Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 25, 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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Claim of interest u/s 214 - claim of the assessee is for payment of compensation on account of the delay in payment of the interest amount - claim allowed - HC
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Demand u/s 201(1) and 201(1A)- TDS default - Onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. - AT
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AO was not justified in treating the payment of incentives to the dealers as well as to another distributor, as payment of commission liable to TDS under section 194H of the Act - AT
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Transfer pricing adjustments - since the international transaction under consideration is not that of financing, naturally, interest income and interest expenditure cannot be construed as the items of operating nature - AT
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Recalculation of LTCG and sale of shares - AO does not have power under the Income Tax Act to substitute fair market value for full value of consideration - AT
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Accrual of income - Merely because there was a penal clause for charging of interest on account of delay in getting the requisite approval and clearance, it does not ipso facto confers right upon the assessee to charge interest - AT
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Allowability of depreciation on the value of goodwill – CIT(A) is not justified in denying the benefit of depreciation claimed by the assessee on the ‘goodwill’ - AT
Customs
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Classification of goods being Sweet Pearl P.200 - Food Flavouring Material - food preparations versus food additive - A food additive per se need not be a food preparation. - stay granted - AT
Service Tax
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Demand of service tax - Export - Prima facie, it would appear that use outside India cannot be equated with performed outside India because the expression ‘performed outside India’ is already used in the case of services at Rule 3 (1) (ii) - AT
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Classification of service - Works contract service or Site formation service - Excavation and Earth Moving, Demolition Service, cutting down trees, construction of structure etc - stay granted partly. - AT
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Valuation - works contract composition scheme - inclusion of advance termed as mobilisation advance from their customer - matter remanded back - AT
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Waiver of pre-deposit - Cenvat Credit - authorised service stations - cenvat credit of service tax paid on post sale service - prima facie credit is available - AT
Central Excise
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Reversal of CENVAT Credit - Supply of goods to 100% EOU without payment of duty - deemed export - demand set aside - AT
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Valuation of goods - Deduction on account of transportation charges - If the invoices were not to be submitted to the Revenue, failure of the assessee not to file the same with the Revenue cannot be held to be any suppression of facts with any mala fide intent. - AT
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Valuation of goods - Job work - applicants are paying duty at the sale price of principal as per the provisions of Rule 10A - the value of waste and scrap retained by the applicant cannot be considered as additional consideration - AT
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100% EOU - Clearance of fruit pulp to their DTA unit - DTA unit got processed the fruit pulp and ultimately sold the juice - applicant has a prima facie case in their favour - stay granted - AT
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SSI exemption - manufacture of medicines - Respondent were clearing the goods under the brand name other person as such, they were not entitled to benefit of SSI exemption of Notification No.8/2001 - AT
VAT
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Charge on property - Crown debt - priority given under section 50 of the RST Act to the recovery of local sales tax will apply with equal force to the recovery of Central sales tax qua inter-State trade or commerce. - HC
Case Laws:
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Income Tax
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2014 (6) TMI 675
Stay of demand - application u/s 220(6) - whether the payment made to an agent of a non-resident foreign carrier shall be treated to have been made to such foreign carrier. - The appeal before the C.I.T. (appeals) is pending - Held that:- a prima facie case has been made out and the assessing officer ought to have been considered the said point while dismissing the application under Section 220 sub-section 6 of the said act. This Court, therefore, finds that any order directing the petitioner to deposit the demand raise on the above points to the tune of Rs.30 lakhs is passed, it would cause hardship to the petitioner. Petitioner directed to make pre-deposit of Rs. 10 lakhs as a condition for stay of the recovery proceedings or any coercive steps to be taken for realization of the demand during the pendency of an appeal - stay granted partly.
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2014 (6) TMI 674
Stay of demand - held that:- The appellate authority has entertained the appeal and posted the same for final hearing on 17.06.2014. Though the stay application has been summarily rejected by the first respondent, it is the discretion of the authority regarding the demand of percentage to be deposited. However, taking into consideration the petitioner's request that their business is not good and that they are not in a position to pay 50% as directed by the first respondent, there could be a slight modification to the order passed. 50% amount ordered to be deposited in three installments - stay granted partly.
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2014 (6) TMI 673
Claim of interest u/s 214 - scope of the term 'compensation' - the claim of the assessee is for payment of compensation on account of the delay in payment of the interest amount - Held that:- the meaning that is required to be given to the word compensation has been considered extensively and finally the department was directed to pay interest @ 9% per annum within a period of one month from the date of receipt of copy of the order, failing which the department shall pay a penal interest @ 15% per annum for the period mentioned in the said judgment. - Following the decision in Sandvik Asia Ltd [2006 (1) TMI 55 - SUPREME Court] decided in favor of assessee.
