Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 24, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Where regular business transactions are carried on by an assessee in its ordinary course of business with its subsidiary, they cannot be treated as deemed dividend for the purpose of section 2(22)(e) - AT
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Scope of the term 'expenditure' - Cash payment - When the amount paid by the assessee had not been claimed as deductible expenditure while computing the business income provisions of section 40A(3) cannot be applied. - AT
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Whether the right of the assessee to challenge the additions on merits can be maintained by the Tribunal despite the fact that the assessee failed to agitate and assert such rights before the Tribunal by filing a cross appeal or cross objection - Held yes - AT
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Penalty u/s 271(1)(c) - A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income - AT
Service Tax
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Business auxiliary services - activity of selling to various persons various vehicle finance schemes - there is no ambiguity even remotely amenable to the interpretation that their services did not fall under the category of promotion and marketing services - AT
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Scope of business auxiliary services - the word ‘includes’ has not been used to expand the definition of ‘support service of business or commerce’. - AT
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Service tax on GTA services - just because a person has not issued consignment note in accordance with law and violated the provisions of law, it cannot be held that the recipient also can claim that he would also violate the law - AT
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Only leased circuit services rendered by a telegraph authority is taxable and since the foreign vendor is not such an authority, the question of levy of Service Tax from the recipient of the service under reverse charge basis does not arise - AT
Central Excise
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Interest from 29/7/2010 to 13/5/2011 is payable to the appellant as the rebate claim in fact was sanctioned on 28/7/2010 but adjusted against some arrears which were separately under litigations - AT
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Clandestine removal of goods - When the deficiency of stock was found by investigation and that remained unexplained, that is enough to make allegation of unaccounted removal of such goods. - AT
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Cenvat credit of duty paid on raw materials, capital goods and input services utilised in the captive power plant. - Benefit of Section 80-I of the Income tax claimed - credit allowed - AT
VAT
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Initiation of reassessment proceeding - The words “reason to belief“ as used in Section 21 (1) of the Act, 1948 has not to be based on surmises and conjectures, rather it is to be based on objective satisfaction. - HC
Case Laws:
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Income Tax
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2014 (6) TMI 643
Disallowance u/s 40(a)(i) of the Act – Non-deduction of TDS u/s 195 – Held that:- No evidence has been placed on record to allege any misreading of evidence by the CIT(A) - assessee’s overseas agents do not have any permanent establishment in India - The assessee and its agents had executed agreements for procuring export orders and furnishing of upto date information about fashion and market trends - Services have been rendered outside India - The reimbursements in the nature of export commission have also been paid overseas -neither any services nor payment have taken place in Indian territory - no evidence proving that the agents had provided or made available any technical services has been filed - the Revenue’s mere plea that the assessee’s obligation of export commission attracts 9 r.w.s 195 does not deserve acceptance – relying upon Commissioner of Income Tax Versus M/s. T. Abdul Wahid & Company, M/s. Farida Leather Company [2014 (6) TMI 463 - ITAT CHENNAI] – Decided against Revenue.
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2014 (6) TMI 642
Reopening of assessment u/s 148 of the Act – Bar of limitation – Mere change of opinion - Held that:- No action can be taken under the section after the expiry of four years unless income chargeable to tax has escaped assessment for the failure on the part of the assessee either to file return u/s 139 or in response to the notice issued u/s 142(1) /148 or to disclose fully and truly all material facts necessary for that AY - the re-assessment proceedings have been initiated beyond the period of four years in both the AYs AY.2003-04 and 2004-05. Relying upon Sri Sakthi Textiles Ltd. Vs. JCIT [2010 (8) TMI 449 - MADRAS HIGH COURT] - in order to fall within the proviso to section 147 of the Act, apart from stating that there were reasons for the authority to believe that there had been escapement of chargeable income, it should have also been recorded that such escapement was due to the failure of the assessee to disclose fully and truly all material particulars necessary for that AY - such recording is absolutely mandatory - the AO cannot travel beyond his jurisdiction and invoke the provisions of section 147 by ignoring mandatory conditions set out in proviso to the section - the action of AO clearly amounts to review of the assessment order which is not permissible under the Act - the re-assessment proceedings initiated against the assessee in both the AYs are without jurisdiction and are thus liable to be set aside. Deemed dividend u/s 2(22)(e) of the Act – Loans received – Held that:- The assessee is having substantial interest in both the companies – assessee contended that the amounts have been advanced by CEPL to CIPL in the normal course of business - there is no question of invoking provisions of section 2(22)(e) - both the companies are in the same line of business and are complementing the business of each other - CEPL apart from the fact, it has advanced loan to CIPL is also the holding company of CIPL - It has interest in the business of its subsidiary – Relying upon Farida Holdings P. Ltd. Vs. DCIT [2012 (6) TMI 235 - ITAT CHENNAI] - where regular business transactions are carried on by an assessee in its ordinary course of business with its subsidiary, they cannot be treated as deemed dividend for the purpose of section 2(22)(e) of the Act – Decided in favour of Assessee.
