TMI Tax Updates - e-Newsletter
June 2, 2014

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Open letter to the Prime Minister and Finance Minister of India.

   By: DEVKUMAR KOTHARI

2. No Service tax on schooling arrangement

   By: Subodh Sharma

3. PLACE OF PROVISION OF EVENTS

   By: Dr. Sanjiv Agarwal

News

1. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

2. FCNR (B) Flows caused Surge in International Rupee Liabilities of Indian Banks in 2013

3. Canadian Trade Minister Calls Nirmala Sitharaman

4. Nirmala Sitharaman Launches Commerce & Industry Ministry’s Twitter Handle

Notifications

Customs

1. 44/2014 - dated 30-5-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

VAT - Delhi

2. F. NO. IV/Misc/BWD/Estt.07/14-15/1282-98 - dated 29-5-2014 - DVAT

Administrative Functional Control

Highlights / Catch Notes

Income Tax

• High Court rules writ petition not maintainable due to petitioner's failure to fully disclose income; penalty stands.

  Case-Laws - HC : Order of settlement commission - Commission found that since the petitioner had committed a default and did not truly disclose his income, the penalty could not be waived - writ petition not maintainable - HC
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• High Court Upholds Reassessment Notice Validity u/s 148 of Income Tax Act Based on "Reason to Believe.

  Case-Laws - HC : Reassessment - Validity of notice u/s 148 of the Act – Reason to believe – The material found in post search enquiries could form a “reason to believe“ that income had escaped assessment - HC
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• High Court Validates Reassessment Notice u/s 148 Based on Tangible Material, Not AO Opinion Change.

  Case-Laws - HC : Reassessment - issuance of notices is not an outcome of change in opinion of the successor AO but is based on tangible material received to him during the assessment proceedings of the subsequent year - notice issued u/s 148 is valid - HC
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• Court Finds Family's Unexplained Jewelry Within Tax Authority's Acceptable Limits Based on Status and Quantity.

  Case-Laws - HC : Addition of unexplained jewellery – Looking to the status of the family and the jewellery found in possesssion of four ladies, it was being within the tolerable limit or the limits prescribed by the Board - HC
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• CIT's Jurisdiction u/s 263 Challenged Due to Lack of Recorded Reasons Against AO's Assessment.

  Case-Laws - AT : Jurisdiction of the CIT u/s 263 - order of the CIT without recording the reason to demonstrate that the view of the AO after enquiry as incorrect, unsustainable in law - AT
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• Clarification on Capital Gains: Speculation Profit u/s 43(5) Doesn't Indicate Intent to Trade Shares for Tax Purposes.

  Case-Laws - AT : Sale/purchase of shares - capital gains - Merely because the assessment of speculation profit is as per the provision contained u/s 43(5) would not lead to ipso facto conclusion that assessee’s intention was to trade in shares - AT
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• Taxpayer's LTCG vs. STCG Reporting u/s 271(1)(c) Raises Interpretation Issues in Income Tax Penalty Case.

  Case-Laws - AT : Penalty u/s 271(1)(c) – LTCG claimed inspite of STCG – there can be two views on the issue and it cannot be said that assessee’s action in returning the income as long term capital gain was illegal - AT
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• Surcharge and education cess apply post-MAT credit, treating MAT like pre-paid taxes for calculation purposes.

  Case-Laws - AT : Surcharge and education cess to be levied after giving MAT credit - The nature of MAT is like pre-paid taxes and, therefore, it should be treated alike for the purposes of computing education cess and surcharge also - AT
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Customs

• Customs House Agent License Revocation: Authorities Cannot Compel Witness Attendance, Must Disregard Absent Witness Evidence in Proceedings.

  Case-Laws - AT : Revocation of CHA License – It is true that there is no power in such authorities to enforce attendance of persons being passengers, giving statement, but if their presence cannot be secured, their evidence has to be discarded - AT
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Service Tax

• "Motor Vehicle" Excludes Vehicle and Parts in Repair Services; Impacts Service Tax Applicability per High Court Rulings.

  Case-Laws - HC : Scope of the term Motor Vehicle with regard to repair and management service - When the Statute clearly intended to exclude motor vehicle, it is apparent that it excludes parts of motor vehicle also. - HC
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• Court Rules Transaction as Service Taxable, Not Solely Goods Supply.

  Case-Laws - AT : Management/maintenance/repair service - assessee contended that entire amount relates to supply of goods is not correct - AT
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• Cenvat Credit Waiver Denied for Bus Transport Services Used for Non-Business Activities Like Social Events and School Transport.

  Case-Laws - AT : Waiver of pre-deposit - cenvat credit - input service - bus transport service - activities involving social gathering, marriage, picnic and taking children to the school will not fall in the category of business activity - AT
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Central Excise

• CENVAT Credit Denied Due to Non-Receipt of Goods; Appeals Dismissal Unsupported Amid Fraud Claims.

  Case-Laws - AT : CENVAT Credit - allegation of non receipt of goods physically - Ground taken up by Commissioner (Appeals) to drop the demands and penalties has no legs to stand as fraud is clearly manifested - AT
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• Duty Demand Overturned After Explanation for Stock Shortage; No Admission of Goods Removal by Appellant's Representative.

  Case-Laws - AT : Duty demand - Shortage in stock - appellant representative has accepted the shortages only but nowhere accepted the fact of removal of the same. On the other hand, there is plausible explanation of the same - demand set aside - AT
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• CENVAT Credit Allowed for Storage Loss: 0.5% Loss Acceptable, Even as Transit Loss.

  Case-Laws - AT : CENVAT Credit - Storage loss - even if it is treated as transit loss, since the same is 0.5%, the Cenvat credit cannot be denied - AT
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Case Laws:

• Income Tax

• 2014 (5) TMI 1006
  Maintainability of writ petition - order of settlement commission - Non-disclosure of income – Penalty u/s 271(1)(c) of the Act – Commission found that since the petitioner had committed a default and did not truly disclose his income, the penalty could not be waived. - Held that:- Even if there is an error of law or fact in calculating the penalty, where the assessee volunteered to appear before the Settlement Commission for settlement of his matter, the discretion exercised by the Settlement Commission requires no interference unless the exercise of power made by the Settlement Commission was perverse requiring interference under Article 226 of the Constitution - The Writ Court, under Article 226 of the Constitution is not bound to interfere in its discretionary remedy even if there was an error of law or fact - Article 226 merely vest a discretion to the Court to interfere in exceptional cases and even if the impugned order was not in conformity with law, the Court was not bound to set aside the order - an order passed by the Settlement Commission attains finality u/s 245(i) of the Act - the Court is not inclined to exercise its discretionary jurisdiction under Article 226 of the Constitution to interfere in the orders passed by the Settlement Commission – Decided against Assessee.