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2014 (6) TMI 672
Demand u/s 201(1) and 201(1A) against short deduction of TDS or non-deduction of TDS u/s 194A - TDS on interest on certain deposits placed by the customers with the assessee (Bank) - Held that:- the taxes cannot be recovered once again from the assessee in a situation in which the recipient of income has paid due taxes on income embedded in the payments from which tax withholding requirements were not fully or partly, complied with. - Decision in the case of Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] followed. Onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Once all the details of the persons to whom payments have been made are on record, it is for the Assessing Officer, who has all the powers to requisition the information from such payers and from the income tax authorities, to ascertain whether or not taxes have been paid by the persons in receipt of the amounts from which taxes have not been withheld. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in depositing the taxes are set out in Section 201(1A). These provisions provide that for any delay in recovery of such taxes is to be compensated by the levy of interest. In a case in which the recipient of income had no tax liability embedded in such payments, there will obviously be no question of delay in realization of taxes and the provisions of section 201(1A) will not come into play at all. The computation of interest is to be redone in the light of this legal position. Matter remanded back to AO for fresh adjudication in accordance with the law - Decided in favor of assessee.
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2014 (6) TMI 671
TDS u/s 194H on payment of commission - disallowance of Rs.2.46 crores made u/s.40(a)(ia) - treatment of sales incentives/cash discount as commission - Held that:- similar payment of sales incentive given to the dealers in the immediately preceding assessment years were not treated as commission - AO was not justified in treating the payment of incentives to the dealers as well as to another distributor, as payment of commission liable to TDS under section 194H of the Act - Decided in favor of assessee. TDS on cash discount - Held that:- the provisions of Section 194H are not attracted towards the cash discount given by the appellant. - Decided against the revenue. Disallowance of interest - grant of interest free fund to three parties - Held that:- issue restored back to the file of ld.CIT(A) to decide it afresh after verifying the claim of the assessee whether the assessee was having the sufficient interest-free funds or not and also verify whether the loan was given in the current year or in the earlier years. - matter remanded back - Decided in favor of assessee.
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2014 (6) TMI 670
Rectification of mistake u/s 254(2) - Undisclosed income from interest and sale of dumpers - investment in the name of partnership firm - assessee got 85% share of land of M/s. Ekta Corporation. - tribunal had confirmed the additions - Held that:- Once the Tribunal has taken a conscious decision after considering the evidences on record as also the facts of the case, therefore, it is not a situation when a mistake at all; what to say an apparent mistake, was committed. If that order of the Tribunal is going to be disturbed then the tinkering shall amount to review of the order of the Tribunal which is out of the purview of Section 254(2) of IT Act. - present Misc. Petition has no force thus deserves to be quashed. - Decided against the assessee.
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2014 (6) TMI 669
Transfer pricing adjustments - determination of ALP - exclusion of interest income from the operating revenue - Held that:- since the international transaction under consideration is not that of financing, naturally, interest income and interest expenditure cannot be construed as the items of operating nature. - First the interest in the present circumstances is not in the nature of ‘Business income’ - The second reason for not approving this contention is that the question as to whether interest is ‘Business income’ or not is irrelevant when the point for determination is the amount of operating profit margin. Operating profit margin is obviously a part of the overall profit margin which is deduced by reducing non-operating expenses and non-operating incomes from the net profit. As the assessee is not in the financing activity with its AEs, but, rendering only mediatory and support services, we hold that interest earned from investing working capital service cannot first qualify as income from such international transactions and then at any rate it is not a operating income. This contention raised on behalf of the assessee is therefore, repelled. Deduction of administrative and other costs incurred in making these FDRs yielding interest income - Held that:- it would be just and fair to apply this logic in working out the amount of administrative and other costs incurred by the assessee in making FDRs on which the interest income was earned. That being the position, there would result the deductible amount of Rs.13.19 lac against the impugned order granting deduction of Rs. 5 lac. We, therefore, hold that operating expenses be reduced by this extent. Inclusion of the case of Samrat Clearing in the list of comparables - The only thing available was its Profit & Loss Account with sales/operating income at Rs. 9 lac. The ld. AR contended that the TPO himself excluded this case in the immediately succeeding year on the ground of low turnover. It was, therefore, prayed that this case be expelled from the list of comparables. - Held that:- there is no discussion in the order of the TPO about the comparability or otherwise of this case with the assessee. - matter remanded back to TPO/AO - decided partly in favor of assessee.