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2014 (6) TMI 641
Extension of demand stayed by Tribunal – Held that:- CIT vs. Ronuk Industries Ltd. [2010 (11) TMI 461 - Bombay High Court] - where the delay in the disposal of pending appeal is not attributable to the assessee, the Tribunal has the power to extend the stay beyond the period of 365 days even after the amendment of the third proviso to section 254(2A) w.e.f. 1st October, 2008 - the assessee had already complied with the terms and conditions of the first stay, further stay is granted till the disposal of the present appeal or for a further period of 180 days from the date of this order, whichever is earlier – stay granted.
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2014 (6) TMI 640
Non-speaking order - Transfer pricing adjustment – Royalty payment to AE – Held that:- The order of the DRP is a laconic order - the speaking order has not been passed by the DRP - It has not given any reason for disposal of the assessee’s objections and far reaching its conclusions - It has also not adopted the reasons contained in the draft assessment order nor even the reasons that are contained in the order of the TPO - The assessee has a right to know the reason and Appellate Tribunal also can scrutinize the correctness of the said order only if reasons thereto are contained in the order - In the absence of any reasoning the order so passed is set aside – the matter is remitted back for the fresh adjudication – Decided in favour of Assessee. Disallowance u/s 14A r.w. Rule 8D of the Act – Held that:- Assessee claimed that the investment in mutual funds was made out of the surplus funds - This fact needs to be examined and a finding has to be returned by the Assessing Authority – thus, the matter is to be remitted back to the Assessing authority for fresh adjudication with respect to the Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] – Decided in favour of Assessee. Disallowance of royalty and technical fees – Held that:- The AO did not have benefit of THE COMMISSIONER OF INCOME TAX-II Versus MUNJAL SHOWA LTD. [2010 (9) TMI 121 - DELHI HIGH COURT] - thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (6) TMI 639
Addition of undisclosed income – Loose papers found during search – Held that:- AO while making the addition has placed reliance only on the seized document taking the sale difference as undisclosed income – the seized document is a trading and profit and loss account drawn by the assessee in which all the income and expenses had duly been shown and a net profit has been reflected - The AO has adopted pick and choose method by taking the sales figure and ignoring the income reflected in the same paper after expenses – the pick and choose method/approach is not sustainable in law and if at all the paper was to be relied for making addition in the case of assessee, the undisclosed income can be taken only to the extent as shown by the assessee in the paper out of which profit shown in the regular return of income and undisclosed income shown in the return of income for block period be reduce – thus, addition to the extent of Rs. 10,10,515/- is sustainable – Decided partly in favour of Assessee.
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2014 (6) TMI 638
Stay application – Applicability of seciton 194J or section 192 of the Act - Payment made by hospital/trust to the Doctors – Held that:- Prima facie the assessee has brought out a good argueable case on the point that the provisions of section 192 are not applicable as the arrangement between the assessee and the Doctors are on professional basis and not employer and employees - when the payees have already discharged the liability of tax on the amount received from the assesee, the stay of demand is allowed in respect of the four years before us for a period of 180 days or till disposal of appeal whichever is earlier – Decided in favour of Assesee.
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2014 (6) TMI 637
Procedure in appeal u/s 250(6) of the Act – Exparte order - Held that:- The purpose of enquiry into the reasons for the assessee’s non-attendance before the CIT(A), even as clarified during the hearing itself, was to ascertain if there has been any abdication of responsibility on the part of the assessee toward his legal obligations - assessee cannot abuse the process of law by acting in a nonchalant or lackadaisical manner and then seek redressal in the appellate proceedings before a higher forum - the assessee’s bona fides are accepted and refrain from imposing any cost – thus, the matter is to be remitted back to the CIT(A) who shall decide the issue/s agitated before him in accordance with law after hearing the parties before him – Decided in favour of Assessee.
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2014 (6) TMI 636
Working capital adjustment – Held that:- Following M/s Avineon India Pvt. Ltd. Versus Dy. Commissioner of Incometax [2014 (5) TMI 107 - ITAT HYDERABAD] - assessee contended that trade practice of advances and subsequent adjustment of these advances against invoices raised, being captive service provider has a bearing on profit margin, therefore, working capital requirement should be taken care of by way of adjustments - Whether similar conditions exist for other comparables require examination and adjustment towards working capital – assessee furnished detailed annexure making working capital adjustment to justify 3.30% sought by Assessee as against 1.38% given the TPO – thus, the matter is required to be remitted back to the TPO for verification with a direction to examine the veracity of Assessee’s claim and take proper decision in correctly computing the working capital adjustment – Decided in favour of Assessee. Selection of comparables – Held that:- Following M/s Avineon India Pvt. Ltd. Versus Dy. Commissioner of Incometax [2014 (5) TMI 107 - ITAT HYDERABAD] - the TPO had included the company which was also engaged in portfolio management services and investment activities and such services cannot be compared to Assessee as both are in divergent sectors - the company cannot be a comparable, thus, the AO is directed not to treat the company as comparable to the assessee – AO/TPO is directed to determine the ALP – Decided in favour of Assessee.
