Collection Explained.

  Case-Laws - AT : For invoking the provisions of Section 11D, two conditions have to be fulfilled viz. the person should be liable to pay the duty under Central Excise Act and the duty collected in excess by the said person represent the duty of Central Excise - AT
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• Imported Goods Excluded from Excisable Category; Excise Duty Not Payable u/s 11D.

  Case-Laws - AT : Imported goods are not excisable goods, hence amount collected in the name of excise duty is not payable u/s 11D - AT
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Case Laws:

• Income Tax

• 2012 (6) TMI 298
  Dis-allowance of bad debts - difference in accounting methodology - bad debts of 7.5 crores adjusted against available balance of 1.81 crore in provision for bad debts and balance directly to P/L/ a/c - Revenue dis-allowed claim on ground that whole bad debts should have routed through Provision for Bad debts - Held that:- Contention of assessee that as per sec. 36(2)(v), the bad debts can be debited only to the extent of the available balance in the Provision account, is accepted as the same is in accordance with the accounting principles. Even if methodology suggested by AO is accepted, net effect would have been same. Hence CIT(A) has rightly deleted the dis-allowance - Decided in favor of assessee. Reduction of excess provision back - partial dis-allowance u/s 14A - dividend income - Held that:- Matter restored to file of AO for fresh examination.

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• 2012 (6) TMI 297
  Dis-allowance u/s 14A - depreciation and other related expenses dis-allowed by apportioning them in the ratio of exempt share income from firm u/s 10(2A) to taxable income - Held that:- Instant case is that of the partner and therefore what is to be examined is whether the share income is excluded from his total income. The answer is obviously in the affirmative. In such a situation, provision contained in section 14A will come into operation and any expenditure other than depreciation incurred in earning the share income will have to be disallowed - Decided against the assessee. Depreciation being an expenditure or not? - Section 14A deals only with the expenditure and not any statutory allowance admissible to the assessee. A statutory allowance u/s 32 is not an expenditure, hence it cannot be subject matter of dis-allowance u/s 14A. See Hoshang D. Nanavati (2011 (3) TMI 89 (Tri)) - Decided in favor of assessee.

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• 2012 (6) TMI 296
  Whether amendment made to the provisions of section 40a(ia) by the Finance Act,2010, would apply with retrospective effect from 1.4.2005 or w.e.f 1.4.2010 - Held that:- Amendment to the provisions of Sec.40(a)(ia), by the Finance Act, 2010 is applicable retrospectively from 1.4.2005. Consequently, any payment of tax deducted at source on or before the due date for filing return of income u/s 139(1), can not be disallowed in terms of provisions of Section 40a(ia) - Decided against Revenue.

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• 2012 (6) TMI 295
  Capital Loss vs Business loss - loss on sale of Government securities treated as business loss - assessee, Co-operative bank registered under Gujarat Co-operative Societies Act and RBI, engaged in banking business had however considered the investments made in the securities as "Investments" and not as "stock in trade" - Held that:- It is undisputed that assessee has been treating for all intents and purposes the securities as its investments right from the date of its acquisition and it continues to treat it as investments. The C.B.D.T. Circular No.599 dt. 24.4.1991 has clarified that the securities held by Bank must be regarded as "stock in trade" meaning thereby "regarded" by whom i.e. by the Bank itself. Undisputedly in the present case the Bank in question has not regarded the "investment" as "stock in trade" but as "investment.", therefore loss on sale of investments has to be taken as capital loss and not business loss - Decided in favor of Revenue.

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• 2012 (6) TMI 294
  DTAA between India and Japan - Whether Liasion Office maintained in India under approval of RBI constitutes its Permanent Establishment in terms of Article 5 of said DTAA - assessee submitted that office was carrying on preparatory or auxiliary work but not undertaking any core revenue generating activity - Held that:- There is no dispute that India office is a fixed place. The dispute is whether the business of the assessee is being partly carried on through this office and in absence of any evidence on record with regard to commercial activity having been done by the assessee in India, the LO cannot be considered to be a PE. Further, income which otherwise neither arose nor accrued in India cannot be deemed to accrue or arise in India by looking merely an exclusionary clause (e). Once an activity is construed as being subsidiary or in aid or support of main activity, it would fall within the exclusionary clause. In view of the AAR ruling in case of K.T. Corporation, Korea(2009 (5) TMI 37 (AAR)) it is held that LO cannot be taken to be a PE unless its activities exceed the permitted activities or the department lays hand on any concrete material or evidence to state that any substantive business activity has been carried on from this place. Since no income accrues or arises to the assessee in India, no income can be deemed to accrue or arise to the assessee in India by invoking exclusionary sub-paragraph (e) - Decided against the Revenue

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• 2012 (6) TMI 293
  Dis-allowance u/s 40(a)(ia) - belated deduction of tax from April 2007 to February, 2008 in the month of March 2008 and deposit of same before the due date for filing the return u/s.139(1) - Held that:- It is not in dispute that that the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however, it was paid before the due date of filing the return specified in section 139(1) of the Act. On a similar issue, the Calcutta High Court held that amendment in sec. 40(a)(ia) is having retrospective operation in the case of CIT v. Virgin Creations(2011 (11) TMI 348 (HC)). Therefore, CIT(A) has rightly deleted addition on account of such dis-allowance - Decided in favor of assessee.

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• 2012 (6) TMI 292
  Principle of Mutuality - Co-operative Housing Society, deriving income for hiring of hall, catering services, commission etc - dis-allowance of expenses on ground that income is derived from “other sources” - dis-allowance of transfer fee - Held that:- Act recognizes the principle of mutuality and has excluded all businesses involving such principle from the purview of the Act, except those mentioned in clause (vii) of that section. The three conditions, the existence of which establishes the doctrine of mutuality are (1) the identity of the contributors to the fund and the recipients from the fund, (2) the treatment of the company, though incorporated as a mere entity for the convenience of the members, in other words, as an instrument obedient to their mandate, and (3) the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. By applying the aforesaid principles to the facts of the present case, it is held that dis-allowance of transfer fees stand deleted and since no part of other expenditure are in nature of capital expenditure, hence 100% of expenses are allowed as deduction. Also, net surplus of income over expenditure will not be taxable because the income of the assessee by way of interest from co-operative bank is exempt u/s 80P[ii] - Decided against the Revenue