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2014 (6) TMI 668
Levy of penalty u/s 271(1)(c) of the Act - Depreciation on leased assets and disallowance u/s 14A of the Act – Disallowance of higher depreciation on UPS - Held that:- In the earlier assessment year, it has been held that the disallowance on depreciation on leased assets is set aside, the order of the FAA is set aside and the AO is directed to allow depreciation on leased assets - no ground for penalty survives - for disallowance of depreciation on UPS at 60% it was treated as a part of the computer system - penalty on this issue would stand to be necessarily set aside. Disallowance of incremental commission – Disallowance of expenditure on renovation and architect’s fees as capital expenditure - Held that:- The disallowance as finally sustained by him and which has since been restored back to the file of the AO by the tribunal in the quantum proceedings – there is no hesitation in setting aside the and the penalty is to be set aside - CIT(A) has not adjudicated the ground, mistakenly treating the same as covered by his predecessor’s order for AY 2003-04, which does not list the disallowance - therefore, there has been an omission on the part of the CIT(A) in adjudicating the ground – the matter is to be remitted back – Decided partly in favour of Assessee.
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2014 (6) TMI 667
Entitlement for deduction u/s 80IB(10) of the Act – Effect of amendment – Held that:- CIT(A) rightly followed JCIT vs. Brahma Associated [2011 (2) TMI 373 - BOMBAY HIGH COURT] - in case of housing project comprising of commercial area as permitted under the rules of the local authority, deduction u/s 80IB(10) cannot be denied - relying upon ACIT – Circle -2, Kalyan Versus Shri Girdharilal K. Lulla, Shree Ganesh Builders & Osho Dhara Developers [2011 (5) TMI 867 - ITAT MUMBAI] - the amendment is prospective in operation and for the projects which have commenced prior to the date the assessee is entitled to claim the benefit under section 80IB(10) of the Act – there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (6) TMI 666
Recalculation of LTCG and sale of shares - Treatment of difference between sale of value and books value – Income treated as income from other sources – Held that:- The assessee for the purpose of acquiring controlling ITL Industries Ltd by ITL Embellishments i.e., the purchasers entered into the transaction of selling the shares - the full value consideration received is at the rate of Rs.21 for 1,00,000/- shares - there are no provisions under the Income Tax Act available to the AO to determine or adopt the full value consideration at a value different from the actual sales consideration - wherever the legislature intends to give authority to AO to replace the value i.e., the sale consideration, specific provision have been provided for - In the absence of specific provision, the AO cannot chose to replace the value – Relying upon ACIT Cir. 16(3) Mumbai Versus M/s. B. Arunkumar & Co. [2014 (6) TMI 462 - ITAT MUMBAI] - once it is found that shares are sold at a particular price it is not possible for the AO to disturb the figure without bringing any material facts contradictory to the calculation made by the assessee - the AO does not have power under the Income Tax Act to substitute fair market value for full value of consideration – CIT(A) was not justified in confirming the addition made by the AO – Decided in favour of Assessee.
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2014 (6) TMI 665
Accrual of income - recognition of interest income on the basis of penal clause for charging of interest on account of delay in execution of contract – Held that:- The development agreement was still to be legally executed and approvals and clearances were pending and the construction of the residential project had not commenced, penal interest would not be charged, assessee decided to waive the same - The income can be taxed on the real income only - The liability to tax is attracted either at the time of accrual of the income or on its receipt - if the income does not result at all, then it cannot be taxed even though an entry is made in the books of account about such a hypothetical income which has not been materialized - Under the mercantile system of accounting also, there must be a debt created in favour of the assessee by somebody and until then, it cannot be said to have accrued to the assessee even under the mercantile system of accounting – Relying upon Commissioner Of Income-Tax, Bombay City I Versus Messrs. Shoorji Vallabhdas And Company [1962 (3) TMI 6 - SUPREME Court] - Merely because there was a penal clause for charging of interest on account of delay in getting the requisite approval and clearance, it does not ipso facto confers right upon the assessee to charge interest, unless the other party also recognises as a debt to be discharged in actual terms. The debit note raised by the assessee has been rejected / returned back to the assessee and based on this, the assessee has not recognised this income, has not been disputed by any material on record or by way of any enquiry from the said party specific on this score, then it cannot be held that the income, has accrued to the assessee in the real sense - the income cannot be said to be generated, actual or accrued, by mere entries in the accounts made by the parties - Such a hypothetical income cannot be said to have been accrued to the assessee merely because the other party has treated it as a liability – thus, the interest income as taken by the AO has not accrued to the assessee and it is not liable to the taxed in the hands of the assessee – Decided in favour of Assessee.