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2014 (6) TMI 635
Remand report of AO - Disallowance of claim for bad debt u/s 36(1)(vii) of the Act - Held that:- Assessee has failed to establish the correct nature of such debts and also whether the same had been offered for taxation in the past, assessee filed additional evidence before CIT(A) which was sent back by the CIT(A) to AO for his comments - the details regarding name and address of the parties, confirmed copies of their accounts for the earlier years are additional evidence which were not furnished during the course of assessment proceedings - as the assessee itself has affirmed that such details were sought by the AO on 14-11-2007, it is clear that he had sufficient time to furnish confirmation of the parties - it was not prevented by sufficient cause to furnish such details - CIT(A) admitted the additional evidence and decided the issue in favour of assessee without verifying the same – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue.
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2014 (6) TMI 634
Addition u/s 69 of the Act – Unexplained investment in house property – Held that:- The present whereabouts of the assessee were not known along with notice u/s 142(1) dated 03-12-2007 were issued to the assessee at the residence premises at Tulip Bangalow of which assessee is the owner - no-body attended nor any written communication in the matter by the assessee either on the date so fixed or thereafter - notices issued by RPAD and speed post in question have yet not been received back un-served till date of order. None appeared on behalf of the assessee despite the fact that notice for today’s hearing was sent to him on the address mentioned by the assessee in form no. 36 – the assessee has failed to avail the opportunity granted while restoring the matter to the file of AO in the first inning of litigation - Despite several opportunities given by AO and Ld. CIT(A) assessee has not offered any explanation in respect of on money of Rs. 4,78,750/- paid by him to the Tulip Bungalows for acquiring the Bungalow No. 11 in Tulip Bungalows Scheme and therefore addition made by AO of Rs. 4,78,750/- towards payment of on money u/s 69 of the Act as unexplained investment in his property which has been sustained by CIT(A) is hereby upheld – Decided against Assessee.
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2014 (6) TMI 633
Validity of reopening of the assessment u/s 147 of the Act – Mere change of opinion - Held that:- No addition was made thereby the expenses were treated as revenue expenses – Reopening of the assessment was not justified - assessment can be re-opened even in cases where there has been complete disclosure of all the relevant facts necessary for assessment and the words ''escaped assessment" are apt to cover the case of discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its-non-consideration or caused by a mistake of law applicable to such transfer or transaction - the AO has specifically asked for the details and the assessee has submitted the details of payments and only thereafter the assessment has been completed - the CIT(A) concluded that the AO consciously applied his mind in the original assessment and that was the reason for quashing the reassessment. The assessee had furnished information about the payment before the AO and considers that after conscious application of mind, the AO has accepted the claim - it cannot be stated that it was not a conscious decision of the AO to allow claim of the AO to allow the claim of the assessee - also in Jindal Photo Films Ltd. Vs. DCIT [1998 (5) TMI 20 - DELHI High Court] it has been held that a claim has been considered in the original assessment without any further material on record, it cannot be reopened and it would amount to change of opinion, which is not permissible even after the amendment and the case falls within the four years’ time limit - reopening was not proper and quash the same - the reopening does not seem to be justified – thus, the reopening of the assessment was not proper and the order passed by AO is set aside – Decided in favour of Assessee.