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• 2014 (5) TMI 1005
  Reassessment - Validity of notice u/s 148 of the Act – Reason to believe – Held that:- Under Section 147 of the Act, proceedings initiated for re-assessment proceedings can only be done if the Assessing Officer had reasons to believe, namely, that any income chargeable to tax had escaped income in any assessment year - The assessee had disclosed the gift cheques in his return filed u/s 139 of the Act - no notice was issued to the petitioner u/s 143(2) of the Act by the AO and the returns were accepted by issuance of an intimation u/s 143(1) of the Act – u/s 143 of the Act, it is the discretion of the AO to accept the return as it is or to proceed further with the assessment of income - once the AO decides to proceed, he has to issue notice u/s 143(2) of the Act within the prescribed period, at the relevant moment of time, was 12 months to make the assessee aware that his return has been selected for scrutiny assessment. The material came into existence during post search enquiry when it became known that the gift cheques shown in the return filed u/s 139 of the Act were not regular transactions but were purely arranged transactions to avoid income tax - income disclosed in the return filed u/s 139 of the Act could not become "undisclosed income", merely because in post search enquiry, it came known that the gift cheques was a sham transaction - An amount which has already been included in the regular assessment cannot be assessed again in the course of block assessment - The gift cheques, having been disclosed in the return u/s 139 of the Act could not be re-assessed in block assessment proceedings u/s 158BC - The authorities were justified in not including the gift cheques in block assessment proceedings. The material found in post search enquiries could form a "reason to believe" that income had escaped assessment by issuance of a notice under Section 143(2) of the Act - the period u/s 143(2) of the Act had expired, the AO having genuine reasons to believe that income had escaped assessment and consequently, could issue a notice u/s 148 of the Act - Such notices so issued were perfectly justified and was within the powers of the Assessing Officer – Relying upon Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] - the expression "reason to believe" in Section 147 of the Act would mean cause of justification to know that income had escaped assessment - at the stage of issue of notice, the only question is, whether there was relevant material on which a reasonable person could form the requisite belief that income had escaped assessment - the AO was justified in forming an opinion, that income had escaped assessment and was justified in issuing notice u/s 148 of the Act – thus, the notice u/s 148 of the Act is upheld – Decided against Assessee.

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• 2014 (5) TMI 1004
  Settlement commission - deduction u/s 80IB - Material placed by the CIT under Rule 9 not considered – Held that:- The contention of the revenue cannot be accepted that Settlement Commission had not examined and overlooked the material placed before the Settlement Commission in support of their contentions that the respondent was not entitled to the deduction under Section 80-IB of the said Act - the new unit should not have been made by splitting up or reconstructing an already existing business - the new business should not have been formed by transfer if the plant or machinery which had been previously used for the purpose - Insofar as these conditions are concerned, there is no material to show that they have not been satisfied. There is evidence of the fact that the AO, in respect of the AY 2005-06, 2006-07 and 2007-08, has allowed the deduction u/s 80-IB of the Act - The presumption is that an AO is aware of the conditions stipulated in sub-section (2) of Section 80-IB of the Act and that those conditions have been met - It is his duty to do so - the AO allowed the deduction u/s 80-IB of the Act for the three AY- 2005-06, 2006-07 and 2007-08 - he had checked and verified that the conditions stipulated in Section 80-IB (2) had been satisfied - There is nothing on record to rebut this presumption - it cannot be contended that the conclusion arrived at by the Settlement Commission that the respondent was entitled to the deduction u/s 80-IB of the Act was arbitrary or perverse – thus, there was no reason for interference in the order of the Settlement Commission – Decided against Revenue.

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• 2014 (5) TMI 1003
  Reassessment - Validity of notice u/s 148 of the Act – Held that:- Relying upon Associated Stone Industries V/s. Commissioner of Income Tax, Jaipur [1997 (2) TMI 6 - SUPREME Court] - the information obtained by the Income Tax Officer need not be one outside the record; it may be one obtained from the assessment records already available - the facts which were revealed to the AO who carried out the assessment for A.Y. 2010 – 2011 was the 'information' as is contemplated by Section 147 of the Act leading the officer to form a belief that the income had escaped the assessment for the A.Y. 2006 – 2007 and 2008 – 2009. Whether the ‘information’ received to the AO is relating to A.Y. 2006-2007 and 2008-2009 – Held that:- On perusal of the reasons given by the respondents for reopening the assessment for A.Y. 2006 – 2007 and 2008 – 2009, it cannot be said that there was no information with the AO relating to the said assessment years - the information is received to the officer during the course of the assessment proceedings for A.Y. 2010 – 2011 – the information does not seem to be restricted only to A.Y. 2010 – 2011 - Material on record shows that petitioner company has debited the order procurement charges in the AY 2010 – 2011 and the deduction of the amount was claimed u/s 37(1) of the Act as business expenditure - The information received to the AO from the statement of Anil Asarkar is sufficient to draw a prima facie inference that Anil Asarkar (H.U.F.) might not have worked for the petitioner company and further that it was receiving the cheques from the petitioner company and giving them the cash back from the financial year 2006 – 2007 - the information which was received to the AO was sufficient for him to reasonably believe that the income had escaped assessment for the respective assessment years. The reasons recorded by the AO nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year - the reasons are required to be read as they were recorded by the AO - No substitution or deletion is permissible - No additions can be made to those reasons - No inference can be allowed to be drawn based on reasons not recorded - the reasons were recorded before issuance of the impugned notices - no malafides seen in the delay caused in communicating the reasons - the facts revealed to the AO during the assessment proceedings for A.Y. 2010 – 2011 is an ‘information’ contemplated by Section 147 of the Act - the information so revealed pertains to the assessment years to which the impugned notices relate - the information has direct nexus and/or live link with the tax liability for A.Y. year 2006 – 2007 and A.Y. 2008 – 2009 - the material in the hands of A.O. is prima facie sufficient for him to form a belief that income had escaped assessment of the assessment years to which the impugned notices relate and therefore, reassessment is needed - the issuance of notices is not an outcome of change in opinion of the successor AO but is based on tangible material received to him during the assessment proceedings of the subsequent year - The other two objections raised by the petitioner, first about the competence to issue the notice and the other that the action is beyond the period of limitation are kept open to be agitated before the appropriate authority – there was no fault with the notices – Decided against Assessee.

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• 2014 (5) TMI 1002
  Addition of unexplained jewellery – Proper explanation made or not – Held that:- The jewellery which has been found in possession of the family members is in accordance with customs and practice prevalent in the community and in accordance with status of the family - the Tribunal was rightly of the view that the Central Board of Direct Taxes keeping in view the status of the family, customs and practice of the community, came down with the circular and one has to go with the weight and not with the value as the value may fluctuate over the years - the marriage of three sons were performed in the year 1996, 2000 and 2003 and all the marriages including the assessee and three sons were performed prior to 2003 - the statement of various family members were recorded and none has stated that these are not personal wearing jewellery and same were received by the respective ladies/daughter-in-law on/or at the time of their marriages either from the parental side or in-laws side and even subsequently at the time of birth of their children - Looking to the status of the family and the jewellery found in possesssion of four ladies, was held to be reasonable and the authorized officers, in the first instance, did not seize the jewellery as it was being within the tolerable limit or the limits prescribed by the Board - the Tribunal has correctly analyzed the Circular of the Board and there was no infirmity in the order of the Tribunal – Decided against Revenue.

