TMI Tax Updates - e-Newsletter
June 18, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. Disallowance of input tax credit on the ground that seller is bogus or cancelled dealer-part II

   By: AMIT BAJAJ ADVOCATE

2. FORMS UNDER COMPANIES RULES

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Three Divisions of RBI’s Foreign Exchange Department to shift to New Delhi from July 15, 2014

2. RBI cancels Licence of Shri Shivaji Sahakari Bank Ltd, Gadhinglaj, Kolhapur, Maharastra

3. RBI Reference Rate for US $ and Euro

4. Financial Sector Legislative Reforms Committee Report (FSLRC): What to do and when? (Talk by Dr. Raghuram Rajan at the First State Bank ‘Banking and Economic Conclave’ held at Mumbai on June 17, 2014)

Notifications

DGFT

1. 82 (RE – 2013)/2009-2014 - dated 17-6-2014 - FTP

Export Policy of Onions.

Circulars / Instructions / Orders

FEMA

1. 143 - dated 16-6-2014

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism (CFT)/ Obligation of Authorised Persons under Prevention of Money Laundering Act (PMLA), 2002 – Amendment to Section 13(2) – Money Changing Activities

2. 144 - dated 16-6-2014

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism (CFT)/ Obligation of Authorised Persons under Prevention of Money Laundering Act (PMLA), 2002 - Amendment to Section 13(2) - Cross Border Inward Remittance under Money Transfer Service Scheme

Highlights / Catch Notes

Income Tax

• Trust Denied Section 12AA Registration for Serving Only Agrawal Community, Fails to Prove Eligibility Requirements.

  Case-Laws - HC : Registration u/s 12AA - benefit only for the Agrawal community - One restriction is where the trust or institution is created or established for the benefit of any particular religious community or caste - assessee having failed to discharge the burden - HC
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• Court Upholds Tax Additions for Firm Due to Lack of Hearing Opportunity and Absence of Partners' Independent Income Evidence.

  Case-Laws - HC : Failure to provide opportunity of being heard – Addition made in the hands of firm – no material had been produced to show that partners had independent source of income - additions confirmed - HC
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• Deemed Dividends u/s 2(22)(e) Apply Only to Registered Shareholders, Not Other Companies.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) of the Act – Transaction undertaken with other companies – section 2(22)(e) can be invoked only in the hands of the borrowers who were registered shareholders only - AT
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• Tax Authority's Reopening Based on Audit Objection Ruled Invalid, Reassessment Canceled by Commissioner of Income Tax (Appeals.

  Case-Laws - AT : CIT(A) was justified in holding that the reopening of the assessment, based on the audit objection, is neither legal nor valid, and consequently, cancelling the same - AT
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• Tax Tribunal Upholds Company's Right to Deduct Bad Debts and Advances, Influencing Income Tax Loss Treatment.

  Case-Laws - AT : Deletion of disallowance of bad debts/ advances written off – Allowability to deduct the losses and debts of subsidiary company – claim allowed - AT
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• Commissioner of Income Tax (Appeals) failed to provide opportunity to be heard, violating Section 251(2) procedural requirements.

  Case-Laws - AT : Jurisdiction of the CIT(A) to enhance the income - opportunity of being heard – the mandatory part of the requirement of the provisions laid down u/s 251(2) has remained to be complied - AT
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• Assessing Officer Cannot Alter Sale Consideration Value in Current Capital Gain Case Due to Lack of Specific Circumstances.

  Case-Laws - AT : Computation of capital gain – AO’s has the power to substitute the value of consideration in place of sale consideration only in special circumstances which are missing in the present case - AT
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Customs

• Court Examines Waiver of Pre-Deposit Rules for Misdeclared Muriate of Potash Exports, Impacting Farmers and Economy.

  Case-Laws - AT : Waiver of pre deposit - export of Muriate of Potash (MOP) of fertilizer - mis-declaring the goods - While interest of farmers has suffered, Exchequer has also suffered. Added to that, interest of the economy has also suffered. - AT
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• Refund Denial Overturned: Section 27 of Customs Act Not Applicable in Redemption Fine and Penalty Case.

  Case-Laws - AT : Denial of refund claim of redemption fine and penalty - provisions of Section 27 of the Customs Act are not applicable to the facts of the case - orders of the lower authorities holding that the refund claim is time barred, is not sustainable - AT
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Service Tax

• Chilling Milk for Transport Isn't Manufacturing: No Production or Processing Change, Just Spoilage Prevention.