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2014 (6) TMI 632
Disallowance made u/s 40(a)(ia) of the Act – Failure to furnish details of Lorry Hire Charges in prescribed format – Held that:- The assessee has collected Forms in 15I from truck owners at Rs. 18,48,00,229/- and the same were produced before the revenue authorities - filing of Form 15I or 15J belatedly cannot be a reason to deny the deduction claimed by the assessee - If the assessee filed these forms which are duly filled with the details such as full address, PAN, father’s name and they are assessed to tax and the same should be considered as filing of these forms are only procedural in nature. Explanation III to section 194C being applicable to the assessment year under consideration as the Explanation would be applicable prospectively from 01/07/1995, on which date it was introduced - the assessee made specific plea before the revenue authorities that assessee has collected form 15I from the truck operators but he could not produce them before the AO, however, the same was produced before the CIT - once the assessee has obtained form No. 15I from the sub-contractors, he is not liable to deduct TDS on the payment made to sub-contractors and no disallowance can be made u/s 40(a)(ia), belated furnishing of Form No. 15-J to the CIT is an act of posterior in time to payments made to sub-contractors - this cannot be itself undone the eligibility for exemption created in second proviso to section 194C(3)(1) by virtue of submission of form 15I by subcontractors. The purpose of rule 46A is to place fetters on the rights of an appellant to produce additional evidence before the first appellate authority and not the rights of the first appellate authority to call for production of any fresh evidence or information - This aspect of the provisions of rule 46A is clear from the provisions of Sub-rule (4) of rule 46A itself that nothing contained in rule 46A shall affect the power of first appellate authority to direct the production of any document or examination of any witness to enable him to dispose of the appeal or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the assessing officer) - due credit be given to the claim of the assessee in terms of Form 15I and 15-J filed by the assessee – thus, the order of the CIT(A) is upheld in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act – Decided against Revenue. Disallowance of 1/5th of various expenditure - Section 40A- Held that:- Incurring of expenditure is not doubted by the revenue authorities - the assessee has not raised any objection before the AO, the addition made by the AO was confirmed by the CIT(A) - there is no doubt that incurring of any expenditure and also other conditions are not applicable to the facts of the case of the assessee - some expenditures like telephone expenses are paid by cheque - if the payments are made by cheque and supported by self-made vouchers, it cannot be said that the expenditure is excessive or unreasonable - the payments made by cheque cannot be disallowed - there is every chance of inflating the same and considering these inflating of expenditure by way of self-made vouchers, the disallowance of 10% of the cash payments made towards the expenditure is upheld – Decided partly in favour of Assessee. Addition of unexplained cash credits – Held that:- The expenditure is not doubted and just because the expenditure was outstanding at the end of the year in the balance sheet, the addition was made u/s 68 of the IT Act - the claim of the assessee and in an arbitrary manner decided the issue without appreciating the facts on record - When they have not doubted the expenditure which debited to the P&L A/c, only the expenditure shown as outstanding in the balance sheet, cannot be doubted when there are valid confirmations letters issued by the concerned parties - there cannot be double addition as the AO made one addition in the form of section 68 and another in the form of section 40(a)(ia) of the Act - the addition made on this count is not warranted – Decided in favour of Assessee.
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2014 (6) TMI 631
Enhancement of disallowance u/s 40A(3) - scope of the term 'expenditure' - Cash payment of Rs. 52.88 lakhs for purchase of land - payment made before registration even on Sundays – Held that:- The assessee has debited/charged an amount towards purchases account-land to the Profit and Loss A/c - the word "expenditure" has not been defined in Income-tax Act – Relying upon Indian Molasses Co. Ltd. vs. CIT [1959 (5) TMI 5 - SUPREME Court] - expenditure is what is paid out or away and is something which is gone irretrievably - the assessee has not claimed the payment as expenditure in the Profit and Loss A/c - It is an item of payment to sundry creditors viz., P. Srinivas & SLN Real Estate (Landlord) Account and not debited to the Profit and Loss A/c. as an expenditure – the amount paid by the assessee cannot be construed as an expenditure charged to Profit and Loss A/c - When the amount paid by the assessee had not been claimed as deductible expenditure while computing the business income provisions of section 40A(3) cannot be applied. Mere entry in the books of account will not change the character of the transaction - there is no dispute that the payments are made on Sunday where there is banking holiday on that day - the payment is not required to be made when the banks are closed i.e. after banking hours - the purpose of the disallowance u/s 40A (3) is to dissuade transactions by cash - no banking facility is available where the properties were purchased by the assessee or payments were made on holidays i.e., Sundays, therefore, there was no choice for the assessee except to make the payments in cash due to exceptional or unavoidable circumstances as provided under Rule 6DD. – thus, the disallowance u/s 40A(3) of the Act is not warranted – Decided in favour of Assessee. Estimation of income – Held that:- CIT(A) deleted the addition on the basis that books of account are not rejected to estimate income of the assessee - certain expenditure towards labour and other miscellaneous expenditure are self-vouched and not verifiable - AO estimated the income at 10% of the sales and given deduction towards interest to partners - the estimation by the AO is reasonable and was accepted by the assessee during the course of assessment by signing the order-sheet - deduction cannot be deleted and is to be confirmed – Decided in favour of Revenue.