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• 2014 (5) TMI 1001
  Jurisdiction of the CIT u/s 263 of the Act – Held that:- After enquiry conducted by the CIT, he has recorded a bald statement that he was not satisfied with the explanation offered by the assessee - During the revisional proceedings the assessee has brought to the notice of the CIT, that the issue was inquired into by the AO and it has filed the said reply before the AO during the course of assessment proceedings, so the reply submitted to the AO must have been part of the assessment records - the AO had conducted enquiry into this issue - it is not a case wherein, no enquiry whatsoever was carried out by the Assessing Officer - in the original assessment order there is no mention of this claim at all. The CIT after examining the agreements and the explanations furnished before him ought to have recorded reason to demonstrate that the view taken by the AO is incorrect, and unsustainable in law and consequently ought to have recorded a finding that the order of the AO was erroneous and prejudicial to the interest of Revenue - CIT did not record any reason to hold that the implied view of the AO is unsustainable in law and therefore erroneous and prejudicial to the interest of the Revenue, which exercise has not been found to have taken place - the order of the CIT without recording the reason to demonstrate that the view of the AO after enquiry as incorrect, unsustainable in law and consequently ought to have recorded a finding that the implied view of the AO was erroneous and prejudicial to the interest of Revenue, which is absent in the order and therefore vitiates the revisional order – thus, the order of the CIT is set aside – Decided in favour of Assessee.

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• 2014 (5) TMI 1000
  Amendments made to Section 40(a)(ia) by Finance Act, 2010 - Retrospective effect or Prospective effect - Deletion made u/s 40(a)(ia) of the Act – Existence of contract/sub-contract between assessee and the payee – Obligation to deduct TDS – Held that:- The TDS deducted for the period April 2008 to February 2009 was deposited before the due date of filing of return u/s 139 (1) of the Act – there was no infirmity in the order – Following CIT vs. Naresh Kumar [2013 (9) TMI 275 - DELHI HIGH COURT] - the amendment made to Section 40(a)(ia) by the Finance Act 2010 should be given retrospective effect. Excess depreciation on vehicles – Held that:- CIT(A) rightly was of the view that the Principle laid down in the circular and judicial precedents clearly reiterates intention of legislature to allow benefit of higher depreciation to the persons involved in the business of running motor cars, motor lorries etc. on hire as well as using these vehicle for transporting goods on hire - The word ‘hired’ used by statute was only to indicate that some income should be rendered to taxation by utilization of those assets in fact tippers/trucks were used in appellant’s business of transportation and income from such activity was duly included in business income as appellant had entered into a composite contract - The Tax Auditor has duly certified depreciation claim - the facts are not in dispute in as much as that the assessee entered into a transportation contract with M/s East India Minerals Ltd. for transportation of Iron ore etc. from crusher stockpile to railway sidings which has not been assailed by the revenue by way of any argument on fact or any evidence led to show that a fact has been wrongly taken into consideration, in the absence of the same, the commercial heavy goods vehicles belonging to the assessee have been used for hire for transporting the goods from one place to the other - Considering the Circular No. 652 dated 14/6/1993, the order of the CIT(A) is upheld - Decided against Revenue.

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• 2014 (5) TMI 999
  Genuineness of expenses not proved – Commencement of business - Determination of specific date - Held that:- There is no reference to any agreement entered into by the assessee - the CIT(A) has made reference to two agreements however has not given any conclusive finding or has cared to examine them so as to come a finding as to when they were entered into and on the basis of the agreements on which specific date he has come to the conclusion that business has commenced in April 2006 - The CIT(A) should have come to a specific finding discussing the facts as to on what specific date in April 2006 he has come to the conclusion that business has commenced - business is a continuous course of activities and it has been variously held that for commencement of business all the activities which go to make up the business need not be started simultaneously. The assessee is engaged in the business of software development in the field of information technology, there is no such finding - No specific date has been considered to be the date on which considering the material on record the business can be said to have commenced - it is necessary for the assessee to lead the specific evidence in support of the arguments that the essential activity has started evidenced by some document on a specific date - The issue has not been considered in the proper perspective and only general argument has been advanced which has been accepted that business commended in April 2006 - No effort has been made to point out that on which specific date the business has commenced – thus, the matte is remitted back to the AO for fresh adjudication – decided in favour of Revenue.

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• 2014 (5) TMI 998
  Addition u/s 41(1) - Remission / cessation of liability - Book adjustment of advance received from customers – Held that:- CIT(A) was of the view that JGW actually received the money due to it by the assessee from L &T, and L &T in turn, owed money to the assessee - The balance standing credit to the a/c of JGW in the books of assessee in no way can be treated as income of the assessee in view of the fact that JGW has actually received this amount on a/c of the assessee from L&T - the amount of Rs.76,90,367/- has already been received by JGW from L &T on a/c of the assessee to give effect to this transaction in books of assessee all that is needed to be done is that the amount will be debited to the a/c of JGW and credited to the a/c of L &T in the books of the assessee - It will have the effect of reducing the debit balance of rs.11,65,00,000/- of L &T by Rs.76,90,367/- and balance of JGW to NIL. Rs.76,90,367/- will not be written back and treated as income u/s 41 of the Act but will be adjusted to the account of L &T in the books of assessee - Section 41(1) will not be attracted as there has been no remission or cessation of such liability – there is no reason to interfere in the order of the CIT(A) – Decided against Revenue. Deletion of bad debts – Held that:- There is no infirmity arrived at in the impugned order as the assessee has shown the amount as sales in the previous years which has formed part of its income - when the bad debts claimed have formed part of sales of the assessee in the previous year the occasion for it not forming part of its income does not arise - claim of bad debts cannot be disallowed and added to its income as it fully meets the requirement of Section 36(2) (i) of the Act - The CIT(A) has rightly allowed the assessee’s claim – Decided against Revenue.

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• 2014 (5) TMI 997
  Sale/purchase of shares under the head capital gains - Held that:- Primarily the intention of assessee is of paramount importance in determining whether the shares were held by it as investment or as stock in trade - All the attendant circumstances have to be taken into consideration to find out the true intention of assessee - there is no dispute that in earlier years the assessee had treated all share holdings as its investment and never traded in shares - the intention of assessee in acquiring shares was always as investor and not as trader - In the current assessment year also the shares were acquired in respect of one company only but the number of shares was considerable due to which brokers note were running into several pages which probably triggered the entire controversy and in culminating into the observations of AO that assessee had entered into hundreds of transaction on day to day basis. The assessee has clearly demonstrated that the observations were not correct and nothing has been brought on record by the Department to controvert the finding of the CIT(A) - The magnitude of transaction does not alter the nature of transaction that does not decide the intention of assessee - The total number of purchase transactions were only six and the sale transactions were only eight - By no stretch of reasoning, this frequency can be said to be very frequent so as to lead to the conclusion that assessee was trading in shares. Merely because the assessment of speculation profit is as per the provision contained u/s 43(5) would not lead to ipso facto conclusion that assessee’s intention was to trade in shares - Mere assessment under a particular head of income is no criteria for determining the overall intention of assessee - An investor also can enter into speculative transactions as there is no prohibition under the Act - Only the income is to be assessed as business income - this aspect cannot form the basis for deciding the intention of assessee in respect of those shares where assessee has taken delivery of shares and then sold them within a short gap of time – there is no reason to interfere with the order of CIT(A) – Decided against Revenue.