  Case-Laws - AT : The process of chilling of milk to make it fit for long distance transportation without getting spoiled, which does not bring into existence any change whatsoever, would not amount to production or processing of the goods not amounting to the manufacture. - AT
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• Scaffolding Handle Conversion Not Taxed as Business Auxiliary Services; No Goods Production Involved Under Service Tax Law.

  Case-Laws - AT : Job work of converting rounds into handles which are a part of scaffolding - the activity of the appellant cannot be treated as Business Auxiliary Services (production of goods not amounting to manufacture) - AT
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Central Excise

• Late Duty Payment Violates Rule 8(3A) of Central Excise Rules 2002, Penalties for March 2008 Duty Payment in June.

  Case-Laws - AT : Utilization of lapse credit for payment of duty - duty for the month of march, 2008 was discharged beyond the period of 30 days in June, 2008 - consequence of violation of Rule 8(3A) of the Central Excise Rules, 2002 would flow - AT
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• Exemption Denied: Parts for Non-Conventional Energy Devices Not Covered Under Notification No. 3/2001-C.E.

  Case-Laws - AT : Exemption under Notification No. 3/2001-C.E. - Notification does not provide any exemption to parts supplied for use in non-conventional energy producing devices. - AT
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• Excise Authorities Cannot Deny Cenvat Credit for VAT Paid under Assam Laws Added Tax Rules.

  Case-Laws - AT : Cenvat credit - Inasmuch the said endorsement was in respect of VAT paid in the Assam Laws Added Tax Rules, such endorsement cannot be adopted by the Excise authorities for denial of Cenvat Credit of Excise duty paid on the same. - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 477
  Rejection of application for registration u/s 12AA of the Act – Object of the Trust – benefit only for the Agrawal community - Held that:- Section 12AA mandates that the Commissioner has to satisfy himself, after calling for documents or information from the trust, about the genuineness of the activities of the trust or institution and the objects of the trust – Relying upon Commissioner of Income Tax Versus M/s. Dawoodi Bohara Jamat [2014 (3) TMI 652 - SUPREME COURT] - Sections 11 and 12 are substantive provisions which provide for exemptions to religious or charitable trusts - Sections 12A and 12AA lay down the procedural requirements - Section 13 sets out the circumstances in which the exemption would not be available to a religious or charitable trust - One restriction is where the trust or institution is created or established for the benefit of any particular religious community or caste - assessee having failed to discharge the burden, the Tribunal was justified in confirming the decision of the Commissioner – thus, no substantial question of law arises for consideration – Decided against Assessee.

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• 2014 (6) TMI 476
  Failure to provide opportunity of being heard – Relevant materials could not be produced - Addition made in the hands of firm – Money belonged to individual partners or not - Held that:- The Tribunal was rightly of the view that no further evidence was furnished before the tribunal and it has been noted and an addition has been upheld by the Tribunal - The Tribunal has limited power of correcting any apparent mistake of record while deciding the miscellaneous application filed u/s 254(2) of the Act - the second plea of the applicant that it has not provided sufficient opportunity of hearing is not correct - the money introduced in the names of the partners was in fact earned by the firm from its business of Cold Storage and was its unaccounted income - no material had been produced to show that partners had independent source of income. The assessee-firm in spite of several opportunities having been provided to it to produce the partners so that confirmation of introduction of cash by them could be verified, had failed to comply with it - the assessee had not furnished the addresses of the farmers from whom Cold storage rent is alleged to have been received as the assessee had been carrying on the business of cold storage for the last at least more than 10 years - no receipts in support of the receipt of rent from the farmers had been produced – thus, the order of the Tribunal is upheld – Decided against Assessee.

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• 2014 (6) TMI 475
  Profits and gains from the purchase and sale of shares - Setting off of loss of derivatives and day trading of shares – e meaning of the expression “speculative transaction”. - Held that:- Where an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business – assessee is a share broker as already indicated - The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken or given - the entire transaction carried out by the assessee was within the umbrella of speculative transaction - There was no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares – Decided against Revenue.