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2014 (6) TMI 630
Rectification of order - Allowability of deduction u/s 35(1) - Whether the right of the assessee to challenge the additions on merits can be maintained by the Tribunal despite the fact that the assessee failed to agitate and assert such rights before the Tribunal by filing a cross appeal or cross objection – Held that:- Relying upon CIT v. Rayala Corpn. (P) Ltd. [1995 (1) TMI 42 - MADRAS High Court] - It is the duty of the Tribunal to consider the subject-matter of the appeal and pass 'such orders' as are required to adjudicate the subject-matters before it- If for adjudicating various aspects of the subject-matter or matters incidental thereto, an order or direction is required to be issued, then, 'such order' or 'directions' are legally justified in view of the provisions contained under section 254(1) of the Income Tax Act - where particular issue has been omitted to be considered or has not been adjudicated properly or where perverse findings have been recorded in total disregard of the material on record, the Tribunal is competent enough to set aside the order of the lower appellate authority to that extent, although no specific ground is taken for that purpose by the concerned party - in a given situation, there is an obligation on the part of the Tribunal to consider the subject-matter of appeal and secondly to issue effective directions for adjudicating the subject-matter of appeal, which includes the entire process of assessment and which has been held to be an integrated process. Whether a mistake can be pointed out on the part of ITAT even when the assessee did not seek any relief from the Tribunal – Held that:- It is a mistake apparent from record, so that the order rectifying the mistake is valid- where the Tribunal passes an order taking into account information not disclosed to the assessee, there is a mistake apparent from the order so that Tribunal is duty bound in rectifying the mistake when it is brought to the notice of the Tribunal - while maintaining our order on the main issue with regard to allowability of deduction u/s 35(1) - the Tribunal order is to be amended to that extent and the Registry is directed to post the cases for hearing on 6.10.2014 for the limited purpose of deciding the issue on applicability of provisions of section 35(3) of the Act – Decided partly in favour of Assessee.
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2014 (6) TMI 629
Penalty u/s 271(1)(c) of the Act – Claim of depreciation on plant and machinery – Held that:- Penalty u/s. 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income - assessment proceedings and penalty proceedings are separate and distinct – Relying upon Ananthraman & Co. Vs. CIT [1980 (4) TMI 2 - SUPREME Court] - the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) are different than those applied for making or confirming the additions - When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant, the disallowance of such claim automatically lead to the conclusion that there was concealment of particulars of his income by the assesse or furnishing of accurate particulars of such income. All the material facts relevant to the claim had been furnished by the assessee, thus, it is not a fit case to attract the levy of penalty u/s 271(1)(c) of the Act - A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars of income, by the assessee - no cogent material or evidence was brought to our notice which may prove that the Revenue detected the concealment – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee.
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Customs
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2014 (6) TMI 646
Conviction under NDPS - Non compliance with mandatory grounds of Section 50 - Held that:- Lot of difference between different statements given by the accused - The witnesses produced by the defence are discarded because of various infirmities found in their testimonies which are discussed in detail by the trial court as well as the High Court. - apart from sentencing the appellants for 10 years R.I., a fine of Rs.1,00,000/- (Rupees one lakh) each is also imposed on the appellants. The trial court has further stated that in default of payment of fine, the appellants shall undergo further sentence of 2 = years R.I. We feel that this part of order needs modification. Payment of fine of Rupees one lakh is maintained. However, at the same time we direct that in case of default of payment of fine, the appellant shall undergo further sentence for one year. - Decided against assessee.
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2014 (6) TMI 645
Enhancement of penalty imposed - - Held that:- Revenue has failed to bring the fact that the appellant's appeal quo imposing penalty has been allowed by setting aside the order of imposing penalty to the knowledge of the Commissioner (Appeals) and the Commissioner (Appeals) passed the impugned order. When the department has accepted that no penalty is warranted on the appellants in this matter, therefore, the question of enhancement of penalty does not arise at all. - Decided in favour of assessee.
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Corporate Laws
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2014 (6) TMI 644
Oppression and mismanagement of the company - Non compliance with section 400 - Held that:- In view of the language used in Section 400 and the decisions in the cases of Cosmosteels Private Ltd. and others Vs. Jairam Das Gupta and others [1977 (12) TMI 92 - SUPREME COURT OF INDIA] and Bilasrai Joharmal and others Vs. Akola Electric Supply Co. Pvt. Ltd. [1958 (3) TMI 22 - HIGH COURT OF BOMBAY], it can safely be held that the provisions of Section 400 of the Act are mandatory in nature and the Company Law Board/Tribunal is obliged to issue notice to the Central Government as and when a petition under Section 397 or 398 of the Act is entertained and it is only after considering the representation of the Central Government, if any, that a final order can be passed - It is important to keep in mind that a statute of a mandatory nature if provides for doing a particular thing in a particular manner than that thing should be done in the manner provided or not at all. Therefore, it is not open for the Company Law Board/tribunal to pass a final order on a petition under Section 397 or 398 of the Act except for its summary dismissal, without giving notice to the Central Government as contemplated vide Section 400 of the Act. There is nothing in the impugned order which could reflect or indicate that the Company Law Board had issued any notice as envisaged under Section 400 of the Act to the Central Government before proceeding to decide the petition under Section 397 or 398 of the Act. - There is no material to show that any notice was issued to the Central Government before passing the impugned order - in the absence of notice under Section 400 of the Act, the impugned order dated 20th March, 2009 cannot be sustained in law and his hereby set aside - Decided in favour of appellant.
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Service Tax
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2014 (6) TMI 660
Admissibility of refund claim - period of limitation - Notification No. 41/2007-ST dated 6.10.2007 - As per para 2(e) of ibid notification the claim for refund was required to be filed on a quarterly basis within 180 days from the end of the relevant quarter during which the said goods had been exported. - Held that:- Commissioner (Appeals) has examined the matter in depth. He has rightly distinguished the applicability of section 11B and applicability of notification No.41/2007-ST. Concept that exemption notification has to be strictly construed has been appreciated. - no reason to interfere in the findings - Decided against assessee.
