Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 26, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Customs
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13/2013 - dated
25-6-2013
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ADD
Seeks to extend the levy of anti-dumping duty imposed vide notification No. 74/2011-Customs, dated the 12th August 2011 on imports of ‘Pentaerythritol’, originating in, or exported from, Chinese Taipei for a further period of one year i.e. upto and inclusive of 27th April, 2014
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12/2013 - dated
25-6-2013
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ADD
Seeks to extend the levy of anti-dumping duty imposed vide notification No. 75/2008-Customs, dated the 10th June, 2008 on imports of ‘Acetone’, originating in, or exported from, Korea RP for a further period of one year i.e. upto and inclusive of 9th June, 2014
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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The reopening of an assessment u/s 148 on the basis of a submission which is raised before the appellate authority by the assessee is clearly impermissible - HC
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Settlement Commission - Section 245D - whether the Commission bound to consider whether there has been a full and true disclosure at the stage of a proceeding u/s 245D(2C) - Held yes - HC
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Rectification of mistake - Tribunal's conclusion to restore the matter back to the file of the AO for deciding upon mutual as well as non-mutual activities cannot be termed mistake apparent from record. - AT
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Project completion method rejected by the AO - there is no revenue effect and the income offered by the assessee on completion of the project is revenue neutral. - No addition - AT
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Disallowance of payment made to the legal heirs of the deceased partner - overriding charge - amount is deductible as expense - AT
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Enhancement of income - AO must act honestly and not vindictively or capriciously because he must exercise judgment in the matter but from records it is evident otherwise. - AT
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Voluminous and frequent purchase and sale of shares - profits from sale and purchase of shares and units are to be treated as capital gains of the assessee. - AT
Customs
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Import of Cottonseed Oil of Edible Grade - food safety - so long the Central Food Laboratory, Mysore, will not clear the material on such test after further processing, DRI will not release the goods for the purpose of human consumption. - HC
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Refund claim - filing of refund claim before settling the dispute on the availability or otherwise of the notification, is not in accordance with the law - AT
Service Tax
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Levy of service tax on construction and sale of flats - There is nothing discriminatory or arbitrary in excluding completed constructions, from the purview of service tax, for which no sum is received from the prospective buyer before grant of completion certificate. - HC
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Renting of immovable property - levy of service tax - Tenant has to bear the incidence of the service tax and not the landlord. - HC
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Constitutional validity of Levy of service tax on DTH Service - Writ petitions challenging levy of service tax dismissed for suppression of facts from the High Court. - HC
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Levy of entertainment tax - chargeable event not specified - Section 4-I of the Tamil Nadu Entertainments Tax Act declared as unconstitutional. - HC
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Rent-a-Cab service - appellant ut their buses at the disposal of PRTC - appellants is taxable as rent a cab service - AT
Central Excise
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Modvat / Cenvat Credit - Job Work - Direct sending of the inputs to the job-worker from the factory of the input manufacturer, or from the port of entry - credit allowed - AT
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Interest on Refund - price escalation clause - Provisional assessment - sThe assessees are held to be eligible to interest after the expiry of three months - AT
VAT
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Form H - sale in the course of Export - the goods, which had been exported, were different to the goods sold by the applicant. - sale by the applicant to the exporter cannot be said to be in the course of export under Section 5(3) of CST Act. - HC
Case Laws:
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Income Tax
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2013 (6) TMI 575
Reopening of assessment - if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of Rs.32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up - Held that:- There is no ambiguity whatsoever in the reasons which have been communicated to the assessee in the order dated 18 May 2012, but in the affidavit in reply, it has been stated that the income of Rs.32.83 Crores arising from the investment of contributions of the contributors to the Venture Capital Fund which has been claimed as exempt in the hands of the Petitioner should be assessed as income in the hands of the AOP of the contributors of the Petitioner “on a protective basis”. Again it has been stated that the issue of taxing the AOP of the contributors of the Petitioner “has arisen from the submission of the Petitioner before the appellate authorities” where the Petitioner has contended that the transactions amount to a revocable transfer and that the income which would arise should be taxed in the hands of the individual contributors. The reopening of an assessment under Section 148 on the basis of a submission which is raised before the appellate authority by the assessee is clearly impermissible because what Section 147 requires is a formation of a reason to believe by the AO. In the present case, there is clearly a want of compliance with the jurisdictional condition. AO has not formed a reason to believe that income has escaped assessment since the reopening is based purely on a contingency that may arise upon a particular outcome before the appellate tribunal. To accept the contention of the Revenue in the present case would be to allow a reopening of an assessment under Section 148 on the ground that the AO is of the opinion that a contingency may arise in future resulting an escapement of income. That would be wholly impermissible and would amount to a rewriting of the statutory provision. Thus setting aside the notice of reopening. In favour of assessee.