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• 2014 (5) TMI 996
  Deletion of penalty u/s 271(1)(c) of the Act – LTCG claimed inspite of STCG – Intention to evade tax - Held that:- The assessee had treated the entire capital gain as long term capital gain for the reason that ESOPs remained vested with him for more than 12 months - the date of acquisition of shares has been considered with reference to the date of which assessee had exercised the option by making payment for shares - the issue is highly debatable as to whether date of acquisition of shares is to be reckoned from the date when the assessee exercised its option to acquire shares in pursuance to the rights vested in him by virtue of allotment of ESOP or from the date from which the right vested in him by allotment of ESOP entitling him to acquire the shares, which is also a capital asset - there can be two views on the issue and it cannot be said that assessee’s action in returning the income as long term capital gain was illegal - The assessee had not concealed any particulars of its income - The facts were duly disclosed before the Department and only on account of different interpretation, the capital gain was treated as short term capital gain – thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.

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• 2014 (5) TMI 995
  Addition made on account of entry tax – Lack of supporting evidences – Held that:- Revenue was required to explain the figure of Rs. 71,763/- as appearing in the ground of appeal – but, the revenue could not explain the amount - CIT(A) has recorded a categorical finding that all the evidences are available on record which has not been controverted by Department – there was no reason to interfere with the order of CIT(A) – Decided against Revenue. Addition in Partners Capital Account – Held that:- CIT(A) considered the submissions advanced by assessee and has found that the source of deposit of cash stands duly explained in case of all the three parts - The powers of CIT(A) are coterminous with the powers of AO and if AO without making any specific query makes the addition, then assessee is entitled to assail the addition before CIT(A) and substantiate the same also by furnishing necessary evidence - The department has not brought on record any evidence to controvert the findings of CIT(A) – there was no reason to interfere in the order of the CIT(A) – Decided against Revenue. Addition on account of unsecured loans – Held that:- Cash of Rs. 1,50,000/- was deposited in accounts of creditors just one day before the issuance of cheque in favour of assessee firm - The proximity of cash deposit just before issuance of cheque requires credible evidence for establishing the genuineness of transaction - CIT(A) has merely observed that both were returning reasonable amounts of income every year but he has not given as to how much income was returned by the two creditors and has not demonstrated whether they were in a position to save so much cash for depositing the same in their account for issuing cheque in favour of firm – the entire evidence requires proper scrutiny – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue.

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• 2014 (5) TMI 994
  Disallowance of commission – Admission of additional evidences – Held that:- CIT(A) was rightly of the view that there is no evidence with the revenue to show that expenses were not incurred for the purposes of the business of the assessee or that services were not rendered by any of these persons - the assessee has been paying commission in past also and no disallowance has ever been made - the department has not raised any issue challenging the admission of additional evidence, the contention of revenue in this context cannot be entertained – there was merit in the contention of the assessee that there is no allegation about payments having been made to specified parties u/s 40A(2)(b) - The fact that payments are through a/c payee cheques, payees are assessed to tax, TDS has been deducted, relevant details filed, have not been disputed - unless a specific payment is pointed out to be non-genuine or not incurred for the purpose of business, the business expenditure cannot be disallowed on ad hoc basis – thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.

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• 2014 (5) TMI 993
  Deletion of extra depreciation on computer peripherals – Held that:- Following Container Corporation of India Ltd. Versus Assistant Commissioner of Income-tax, Circle 3(1), New Delhi [2009 (2) TMI 499 - ITAT DELHI] - CIT(A) has rightly allowed the depreciation claimed by the assessee @ 60% - The accessories and peripherals of computers provide input processing, storage and various output devices - The output devices such as printer, scanner, etc. are computer peripherals and form essential parts of PC - These output devices cannot work in isolation and also working on computer system without an output device such as printer would be futile – the order of the CIT(A) is upheld – Decided against Revenue. Deletion of non-deduction of TDS – Payment made to NSE – Held that:- Following Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] and in assessee’s own case for the previous assessment year, it has been held by the CIT(A) that no material has been brought on record to show that the payments on account of transaction charges, V-SAT charges, lease line charges and misc. Charges were made in Pursuance of a contract - The payments were made to NSE in the normal course of business and these payments do not fall within the scope of section 194C of the Act - the provision of section 40(a)(ia) cannot be invoked with respect to the payments which are actually paid during the financial year, but it can be invoked only with respect to the payments not actually made - all the payments were made during the year and nothing was payable at the end of the year, no disallowance is called for - the order of the CIT (A) is upheld – Decided against Revenue. Rebate u/s 88E of the Act – Computation of book profits u/s 115JB of the Act – Held that:- The AO has computed the taxable income of the assessee company under the normal provisions of the Act as well as under the special provisions of section 115JB of the Act - While computing the book profit u/s 115 JB, the AO has not allowed the rebate on account of STT u/s 88E of the Act from the book profit of the assessee company – Relying upon M/s Horizon Capital Limited, the ITAT Bangalore [2011 (10) TMI 489 - KARNATAKA HIGH COURT] - tax rebate in respect of STT u/s 88E is available even against tax liability u/s 115JB – the order of the CIT(A) is upheld – Decided against Revenue. Disallowance u/s 14A read with Rule 8D of the Act – Held that:- Following Maxopp Investment Ltd. Vs. Commissioner of Income-tax (2012) 2011 (11) TMI 267 - Delhi High Court ] the AO if not satisfied with the correctness of the claim of the assessee, the AO gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the prescribed method - when there is no amount of expenditure is incurred directly relating to the exempt income which does not form part of the total income, Rule 8D(ii) & (iii) cannot be applied when the shares are held as stock-in-trade and no notional expenditure could be deducted from the income - the dividend income is incidental to its business of sale of shares which remained unsold by the assessee - expenditure estimated invoking rule 8D above are set aside – Decided in favour of Assessee.

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• 2014 (5) TMI 992
  Verification of claim - Whether the CIT(A) has erred in directing the AO to verify the claim of the assessee – Held that:- Section 251 clearly states that when an appeal is preferred against the assessment order, CIT(A) has the power to confirm, reduce, enhance or annul the assessment – the order of the CIT(A) is from an appeal preferred against an order passed by AO u/s 154 of the Act - An appeal against section 154 order of the Act of the AO does not fall under section 251(1)(a), the power of the CIT(A) has to be drawn from section 251(1)(c) which clearly states that in any other case he may pass such orders as he thinks fit - the order before the CIT(A) falls under the category “in any other cases” envisaged u/s 251(1)(c). Only one notice was send by AO, to assessee on 15.06.2012 fixing the matter on 30.05.2012 - no reply or none appeared on behalf of the assessee, the AO passed an ex-parte order u/s 154 of the Act - the CIT(A) has not set aside the order of the AO Officer which was passed u/s 154 but he has only remitted the case back to the file of the AO to verify the claim of the assessee on the ground of violation of natural justice – thus, there was no infirmity in the direction passed by the CIT(A) – Decided against Revenue.