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2014 (6) TMI 659
Demand of Service Tax - Business auxiliary services - to approach, discuss, inform, market and sell to various persons various vehicle finance schemes - whether in the nature of provision of Service on behalf of clients or promotion and marketing activities - exemption under Notifications Nos. 14/2004-ST & 25/2004-ST - penalties under Sec 76,77 and 78 - Held that:- Appellants service are not covered under the scope of ‘provision of services on behalf of the clients’, the benefit of the said exemption Notifications is not available to them.. Agreement between M/s. TFL and the Appellants is so clearly worded regardings the activities to be carried out by the Appellants that it leaves no scope for any ambiguity whatsoever, leave alone the ambiguity even remotely amenable to the interpretation that their services did not fall under the category of promotion and marketing and/or that they were providing services to the potential loan seekers on behalf of Ms. TFL and not to M/s. TFL. Levy of penalty - Held that:- Obviously, the Appellants deliberately chose not to pay Service Tax and then sought to justify their action by trying to put fourth an interpretation which is so grossly untenable and devoid of any basis that no reasonable person even with the fullest sympathy with the Appellants would buy their contention. They did not even take Service Tax registration and so obviously also did not file any Service Tax returns. In these circumstances their plea that it was a matter of interpretation is totally untenable. Consequently, there is no infirmity with regard to the Appellants liability to penalty which is patently leviable on them - Decided against assessee.
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2014 (6) TMI 658
CENVAT credit - export of services - credit has been denied on the ground that original authority thought that the output services were not at all taxable and therefore input service credits could not have been taken at all - Held that:- the detailed submissions made in respect of different services rendered by the respondents/assessee have not been discussed in detail at all. Even where there has been discussion, the discussions are not sufficient and mostly general in nature. - matter remanded back for reconsideration. Classification of output services - According to Revenue output service was classifiable under Information Technology Service (ITS) whereas it is claimed by the respondents that such services are classifiable under Business Support Service (BSS) or Business Auxiliary Service (BAS). - Held that:- Since the refund claims had been rejected on the ground that output services were a non-taxable service and the eligibility for the credit had not been examined, this aspect also will have to be considered in detail by the original adjudicating authority. It was also requested by both the sides that some general guidelines should be laid down by this Tribunal while remanding the matter. Scope of business auxiliary services - scope of the term 'include' - Held that:- the word includes has not been used to expand the definition of support service of business or commerce . This is because the meaning itself is very broad and therefore it may not be correct to say that the word includes as in the normal cases expands the definition here. If the meaning given for support service of business or commerce is taken as very broad and if there was no intention to restrict the same, it would have been sufficient to say that support service of business or commerce means services provided in relation to business or commerce. While coming to the conclusion we take note of the fact that on 8.4.2011 the operational processes for marketing was added by Finance Act, 2011 and if the meaning was to cover almost all services, there was no need to add to the definition subsequently. In fact, the explanation given below in the definition explaining what is infrastructural support service would also support the view that in all types of services provided in relation to business or commerce can be considered as support service of business or commerce may not be correct. - it would be necessary for the original adjudicating authority to consider each service rendered by the assessees herein as to whether they fall under ITS or BAS or BSS or any other service which appellant may choose to make a claim at the time of fresh adjudication. - matter remanded baci - Decided partly in favour of Revenue.
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2014 (6) TMI 657
Denial of refund claim - service tax paid GTA services - consignment note was not issued by the Goods Transport agency - after coming to know that they were not liable to pay they filed a refund claim - Held that:- definition of consignment note in Rule 4B appears to have been provided to ensure that the recipient of the services who is required to pay Service Tax in accordance with Notification No. 35/2004-S.T. in the capacity of recipient can take the Cenvat credit was if all the details which are required as per Cenvat Credit Rules, 2004 are available and is not denied the benefit of credit on the ground that a proper consignment note has not been issued. The question that arises is just because private truck operator or a GTA violates the provisions of Rule 4B by not issuing a consignment note can the recipient refuse to pay Service Tax. According to the law, recipient of the services has been made liable to pay and there is no dispute on this issue. According to Notification No. 35/2004-S.T., person who pays the freight is liable to pay. Therefore just because a person has not issued consignment note in accordance with law and violated the provisions of law, it cannot be held that the recipient also can claim that he would also violate the law. Therefore, on analysis of the statutory provisions and Notification, etc., the recipient is liable to pay Service Tax in situation like this and therefore the refund claim has correctly been rejected. - Decided against the assessee. Rejection of refund claim of the ground of no challenge to assessment order - Held that:- When the Revenue contends that the appellant/assessee should have challenged the assessment before filing refund claim, it is expecting the impossible since how can a person challenge his own assessment. Moreover, this leads to the question as to before whom assessment should be challenged. In this case, assessment is by the assessee and this has to be treated as the Order-in-Original but there is no appellate authority prescribed in the statute. Therefore this is not a correct proposition of law. - the view taken by the Revenue that refund claim can be rejected on the ground that the refund claim has been made without challenging the assessment order cannot be sustained.