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2013 (6) TMI 574
Validity of order passed by the Settlement Commission u/s 245D - validity of application moved for settlement of cases - whether the Commission bound to consider whether there has been a full and true disclosure at the stage of a proceeding under sub-section 2C of Section 245D - Held that:- Error in the order of the Commission in the present case lies in permitting the application for settlement of cases to proceed without that satisfaction being recorded by the Commission, which is a fundamental aspect which goes to the root of its jurisdiction to entertain an application under Section 245C. The Commission has proceeded on the basis that at this stage it cannot hold a view that the income offered in the statement of facts is not a true and full disclosure. In the same vein, the Commission was of the view that the subject of true and full disclosure is open for examination in the proceedings under subsection 4 of Section 245D. In holding this, the Commission has moved over to the stage of Section 245D(4) without entering upon the fundamental issue as to whether the application was or was not invalid. This exercise had to be carried out by the Commission at the stage of the proceedings under sub-section 2C of Section 245D on the basis of the report submitted by the Commissioner and after hearing the applicant. The Commission has abdicated the discharge of that obligation at that stage, by deferring its consideration at a later stage. The Commission, thus was completely in error in holding that unless it is established by a competent authority that the purchases are all bogus, that the application at this stage could not be held to be invalid, though the department may have in its possession certain evidence indicating the fact that the income has not been truly and fully disclosed, or that the quantum of income disclosed in the application in comparison to the claim of the department is meager. The Commission could not have declined to determine as to whether the application fulfilled the requirements or prerequisites of a valid application under Section 245C(1). The Commission has to consider as to whether or not the application is invalid. Thus the impugned order of the Settlement Commission is unsustainable and would have to be quashed and set aside.
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2013 (6) TMI 573
Rectification of mistake - as per assessee Tribunal had not considered submission of assessee that AO misdirected himself in law in attributing the entire expenditure against the so-called exempt income and assessing interest income on gross basis without deduction of any expenditure that provisions of section 14A required and laid down specific method of attributing and disallowing the expenses in relation to an exempt income - Held that:- Considering assessee's submission and DR statement section 14A was not applicable Tribunal's conclusion to restore the matter back to the file of the AO for deciding upon mutual as well as non-mutual activities cannot be termed mistake apparent from record. It is not the case of the assessee that any judgment delivered by the Hon'ble jurisdictional High Court or Supreme Court relied by the assessee have not been considered. By a long drawn process of reasoning assessee wants to review the order of 16th November, 2012 which is not permissible as per the provisions of section 254(2). Rectification available to the Tribunal u/s.254(2) cannot be exercised on failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion because it is an error of judgment and not an error apparent on the record. See CIT Versus Ramesh Electric And Trading Co. [1992 (11) TMI 32 - BOMBAY High Court] & CIT Versus EARNEST EXPORTS LTD. [2010 (2) TMI 261 - BOMBAY HIGH COURT]. Against assessee.
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2013 (6) TMI 572
Profit arriving from purchase & sale of shares - Capital gain v/s business income - Held that:- From the detail as produced it find that 73.75% of investments transacted were held for more than 6 months, despite the fact that numbers of transactions were 61 in 46 scrips, which resulted in only 13.95% shares held as investments. Based on these facts applying the decisions of Gopal Purohit [2009 (2) TMI 233 - ITAT BOMBAY-G] which now has found approval even by the Hon'ble Supreme Court [2010 (11) TMI 222 - Supreme Court of India], the Hon'ble Bombay High Court had insisted upon intention at the time of purchase and consistency in the nature of holdings. On both these grounds, the issue is squarely covered by the decision. Coming to the charts and the details in the Balance Sheet, with regard to the holding pattern of shares, held under investments and trading, it is evidently clear that the assessee was maintaining separate distinct portfolios. This fact, not having been denied by the AO, is basically the spine of the submissions of the assessee, before the revenue authorities. Hence the facts gets squarely covered by the decision of Gopal Purohit (supra). Thus Respectfully following the decisions above no reason to disturb the order of the CIT(A)stating that profit arising on sale of such shares cannot be assessed under the head business and the claim of the assessee that it is assessable under the head long term capital gains has to be accepted. Against revenue.