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• 2014 (6) TMI 474
  Determination of total income – Disallowance of salary expenses – Held that:- CIT(A) called remand report from the AO/ ACIT on the written submissions of the assessee dated 6/6/2012 and the AO submitted a detailed report dated 6/8/2012 - the assessee submitted written submissions before the CIT(A) on 4/9/2012 and the assessee also submitted other relevant details of purchase, bills, supporting evidence and TDS Certificates before the authorities below but the same have not been considered while passing the impugned order and the assessment order - the appeal of the assessee has been dismissed on the basis of acryptic and mechanical order without considering the relevant remand report, submissions of the assessee and other relevant evidence and supporting documents - The AO also ignored relevant submissions, explanation and supporting evidence of the assessse while passing the assessment order - the issue of assessment for AY 2009-10 requires fresh adjudication at the end of AO – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 473
  Validity of reassessment u/s 148 of the Act – Notice u/s 143(2) of the Act not served – Held that:- No notice u/s 143(2) was either issued or served on the assessee – Following ALPINE ELECTRONICS ASIA PTE LTD. Versus DIRECTOR GENERAL OF INCOME TAX & OTHERS [2012 (1) TMI 100 - DELHI HIGH COURT] the reassessment is invalid for not serving mandatory notice u/s 143(2) on the assessee – also in PG. FOILS LIMITED Versus INCOME TAX SETTLEMENT COMMISSION AND ANOTHER [2008 (2) TMI 210 - MADRAS HIGH COURT] it has been held that the observation of settlement commission in the case of another person to which assessee was not a party could not form basis of reason to believe for reopening of assessee’s assessment without inviting objections or explanation from assessee and deciding the same on merits uninfluenced by said observation of Settlement Commission - CIT(A)’s direction as far as assessee is concerned has no legal force and cannot be a reason for reopening the assessment - there is no other material available on record with AO to reopen the assessment - the reopening of assessment is bad in law. Change of opinion - Held that:- Following Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the AO has exercised opinion – AO made the addition u/s 2(22)(e) - Thus, taking a different view amounts to change of opinion - the reassessment based on change of opinion is bad in law and liable to be set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 472
  Deletion of commission income received – Held that:- The assessee is following AS-9 and AS- 29 - In the Accounting Standard-9 issued by the ICAI provides that Revenue is recognised in a transaction involving rendering of services either under the completed service contract method or under the proportionate completion method - the work of commissioning was not completed in the previous year - amount received by the assessee included remuneration towards the services to be provided during extended warranty support also - assessee had to support during three years warranty period. CIT(A) rightly held that the remuneration received for extended warranty period cannot be considered as income - assessee would legally claim the amount only after the rendering the services - receipt was relatable to a particular period in future, it would fructify and mature into income during that period and not earlier - assessee has been following this principle of recognizing revenue in the past also - when the assessee has been following AS-9 and AS-29 and has been following consistent system of accounting, there is no need to interfere with the assessee’s method of accounting - Relying upon Commissioner of Income Tax Versus M/s Excel Industries Ltd. and Mafatlal Industries P. Ltd. [2013 (10) TMI 324 - SUPREME COURT] - there is no case of making the addition in the hands of thee assessee – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 471
  Deemed dividend u/s 2(22)(e) of the Act – Transaction undertaken with other companies – Held that:- The AO has passed an ambiguous order - amount advanced by the assessee to various group company and concerns of M/s Sammag Group are treated as deemed dividend u/s. 2(22)(e) of the Act, and taxed in the hands of the recipients for advance on prorata basis and substantive addition shall be made in the hands of the registered and beneficial shareholders on substantive basis by seeking or resorting to the appropriate action, as per the provisions of the Act - AO has erred in understanding the provisions of the Act - Section 2(22)(e) does not contemplate the addition in the hands of the lenders rather it provides for addition as deemed dividend in the hands of the borrowers - Furthermore, as expounded by the Special Bench of the Tribunal in ACIT vs. Bhaumik Colours P Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] - section 2(22)(e) can be invoked only in the hands of the borrowers who were registered shareholders only - there is no basis of making assessment as deemed divided u/s 2(22)(e) of the Act in the hands of the assessee on protective basis - CIT(A) is correct in holding that the addition u/s 2(22)(e) in this case cannot be made in the hands of the assessee – Decided against Assessee.

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• 2014 (6) TMI 470
  Validity of reopening of assessment u/s 147 of the Act – Reason to believe - Held that:- CIT(A) rightly held that the AO has accepted the income returned u/s 143(3) of the Act, after examination of all the relevant material, such as agreement/cancellation of agreement - the AO had no reason to believe that there was escapement of income to initiate proceedings u/s 147 of the Act – Relying upon CIT V/s. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - mere change of opinion cannot be a reason to reopen the assessment - the AO has rightly taken the consideration of Rs.20 lakhs received by the assessee from M/s. Balaji Construction Company under the head ‘capital gain’, and gave benefit u/s 54EC in the original assessment - CIT(A) was justified in holding that the reopening of the assessment, based on the audit objection, is neither legal nor valid, and consequently, cancelling the same - Decided against