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• 2014 (5) TMI 991
  Deletion of penalty u/s 271(1)(c) of the Act – Transfer pricing adjustment –Failure to disclose true income - Held that:- The quantum proceedings had been restored the issue to the file of AO for reconsideration - the AO is directed to delete the penalty - the AO will be at liberty to initiate penalty proceedings after passing a fresh assessment in accordance with law – Decided against Revenue.

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• 2014 (5) TMI 990
  Validity of Re-opening of assessment – protective assessment - Held that:- In the block assessment proceedings as well as in re-opening assessment proceedings u/s 147 of the Act, the additions have been made in respect of the same bank account and the same amount which has been added in the block assessment on substantive basis - additions made in the reopening assessment proceedings are on the protective basis - Revenue has not controverted the contention of the assessee that the same addition has been affirmed up to the stage of ITAT in block assessment proceedings - the additions made u/s 158BC of the Act have become final – the AO is directed to delete the addition made on protective basis in all the three assessment years – Decided in favour of Assessee.

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• 2014 (5) TMI 989
  Addition made u/s 68 and 69A of the Act - Principle of natural justice – Reason to believe for issuance of notice u/s 148 of the Act – Held that:- CIT(A) has referred to the additional evidence filed by the assessee and remand report dated 30-4- 2012 submitted by AO - there is no finding as to whether the additional evidence has been admitted or not - the additional evidence which consists of income-tax record, confirmations etc. of the share applicants necessary for discharge of the onus of the assessee has not been cross verified by AO from the department’s record - in the absence of consideration, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (5) TMI 988
  Disallowance u/s 14A r.w. Rule 8D of the Act Held that:- Following Godrej Boyce Ltd. Mfg. Co. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the provisions of section 14A are applicable in circumstances as are prevailing presently and the disallowance has to be worked out by the AO on some reasonable basis and not under rule 8D in so far as the assessment years prior to 2008-09 are concerned the preent case is related with the AY 2007-08 - rule 8D cannot be applied, but the disallowance is required to be worked out on some reasonable basis thus, the matter is remitted back to the AO for computation of the disallowable amount as per rule 8D Decided in favour of Assessee. Surcharge and education cess to be levied after giving MAT credit or before giving the credit Held that:- The claim of the assessee is that MAT credit should first be reduced from the tax payable and thereafter on the residual amount the surcharge and educational cess be levied - there was merit in the contention of the assessee that MAT credit should first be reduced from the tax payable and thereafter on the residual amount the surcharge and educational cess be levied What is required is that in the year when such credit is given, education cess and surcharge should be computed after giving credit of MAT to the tax computed on the assessed income in the same way as in the case of interest under sections 234B and 234C. The nature of MAT is like pre-paid taxes and, therefore, it should be treated alike for the purposes of computing education cess and surcharge also. - Decided in favour of Assessee.

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• 2014 (5) TMI 987
  Allowability of deduction u/s 80HHC of the Act – Deduction u/s 80IB of the Act not deducted – Held that:- Following Associated Capsules Pvt. Ltd. vs. DCIT [2011 (1) TMI 787 - BOMBAY HIGH COURT] - the reasonable construction of section 80-IA(9) would be that where the deduction is allowed u/s 80-IA(1), then the deduction computed under other provisions under heading C of Chapter VI-A have to be restricted to the profits of the business that remain after excluding the profits allowed as deduction u/s 80-IA, so that the total deduction allowed under the heading C of Chapter VI-A does not exceed the profits of the business – thus, the assessee is eligible for deduction u/s 80HHC of the Act – Decided against Revenue.

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• Customs

• 2014 (5) TMI 1010
  Confiscation of goods - Redemption fine - mis-declaration of Present Market Value (PMV) and FOB value - claim of abnormally high DEPB credit - Right to get goods released on redemption fine payment - Held that:- appellant, as a matter of right, cannot claim release of the goods on payment of redemption fine and duty. Even though gold as such is not a prohibited item and can be imported, such import is subject to lot of restrictions including the necessity to declare the goods on arrival at the Customs Station and make payment of duty at the rate prescribed. There is no need for us in this case to consider the conditions on which import is permissible and whether the conditions are satisfied because the appellant attempted to smuggle out the goods by concealing the same in emergency light, mixie, grinder and car horns etc. and hence the goods so brought is prohibitory goods as there is clear violation of the statutory provisions for the normal import of gold. Further, as per the statement given by the appellant under Section 108 of the Act, he is only a carrier i.e. professional smuggler smuggling goods on behalf of others for consideration. Since the exporter realized the value declared as FOB value it has to be taken as correct This circular is silent on the manner in which PMV is to be ‘considered for the purpose of allowing credit’. Since the circular is a continuation of earlier circular it is reasonable to conclude that the consideration is to ensure that credit given does not exceed 50% of PMV as ascertained. At any rate this change is after the export of goods on 17-08-2000 and cannot be made applicable to this this case - In the process of re-determining the eligible DEPB credit the appellant seems to have suffered beyond what was prescribed under law - in the matter of issue of SCN, the procedure prescribed vide circular 79/98-Cus dated 22-10-98 as amended by Circular dated23/99-Cus dated 11-05-99 was not followed - confiscation of goods and redemption fine and penalty imposed is set aside - Decided partly in Favour of assessee.

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• 2014 (5) TMI 1009
  Revocation of CHA License – Transfer of Licence – Recoded statement - Section 108 of Customs Act - Regulation 12 of CHALR, 2004 - Held that:- Appellant is one of 10 persons to whom the licence alleged to have been transferred - Thus, department could not establish that the provisions of Regulation 12 of CHALR, 2004 were contravened - The appellant obtained valid and a proper authorization letters from their clients and that Regulation 13(a) of the CHALR, 2004 have been contravened is not established. Entire case of the department is based on the statements recorded u/s 108 - Admittedly the proceedings under CHALR, 2004 are in the nature of domestic Inquiry proceedings and evidence is required to be brought on record during the course of the Inquiry proceedings - The evidence given by witnesses clearly brings out the basic fact that the licence has not been transferred and that it was the employees of the appellant who have been attending to Customs clearance work in Custom house by filing the necessary documents, attending to assessment, examination and clearance of the goods - Evidence given by Shri Sagar Rakshe and Amit Pattani, during the Inquiry has not been taken into consideration only because the said evidences given by the witnesses of the department is against the charges framed by the department. Relying upon M.V. Bijlani v. Union of India and Ors [2006 (4) TMI 455 - SUPREME COURT] -Statement recorded vide Section 108 has been given some special status as to its acceptability in relation to proceedings under the Act but there no provision like the one found in Regulation 23(3), exist for the purpose of adjudication under the said Act - Notice u/s 124 has to be served which also includes the statements recorded u/s 108 and the other side has an option to ask for production of such persons for cross-examination - Both recording of evidence and offering the persons for cross-examination has been made mandatory under Regulation 23(4) - Non-examination of these two passengers and non-offering them for cross-examination to the delinquent, therefore, makes their statements recorded in other proceedings not admissible - There is also no allegation that these two passengers have been intentionally kept away by the appellant and only ground for non-examination mentioned is that they did not respond to the summons - It is true that there is no power in such authorities to enforce their attendance, but if their presence cannot be secured, their evidence has to be discarded and cannot be used in any manner - Any use of their statement would directly violate Regulation 23(4) - Impugned order is set aside – Decided in favour of appellant.