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2014 (6) TMI 664
Withdrawal of deduction u/s 36(1)(viia) of the Act - Provisions of standard assets – Held that:- The assessee has accepted that the third issue relating to the provisions of doubtful debts for the purpose of allowance of deduction u/s 36(1)(viia) is similar to as decided in assessee’s own case for the previous year – thus, it is very difficult to accept the contention that at the time of hearing, he has not admitted the fact and on the contrary, has argued the issue on merits highlighting the distinguishing features from the earlier year with the order of the AY - There is nothing in the record that on the issue, the Tribunal has overlooked the assessee’s submission. Mistake apparent on record - Whether there is any mistake apparent from record within the ambit of section 254(2) which has crept in the order – Held that:- The issue of allowance of deduction u/s 36(1)(viiia) with regard to the provisions on standard assets was subject matter of revision by the Commissioner u/s 263 not only in the year but also in the earlier year i.e., 2005-06 - the major difference in this year is that, the Commissioner has passed the order after discussing it on merits and has directed the AO to withdraw the deduction u/s 36(1)(viia) in the earlier year - on the material difference itself, the earlier order of the learned Commissioner as well as the Tribunal cannot be held to be mutatis mutandis applicable in this year – thus, the order is recalled for the purpose of withdrawal of deduction u/s 36(1)(viia) in relation to the provisions of standard assets – Decided partly in favour of Assessee.
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2014 (6) TMI 663
Addition made u/s 68 of the Act - Business of scrap dealer – Held that:- Confirmation of statement of A/c sent to Assessee was before AO as the same had been delivered on 21st November, 2011 and the Assessment Order was passed on 29/12/2011 - there is apparent contradiction in the findings recorded by AO and the documents on record - CIT(A) has taken note of confirmation but without considering the specific ground raised before him held that assessee had agreed for the addition - the confirmation filed by the party has not been considered by both the lower revenue authorities - Assessee had duly discharged its primary onus by furnishing the necessary confirmation along with details - all the transactions were through bank account and there were regular dealings with the party - The AO had not disputed the purchases from the party - when all the relevant details regarding creditor were furnished by Assessee, no addition was warranted - necessary verification of confirmation has not been done, thus, the matter is required to be remitted back to the AO for the purposes of examining the confirmation filed by the M/s Affain Steel Pvt. Ltd. and if no discrepancy is found there then no addition is called for – Decided in favour of Assessee.
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2014 (6) TMI 662
Admission of additional evidence - Confirmation of income from rental business - Leased premises treated as "Income from House Property – Addition u/s 68 of the Act – Sundry creditors – Held that:- The assessment order as well as the order of CIT(A) are passed ex parte for want of any representation from the side of the assessee - assessee has explained the reasons for non-appearance as fault on the part of the assessee, who did not appear before the authorities below and the assessee was kept in dark - the additional evidence intended to be filed by the assessee is relevant for the purpose of determining the nature of income received for the factory building given on license for conduct of business. The assessee has also sought to file the additional evidence in the shape of details of asset and machinery in the factory premises which was given on license - the additional evidence sought to be filed by the assessee requires a proper verification and examination at the level of AO – thus, the additional evidence to be filed by the assessee – thus, the AO is directed to decide the issue after verification and examination of the additional evidence filed by the assessee - the claim of depreciation is also required to be examined by the AO if the income received by the assessee is treated as business income - the assessee has claimed depreciation including land and building which requires a proper verification – Decided in favour of Assessee.
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2014 (6) TMI 661
Allowability of depreciation on the value of goodwill – Held that:- Following Commissioner of Income Tax, Kolkata Versus Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - explanation 3 to section 32 states that the expression asset shall mean intangible asset being know-how, copyrights, trademarks, licenses, franchises or any other business are commercial rights of similar nature - The words ‘any other business or commercial rights of similar nature’ stated in explanation 3 includes that ‘goodwill’ would fall under the expression ‘any other business of commercial rights of a similar nature’ - the principle of ‘ejusdem generis’ would strictly apply while interpreting the said expression which find place in explanation 3(b) - ‘goodwill’ is an asset under the explanation 3(b) to section 32(1) and eligible for the depreciation - CIT(A) is not justified in denying the benefit of depreciation claimed by the assessee on the ‘goodwill’ – the AO is directed to allow the claim of depreciation - Decided in favour of Assessee. Admission of additional evidence under Rule 46A of the Rules – Held that:- The assessee claimed the total depreciation on intangible asset as per the business transfer agreement, the value of which is at 11.13 crores - mere devaluation of the goodwill will not reduce the claim of depreciation, as the assessee is entitled @ 25% on the total value of the intangible assets valued at Rs.11.13 crores - the assessee is entitled for the depreciation on the good will on the same rate @ 25% - Decided against Revenue. Disallowance of employee’s contribution to provident fund – Held that:- The assessee has made the payments after the due date of payment but the said payment has been paid within the grace period - the payment made within the grace period is held to be made within the due date – thus, there was no reason to interfere with the decision of the CIT(A) – Decided against Revenue.
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Customs
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2014 (6) TMI 678
Jurisdiction of court - Determination under Section 8B of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 - Held that:- The rules as well as the provisions of law, i.e., substantive Section 8B envision consideration of the report and recommendations of the designated authority by the Central Government which then would proceed to decide what should be the further course of action i.e. the rate of duty and the period for which it is to be imposed. Such final decision of the Central Government would then be made operative through the Notification to be published in the official gazette or made known generally to all concerned - no interference would be called for in respect of such matters, as they are mere recommendations. This Court is of the opinion that it would not be appropriate for this Court to exercise its powers of judicial review under Article 226 of the Constitution of India at this stage. This is, of course, not to preclude the petitioner from challenging the ultimate decision notified by the Central Government under Rule 12 in accordance with law - Decided against assessee.