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• 2012 (6) TMI 291
  Penalty u/s 271(1)(c) - foreign bank - dis-allowance of loss on ready forward transactions on ground of them being illegal - alleged concealment of income - Held that:- Dis-allowance made as speculative loss cannot be considered alone as concealment of income for considering the penalty u/s 271(1)(c) when the same amount can be set off to speculation profits as directed by the CIT (A) and the ITAT, the direction which was not complied by the Assessing Officer. Since all the particulars are furnished by assessee from out of the records and the Assessing Officer having not disturbed any of the computations as furnished by assessee, it cannot be stated that penalty was levied for furnishing inaccurate particulars. Also, at the relevant point of time, inspite of having the directions/circulars of the RBI, most of the Banks (not only the foreign banks but Indian scheduled banks including PSU Banks) were routinely and regularly involved in these transactions till the scam broke out. It cannot be stated that the assessee deliberately concealed the particulars. Thus, considering only the amount of speculation loss for quantification as concealed income is not correct according to the law. Limitation - As per the record, the ITAT order was dated 15/2/2007. Therefore, six months time limit for passing penalty order expires on 30/09/2007. The penalty order passed on 31/08/2009 was certainly barred by limitation. Also, limitation prescribed u/s 275(1)(a) does not extend the time limit till miscellaneous application was disposed off. Hence, both on merits of the case as well as on the ground of limitation, the order of the penalty cannot be sustained - Decided in favor of assessee

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• 2012 (6) TMI 290
  Percentage of completion method of accounting – Held that:- The assessee revised its basis of accounting from the invoicing schedule method to the percentage of completion method for computing revenues arising from the project management and onshore supply contract with effect from assessment year 1998-99 - the facts of this ground for the current year are mutatis mutandis similar to those of immediately preceding year wherein such ground has been decided by the Tribunal in assessee's favour, thus following the precedent uphold the impugned order on this issue – in favour of assessee. Profit in respect of offshore supplies – CIT held it not to be taxed in India – Held that:- It is a case of an offshore supply of equipment on CIF basis outside India for which payment was also made outside India and hence no income accrued or arose in India – in favour of assessee. Revenues from Project Management Contract – CIT(A) considered it to be taxed on net income basis - AO contested that the assessee was not engaged in any construction activity but only in providing services and hence the revenues from PMCs were liable to be considered u/s 9(1)(vii) being fees for technical services – Held that:- From the nature of services rendered by the assessee to MRPL, HPL and CFCL, it can be seen that the same are not at all related with the direct construction/ erection of units, the assessee's services are in the nature of managing or supervising the construction/erection of units and not directly entering into such activity - parties are residents of India and the amounts have been paid by them to the assessee, a non-resident which is in the nature of fees for technical services and such services have been utilized by them in business carried on in India or for earning any income from any source in India, thus the amount received by the assessee falls u/s 9(1)(vii) and hence will be deemed to accrue or arise in India - since revenues are found to be covered u/s 9(1)(vii), the natural consequence would be the attraction of section 44D - admittedly the assessee, a non-resident, is tax resident of Japan position under DTAA need to be examined - as such the expenses so claimed by the assessee have remained unverified in terms of Article 7 read with paras 7 and 8 of Protocol the impugned order is set aside and the matter is restored to the file of AO. Challenge charging of interest u/s 234B – Held that:- As decided in case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 (HC)] that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B – in favour of assessee.

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• 2012 (6) TMI 289
  Revision under section 263 by CIT(A) - period of limitation – Held that:- CIT(A) has rightly reckoned the period of limitation from the date of passing of the income-escaping assessment order under section 143(3), read with section 147 - as per the provisions of section 263(1), where an original order is rectified by an order of rectification, it ceases to exist and a rectified order comes into existence. - After the date of rectification, there remains no original order in existence - the assessment was made for the first time u/s 143(3) r.w.s 147 and there was no occasion before that to scrutinize the return and section 263(2) makes it clear that order passed u/s 143(3) r.w.s 147 can be revised. So, it becomes amply clear that the limitation will start from the date of assessment made u/s 143(3) r.w.s 147 i.e 24.12.2008 in this case and not from the date of intimation as has been claimed by the assessee-company - the revision order passed by the Commissioner of Income-tax is within the period of limitation. Income taxable under section 28(iv) – amalgamation - treatment of sum transferred by the assessee to its General Reserve - Held that:- The amount of Rs. 2,899.68 lakhs transferred by the assessee to its General Reserve was not generated out of trading operations. The surplus in fact arose out of acquisition of capital assets. - It was a transaction in the capital segment. In fact, there is no surplus. It was only an accounting notion. It was necessarily to be reflected in the accounts so as to tally the balance sheet. - Even if the surplus is attributed to a capital transaction, there again section 47(vi) provides that any surplus arising in such cases of amalgamation cannot be brought to capital gains tax, as the act of amalgamation is not treated as 'transfer' for the purposes of section 45. - The sum of Rs. 2,899.68 lakhs is not in the nature of any benefit or perquisite and thus, not taxable u/s 28(iv) of the Income-tax Act, 1961.

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• 2012 (6) TMI 288
  Capital gains - Valuation of plot as on 1.4.1981 - held that:- The CIT(A) and the Tribunal after noticing that there was transaction of sale of land by the Improvement Trust on 1.6.1981 and other comparable sale instances had accepted the fair market value of the land at Rs. 330/- per square yard as on 1.4.1981. Learned counsel for the revenue was unable to point out any error in the aforesaid finding which may warrant interference by this Court. - Decided in favor of assessee. Revenue or capital expenditure - Expenses incurred as "demolition charges" - held that:- the business of the assessee had continued till 31.3.1995 as the Assessing Officer himself had allowed business expenses till that date. - the assessee had to spend "demolition charges" in respect of structure that had caught fire and for which major repair was undertaken. - Therefore, the "demolition charges" and the "repairing charges", were held to be admissible to the assessee. - Decided in favor of assessee.