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2014 (6) TMI 656
Waiver of pre deposit - Demand of limitation - Bar of limitation - Held that:- The appellant furnished the required particulars through a letter dt. 08/08/2006 wherein they, inter alia, offered to supply copies of the relevant agreements, which were submitted on 17/11/2006. It thus appears that all the relevant documents and information were furnished by the appellant to the Department during July to November 2006. However, the show-cause notice came to be issued as late as in April 2010. It is also on record that, consistent with the stand taken by the appellant in their correspondence with the Department, they took registration under BAS and other services and started paying service tax accordingly on the activities covered by the very same agreements. Prima facie, the appellant cannot be said to have suppressed material facts with intent to evade payment of service tax - stay granted.
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2014 (6) TMI 655
Import of service - Reverse charge - Leased Circuit / Telecommunication service received from Singapore - telegraph authority - clarification issued by the Board vide letter dated 15-7-2011 - Held that:- The clarification given by the Board squarely deals with the situation in the case before us. As per the said clarification, no Service Tax is payable under Section 66A if leased circuit service is received from a foreign vendor. The argument of the department that this clarification is only an internal correspondence and not a circular and hence not binding on the department is childish, to say the least. Only leased circuit services rendered by a telegraph authority is taxable and since the foreign vendor is not such an authority, the question of levy of Service Tax from the recipient of the service under reverse charge basis does not arise. - Decided in favour of assessee.
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Central Excise
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2014 (6) TMI 653
Non-payment of interest on alleged delayed payment of rebate claim - Rebate claim sanctioned but appropriated towards the appellant’s arrear liability - Held that:- Rebate claim of the appellant was filed on 29/04/2010 which was found admissible and sanctioned on 28/07/2010. However, the same was adjusted against some arrears pending against the appellant. The appropriation made by the Revenue was protested by the appellants that such adjustment without putting them to notice was not permissible. Separate appeals filed against the cases of arrears, against which adjustment was made and CESTAT vide order dt 4/10/2010 remanded those case back to the Commissioner (A) to decide the appeals without insisting for a pre-deposit. In the light of above factual matrix, adjustment of arrears from the rebate claim were not justified when separate appeals/stay applications were pending before the appropriate appellate authorities. Full rebate payment was due to the appellant after three months from the date (29/4/2010) of filing the rebate claim but was paid only on 13/5/2011 by the Adjudicating Authority. Interest from 29/7/2010 to 13/5/2011 is payable to the appellant as the rebate claim in fact was sanctioned on 28/7/2010 but adjusted against some arrears which were separately under litigations. - Decided in favour of assessee.
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2014 (6) TMI 652
Duty evasion - Shortage in stock - Clandestine removal of goods - Held that:- The material facts with evidence brought out by investigation as depicted in the preceding paragraphs appears to have force and truth, not being discarded by Respondent. Statements recorded brought out evidence to support the case of investigation. There was neither any hypothesis nor any presumption made by investigation. Investigation made its story of evasion believable bringing out the manner of causing evasion backed by cogent evidence depicted as aforesaid. The electronic record (computer data) proved the modus operandi of the respondent. Fabrication of the records proved evasion of excise duty. This is vividly clear from para 15 of the adjudication order. When the deficiency of stock was found by investigation and that remained unexplained, that is enough to make allegation of unaccounted removal of such goods. No evidence was there to show reason of evacuation of stock - Decided in favour of Revenue.
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2014 (6) TMI 651
Reversal of CENVAT Credit - Clearance of old and used capital goods to their other units on payment of duty on the transaction value - Held that:- Larger Bench of the Tribunal in the case of CCE Vs. Navodhaya Plastic Industries Ltd. - [2013 (12) TMI 82 - CESTAT CHENNAI], following the decision of the Hon’ble Madras High Court in the case of CCE Vs. Rogini Mills Ltd. - [2010 (10) TMI 424 - MADRAS HIGH COURT], held that reversal of CENVAT credit of 2.5% for each quarter of an year from the date of taking of CENVAT credit - matter should be examined in the light of the Larger Bench of the Tribunal in the case of Navodhaya Plastic Industries Ltd. (supra). Accordingly, I set aside the impugned orders and remand the matter back to the adjudicating authority to decide the matter afresh after considering the decision of the Larger Bench in the case of Navodhaya Plastic Industries Ltd. (supra) - Decided in favour of assessee.