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• Corporate Laws

• 2014 (5) TMI 1008
  Winding up of company - Inability to pay debts - Gold ornaments made on order - But payment was not made fully - Held that:- respondent has admitted the debt. It is also an admitted position that the respondent Company is not a going concern and the respondent Company has lost its financial sub-stratum and has become commercially insolvent and is unable to pay its debts. In light of such admitted position therefore, the petition deserves to be allowed. The respondent Company is hereby ordered to be wound up under Sections 433 and 434 of the Companies Act. The Provisional Liquidator appointed by this Court vide order dated 30.4.2012 and 13.11.2013 passed in Misc. Civil Application No. 182 of 2013 is hereby appointed as Official Liquidator. The Official Liquidator shall take possession of all movable and immovable assets of the respondent Company and shall file its report within a period of three months - Decided in favour of appellant.

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• Service Tax

• 2014 (5) TMI 1023
  Scope of the term Motor Vehicle with regard to repair and management service - whether repair of part of vehicle is amount of repair of vehicle as such - Exclusion of the maintenance and repair of motor vehicle from service tax - period up to 30.4.2006 - Extended period of limitation - appellant engaged in the business of reconditioning engines and parts thereof and repairs of other parts of vehicles of all brands - appellant contended that they were in bona fide believed that they had no tax liability in respect of the activities in question and hence did not include the relevant particulars in their returns. Held that:- The word exclusion apparently means excluding any maintenance or repair relating to a motor vehicle. A motor vehicle has several parts and if only a part of the motor vehicle requires maintenance or repair, can it be said that it is not maintenance or repair of a motor vehicle? - It is not in dispute that if the motor vehicle was brought to the service centre of the appellant and they themselves had dismounted the engine and repaired it and then refitted it to the motor vehicle, they are entitled for the exclusion. But exclusion is not given by stating that dismounting has taken place at a different place. Such a view, according to us, cannot be accepted on account of the fact that motor vehicle apparently includes all its parts as well. Without its individual parts, it does not become a motor vehicle. Such part cannot be used for any other purpose as well and it is normally fitted to the same vehicle from which it is dismounted. Therefore, if any service centre or maintenance centre or workshop does maintenance or repairs to any part of the motor vehicle, it is also entitled to get the benefit of exclusion, as provided under Section 65(64) of the Finance Act, 1994. - Decided in favor of assessee. When the Statute clearly intended to exclude motor vehicle, it is apparent that it excludes parts of motor vehicle also. If such an interpretation is not given, the very purpose of such exclusion will be rendered ineffective. - Decided in favor of assessee. Extended period of limitation - Held that:- Adjudicating authority found that the assessee has not furnished all material details in their ST-3 returns and such details came to be disclosed only as a result of audit conducted by the department. This is a finding of fact, which we do not think can be ignored and there is no material to come to a different finding. In that view of the matter, we are of the view that the department was justified in invoking the extended period of limitation. - Decided against the assessee. Levy of penalty - Held that:- if the appellant has a case that repair of engines and other parts of a motor vehicle are excluded from the liability to pay service tax, definitely the issue ought to have been decided by a proper authority. Unless such a decision is taken in accordance with the procedure prescribed, it cannot be treated that there is a deliberate attempt to evade tax. Therefore, the imposition of penalty for that reason was itself bad in law. - no penalty - Decided in favor of assessee.

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• 2014 (5) TMI 1022
  Waiver of pre deposit - Quantum of deposit - Held that:- primary dispute that arises for consideration in this appeal relates to the quantum of pre-deposit to be made by the appellant as a condition precedent for the hearing of the appeal. After hearing learned counsel for the appellant and keeping in view the totality of the facts and circumstances of the case, the order of the Tribunal requiring the appellant to deposit Rs. 5 lacs as a condition precedent for hearing of the appeal appears to be just and reasonable. we do not find any reason to reduce the quantum of amount to be deposited as a condition precedent for hearing of the appeal - No substantial question of law arises - However, time period to make pre deposit is extended.

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• 2014 (5) TMI 1021
  Maintainability of writ petition - Assessee being Local Authority contended that it is not able to recover the amount from the parties - Service Tax on Bus stand fee, Advertisement tax, and fee collected on letting out of immovable property - Held that:- it is clear that the Bench specifically observed that the case of a person who did not choose to avail the statutory remedy within the specified time, is never seated on a better position than a person who approached this Court directly by filing a writ petition instead of availing a statutory remedy before expiry of the time and driven out relegating to avail the statutory remedy declining interference under Article 226. Undisputedly, the petitioner was simply sleeping over the issue. Whether the petitioner has approached this Court at least within 'reasonable time', after expiry of the statutory period for filing the appeal - Held that:- even if it is presumed that, no statutory remedy is available, could the matter be agitated before this Court at this distance of time; is the point to be considered. Obviously, the impugned orders (Exts.P3 and P4) are dated 24.05.2012 and 23.08.2012 respectively, whereas the writ petition has been filed only about 1= years after passing the said orders. This being the position, it cannot but be held, that the petitioner has not approached this Court within a reasonable time, so as to call for interference by this Court in exercise of the discretionary jurisdiction under Article 226 of the Constitution of India. - Decided against assessee.

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• 2014 (5) TMI 1020
  Demand of service tax - Management/maintenance/repair service - maintenance contract with supply of goods - assessee contended that entire amount relates to supply of goods - Re quantification of demand - Exclusion of value of goods - Held that:- both Revenue as well as the appellants have not segregated the amounts received towards service and supply of goods and quantified the demand correctly. That being the position, the matter in any case has to be remanded. At the same time, it would be unfair to the Revenue if the remand order is passed without requiring appellants to make any pre-deposit especially in view of the fact that they have made a claim that entire amount relates to supply of goods which does not seem to be based on facts. In view of the above, while we consider it appropriate and in the interest of both the sides that the matter should be remanded at this stage itself rather than granting a stay subject to pre-deposit and passing a final order thereafter, yet we consider that appellant should be put to terms. Accordingly, the appellant is required to deposit an amount of Rs.50,00,000 within eight weeks and report compliance to the Commissioner (original adjudicating authority) who after noting compliance shall proceed to adjudicate the matter afresh after giving reasonable opportunity to the appellants to present their case - Decided partly in favour of assessee.