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• 2012 (6) TMI 287
  Purchases from sister concern - applicability of section 40(A)(2)(a) of the Act - held that:- The AO has not pointed out that the purchases made by the assessee from PIH were excessive having regard to the fair market value of the goods. He has also not disputed the rate at which the sales were made by the assessee. The fact that assessee provided discount by way of extra cases to its customers has also not been found to be false by the AO. The AO has also not been able to bring any material on record to show as to how and in what manner the assessee intended to avoid payment of tax before invoking the provisions of Section 40A(2)(a) of the Act. - Decided in favor of assessee. Rejection of book of accounts on the ground of declaration of loss - estimation of gross profit - held that:- The conclusion arrived at by the learned CIT(A) that the assessee company has been roped in merely to transfer the losses of the holding company is not based on any evidence or material. The learned CIT(A) further relied upon the rate of profit shown by other group companies but that cannot be a sole criteria to reject the assessee's books of account and then to invoke Section 40A(2)(a) for the purpose of disallowing expenses of purchases. - any estimation of gross profit at the rate of 13.73% is unwarranted. - Decided in favor of assessee.

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• 2012 (6) TMI 286
  Transfer pricing - Computing operating-margin (OP) - eimbursement of advertisement expenses - held that:- reimbursement of advertisement expenses by the AEs constitutes the OP to be included for the purpose of determining operating margin. Making adjustment to the arm's length price in respect of difference in functions performed, risks undertaken and the assets employed. - ad-hoc adjustment. - held that:- deduction by 20% is a reasonably accurate adjustment. Deduction u/s 35DDA - expenditure on Voluntary Retirement Scheme (the VRS) - held that:- the assessee has not discharged the burden that all the units constituted only one business. - it has not been proved that the closed business of manufacturing goods was a part and parcel of the overall business of the assessee. - the assessee is entitled to deduction of one-fifth of the expenditure u/s 35DDA as claimed. Legal and professional charges - Capital or revenue expenditure - held that:- although the expenditure grants benefit of enduring nature but it does not lead to creation of an asset and, therefore, it should be allowed in five years, as done in the case of the VRS payments. The AO is directed to allow 1/5th of the expenses in this year and balance in next four years in equal installments. Depreciation of assets - closer of the unit - held that:- neither the building nor the machinery or plant in Dharuhera unit were owned by the assessee or used by it on account of closure of the unit and transfer of the assets in this year. - the provisions contained in section 32 regarding ownership and user come into play. As the assessee is neither the owner of the assets nor the assets have been used in the business of the assessee, the assessee is not entitled to deduct depreciation. Advertisement and sales promotion expenses. - held that:- there is no allegation that any part of the expenditure relates to products in which the assessee is not dealing in the normal course of its business. The expenses by way of advertisement and sales promotion are revenue in nature. Addition on account of deposit of sales-tax under protest – Held that:- CIT (Appeals) was right in granting relief to the assessee Provision made by the assessee for import duty payable - held that:- this is merely a book entry. - the provision should be excluded for working out the OP in the case of the assessee.

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• 2012 (6) TMI 285
  Whether in a case where the Assessing Officer drops a proceeding under Section 147/148 of the Income Tax Act, 1961 after filing of return and on the basis of return then refund claimed in that return is required to be allowed to the assessee – Held that:- order passed by the Assessing Officer clearly indicates that the proceeding was dropped by the Assessing Officer on the basis of return submitted by the assessee and that return has duly been accepted by the Assessing Officer, Assessing Officer has not rejected the claim of assessee for refund while passing the impugned order, Revenue is required to refund the amount, the excess deposit of tax by the assessee, Commissioner of Income Tax committed error of law, in view of the fact that it failed to take note of the reason given in the order passed by the Assessing Officer and proceeded to decide the application of the assessee on assumption that it is a case of mere dropping of the proceeding, ignoring the fact why it has been dropped, writ petition is allowed and the respondents are directed to refund

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• 2012 (6) TMI 269
  Income - accrual - interest on sick advances - NPA - assessee-company, wholly owned by the Government of Kerala, engaged in the business of marketing of products manufactured by M/s. TTPL, advanced money to various other Government of Kerala undertakings on direction of Government of Kerala - non-accounting of interest income on ground of advances becoming sick - Revenue contended accounting of same since assessee was following the mercantile system of accounting - Held that:- Guidance Note on Accrual Basis on Accounting issued by the ICAI lays down that where the ultimate collection with reasonable certainty is lacking, the revenue recognition is to be postponed to the extent of uncertainty involved. In the instant case, the assessee did not account the interest income as there was uncertainty about its recovery. The apprehension or the situation foreseen by the assessee has been vindicated by the subsequent developments i.e. all the companies have gone into liquidation. Addition made on account of accrued interest income is directed to be deleted. See Brahamputra Capital & Financial Services Ltd v. ITO(2008 (4) TMI 361 (Tri)) - Decided in favor of assessee.

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• 2012 (6) TMI 268
  Principal of natural justice - High Court on petition of assessee directed Tribunal to disclose material collected by the Revenue in the course of various searches and surveys, connected with the dispute in question, which is not yet disclosed and which may be relied upon by the Tribunal - reference to Special bench - dissenting views of all the three members - Held that:- It has been noticed above that both the sides are at variance in reading the majority conclusion drawn by the three members of the earlier special bench. After going through such orders The majority view is in favor of the Revenue and against the assessee. As such, in so far as the tribunal is concerned, it cannot issue any direction to the AO to disclose the material in a particular manner or to a particular extent.

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• 2012 (6) TMI 267
  Commission to Managing Director holding 39.9% of shareholding - dis-allowance on ground that assessee has not distributed the dividend from the very inception and the amount of commission could be paid as a profit or dividend income - Held that:- Distribution of dividends is one component. It does not give the meaning that if an assessee failed to distribute the dividend, then payment of any commission would take the colour of dividend. The commission paid to managing Director is linked with the sales turnover of the assessee and to the performance of the directors. It has nothing to do with the shareholding pattern - dis-allowance held to be unjustified - Decided in favor of assessee. Admission of additional evidences - Rule 46A - first appellate authority deleted the addition made by AO after admitting and going through additional evidences - Held that:- Sub-rule (3) of Rule 46A suggests that first appellate authority shall not take into consideration any evidence produced under sub-rule (1) of Rule 46, unless the Assessing Officer has been given an opportunity to rebut the evidence taken on record. Since no opportunity was given to the AO, therefore, order is set aside on this issue and issue restored to the file of the Assessing Officer for readjudication.