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• 2014 (6) TMI 469
  Difference in ALP determination - Transfer pricing adjustment - Incentive expenditure offered as discount need to be excluded from TP adjustment - the AMP attributable expenditure which is the amount received from AE, YMC, Japan by way of reimbursement and allowed by the TPO - Expenditure incurred on dealers meet cannot be held as advertisement expenses. Selection of Comparables – Held that:- comparables of Scooters India Ltd., is to be excluded for bright line test as it deals in manufacturing of three wheelers only & not 2 wheelers – also, comparables - LML Ltd. and Kinetic Motor Co. Ltd. should not have been excluded as they operate in the same field of manufacturing 2 wheelers, as done by assessee - the entire TP adjustment will stand deleted. Depreciation on computer peripheral – Held that:- Following COMMISSIONER OF INCOME TAX Versus BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [2010 (8) TMI 58 - DELHI HIGH COURT] - Computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system -- the computer accessories and peripherals cannot be used without the computer - they are the part of the computer system, they are entitled to depreciation at the higher rate of 60% - Decided in favour of Assessee.

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• 2014 (6) TMI 468
  Deletion of disallowance of bad debts/ advances written off – Allowability to deduct the losses and debts of subsidiary company – Separate legal entity – Held that:- The fact about FBII having become financially unviable due to exigencies mentioned have not been disputed by the AO - The fact that assessee advanced amount in its books of account which has been accepted by the department and the amounts have been actually written off as bad debt are clearly allowable u/s 36(1)(vii) - in any case it becomes a business loss of the assessee – thus, there was no infirmity in the order of CIT(A) – Decided against Revenue. Addition on discontinued operation - Pharma division sold under slump sale – Held that:- The facts have not been disputed by the AO - The liabilities qua the sundry creditors have been disallowed on a misconception that they were provided in the business transfer agreement whereas assessee has demonstrated that it is part of the business transfer agreement which has been properly appreciated by the CIT(A) - The issue about the amounts having been transferred from the assessee’s pharma division carried out in the name of Vita Life (pharma division) and subsequent payments are also demonstrated in the books of account which have been duly verified - the relief has been granted after proper verification of the facts, there was no reason to interfere in the finding of CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 467
  Deletion of disallowance of deduction u/s 80IC of the act – Held that:- Following ACIT, Central Circle 2, New Delhi Versus M/s. Wings Pharmaceuticals Pvt. Ltd. [2014 (4) TMI 530 - ITAT DELHI] - the value of old machinery is not more than 20% - It has also returned a finding that the assessee has complied with the provisions of the Act for its claim of deduction u/s 80 IC of the Act - no change in facts or law has been pointed out - the order of the CIT(A) is upheld in allowing deduction u/s 80 IC of the Act – Decided against revenue. Restriction of disallowance u/s 14A of the Act – Held that:- The assessee is found to have made a disallowance in returning its income - The disallowance was worked out in terms of Section 14A of the Act - The Assessing Authority made total disallowance which also included the aforesaid disallowance made by the assessee himself - In result the CIT(A) is found to have upheld the disallowance in addition to the disallowance already made by the appellant himself in the computation of income filed with the return of income - No infirmity has been pointed out by the Revenue in appeal in the findings returned and conclusion reached by CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 466
  Validity of order u/s 147 of the Act – Held that:- Neither before AO nor before ld. CIT(A), the assessee was represented - The assessee in the additional grounds of appeal has assailed the assessment order on the ground of service of notice u/s 148 and also u/s 143(2) and 142(1) which goes to the very root of assumption of jurisdiction keeping in view the principles of natural justice – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of Assessee.

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• 2014 (6) TMI 465
  Jurisdiction of the CIT(A) to enhance the income - Show cause notice not served u/s 251(2) of the Act – opportunity of being heard – Held that:- Though the CIT(A) has noted about the issuance of notice u/s 251(2) on 20/1/2011, but it does reflect from the first appellate order as to whether this notice was served upon the assessee or not - The very object of the provision for issuance of show cause notice before the proposed enhancement is to afford opportunity of being heard to the assessee - the mandatory part of the requirement of the provisions laid down u/s 251(2) has remained to be complied – thus, the matter is to be remitted back to the CIT(A) for fresh adjudication as to ensure that the show cause notice for the enhancement has been duly served upon the assessee – Decided in favour of Assessee.