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• 2014 (5) TMI 1019
  Demand of service tax - business auxiliary service - Held that:- With effect from 16-5-2008, Information Technology Service became taxable under the Finance Act. As per the definition of Information Technology Services provided under Section 65(53a) means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment. We have gone through a copy of the agreement which is on record whereby the applicants are undertaking activity of system development and maintenance, computer operations and support, etc. In view of above, we prima facie find the merit in the contention of the applicant that the applicant is not providing business auxiliary service but in fact are providing Information Technology Service which has become taxable only with effect from 16-5-2008. In view of above, pre-deposit of the dues is waived and recovery thereof stayed during the pendency of the appeal - Stay granted.

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• 2014 (5) TMI 1018
  Denial of refund claim - Notification No. 41/2007-S.T - port charges and on technical inspection - Held that:- assessee, who paid the Service Tax on the services availed in the course of export of goods, are entitled for refund claim of service tax paid if they had complied with the condition of the above said Notification. In this case on perusal of the record, I find that the appellant has fulfilled the condition of the Notification No. 41/2007-S.T., therefore, they are entitled for the refund claim - Decided in favour of assessee.

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• 2014 (5) TMI 1017
  Waiver of pre-deposit - cenvat credit - input service - bus transport service - Held that:- in the case of Stanzen Toyotetsu India (P) Ltd. (2011 (4) TMI 201 - KARNATAKA HIGH COURT) it is held that for providing transport service for taking the employees to the factory, Cenvat credit on the transport service is available to the assessee. However, I find that the activities involving social gathering, marriage, picnic and taking children to the school will not fall in the category of business activity. Accordingly, the applicant is directed to deposit Rs. 20,000 within four weeks and report compliance on 19-10-2012. On such compliance, there shall be stay of recovery in respect of balance amount during the pendency of the appeal. - Stay granted partly.

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• Central Excise

• 2014 (5) TMI 1015
  CENVAT Credit - allegation of non receipt of goods physically - receipt of goods before the date of removal - Commissioner (appeals) dropped the demand and penalty - Held that:- respondents have not been able to answer as to how the goods removed by the Principal manufacturer reached destination on the date prior to the date of its removal - Further, it was also revealed during investigation as pointed out by ld. DR, that goods have been found transported by truck covering a distance of over 1400 Kms. in a single day from Nagothane to Parwanoo. Details are duly reflected in para 5 of the adjudication order. This is impossibility as no such transportation can take place. All these facts arouse suspicion and needs to be answered. Once impossibility creeps into results of investigation, result becomes unassailable pointing toward false transaction. Verification of the records maintained by the Excise & Taxation Department of the Government of Himachal Pradesh at the Parwanoo Barrier also revealed that some of the consignments as detailed in Annexure ‘A’ have not entered the State of Himachal Pradesh through Parwanoo Check Post/Barrier as evident from the correspondences made with the Sales Tax Authorities of Parwanoo. Ground taken up by Commissioner (Appeals) to drop the demands and penalties has no legs to stand as fraud is clearly manifested. - Demand of duty and penalty confirmed - Decided in favour of Revenue.

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• 2014 (5) TMI 1014
  CENVAT Credit - Dispute relates in respect of Cenvat credit availed on imported aluminum scrap under the Bills of Entries inasmuch as duty was paid not in cash but was deposited in the DEPB - Held that:- Cenvat credit of duty in respect of imported inputs on which duty has been debited through DEPB cannot be denied in as far so w.e.f. 28.1.04. Para 4.3.5 of the Foreign Trade Policy has been amended where under duty debited through DEPB has been made admissible for Cenvat credit or for drawback claim w.e.f. 28.1.04. In the present case the Cenvat Credit denied to the Appellants pertain to the period April 2004 onwards i.e. after the amendment of Para 4.3.5 of the Foreign Trade Policy - no justifiable reasons to interfere in the same in the absence of any evidences supporting the revenue allegations, Commissioner (Appeals) has rightly set aside the confirmation of demands against the assessee - Decided against Revenue.

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• 2014 (5) TMI 1013
  Duty demand - Shortage in stock - Assessee contends that since new ERP based Navision Software was installed for making entries, he was not aware of the discrepancy - Held that:- It is seen that the appellant had recently started using ERP Based Navision Software. The main Server of the same was located in the head Office at 54/38, Nayaganj, Kanpur. The main feature of this Software is that it is to be connected through Broadband Network and subsequently the entries in the records were then made at the Unnao Unit at the end of the day. But sometimes, due to problem in services of BSNL connectivity to the Server was not available and it resulted into delay in feeding entries/data in the Computer. That at the time when inspection was conducted by the Department, due to server problem, the broadband could not be connected to the main server and hence the days entry could not be updated in the system of the applicant. - appellant representative has accepted the shortages only but nowhere accepted the fact of removal of the same. On the other hand, there is plausible explanation of the same. As such, I find no reasons to the upheld the confirmed demand against them - Decided in favour assessee.

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• 2014 (5) TMI 1012
  Benefit of Cenvat credit of Service tax - Revenue denied credit that Services like Telephone Services, Xerox services, Courier services and Insurance services cannot be held as input services - Held that:- Telephone Services, Xerox Services, Courier Services and Insurance Services are eligible input services - even if the invoices were received at the Head Quarters and the Services were availed in the factory, the credit cannot be denied - However, demand is also barred by limitation period - Following decision of M/s. Econ Antri Ltd. Vs. CCE, Gwalior [2014 (2) TMI 870 - CESTAT NEW DELHI], M/s. Valco Industries Ltd. [2012 (12) TMI 30 - CESTAT, New Delhi] - Decided in favour of assessee.