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2014 (6) TMI 677
Waiver of pre deposit - Classification of goods being Sweet Pearl P.200 - Food Flavouring Material - food preparations versus food additive - Classification under Heading 2905 4920 or under Heading 2106 90 60 - Mis declaration of goods - Held that:- From the test report from CFRL, we find that the product in question is a separately defined chemical compound and based on the Chapter Notes under Chapter 29, prima facie, there is no scope for taking it out of Chapter 29 and classifying it under Chapter 21 especially because heading 2106 is for “Food Preparations”. - A food additive per se need not be a food preparation. The test report shows it to be chemical compound of 99% purity and not a preparation made of many elements. Therefore, we grant waiver of pre-deposit for admission of appeal and further there shall be stay on collection of such dues during the pendency of the appeal - Stay granted.
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Corporate Laws
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2014 (6) TMI 676
Maintainability of appeal - whether the CLB was right in law in holding that the appellant had no locus standi under Section 237(b) of the Act - Held that:- It may be open to the CLB to form such an opinion while examining any matter before it, there is no prohibition placed upon it from forming an opinion on the basis of material which is brought to its notice by any person who may not be a member or creditor of the company or in any way connected to the company. Under Section 235(2) the application for investigation can be moved by not less than 200 members or by members holding not less than 1/10th of the total voting power. Section 237(b) does not place any such restriction. There may be several persons other than members of the company who may be in the know of the violations and irregularities or fraudulent practices perpetrated by a company. Those persons, driven by public spirit or public interest, may bring the relevant facts and the material with all the supporting evidence to the notice of the CLB to assist the CLB to suo motu form an opinion as to the existence of circumstances described in the three sub-clauses of clause (b). - decided against appellants.
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Service Tax
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2014 (6) TMI 695
Demand of service tax - Classification - Business Auxiliary Service or Broadcasting Agency - canvassing advertisements to be broadcast on Vijay TV. - export of services - use outside India versus performance outside India - Rule 3 (1) (iii) of Export of Service Rules, 2005 - recipient of Service is located outside India - Held that:- activity of selling time slot also will get classified under services of Broadcasting Agency. - there is strong prima facie case in favour of appellant on the first argument. Regarding export - Held that:- concept of Export of Service has evolved over a period of time and this clause got omitted from 27-02-2010. There are large numbers of cases pending on this issue and there is also a difference of opinion between two Members of the Tribunal pending on this issue in the case of Microsoft Corporation as reported at [2011 (11) TMI 60 - CESTAT, NEW DELHI] which is yet to be resolved. Prima facie, it would appear that use outside India cannot be equated with performed outside India because the expression ‘performed outside India’ is already used in the case of services at Rule 3 (1) (ii) and when the Legislature is aware of one expression and if it is using a different expression in the same rules, the new expression has to be understood to be having a different meaning from what is already used. In view of this argument, we see prima facie case in the matter of claim of export of service also - Stay granted.
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2014 (6) TMI 694
Waiver of pre-deposit of Service Tax - Classification of service - Works contract service or Site formation service - Excavation and Earth Moving, Demolition Service, cutting down trees, construction of structure etc. - Held that:- Applicant had initially not disputed the classification of the services rendered under the category of 'site formation service' but expressed their inability to discharge the service tax being not reimbursed by the service receiver viz. M/s. Brahmaputra Cracker and Polymer Ltd. Prima facie, on scrutiny of the work order enclosed with the appeal memorandum, we find that the applicants are providing the services relating to earth filling, cutting of trees alongwith the services of raising of RCC structures etc. At this stage, it would be difficult to come to a conclusion whether the said services would fall under the scope of works contract service or site formation service without appreciation of evidences adduced by both sides as these services had been rendered against a common work order - stay granted partly.
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2014 (6) TMI 693
Demand of service tax - Maintenance of garden - Maintenance of Raj Bhawan exempted from tax - Revenue contends that services have been rendered in respect of landscape and garden and not in respect to the road and Government buildings - Held that:- Services in relation to the maintenance of road divider is covered under the provisions of Section 97 of the Finance Act, and the garden which is part of the Raj Bhavan forms part of the Government building. Accordingly, this maintenance service is exempt under Section 98 of the Finance Act. It is vehemently argued by the appellant that the appellate Commissioner have failed to consider the case under Sections 97 & 98 and ordered pre-deposit without considering the important aspect in this case - appellate Commissioner should have considered the applicability of the Sections 97 & 98 before passing any order for pre-deposit as the same goes to the root of the matter. - matter remanded back - Decided in favour of assessee.