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• 2012 (6) TMI 266
  Allowable expenditure on repair- the tribunal held that the expenditure of is capital in nature – Held that:- The CIT (A) and the Tribunal have considered the finding against the Assessee on the basis of the survey report of the Insurance Company with no opportunity was ever given to the Assessee to dispute the correctness of the said survey report held to be violation of principles of the natural justice - It is open to ITO to collect materials to facilitate assessment even by private enquiry but if he desires to use the material so collected, the Assessee must be informed of the material and must be given an adequate opportunity to explain it and controvert the contents of it – in favour of assessee. Determining the profits exempt u/s 80HH & 80-I - Mode of apportionment of expenditure – Held that:- As in assessment proceedings no details of expenses were furnished by the assessee to establish that the particular expenses were incurred in its particular unit out of its two units -thus in the absence of any details being made available by the Assessee the expenses incurred in the various heads are required to be treated for both the units - Tribunal attempt in order to arrive at a just figure of expenses of each unit the expenses to be bifurcated and divided in the ratio of turnover of both the units is acceptable- in favour of the Revenue.

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• 2012 (6) TMI 265
  Interest paid in respect of capital borrowed – borrowed capital is utilized for purchasing shares of the two companies claiming the amount as a deductible business expenditure – disallowance by Revenue as not a permitted deductions within the scope of Section 36(1)(iii) - Held that:- The tribunal which has reversed the decision of the assessing officer and the affirming order of the appellate commissioner has not recorded a positive finding as to what exactly was the business activity of the assessee and as to how the activity constituted a business activity and the borrowing also constituted an investment, which is in the nature of a capital investment for the purpose of business of the assessee - in the absence of a commensurate finding on the part of the tribunal remand the matter back for reexamination and to record a proper finding and then apply the legal principles.

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• 2012 (6) TMI 264
  Tribunal remitting the issue of claim of deduction u/s 10B to the file of the AO – Tribunal stated that CIT(A) has not followed the requirement of Rule 46A - assessee contested that all details have been furnished to the AO who was also given an opportunity in the course of appellate proceedings before the CIT(A) – Held that:- The documents that were placed before the CIT(A) related to Form 56G and the documents pertaining to local sale and export sale a certificate granted by the Export Commissioner as regards the separate location of the export unit - in the course of the appeal before the CIT(A), details in support of the various columns in Form 56G were placed before the Assessing Authority for his remarks and report - the order of the Tribunal shows that there is hardly any reference as to the fresh material which went unnoticed or which had not been placed before the Officer for offering his comments – absolute compliance of the provisions of Rule 46A (3)no justification in granting the order of remand - in favour of assessee.

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• 2012 (6) TMI 263
  Provisions of Section 40(a)(ia) is retrospective or not - Tribunal not considering the issue raised by the Revenue – Held that:- Referring to the circular of the Board 1/2009 dated 27.3.2009, particularly with reference to the amendment brought under the Finance Act, 2008 FOR Section 40(a)(ia) with retrospective effect from 1.4.2005, CIT (A) held that since tax deducted at source had been paid well before the due date for filing the return of income, the assessee was entitled to have the deduction - Since the Tribunal had gone only on the aspect of the actual deduction and had not gone into the applicability of the provisions of law considered by the CIT (A) for granting relief the proper course would be to remand the matter back to the Tribunal to re- consider - in favour of assessee.

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• 2012 (6) TMI 261
  Undisclosed income - Pursuant to the notice assessee filed return in Form No.2B declaring undisclosed income of Rs.3 lakhs. However, apart from this declared undisclosed income, the assessing officer made an addition of Rs.4,15,000/-. Even though the assessee made specific plea that out of Rs.4,15,000/- Rs.3 lakhs represents gift received from Non Resident Indians, Assessee not only failed to prove it but did not even pursue the contest against assessment – Held that:- with reference to the undisclosed income of Rs.3 lakhs which though claimed as a gift, the assessee miserably failed to prove it. Penalty u/s 158BFA (2) of the I.T.Act - penalty is mandatory at least on above amount Regarding balance amount of Rs.1,15,000/- Held that:- it is only an additional amount after rejection of cash flow statement. some leniency can be shown to the assessee in respect of this amount because with the tax and penalty and the interest for delay in payment of tax the assessee would otherwise end up paying more than the undisclosed income.

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• 2012 (6) TMI 260
  Unexplained cash credits - unexplained cash credits were treated as unaccounted income and assets in the hands of the assessee – Held that:- in Sandeep Kumar (2007 (4) TMI 59 (HC) ). No substantial question of law arising from the findings of the Tribunal because it is only a case of assessee's failure to establish the cash credits with acceptable evidence about the genuineness, capacity and creditworthiness of the donors and the details and the accounts of donors. Decided against assessee

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• 2012 (6) TMI 259
  Validity of notice u/s 148 – block assessment order u/s 158BC - Held that:- Hon'ble High Court has given liberty to issue notice as per law which means that if the notice fulfils the other conditions laid down in the Act, the Assessing Officer can issue notice, afresh. Otherwise also, the very section 147 of the Act empowers the Assessing Officer to initiate re-assessment action in respect of escaped income within the prescribed time, and no authority can stop him for doing so. after striking down the directions of the ld. CIT(A) and the liberty was only for issuance of notice u/s 148 of the Act which the Assessing Officer otherwise possesses. reasons recorded are the same and identical on the basis of which action u/s 147/148 was initially initiated. So, on the basis of same reasons which have already been quashed by the Tribunal, notice issued u/s 148 would not survive. When the particular direction/liberty has been quashed by the Tribunal such a direction no longer survives. no provision in law to take action u/s 147 under the direction of any authority or Court. appeal of the Revenue stands dismissed.