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• 2014 (6) TMI 464
  Rejection of order u/s 143(3) of the Act – Admission of additional evidence under Rule 46A of the Rules – Held that:- Before the AO assessee has not filed confirmatory letter and other evidence to prove the genuineness of the deposits - additional evidence was filed before the CIT(A) in order to prove the genuineness of the deposits – there was no iota of evidence that the additional evidence was ever confronted to the AO before taking cognizance of the same for adjudicating the appeal filed before him - additional evidence were filed for the first time before the CIT(A) and it was never confronted to the AO for his comments or for remand report and the evidence was taken into account by the CIT(A) while deleting the addition made by the AO - there is a clear violation of the provisions of rule 46A of the Rules – the order of the CIT(A) suffers from infirmity and it is not valid in the eyes of law – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for re-adjudication – Decided in favour of Revenue.

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• 2014 (6) TMI 463
  Deletion of disallowance u/s 40(a)(ia) of the Act – TDS not deducted - Payment made to foreign commission agents – Held that:- Following Income-tax Officer, Co. Ward-II(1) Versus Faizan Shoes (P.) Ltd. [2014 (1) TMI 440 - ITAT CHENNAI] – sales commission paid by the assessees to non-residents are not chargeable to tax in India, therefore provisions of section 195 are not applicable - assessees paid sales commission to its nonresident agents for the services rendered by them outside India and the sales commission is not chargeable to tax in India so as to deduct TDS on payments u/s 195 of the Act – thus, the order of the CIT(A) in deleting disallowance made u/s 40(a)(ia) of the Act is upheld – Decided against Revenue. Restriction of disallowance to 50% on the 15% disallowance – Held that:- CIT(A) was rightly of the view that the ledgers, vouchers, etc. have also been produced during the appeal hearings and on a random test check on the same was largely found to be in order - the ad-hoc addition made by the AO of 15% of such expenses appears to be on the higher side – thus, there was no reason to interfere with the order of the CIT(A) in restricting disallowance to 50% of 15% - Decided against Revenue. Deletion of interest u/s 234B and 234C of the Act – Held that:- CIT(A) rightly held that charging of interest u/s 234A, 234B, 234C & 234D are mandatory and he has directed the AO to re-compute correct interest u/s 234B & 234C of the Act while giving effect to the order – Decided against Revenue.

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• 2014 (6) TMI 462
  Computation of capital gain – AO’s power to substitute the value of consideration in place of sale consideration - Held that:- .Once it is found that shares are sold at a particular price it is not possible for AO to disturb the figure,without bringing material facts that contradict the calculation made by the assessee. In our opinion FAA has analysed the provisions of capital gain tax in right perspective. There is no doubt that in certain circumstances, sale-price of shares can be substituted by the AO for determining the capital gains/loss. But, in the case under consideration those circum -stances were missing. Relying upon Commissioner Of Income-Tax, West Bengal, And Another Versus George Henderson And Co. Ltd. [1967 (4) TMI 18 - SUPREME Court], capital gain/loss arising on sale of shares has to be treated in a special manner. Act provides different treatments for sale of shares and exchange /otherwise transfer of shares – Decided against Revenue.

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• Customs

• 2014 (6) TMI 480
  Waiver of pre deposit - Penalty u/s 114 - export of Muriate of Potash (MOP) of fertilizer - mis-declaring the goods as OWC (drilling chemical additive) - reconsideration of stay order as per the direction of high court - held that:- Prima facie, the goods attempted to be exported were MOP as exhibited by report of two laboratories and other material facts and evidence on record. The offending goods were notified to be prohibited goods Goods defined to be prohibited under section 2 (33) of the Customs Act 1962 were when attempted to be exported, that renders such goods to be confiscated absolutely. Appellant had failed to satisfy the investigation as to whether it had procured OWC from the seller. Two testing laboratories opined against appellant exhibiting the goods attempted to be exported were MOP. While interest of farmers has suffered, Exchequer has also suffered. Added to that, interest of the economy has also suffered. While financial hardship is plea of appellant in one hand, protection of interest of Revenue is of paramount importance on the other. - it may be said that the appellant causing serious prejudice to Revenue making attempt to export MOP, does not appear to unduly suffer by present predeposit order. - appellant to make pre-deposit Rs. 20.00 Lakhs (Rupees twenty lakhs) as against earlier order for making pre-deposit of Rs. 25.00 lakhs - stay granted partly.

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• 2014 (6) TMI 479
  Denial of refund claim of redemption fine and penalty - Reduction in quantum of fine and penalty - Bar of limitation - Held that:- Section 27 of the Customs Act, 1962, deals with the refund claim arises out of duty and interest. The Section 27 ibid does not talk about the refund of redemption fine and penalty. Therefore, the provisions of Section 27 of the Customs Act are not applicable to the facts of the case. Therefore, the orders of the lower authorities holding that the refund claim is time barred, is not sustainable - Decided in favour of assessee.