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2014 (6) TMI 692
Valuation - works contract composition scheme - inclusion of advance termed as mobilisation advance from their customer - Held that:- there seems to be contradictory stand taken by the appellant himself, which needs to be verified. - another grievance of the appellant is that the lower authorities have demanded the tax on the mobilisation amount separately, by applying the rate of service tax at 10%. - matter remanded back. Valuation in respect of contract where composition scheme not opted by the assessee - Held that:- the two contracts, where the appellant did not exercise works contract would be assessed to duty in terms of Section 66. The lower authority would also examine the appellant’s claim of exemption in respect of construction of roads, involved in one of the contracts, which stand exempted with retrospective effect. - matter remanded back - decided partly in favor of assessee.
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2014 (6) TMI 691
Waiver of pre-deposit - Cenvat Credit - authorised service stations - cenvat credit of service tax paid on post sale service - Held that:- It does not appeal to commonsense how post service obligation of the appellant was a disintegrated activity to deny Cenvat credit. Prima facie there appears a case of balance of convenience in favour of appellant. Accordingly, there shall be waiver of pre-deposit during pendency of the appeal. - Stay granted.
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2014 (6) TMI 690
Waiver of pre deposit - Manpower Supply Service - Payment of labour charges to farmers - organizing labourers making it available to the farmer for harvesting sugar cane - Held that:- In the absence of employer-employee relationship between the applicant and the labourers, prima facie, it appears that payment to the labourers is only routed through applicant and applicant is not receiving any consideration for services, if any, rendered. For levying service tax, it is necessary that services should be rendered and there should be consideration received for such services. Since adequate proof regarding consideration retained by the applicant is not brought on record, we consider it proper to grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal following the earlier order given by this Tribunal. We also note that the order passed by the Bombay Bench of the Tribunal in the case of Samarth Sevabhavi Trust (2011 (4) TMI 918 - CESTAT, MUMBAI) was in a different set of facts. We note that applicant therein was not a sugar factory. The applicant therein was engaged in the business of organizing labourers making it available to the farmer for harvesting sugar cane and also in transportation of sugarcane to the sugar factory and they were receiving consideration for the services. Therefore, we feel that the order passed in that case is not applicable in the facts of the present case. - Stay granted.
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Central Excise
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2014 (6) TMI 687
Denial of refund claim - Removal of the used capital goods without payment of duty - Subsequent reversal of the entire amount of credit originally taken on the said capital goods under protest - Held that:- Reversal of CENVAT credit of 2.5% for each quarter of an year from the date of taking of CENVAT credit on capital goods. - matter should be examined in the light of the decision of the Larger Bench of the Tribunal in the case of Navodhaya Plastic Industries Ltd. (2013 (12) TMI 82 - CESTAT CHENNAI). Accordingly, I set aside the impugned orders and remand the matter back to the adjudicating authority to decide the matter afresh - Decided in favour of assessee.
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2014 (6) TMI 686
Valuation of goods - Related parties - mutuality of interest - appellant and M/s Mayer Organics Pvt. Ltd. (MOPL) are interconnected units - Rejection of valuation of goods - Held that:- There is absolutely no discussion about relationship between MOPL and the appellant. - In the case relied upon by the assessee, the Tribunal had observed that in respect of one item, the appellant was already paying Excise duty on the basis of price at which the goods were sold by MOPL and the issues of related person are not relevant. On going through both the orders of the Tribunal as well as Hon'ble Supreme Court, we find that the issue was not considered by them. We find that Hon'ble Supreme Court also did not consider this issue. In the absence of a specific challenge to the findings, prima facie, we find that the conclusion of the Commissioner that both the appellant and MOPL are related because they are interconnected undertakings and mutuality of interest has to be considered to have attained finality. Therefore, in our opinion, the appellant does not have prima face case. - Conditional stay granted.
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2014 (6) TMI 685
Reversal of CENVAT Credit - Supply of goods to 100% EOU without payment of duty - deemed export - Whether the capital goods can be removed without reversing the CENVAT credit to an EOU unit availing the benefit of Notification No. 22/2003-CE - Held that:- Commissioner (Appeals) has rightly relied upon the circular issued by the Board wherein it has been clarified that inputs can be considered as excisable goods and clearance of the same can be placed on par with clearance of excisable goods. Even though Rule 19(2) of Central Excise Rules was not cited nor discussed by any of the lower authorities, I still feel that also will be relevant. According to Rule 19(2) of Central Excise Rules, any materials can be cleared without payment of duty by a manufacturer for export. Provisions of Rule 19(2) which provide for clearance of goods without payment of duty irrespective of the fact that they were manufactured by the assessee or otherwise in my opinion would cover the issue in favour of the appellant. Further another point which was submitted by the learned counsel for the respondent that would be relevant is that after 2004, 100% EOU was eligible for the CENVAT credit. Therefore even if the assessee were to reverse the CENVAT credit the receiving unit would have taken the credit and if they could not utilize the same for payment of duty they could have claimed refund - Following decision of Solectron Centum Electronics Ltd. [2008 (11) TMI 538 - CESTAT, NEW DELHI] - Decided against Revenue.