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• 2012 (6) TMI 258
  Reopening of the assessment - original assessment for assessment year 1992-93 was completed in this case on 31-3-1995 by making addition of Rs. 80 lakhs received by the assessee – Held that:- no finding or directions have been issued in assessment year 1992-93 to tax the same income in the assessment year under appeal which is also inherently impossible in view of the findings that it is capital receipt. provisions of section 150 of the Income-tax Act would not apply in the case of the assessee and since the reopening of the assessment is made after a period of six years from the end of the assessment year as per section 149 of the Income-tax Act, therefore, it is clearly time-barred. it is finally decided between the parties that such a receipt is a capital receipt; therefore, no income chargeable to tax would have escaped assessment. no addition of Rs. 80 lakhs can be made in the hands of the assessee. appeal of the assessee is allowed

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• 2012 (6) TMI 257
  Disallowance of expenses - Assessing Officer was of the opinion that the agreement did not contain any clause as per which the aircraft was to be utilized by the assessee for its guests and premier clients to avail of these facilities. Therefore, there was no commercial expediency in the said agreement. He was also of the opinion that the taxi operator was the subsidiary of the assessee and, therefore, this agreement was merely a device to make payment to the said taxi operator to reduce its tax liability – Held that:- disallowance under section 40A(2) could only be made if the revenue had discharged its burden of proving that the expenditure so incurred was excessive or unreasonable having regard to the fair market value of the goods, services or the facilities for which the payment was made. Officer to show that similar facilities were available to the assessee at a lower price or that the assessee had made excessive payments. Consequently, in the absence of the such findings the Tribunal concluded that the provision of section 40A(2) could not be invoked for disallowing the said expenditure. under the same agreement the payments made earlier have been held to be genuine accepting the genuineness of the agreement and treating the same as incurred in connection of the business. provisions of Section 40A(2)(b) of the Income tax Act are not attracted in the present case. appeal dismissed

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• 2012 (6) TMI 256
  Capital vs revenue expenditure - nature of the expenditure on account of advertising and marketing incurred by the assessee in different assessment years. The AO was of the view that the expenditure which was incurred on neon signs and glow signs was capital in nature as these signs are semi- permanent fixtures fixed at numerous retail outlets of the assessee and providing enduring benefit. Therefore, out of the total expenditure incurred on advertising and publicity, expenditure which was specifically attributed to the glow signs and neon signs (it was major component of advertising and marketing expenditure) was disallowed as the revenue expenditure – Held that:- In the case of Assam Bengal Cement Co. Ltd. (1954 (11) TMI 2 (SC)) , if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for bringing into existence an asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. glow signs boards have a short life, they decay with the effect of weather, and require frequent replacement. These observations may not be entirely correct having regard to the literature qua neo sign board produced by the learned counsel for the Revenue. However, this fact would not alter the ultimate decision as it is still obvious that no asset of permanent nature is brought into existence. by putting the neon signs and glow signs, no asset of permanent nature is created. Simply because self-life of such neon signs is more, may not be of any significance once we keep in mind the important aspect on which the expenditure is incurred i.e. on advertising and marketing. no question of law arises and these appeals are accordingly dismissed

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• Customs

• 2012 (6) TMI 284
  Non-fulfillment of export obligation in respect of advance licenses - demand of interest on duty liability arising on the goods, imported duty free under the advance licenses - Held that:- It is observed that appellant has moved to High Court against the order of Settlement Commission remanding case back to adjudicating authority. Since, High Court dismissed the petition while upholding interest liability, therefore, it is held that appellant is liable to pay the interest as directed by High Court - Decided against the assessee.

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• 2012 (6) TMI 283
  Classification - Indicating panel 4 zone with LCD, CTEC indicating panel with LCD I Loop Apollo Protocol (Non-expandable), Indicating panel with LCD Repeater - these have been classified by the authorities as fire alarm under Heading 8531 10 20 applying Interpretative Rule 2 – Held that:- no recourse can be taken to Interpretative Rule 2 when there is a specific entry in the Tariff according to which any goods can be classified applying Interpretative Rule 1 itself. Heading 8531 20 00 comes under the broad category of electric sound or visual signaling apparatus as specified against the main heading 8531 itself. Appeal allowed Classification - Ionization Smoke Detector - appellants have claimed classification under Heading 9027 80 10 – Held that:- process of ionization itself is based on principle of radiation and that radiation has to be naturally among one of the alpha, beta or gamma rays. The product is described by the appellant in their pamphlet as a smoke alarm and not as an instrument or apparatus for smoke analysis. Hence based on the exclusion notes given in Chapter notes to Chapter 85.31 and specific notes appended to Chapter 90.22, the above said goods will be squarely covered under CTH 90.22.90. ionized smoke detectors are appropriately classifiable under heading 9022 90 and not under Heading 9027 80 10 as claimed by the appellants

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• 2012 (6) TMI 255
  Shortage of goods found during stock verification - demand imposed - assessee contended that shortage of goods occurred due to fire accident - applicability of Rule 12 of SEZ Rules, 2003 and regulation 28 of SEZ (Customs Procedure) Regulations, 2003 - Held that:- Demand of customs duty foregone does not arise as the goods were in the factory premises when the fire accident took place. It is undisputed that departmental officers have been informed of such accident. Also Tribunal held in case of Satguru Polyfab Pvt. Ltd (2011 (2) TMI 403 (Tri))that when there is an accidental fire resulting in destruction of goods, it cannot be said that it amounts to use of goods for unauthorized operations. Similarly the second term namely failure to account for also cannot be applied since the shortage has been accounted for by fire accident and no evidence has been brought out by Revenue to show that goods have been procured or released elsewhere. Therefore, impugned order is set-aside - Decided in favor of assessee.

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• 2012 (6) TMI 254
  Challenging the Powers of first appellate authority to remand the matter back to adjudicating authority - Held that:- As the issue needs to be factually verified by the adjudicating authority as regards export obligation discharge certificate which were not submitted this exercise would be better left to the adjudicating authority, to be done with the documents available in the hands of the respondent as well as the authorities - against revenue.

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• Corporate Laws

• 2012 (6) TMI 282
  Petition for winding up u/s 433(e) r.w.s. 434 and 439 of the Companies Act, 1956 stating that the respondent is unable to pay its debts of US$ 300,000 - said amount has been advanced to duly authorized representative of company to arrange for stage show of particular film star which became due for refund on account of non-participation of said celebrity - Held that:- It is apparent that there are issues which require to be adjudicated in the presence of Mr. Farhath Hussain( representative). The defense set out by the respondent in the reply to the winding up proceedings cannot be said to be a moonshine or sham. However following the principle that "detailed investigation and adjudication of the dispute should be avoided", present petition and pending application are dismissed with liberty to the petitioner to raise its claim if not earlier raised in the already pending civil suit between the parties.