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• 2014 (6) TMI 478
  Merchant Overtime Tax Charges (MOT) - Jurisdiction - Whether for service of Customs, Excise Officers at the appellant factory for supervision of sealing of export consignments during working hours, MOT is chargeable under the Customs (Fees for Rendering Services by the Customs Officers) Regulations, 1998 or not - Held that:- The Merchant Overtime Regulation mentioned above have been framed by the Board under Sections 157 and 158 of the Customs Act, 1962 and the disputes regarding MOT have to be decided in terms of these regulations. In terms of the provisions of Section 128 of the Customs Act, appeal to Commissioner (Appeals) can be filed by any person aggrieved by any decision or order passed under this Act by an officer lower in rank than the Commissioner of Customs. Therefore, the decision of Assistant Commissioner on dispute relating to MOT chargeable under Customs Regulation has to be treated as a decision taken by the Assistant Commissioner in terms of the Customs Act which would be challengeable before Commissioner (Appeals). The dispute regarding MOT in this case is different from the dispute as to whether the establishment cost of the officers for the whole year is recoverable for their deployment at Customs Bonded Warehouse. Order passed by the Commissioner (Appeals), dismissing the appeal for the lack of jurisdiction is not correct. - Following decision of Reliance Industries Ltd. v. Commissioner of Central Excise, reported in [2013 (10) TMI 675 - CESTAT AHMEDABAD] - Matter remanded back.

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• Service Tax

• 2014 (6) TMI 493
  Demand of service tax - Business Auxiliary Service - chilling of milk to temperature below 50Celcius for M/s. SZDUSS Ltd - Held that:- mere chilling of milk to temperature below 50Celcius for the purpose of its long distance transportation, does not amount to production or processing of goods, as there is no permanent or temporary change in milk other than lowering of the temperature by the process of chilling of milk, due to which it can be transported over long distance without getting spoiled. The Apex court in the case of Commissioner Income Tax Vs. N.C. Budharaja & Co., reported in [1993 (9) TMI 6 - SUPREME Court] has held that word production, when used in juxtaposition with word ‘manufacture’, takes in bringing into existence new goods by a process, which may not amount to manufacture. Therefore ‘Production’, there must be some change in the raw-material subjected to process, though by that change no new product with distinct characteristic, commercial identity and usages has emerged. The process of chilling of milk to make it fit for long distance transportation without getting spoiled, which does not bring into existence any change whatsoever, would not amount to production or processing of the goods not amounting to the manufacture. We also find that earlier, the Commissioner (Appeals) on this very issue had taken view that chilling of milk is not Business Auxiliary Service covered by section 65(19)(v) of the Finance Act, 1994. In view of this we hold that impugned order is not sustainable - Decided in favour of assessee.

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• 2014 (6) TMI 492
  Demand of service tax - Business Auxiliary Services - Job work of converting rounds into handles which are a part of scaffolding - Held that:- appellant had intimated the department about availment of exemption under notification no.214/86-CE and also the principal manufacturer had given an undertaking under this exemption notification to use the job work goods in the manufacture of finished products which would be cleared on payment of duty. It is clear that the department itself has accepted the appellant’s activities as manufacture. Moreover subjecting the rounds to the process of cutting, bending, threading, heat treatment, shot blasting, as a result of which, a part of scaffolding item ‘Handle’ emerges, would amount to manufacture. Therefore, the activity of the appellant cannot be treated as Business Auxiliary Services (production of goods not amounting to manufacture). Moreover, even if, it is treated as service, when it is not denied that the job-work goods were returned by the appellant to the principal manufacturer, the exemption under Notification No.8/2005-ST dated 1.3.2005 cannot be denied on the ground that there is no evidence that the goods produced were used by the principal manufacturer in or in relation to the manufacture of final products. In view of this, the impugned order is not sustainable. The same is set aside - Decided in favour of assessee.