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2014 (6) TMI 684
Duty demand - Clubbing of demands - Revenue clubbed their clearances in the hands of Kandhari Radio Corporation - Held that:- Facts of each case suggest their own fate and characteristics as well as nature thereof for settlement. When there was no job-work agreement, nor there was anything on record to repel the allegations in the show cause notice, we have no other go but to hold that Jeet Enterprises, Hi-Tech Electrical Industries and Kandhari Separators were manufacturers and duty liability in their hands should be determined - Decided against assessee.
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2014 (6) TMI 683
Failure to deposit the duty electronically - Penalty under Rule 27 ibid for violation of the proviso to Rule 8(1) ibid 19 times - whether for each violation, maximum penalty of Rs. 5,000/- and on this basis total penalty of Rs. 95,000/- should be imposed or whether the penalty of Rs. 10,000/- upheld by the Commissioner (Appeals) is sufficient - Held that:- In terms of 3rd Proviso to Rule 8(1), in case of an assessee whose monthly duty payment is Rs. 50 lacs or above, he is required to deposit the duty electronically through internet banking and violation to do so would invite penalty under Rule 27 according to which the contraventions in respect of which no penalty has been prescribed elsewhere, would attract penalty not exceeding Rs. 5,000/-. It is clear that Rs. 5,000/- is the maximum penalty and Adjudicating Authority in its discretion may imposed lower penalty also. Looking to the reasons for the respondent’s inability to comply with provisions of 3rd proviso to Rule 27(1), I am of the view that maximum penalty of Rs. 5,000/- under Rule 27 is not called for and as such I am of the view that the penalty imposed by the Adjudicating Authority which has been upheld by CCE (Appeals) is sufficient - Decided against Revenue.
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2014 (6) TMI 682
Valuation of goods - Deduction on account of transportation charges - Held that:- period involved is from 1-7-2000 to 11-9-2000 and the show cause notice stand issued on 30-4-2002. The adjudicating authority has invoked the longer period of limitation by observing that in terms of Board’s Circular No. 249/83/96-CX., dated 11-10-1996, invoices were not required to be submitted to the department and the assessee’s failure to show transportation charges separately in the invoices came to the notice of the Revenue at the time of visit of the officers to their factory. We find no justification in the above reasoning of the adjudicating authority. If the invoices were not to be submitted to the Revenue, failure of the assessee not to file the same with the Revenue cannot be held to be any suppression of facts with any mala fide intent. If the assessee does not do what he is not required to do under the law, he cannot be charged with any suppression or misstatement - Demand barred by limitation - Decided in favour of assessee.
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2014 (6) TMI 681
Waiver of pre-deposit of duty - Valuation of goods - Job work - applicants are not including the value of waste and scrap retained by them in the value of finished products for the purpose of payment of duty - Held that:- Major portion of the demand is in respect of the goods manufactured on behalf of Steel Authority of India Ltd. The applicants are paying duty at the sale price of Steel Authority of India Ltd. as per the provisions of Rule 10A of the Valuation Rules. In this situation, the value of waste and scrap retained by the applicant cannot be considered as additional consideration - In respect of the goods manufactured on behalf of KEC International Ltd., in similar situation in the case of Sanvijay Rolling & Engineering Ltd. vide order dated 15-11-2011, the Tribunal directed the assessee to pre-deposit part amount of duty and the Hon’ble Bombay High Court set aside the order passed by the Tribunal. In view of the above, the applicant has made out a strong case, therefore pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.
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2014 (6) TMI 680
Waiver of pre-deposit of duty - 100% EOU - Clearance of fruit pulp to their DTA unit - DTA unit got processed the fruit pulp and ultimately sold the juice. - Revenue is of the view that the applicants and the DTA are related person, therefore the applicants are liable to pay duly on MRP on the juice cleared by the DTA unit - Held that:- applicants cleared fruit pulp and are liable to pay appropriate duty on the fruit pulp and not on the juice, hence the applicant has a prima facie case in their favour and the amount already deposited is sufficient for hearing of the appeal. Pre-deposit of the remaining dues is therefore waived and recovery thereof stayed for hearing of the appeal. - Stay granted.