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• 2014 (5) TMI 1011
  CENVAT Credit - Storage loss - Held that:- total of the storage losses for the period from June 2007 to February 2009 comes to 2135 qtls., that it is this loss which had been reported to the Jurisdictional Central Excise authorities as transit loss by mistake, while it is actually storage loss - since it is 0.45% of the total quantity received, the same is within the limit of 2% storage loss prescribed as condonable by the Board - Once it is treated as storage loss, the ratio of the judgment of Division Bench of the Tribunal in the case of Jubilant Organosys Ltd. vs. CCE, Meerut - II (2004 (5) TMI 486 - CESTAT, NEW DELHI) would be applicable and the Cenvat credit in respect of such loss cannot be denied.. In any case, even if it is treated as transit loss, since the same is 0.5%, the Cenvat credit cannot be denied in view of judgment in the case of Dhampur Sugar Mills Ltd. vs. CCE, Meerut - II [2010 (12) TMI 291 - CESTAT, DELHI] which is based on judgment of Larger Bench of the Tribunal in the case of CCE, Chennai vs. Bhuwalka Steel Industries Ltd. [2009 (11) TMI 177 - CESTAT, CHENNAI (LB)]. - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (5) TMI 1016
  Whether any manufacturing activity of Horlicks is undertaken in Tamil Nadu – Concessional Levy of Tax – Interpretation of statute - Manufacturing activity - Under the proviso to Section 3(3) of the Tamil Nadu General Sales Tax Act - Whether the Horlicks by itself without packing is marketable or not - Whether Section 23 can be invoked in this case or not – Levy of Penalty - Held That:- There is no definition to as to the scope of the expression 'manufacture' in the Section - Hence, one can get assistance from the definition of "manufacture" as defined under Rule 3(h) of the Rules – Relying upon THE TAMIL NADU CO-OPERATIVE MILK PRODUCERS' FEDERATION LIMITED v. DEPUTY COMMISSIONER OF CENTRAL DIVISION [2014 (4) TMI 595 - MADRAS HIGH COURT]- The said decision was in the context of purchase of polythene films for being used in packing milk and milk products - There, assessee purchased fresh milk; after pasteurising it, sold it as a pasteurised milk - In the context of such process done to the milk purchased, the question arose as to whether the assessee would be entitled to concessional levy on the purchase of polythene sheets - Referring to ASPINWALL AND CO. LTD v. COMMISSIONER OF INCOME TAX [2001 (9) TMI 3 - SUPREME Court] as well as to the definition of 'manufacturer' as contained in Rule 3(h), this Court held that the preparation or process of making goods for the purpose of trade would also be included within the meaning of 'manufacture' to qualify for concessional levy u/s 3(3) of the Act subject to condition in Section 3(3) of the Act. Thus, when the goods purchased is for the purpose of use in the preparation or a process of the goods for the purpose of trade, such preparation or process or making of the goods for the purpose of trade would also come within the meaning of 'manufacture' – There is no hesitation in holding that when the Horlicks at intermediate stage is brought from Rajahmundry to Chengalpattu Branch of the assessee Unit in Tamil Nadu, and subjected to several processes to make it a marketable commodity, the assessee can legally claim its activities in Tamil Nadu, as coming within the meaning of the term 'manufacture' - Given the nature of the product and the requirements to comply with the provisions of the Weights and Measurements Act with its name and the product code and other details with labels affixed on the bottle, the entire manufacturing process gets completed only when the goods are brought to such a marketable stage. Whether purchase of bottle caps and seals can be considered as component parts of Horlicks powder – Held That:- The purchase of labels and caps are integral to the manufacturing activity and for the purpose of trade – Relying upon HMM LIMITED v. COLLECTOR OF CENTRAL EXCISE [1994 (9) TMI 71 - SUPREME COURT OF INDIA] - Screw cap shall be deemed to be a component part of Horlicks and hence, the assessee is entitled to the concessional excise levy, Revisions are allowed and so too the writ petitions - The order of the Tribunal levying penalty is set aside and the differential duty collected by reason of Section 3(3) of the Act is also deleted - The writ petitions are allowed. Whether Section 3(3) is available prior to the amendment of Section 3(3) for the packing materials or not – Concessional levy of Tax - Held That:- As far as Section 3(3), as it stood during the material point of time relating to assessment years 1990-91 to 1992-93, is concerned, when a dealer purchases any goods, other than consumables for use in the manufacture of any goods for sale inside the State, the tax payable by a dealer in respect of such goods, other than the excluded items, would be 4% - Proviso to Section 3(3) enjoins on the assessee to produce a certificate in Form XVII to claim concessional levy - Based on this alone, the assessee would be entitled to claim concessional levy under Section 3(3). Concessional levy of Tax - Held That:- As far as the assessment year 1999-2000 is concerned, in contra distinction to the provisions of Section 3(3), which related to sale of any goods other than the consumables, the amended provisions referred to sale of any goods including the consumables, packing materials and labels other than capital goods, for the grant of concessional levy - As in the earlier provisions, the only requirement is that raw materials must be used in the manufacture and assembling and packing materials or packing or labelling in connection with the manufacture of goods, as mentioned in the First schedule for sale inside the State - Thus, going by the provisions, it is evident that the tax payable in respect of any goods including consumables, packing materials and labels, would qualify for concessional levy, so long as they are for the purpose and use in the manufacture of goods falling under the First Schedule and that the manufactured goods are to be available for sale inside the State. Bar of Limitation - For assessment order relating to the assessment year 1998-99, since the reassessment proceedings are time barred, no question arises before this Court for any consideration - Decided in favour of Assessee.

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• Indian Laws

• 2014 (5) TMI 1007
  Violation of Section 6(A) of the DSPE Act, 1946 - offence falling under the Prevention of Corruption Act, 1988 - The allegations as set out in the FIR were that a reliable source had informed that Hemant Gandhi is having close contacts with the Petitioner, Lallan Ojha and other officials of the Central Excise for obtaining illegal gratification by corrupt and illegal means from the businessmen - Held that:- on 2nd January, 2012 transfer of bribe money had to take place though the exact time and place was not known, however it was contemplated shortly and thus the CBI was required to act with due dispatch and hence at that stage it could not have and was not required to comply with Section 6(A)(1) DSPE Act - After registration, verification may be entrusted to an officer other than who has submitted the SIR. As far as possible, the requisition of records/documents should be avoided during verification of SIRs. In case, it is absolutely necessary to do so, the requisition must go to the concerned Vigilance Officer under the signatures of the SP after obtaining permission from the DIG concerned. It must be ensured that no record/documents are requisitioned before the Competent Authority has passed orders for registration of an SIR. If a case is required to be registered under the Prevention of Corruption Act 1988 against an officer of the rank of Joint Secretary and above or a Government appointee in the Central Public Sector Undertakings, prior permission of the Government should be taken before enquiry/investigation as required under Section 6A of the DSPE Act except the case under Section 7 of the PC Act wherein the registration is followed by immediate arrest of the accused. In case, involvement of another Government servant of the above-mentioned rank(s) is revealed during the course of investigation, a fresh permission as required under Section 6A of the DSPE Act, which should be obtained at the earliest. The permission so obtained should form an integral part of the FIR or the Case Diary, as the case may be. After the registration of FIR another source information was received that the money had been transacted and Rs. 3 lakhs was delivered to the driver of Lallan Ojha. Thus immediately a raid was conducted. The two co-accused Lallan Ojha and Hemant Gandhi were arrested and their disclosure statements recorded. From the car of Lallan Ojha Rs. 2,95,000/- and other incriminating documents were recovered. Raids were conducted at the house and office of the Petitioner. All these actions of the CBI fall within the ambit of investigation not only against co-accused Lallan Ojha and Hemant Gandhi but also against the Petitioner, as in a case of conspiracy the acts of co-accused committed in furtherance of the common object are attributable to the co-accused. Thus, to state that investigation qua the Petitioner started only after his arrest would be incorrect as all the acts performed by the CBI after the registration of FIR were part of investigation qua the Petitioner as well. Since investigation had already commenced against the Petitioner, Clause (d) of Guideline 13.9 of the CBI Crime Manual has no application to the facts of the present case. - Decided against Appellant.

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