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• 2012 (6) TMI 281
  Winding up - application seeking to create charge over the Lease Hold rights of the property in favor of ICICI Bank ltd. - prior to the commencement of winding up proceedings, Mysore Kirloskar Limited (a company under liquidation) had leased 6 acres 29 guntas of land to the applicant – Held that:- without the permission of the Official Liquidator or the Lessor, the building is being constructed in violation of clause 14 of the lease agreement. The building can be constructed only with the prior intimation to the Official Liquidator or the Lessor. Further, clause 11 of the lease agreement provides for using of sports facilities like cricket ground, tennis court, squash court, golf course was permitted to use by the Lessee. Further, Lessee may also reside in the staff quarters within the residential colony. The intention of the applicant-society is to grab to maximum extent of the land. there is no bona fide in the claim made by the society and the applicant is not entitled for any reliefs in this application. Lease deed also appears to be contrary to section 531A of the Act. The transaction between the Lessor and Lessee is tainted with element of dishonesty. Company Application is dismissed.

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• 2012 (6) TMI 253
  Application u/s 446 of the Companies Act - prayer to direct respondent (one of the secured creditors), to furnish details of the interest accrued on the sale proceeds of assets, possession of which was taken over by respondent and to direct the respondent to deposit Rs. 5,00,000/- out of the sale proceeds of Rs. 75,00,000/- - Held that:- Since balance amount of Rs. 19,42,000/- is available with the respondent under the common head which is available to all the secured creditors as well as for meeting the other eventualities, a sum of Rs. 5 lacs from the said amount to be deposited with Official Liquidator for taking up further proceedings of liquidation of the Company by inviting claims from all concerned. Therefore, at this stage, the direction to furnish details of the interest earned is not necessary to be granted in this application.

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• 2012 (6) TMI 252
  Whether the provisions contained in sections 24, 24A and 26 of the Chartered Accountants Act, 1949 (for short ‘the Act’) operate as a bar against the prosecution of a person who is charged with the allegations which constitute an offence or offences under other laws including the Indian Penal Code (IPC) - a person who is not registered with the Institute of Chartered Accountants of India as Chartered Accountants, but he being not a Chartered Accountant impersonated in the public as such, and performed such functions which are being performed by a Chartered Accountant - After conducting investigation, the police filed challan in the Court of Chief Judicial Magistrate, Betul (‘the trial court’), who passed order dated 10-3-2003 for framing charges against the respondent under sections 419, 468, 471 and 472 IPC – Held that:- interpretation to section 195(1)(b)( ii), whereby the bar created by the said provision would also operate where after commission of an act of forgery the document is subsequently produced in Court, is capable of great misuse. appeals are allowed. The impugned order is set aside and the matter is remitted to the trial court for considering whether the allegations contained in the complaint lodged by Brij Kishor Saxena constitute any offence under the IPC

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• Service Tax

• 2012 (6) TMI 303
  Commercial Training or Coaching Centre - assessee contended that definition excludes many institutes or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force and their case fall within the exclusion clause - non-production of documents - Held that:- Since the documents now produced by the appellants were not before the original authority, they are required to be given a second chance to go before the adjudicating Commissioner and prove their case that they fall under the exclusion clause in the definition of Commercial Training or Coaching Centre. Accordingly, we set aside the impugned order and remand the matter to the adjudicating Commissioner.

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• 2012 (6) TMI 302
  Storage and warehousing service - non-payment of Service tax on storage and warehousing service rendered in relation to empty containers on ground of reasonable belief that applicants are not required to pay Service Tax on handling of empty containers - Held that:- Service Tax on storage and warehousing service was introduced in the year 2003. It is not in dispute that they were paying Service Tax on handling and storage of loaded containers. However, due to reasonable belief they could not pay Service Tax on empty containers and they did not have any mala fide intention to avoid/evade Service Tax which is supported by order of adjudicating authority. Appellants are able to show that there was reasonable cause for the failure to pay Service Tax on empty containers. Therefore the penalty imposed u/s 76 is set aside and appeal is allowed with consequential relief.

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• 2012 (6) TMI 301
  Demand of service tax - Business Auxiliary Services - business of toll collection on behalf of M/s. National Highway Authority of India (NHAI), in respect of the services rendered they received a fixed remuneration –Held that:- in the case of P.C. Paulose, Sparkway Enterprises (2011 (1) TMI 11 (SC)) activity would get covered under Section 65 clause 105(zzm) of the Finance Act, 1994. The provisions relating to constitution of Airport Authority of India and its collection of entry fees at the airport are more or less similar to the constitution of NHAI and its collection of toll charges. Therefore, if NHAI engages somebody else to collect toll charges on its behalf and pays them remuneration, the service so rendered would appear to merit classification under 'Business Auxiliary Service'. appellant directed to make a pre-deposit

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• 2012 (6) TMI 300
  Admissibility of input credit of service tax paid on the outward transportation of the goods – Held that:- in the case of ABB Ltd. (2011 (3) TMI 248 (HC))credit of service tax paid on transportation up to place of sale is admissible. sale is on FOR destination basis. Revenue's appeal rejected

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• 2012 (6) TMI 299
  Adjustment of excess payment made for one period in respect of tax liability for future period – Held that:- Sub-rule (3) of Rule 6 of the Service Tax Rules, 1994 have been amended providing for adjustment of excess payment against future tax liability under rule 6(4A) and 6(4B) of the Service Tax Rules, 1994. Even though these rules were not in force at the material time and therefore are not applicable to the case at hence, considering the spirit of the amended rules and the fact that the appellant is a public sector unit and the entire amount of tax has been paid by adjustment. However, appellant public sector unit is cautioned that they should follow the legal provisions strictly in future and any contravention will be seriously viewed. Appeal is allowed

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• 2012 (6) TMI 274
  Taxability of treasury services being provided by Bank where government does not have its own treasury and maintaining currency chests on behalf of Reserve Bank of India (RBI) - services of payment and receiving money on behalf of government in respect of various transactions - Revenue contended aforesaid services to be covered under definition of other financial services - Held that:- Exemption to the principal would be available to the agent also. For this purpose, since the agent is eligible for the exemption which is available to the principal in terms of the relationship with the principal of the agent and not because of exemption granted specifically to the agent or principal, we have to hold that the appellant is eligible for exemption. If RBI were to undertake the activity there would have been no question of levy of service tax. Therefore, we hold that the benefit of exemption available to RBI would be available to the agent i.e. Canara Bank. In view of the fact that appellant is held to be eligible for exemption as an agent of RBI, other issues are not considered at this stage. Limitation - Since question involves interpretation of law and facts in this case, therefore, we consider invocation of extended period is not called for. Penalty also set aside - Decided in favor of assessee.