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• 2014 (6) TMI 491
  Waiver of pre-deposit - tour operator service - domestic and international tour packages - export of services - valuation - Held that:- According to the table furnished by the petitioner the tax liability component on domestic tour packages (after including the amounts received towards air tickets) is Rs.2,28,643/-, on international tour packages (within the normal limitation period) Rs.2,06,116/- and penalty of interest thereon. - assessee directed to deposit Rs. 10 lakhs (Rupees Ten lakhs), to cover the prima facie liability of tax, interest and penalties on the aforesaid two components of the taxable service. - stay granted partly. Refund of excess pre-deposit - Revenue recovered Rs.29,53,000/-. High Court directed the revenue that it is willing to permit Revenue to retain 50% of the said amount provided Revenue refunds the balance of 50% i.e. Rs.14,76,500/- - Held that:- pursuant to the order of the Karnataka High Court [2013 (6) TMI 644 - KARNATAKA HIGH COURT], Revenue had refunded Rs.14,76,500/- to the assessee. In the light of our prima facie analysis of the petitioner's liability and the conditional order of pre-deposit and stay of further proceedings pursuant to the adjudication order, as mentioned earlier herein, we direct Revenue to refund to the assessee Rs.4,76,500/- within two weeks from the date of this order - Decided in favour of assessee.

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• 2014 (6) TMI 490
  Activity undertaken for plying the buses, inter-State and intra-State - Contract carriage permit - Demand of Service Tax - exemption Notification No. 20/2009-S.T., dated 7-7-2009 - Held that:- activity undertaken by the appellants was exempted by Notification No. 20/2009-S.T., dated 7-7-2009 and the retrospective effect was granted to the exemption through Section 75 of the Finance Act, 2011 and the same is applicable from 1-4-2000. Therefore, the activity undertaken by the appellants is not chargeable to Service Tax with effect from 1-4-2000 and admittedly, in this case the period involved is 1-4-2000 to 31-3-2004. Therefore, no demand can survive - Decided in favour of assessee.

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• 2014 (6) TMI 489
  Waiver of pre-deposit - Cenvat credit on various input services - Held that:- Applicant has a strong case in their favour in respect of outward courier services, Rent-a-cab services and Tour and Travel services on the basis of decision of the Tribunal and High Court cited above. I find that the Architectural Consultancy service which is used for guest houses and conference prima facie is not connected to the manufacturing of final product - stay granted partly.

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• Central Excise

• 2014 (6) TMI 488
  CENVAT Credit - Penalty u/s 11AC - Held that:- demand to be barred by limitation. The credit was availed by duly reflecting the same in the Central Excise records, in the month of June 2004, whereas the show cause notice stand issued on 15.05.2009. The assessee who availed credit on the basis of proper invoice issued by registered dealer, & cannot go beyond the registered dealer to find out as to whether the credit availed by them is proper or not. As per law, he is required to recognize his immediate supplier of the goods. In such a scenario, no suppression or mis-statement can be attributed to the appellants. Accordingly, I hold the demand to be barred by limitation - Decided in favour of assessee.

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• 2014 (6) TMI 487
  Duty demand - Utilization of lapse credit for payment of duty - Assessee contends that inasmuch as the duty liability arose in the month of March, 2008 itself and if they would have paid the same at the time of raising the invoices they were in a position to utilize the said credit. The duty could not be paid in the month of March, 2008, inadvertently and as such, the credit should be allowed to be utilized for payment of duty subsequently in the month of June 2008 - whether the credit which has already lapsed as on 1.4.08, can be used for payment of duty in the month of June, 2008, even in respect of clearance effected prior to 1.4.2008. Held that:- in terms of provisions of Rule 8 of Central Excise Rules, 2002, the duty liability in respect of goods cleared in March, 2008 is to be discharged in the month of March, 2008 itself. If the assessee defaulted in payment of duty beyond 30 days from the due date, he is debarred from utilizing the Cenvat credit. As per the appellants himself, the duty liability arose in the month of march, 2008 and the same was discharged beyond the period of 30 days in June, 2008. As such, consequence of violation of Rule 8(3A) of the Central Excise Rules, 2002 would flow resulting in denial of utilization of Cenvat credit along with interest and the penal provisions inasmuch as such goods have to be held as having been cleared without payment of duty - Assessee is directed to discharge their duty liability in cash along with interest - However, Penalty is set aside - Decided partly in favour of assessee.

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• 2014 (6) TMI 486
  Waiver of pre-deposit - violation of principles of natural justice - Opportunity not given for cross examination - Held that:- there is a violation of principles of natural justice due to there being no findings on either granting or rejection of the plea for cross-examination of the persons - Accordingly, without expressing any opinion on the merits of the case, keeping all the issues open, we set aside the impugned order and remand the matter back to the adjudicating authority to reconsider the issue afresh. The adjudicating authority will grant cross-examination of the persons as has been indicated hereinabove in Paragraph 4; and subsequently grant four weeks’ time to the appellant to file a detailed reply. After receiving such detailed reply, the adjudicating authority shall grant an opportunity of personal hearing and come to conclusion on the matter and pass a reasoned order. - Decided in favour of assessee.