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2014 (6) TMI 679
SSI exemption - manufacture of medicines - Use of brand name of others - Notification No.8/2001 dated 1.2.2001 - Penalty - Held that:- during investigation, Sanjeev Aggarwal, proprietor of the respondent firm was examined under section 14 of Central Excise Act, 1944 wherein he admitted that they are manufacturing goods on behalf of M/s. Soft Pharmaceutical, Chandigarh under their brand name but on 19.3.2004, Shri Sanjeev Agarwal changed his stand and submitted that actually the goods were sold under his brand name and not of M/s Soft pharmaceutical, Chandigarh and they are not paying any royalty to the said firm. The second statement of the respondent appear to be an afterthought, particularly, for the reason that the respondent have not led any evidence which will indicate that the goods, in question, were not sold under the brand of M/s Soft Pharmaceutical or M/s Pharmaceutical were promoter of the said product. In support of his contention, learned Counsel for the respondent had today produced packing box of one of the product ‘Vigor Plus’. On perusal of the packing, we find that this bears logo of Soft Pharmaceutical. Therefore, it is apparent that the Respondent were clearing the goods under the brand name of M/s Soft Pharmaceutical. Though the name of M/s Soft Pharmaceutical has been shown as promoter but they cannot be termed as distributor of goods for the reason that the Respondent had been selling the goods under the brand name of another person. - Respondent were clearing the goods under the brand name other person as such, they were not entitled to benefit of SSI exemption of Notification No.8/2001 - However, penalty is reduced to 25% of demand - Decided partly in favour of assesee.
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CST, VAT & Sales Tax
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2014 (6) TMI 689
Benefit of exemption to the petitioner unit to the extent of 200% instead of 100% of its fixed capital investment - exemption under the Notification Nos. T.T.-2-1711/xI-9(460)/94-U.P. Act 15-48 Order 96 dated 19.7.1996 and T.T.-2-1712 dated 19.7.1996 - Held that:- There is nothing to suggest that Industrial Policy has been approved by the Cabinet of the State Government. However, it does not provide exemption to the extent of 200% on the capital investment in a case where the unit has made an additional investment of ₹ 50 crores or more. It only provides that in order to attract large industrial units to the State Government, it is proposed to provide special incentive to such units. This incentive shall be in addition to the ones listed in the policy. This attraction would be in the form of concessions/incentive with reference to land or its value, 'trade tax etc. This facility shall be given on a case to case basis to the units which have an investment of more than ₹ 50 crore. It shall be dependent on the benefit that will accrue to the State as a consequence of setting up of such unit. Decisions shall be taken on the basis of location of the unit, employment potential and the possibilities of down stream projects, apart from the contribution to the general economic development of that area. From the aforesaid, it is clear that it was only a proposal and the facility would be provided on a case to case basis depending upon various circumstances. It does not provide exemption itself. Having regard to such policy, the State Government issued notification providing exemption. Such exemption cannot be said to be, not in consonance with the Industrial Policy inasmuch as it is always open to the State Government while issuing the notification relating to exemption to examine that how much exemption is to be granted. The U.P. Industrial Policy, 1994 on which much emphasis has been placed is not an Industrial Policy, issued by the State Government and approved by the Cabinet itself. Under the said policy, no specific exemption has been provided. A Special Incentive to Large Industrial Unit has only been proposed to be granted on a case to case basis depending upon various factors inasmuch as there is nothing in the Industrial Policy which provides 200% exemption in additional capital investment making ₹ 50 crores additional investment and the same has been taken away by the notification - Decided against assessee.
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2014 (6) TMI 688
Charge on property - Crown debt - Priority of recovery of dues of Central Sales Tax (CST) - dispute towards liability towards the component of Central sales tax imposed under the CST Act on account of absence of any provision of such priority being specifically stipulated in the CST Act - Held that:- not only the proceeds of the tax are meant for the benefit of the State, the actual recovery also takes place by the State. It is in view thereof that section 9(1) of the CST Act provides that even tax payable under the CST Act though levied by the Government of India would be collected by the State Government in accordance with provisions of section 9(2) of the State Act from which the movement of goods commences. - for all ends and purposes, the mode of assessment, reassessment, collection and enforcement of payment of tax mechanism provided under the State Sales Tax Act would equally apply to the Central sales tax to be collected under the CST Act. Principle of priority of crown debt is incorporated in almost all the State Sales Tax Acts. We had, in fact, put a specific query to learned counsel for the petitioner as to whether he was aware of any State Sales Tax Act where such priory provision was not incorporated, but the learned counsel was not able to give any such example of a State Act nor is such an example incorporated even in the subsequent written synopsis filed by the petitioner. Charge stands created if meaning is to be given to the words "collection" and "enforcement" found in various provisions, more specifically section 9(1) and 9(3) of the CST Act read with the relevant provisions of section 9(2) of the CST Act, coupled with the right of appropriation conferred in the States though the tax may be collected by the Central Government. Thus, the priority given under section 50 of the RST Act to the recovery of local sales tax will apply with equal force to the recovery of Central sales tax qua inter-State trade or commerce. - Decided against assessee.
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