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2014 (6) TMI 650
CENVAT credit - availment on MS/HR plates used for fabrication of capital goods - Held that:- Commissioner has failed to discuss the issues in detail. Commissioner has observed that the assessee had admittedly imported plant and machinery under project imports and nowhere they had stated that they had procured only parts of the machinery under Project Import Scheme; since under project imports complete machinery is imported, MS sheets and HR plates have been used for fabrication of structurals and other capital assets. The observation in this paragraph shows that the Commissioner came to the conclusion that the appellant is not eligible for the credit because under project import full machinery would have been imported and therefore MS plates/HR sheets must have been used for structurals. The submission made by the appellant regarding actual use of MS plates/HR sheets have not been considered at all. Moreover the fact that the appellant factory was being set up and therefore parts would have been fabricated has also not been taken into account. Impugned order suffers from non-consideration of all the submissions made by the appellants and the issues in proper perspective. - matter remanded back - Decided in favour of assessee.
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2014 (6) TMI 649
Cenvat credit of duty paid on raw materials, capital goods and input services utilised in the captive power plant. - Benefit of Section 80-I of the Income-tax claimed - revenue contended that, the same cannot be held to be a part of the appellant’s factory for the purpose of excise - Held that:- appellant’s claim of captive power plant being a new industrial undertaking before the Income-tax authorities was held as not against the appellants claim of the same being a captive power plant before the Excise authorities for the purpose of Cenvat credit. Further the Tribunal in the case of Sangam Spinners v. CCE, Jaipur [2006 (9) TMI 28 - CESTAT,NEW DELHI] held that captive power plant was held to be a part of the factory even when the same was taken up as a separate division by the appellant in their balance sheet - Decided in favour of assessee.
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2014 (6) TMI 648
Waiver of pre deposit - CENVAT Credit - Credit on stapler pins - appellant after availing credit of duty paid on the stapler pins cleared the carton pack on an MRP which is inclusive of the cost of the stapler pins. - Held that:- prima facie appellant is not undertaking any further activity on stapler pins procured by them from the other manufacturer. The same simply accompany the staplers manufactured by them on which duty has already been paid. The stapler pins are also duty paid. As such, we at this stage, find no justifiable reasons to direct the applicant to pay the duty for the second time in respect of the same stapler pins on which no activity is done by them - Stay granted.
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2014 (6) TMI 647
Waiver of pre-deposit of duty - Import of coca beans - CVD paid @ 4% - Credit on CVD paid - Held that:- During the course of manufacture, cocoa beans are retrieved from the shell and shells are discarded. The applicants are selling the cocoa shells in the open market without payment of duty. The case of the Revenue is that the Cenvat credit is availed on the common inputs and cocoa shells are cleared without payment, therefore applicants are liable to pay 5% of the value of exempted cocoa shells cleared without payment of duty under Rule 6(2) of Cenvat Credit Rules, 2004. cocoa shell is a waste, hence prima facie, the applicants have a strong case. Hence, pre-deposit of the dues is waived and recovery thereof is stayed during the pendency of the appeal - Stay granted.
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CST, VAT & Sales Tax
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2014 (6) TMI 654
Initiation of reassessment proceeding - Benefit of compounding scheme - UPTT Act 1948 - change of opinion - assessing authority held that out of the above 21 contracts, 9 contracts were such in which the petitioner had purchased more than 5% value of the raw materials from outside the State of U.P. and held that the compounding scheme could not be applied in respect of those 9 contracts. With regard to the remaining 12 contracts the Assessing Authority held that the contract had been executed before introduction of the compounding scheme 2000-01, hence the petitioner was eligible for the benefit of the compounding scheme as prevalent in the Assessment Year 1996-97. Held that:- It is not the case of the department that the petitioner did not truly and correctly disclosed the nature of the contract work undertaken by him. It has come on record that the Deputy Commissioner (Executive), Trade Tax examined the contract awarded to the petitioner. After examination of the two contracts he accepted the application for compounding with his wide open eyes. There is not even a slightest whisper either in the impugned notice or in the counter-affidavit that the petitioner is guilty of concealing any material fact or has not truly and correctly disclosed the contract work undertaken by him. There is no allegation that the petitioner by playing fraud obtained the order dated 7th February, 1994 by which the application under Section 7-D of the petitioner was accepted. - Section 7-D opens with non-obstante clause. It gives an overriding effect over the provision in the same or the other Act mentioned in the obstante clause. The words "reason to belief" as used in Section 21 (1) of the Act, 1948 has not to be based on surmises and conjectures, rather it is to be based on objective satisfaction. There has to be nexus between the reason to belief and the materials on the record. It is true that if there are materials on the record, the Court shall not enter into the sufficiency of the materials for forming a belief, but if there is no material which is referred to for forming a belief the initiation of reassessment proceedings is arbitrary and falls beyond the Sections 21 (1) and (2) of the Act, 1948. There was no material to form a belief that that tax has escaped assessment and the proceedings initiated were not justified - writ petition allowed - Decided in favour of assessee.
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