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• 2012 (6) TMI 273
  Stay petition - secondary transport charges - denial of the abatement of 75% from the value of service available as per Notification No.13/2008, dt.1.3.2008 - tax paid before issuance of SCN - details not furnished before lower authorities - Held that:- Details viz worksheets, Chartered Accountant's certificate could not be furnished since the appellant closed down the business in 2010 itself and it took time to get the certificate prepared and also get the statement prepared so that there is no mistake on their part even though the calculations have been made and payment has also been made. Accordingly, the impugned order is set aside and the matter is remanded to original adjudicating authority, who shall decide the issue afresh after considering the worksheets submitted by the appellant

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• 2012 (6) TMI 272
  Penalty - authorized service station - liability of Service Tax on the incentive received from the bank, who provided finance to the purchaser of the vehicles - Revenue alleged suppression of facts - period involved June 2003 to June 2005 - Held that:- Issue has finally being clarified by the Board vide Circular No.87/05/2006-ST, dt.6.11.2006. Commissioner has rightly waived penalty relying upon decision rendered in case of Akar Motors vs CCE (2010 (8) TMI 213 (Tri)) wherein it is held that in situations where Board issued a clarification that there was doubts and clarifies the doubts, persons who are liable to service tax cannot be held to be liable to suppression of facts and imposition of penalty - Decided against the Revenue

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• 2012 (6) TMI 271
  Condonation of delay - appeal in this case is filed after a lapse of one year - extraordinary discretionary jurisdiction – Held that:- amount of service tax and penalty demanded is not very large. Further, in any case it is a question of payment of tax from one Central Government Department to another Central Government Department. not inclined to exercise extraordinary discretionary jurisdiction and, therefore, the petition is dismissed. petition is disposed of

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• 2012 (6) TMI 270
  Waiver of pre-deposit - Business Auxiliary Service and Cargo Handling Service – Held that:- one Agreement is in respect of extraction and transfer of coal, and the second one is in respect of transportation of coal within the mining area. As the Applicant is undertaking the activity of mining, which comes under the scope of Service Tax with effect from 1-7-2007, the transportation of coal within the mining is not subjected to Service Tax, pre-deposit of the Service Tax and penalties are waived and recovery of the same is stayed, Stay Petition is allowed

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• Central Excise

• 2012 (6) TMI 280
  Plea for waiver of pre-deposit of duty - demands being raised for fabricated steel structural which has been contended by revenue as the parts of stoplock gate - assessee contended that recently issue has been decided in favor of assessee - Held that:- It is found that that the Commissioner (Appeals), vide its impugned Orders dated 12.01.10 decided the issue in the Department's favour, whereas in his recent Order dated 04.04.12 he has decided the issue in favour of the Applicant. Therefore, the issue is debatable. Thus, prima facie, the case is in favour of the Applicant. Therefore, the requirement of predeposit is waived and recovery thereof, is stayed during the pendency of the Appeals.

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• 2012 (6) TMI 279
  Clandestine removal of goods - confirmation of demand on the basis of shortages of raw material and the hypothetical calculations of production of final product and clandestine clearances of the same - demand dropped by Commissioner(Appeals) on ground that charges of clandestine removal cannot be established on the basis of presumptions - Held that:- In view of difference in opinion of the members regarding whether the case of clandestine removal made out by Revenue is to be upheld or dropped, matter referred to Larger bench.

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• 2012 (6) TMI 278
  Application for compounding of offence rejected as there are demonstrable contradictions or inconsistencies or incompleteness –Held that:- Before the compounding of offence takes place, the penalty imposed is liable to be paid and the basic principle while filing application for compounding of offence is that the offence is admitted - Just because the appellant took a different ground in reply to show cause notice while making the application, it cannot be said that he has failed to disclose the material facts – as at the time of giving statement and at the time of replying to the show cause notice the appellant was working with the Company under the directions of same Company and the common thread as observed that the appellant acted as per the directions of the Managing Director thus it cannot be said that there was deliberate suppression of facts or non-disclosure of material facts. Rectification of mistake (ROM) before the Tribunal against final order – Held that:- If the appellant were to pursue the ROM, it would be for his benefit and the fact of filing of ROM and non-consideration of the same by the Tribunal has affected the appellant adversely and in no way benefitted him - non-pursuing of the ROM application and non-mentioning the fact of filing of application, cannot be said to be non-declaration of material fact or suppression and such non declaration or suppression in no way would benefit the appellant. Submission that the order passed by the Chief Commissioner was an administrative order and therefore is not appealable – Held that:- As decided in DHARAMPAL SATYAPAL LTD. Versus COMMR. OF C. EX., SHILLONG [2008 (3) TMI 86 (Tri)] since the Chief Commissioner will be exercising the power of the Commissioner while adjudicating the matter, there would be normally no dispute about the Appellate Tribunal hearing an appeal against such an Order. Moreover, we note that Section 35B(l)(c) of the Central Excise Act, 1944 provides an appeal to this Tribunal against an Order passed by the Central Board of Excise and Customs, which is a higher authority than the Chief Commissioner. Rejection of the request for compounding of offense on these grounds cannot be sustained - the impugned order is set-aside and the matter is remanded to the Chief Commissioner to decide the matter afresh.

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• 2012 (6) TMI 277
  Plea for waiver of pre-deposit of duty of Rs 2.03 lacs, penalty of Rs 8.31 lacs and penalty of Rs 1 lacs on Director - assessee contended that they have already paid a sum of Rs 7 lacs at the time of visit of the officers of DGCEI and could not deposit 50% amount of penalty directed by the Commissioner(Appeals), who dismissed their appeal for non-compliance with the provisions of section 35F - Held that:- It is found that Commissioner(Appeals) has not decided the issues on merits. Therefore the case is remanded to Commissioner(Appeals) for deciding the issue on its merits without insisting for any further pre-deposit.