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• 2014 (6) TMI 485
  Duty demand - claim of benefit of exemption Notification No.2/95-CE in a case of clandestine removal - Commissioner followed previous decisions and decided in favour of assessee - appellate Commissioner concluded that the as the quantity alleged to have been clandestinely cleared was adjusted by the appellant /assessee under their DTA entitlement as supported by RT-3 return, the assessee was entitled to concessional Duty under Notification No.8/97-CE dated 1.3.97 and the order of the adjudicating authority demanding in excess of the same was set aside. Held that:- judgment of this Tribunal in appeals preferred by M/s Euro Cotspin Ltd. and another, reported in [2000 (12) TMI 122 - CEGAT, COURT NO. I, NEW DELHI] which is the sole basis for the order of the appellate Commissioner has become inoperative and stood eclipsed. Since this judgment is the only basis for the order of the appellate Commissioner, the impugned order cannot be sustained and is accordingly quashed. The matter is now remanded for fresh consideration on by the Commissioner (Appeals), Central Excise, Jaipur II and shall be disposed of expeditiously - Decided in favour of Revenue.

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• 2014 (6) TMI 484
  Exemption under Notification No. 3/2001-C.E., dated 1-3-2001 at Sl. No. 254 read with List 5 - Held that:- according to the Notification No. 3/2001-C.E. Sl. No. 254, non-conventional energy devices/systems specified in List 5 are exempt from payment of duty. It is not the case of the appellant that they have supplied non-conventional energy devices/systems but what they have supplied are only parts. Notification does not provide any exemption to parts supplied for use in non-conventional energy producing devices. Under these circumstances, the rejection of the appellant’s claim for exemption cannot be found fault with and is upheld - Decided against assessee.

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• 2014 (6) TMI 483
  Waiver of pre deposit - Duty demand - Discharge on sales income - Held that:- Demand is based upon the difference of sales income as indicated in ER-1 and the balance sheet. We find that there is no allegation or evidence to support that there was clandestine manufacture and sale of the goods. Prima facie, the claim of the ld. Counsel that the excess sales was shown in balance sheet for availing additional overdraft from bank seems to be supported by the certificate of the Chartered Accountant. At this juncture, we find that demand of the excise duty can be only on the goods manufactured and cleared from registered premises by an assessee which is absent in this case for differential duty. Accordingly, we are of the view that appellant has made out a case for the complete waiver of the pre-deposit of the amounts involved as indicated hereinabove - Stay granted.

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• 2014 (6) TMI 482
  Denial of the Cenvat credit - area based exemption - benefit of Notification No. 33/99, dated 8-7-1999 - Held that:- provisions of Rule 12 of Cenvat Credit Rules, 2004 are specific to the fact that any clearance made in terms of Notification No. 33/99-C.E., dated 8-7-1999, which entitles the manufacturer to claim refund of duty paid out of PLA would not be treated as exempted goods and the Cenvat credit on such inputs shall be admissible. Commissioner (Appeals) has not taken note of the said Rule, while directing the deposit of Rs. 20 lakhs. As per the learned advocate, his intention was drawn to the same. As regards endorsement, it stand clarified that same is in respect of VAT paid under Assam Value Added Tax Rules, 2005, which requires an assessee to endorse the said words on the tax invoice. This issue was addressed by the Additional Commissioner having jurisdiction over the appellants factory by writing a letter to the Commissioner, Guwahati in response to the said query, vide his letter dated 2-2-2012 clarified that in compliance of Rule 32 of said Assam Value Added Tax Rules, 2005, duplicate copy of the invoice bear the word ‘this copy does not entitle the holder a tax credit”. Inasmuch the said endorsement was in respect of VAT paid in the Assam Laws Added Tax Rules, such endorsement cannot be adopted by the Excise authorities for denial of Cenvat Credit of Excise duty paid on the same. As such, I find that the appellants have a good prima facie case in its favour and no pre-deposit directions should have been made by the Commissioner (Appeals) - Matter remanded back - Decided in favour of assessee.

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• 2014 (6) TMI 481
  CENVAT Credit - Commissioner allowed credit - Held that:- Cenvat credit availed by the appellant on the inputs purchased from a manufacturer while the goods purchased have not resulted out of manufacture in the hands of the seller. There is no evidence to show that amount of duty paid by the appellant has not gone to treasury. Therefore penalizing the appellant to disallow the Cenvat credit may be prejudicial to the interest of justice - Decided against Revenue.

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