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• 2012 (6) TMI 276
  Waiver of pre-deposit - whether debiting amount in the Cenvat Credit Account as pre-deposit cannot be accepted as a compliance with the condition of stay order – Held that:- in the case of Manak Moti Forgings (2010 (10) TMI 279 (Tri)) pre-deposit of duty amount by way of debit in the Cenvat Account is accepted as sufficient compliance with the provisions of Section 35F of the Central Excise Act, 1944. as the applicant has already paid the duty demand, pre-deposit of interest and penalty is waived and recovery thereof stayed. Commissioner (Appeals) has not decided the appeal on merits. Hence the impugned order is set aside and the matter is remanded to the Commissioner (Appeals). appeal is allowed by way of remand.

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• 2012 (6) TMI 275
  Demand of duty, interest and penalty - default in payment of duty remained continue beyond 30 days - party has paid an amount through PLA and through cenvat credit account as Central Excise duty - contravention to the provisions of Rule 8(3A) – Held that:- Actually Rule 8 (3A) says that the goods will be deemed to be cleared without payment of duty and all the consequences under "these Rules" will follow. The reference is only to the C. E. rules and not to the Cenvat Credit Rules, 2004. The deeming fiction will apply only for applying penal consequences under Central Excise Rules 2002. The major consequence is that such goods would have been liable to seizure and confiscation under Rule 25 of C. E. Rules. In fact Rule 8(3A) is drafted to enable this as a means to compel the assesse to pay his declared dues promptly by the due date or at least within thirty days thereafter. Non-payment of excise duty arises often in administration of excise levy. Show Cause Notices are issued in such cases as per provisions of Section 11A of the Central Excise Act to recover duty short paid. Normally such short-payment can be made good by paying duty through Cenvat credit as authorized by Central Excise Rules, 2002 and Cenvat Credit Rules, 2004. So there should be a reason why such payment cannot be accepted in this case. The reason being quoted is that this is a situation covered by Rule 8(3A) and the Rule prescribes that so long as the assessee is in default for any previous month payment through Cenvat credit is not a proper discharge of duty liability. This prohibition gets lifted the moment the default is made good along with appropriate interest on defaulted amount and normal situation is restored. Imposition of penalty under Rule 25 - In view of the decision of Gujarat High Court in the case of CCE Vs. Saurashtra Cement Ltd (2010 (9) TMI 422 (HC) ) penalty under Rule 27 is the appropriate penalty and reduce the penalty on the Appellants to Rs.5,000/-. Appeal is thus partially allowed by setting aside the duty demanded and reducing the penalty to Rs.5,000/-.

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• 2012 (6) TMI 251
  Dropping of demand raised u/s 11D of Central Excise Act, 1944 - Held that:- Lower authority have rightly dropped demand on the ground that for invoking the provisions of Section 11D, two conditions have to be fulfilled viz. the person should be liable to pay the duty under Central Excise Act and the duty collected in excess by the said person represent the duty of Central Excise as well as on the ground that no documentary evidence, to the effect that the excess amount collected on account of upward revision of price was representing Central Excise, has been brought on record - Decided against the Revenue.

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• 2012 (6) TMI 250
  Clandestine removal of goods - confiscation of goods held on ground that same had not been entered in RG-1 records - assessee justified non entry on ground that goods were in semi-finished condition and had to pass quality control - Held that:- Revenue has nowhere contended that the goods were of recent manufacture, hence appellant's stand that they were manufactured for last 3-4 years stands accepted. If that be so, allegations of clandestine removal without making their entry in RG-1 register cannot sustain. The visual examination by the officers who are not technical experts in MDF boards, cannot be made the basis for arriving at a different finding. It has very clearly come-up on records in the shape of deposition of various persons that the boards in question were still in semi-finished condition and were not ripe for making their entry in RG-1 register. Confiscation of the same is neither justified nor warranted - Decided in favor of assessee.

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• 2012 (6) TMI 249
  Refusal to approve the proposal for issue of CT-1 certificates in a lot of 25, on the ground that appellant failed to give quantity, description and value of goods, while making application - Held that:- Basically the Commissioner is requiring the appellants to indicate the quantity, description and value in each of the CT-1 certificates before approving the lot of 25 to be issued by the Superintendent. Therefore, it would be in the interest of justice to allow the appellants to apply to Commissioner with necessary details afresh - Matter remanded back.

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• 2012 (6) TMI 248
  Reversal of the CENVAT credit - the applicant has availed Cenvat Credit on the goods received in their factory and thereafter they issued debit Notes to the material suppliers - Held that:- AS the demand has been raised on the debit notes issued by the appellant on their supplier without any explanation to it - since now they have produced a table showing explanation it needs re-examination at the end of the adjudicating authority - remand the matter to the original adjudicating authority to examine the issue afresh.

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• 2012 (6) TMI 247
  Validity of Registration granted to the appellant under Rule 9 - succession - Held that:- As present appellant is carrying on the manufacturing activity and he is also paying the excise duty on manufactured goods no reason to cancel the impugned registration - set aside the impugned order and allow the appellants to carry on his manufacturing activity under the registration already granted.

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• 2012 (6) TMI 246
  Whether imported custom duty paid goods falling in any of the Schedules to the Central Excise Tariff Act, 1985 would come within the ambit of the expression "excisable good" used in the text of sub-section (1) of Section 11D of the Central Excise Act – Held that:- From the Entry 84 of the Union List in the Seventh Schedule and from Sec. 3 of the Central Excise Act, only those goods are subject to central duties of excise which are manufactured or produced in India. imported customs duty paid goods will not come within the ambit of "excisable goods" used in the text of sub-section (1) of Section 11D of the Central Excise Act as those goods are not manufactured or produced in India. imported customs duty paid goods falling under the Schedule of Central Excise Tariff Act, 1985, are excisable goods but duty is payable under sub-section (1) of Section 11D of the Central Excise Act, by the manufacturer or producer or importer. as the appellants are not a manufacturer or producer therefore, as per the provisions of sub-section (1) of Section 11D of Central Excise Act, duty is not payable.

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