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2013 (6) TMI 571
Project completion method rejected by the AO - Held that:- As decided in assessee's own case [2012 (12) TMI 808 - ITAT, MUMBAI] AO accepted the fact that on completion of project, the assessee has offered the income to tax after claiming the deduction u/s 80 IB(10). Therefore when the assessee offered the income to tax from the entire project which has been adopted by the AO for estimation of the income for the year under consideration, then this fact goes to prove that there is no difference in the rate of profit declared by the assessee for the A.Y and the rate adopted by AO for the year under consideration. Thus there is no revenue effect and the income offered by the assessee on completion of the project is revenue neutral. In favour of assessee. Measurement of the plot of the project - Held that:- As a consequence of the directions of the coordinate Bench in assessee's own case [2012 (12) TMI 808 - ITAT, MUMBAI] it was submitted that the verification was assigned to the valuation cell of the department, who submitted the report on 19.03.2013. According to the annexure to the report, the actual size of the plot is 4097.81 sq. mt., which is more then one acre and certified as such by Shri Suresh Thavrdasani, Asst. Valuation Officer, Income Tax Department, Thane, AO is directed to provide full benefit, in so far as the deduction is concerned. In favour of assessee.
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2013 (6) TMI 570
Telephone expenses disallowed - Held that:- As only in the impugned assessment year, the AO has made a disallowance, which has not been followed up even in the subsequent years, though, the assessments were framed u/s 143(3). Thus the rule of consistency cannot be ignored as laid down by a host of decisions in various fora. Therefore set aside the order of the CIT(A) sustaining the disallowance at Rs. 58,557/- on this issue and direct the AO to delete the disallowance made at Rs. 78,076/-. In favour of assessee. Disallowance of partners conveyance - CIT(A) restricted it to 10% - Held that:- The conveyance allowance are fixed by the company to its partners. This fact, as well as the fact that the disallowance has been made only in the impugned year has not been denied by the DR. Thus following the rule of consistency no further disallowance is called for. In favour of assessee. Disallowance of business development expenses - Held that:- As no disallowance made even in the subsequent years. Since the AR has pleaded for a reasonable and suitable reduction ad-hoc disallowance of Rs. 15,000/- would meet the ends of justice. Partly in favour of assessee. Disallowance of foreign travel expenses - Held that:- From the breakup reproduced along with the bills with regard to foreign travel, which do have a positive presumption of carrying professional/business connection, because, durations are small, which can only be presumed to be professional/business oriented. But expenses shown under "others" and "Visa fee", cannot be allowed, because, visa once given can be used by the person for any number of times, including for personal requirements and there are no details of others (Rs. 20,728/-). Therefore, set aside the order of the CIT(A) and direct the AO to restrict the disallowance to Rs. 20,728/- and allow the balance aggregating to Rs. 3,92,115/-. Partly in favour of assessee. Disallowance u/s 40(a)(i) for non deduction of TDS - assessee paid membership fee to Baker Tilly International (BTI), located in England - Held that:- No part of the payment made as subscription to BTI has resulted in income in its hands. Clause 3.5 of the agreement specifies that the company shall not constitute any partnership, joint venture or agency relationship with its members. This clears the deck to come to the conclusion that the subscription paid to BTI does not involve any income element and therefore, the provisions of TAS shall not be applicable. Thus set aside the orders of both the revenue authorities and direct the AO to delete the disallowance made to BTI. In favour of assessee. Disallowance of payment made to the legal heirs of the deceased partner - Held that:- The issue, in so far as the assessee is concerned, can be said to in favour and covered by an order of the coordinate Bench in its own case in assessment year 1981-82. Also AO has himself conceded that in the case of Mulla & Mulla [1990 (9) TMI 32 - BOMBAY High Court] has held that an overriding charge to have been created over the assessee, "where, by the obligation, income is diverted before it reaches the assessee, it is deductible". Since the payment has been made by the firm to the legal heir of its deceased partner, as per the clauses of the partnership deed dated 1.4.2000 having unequivocal covenants. Thus the amount so paid to the legal heir of the deceased partner is an allowable expense. In favour of assessee. Non deduction of TDS on payments made to professionals - Held that:- As payments had been made to non professional who are contracted for 3-4 months to do and learn the basic concepts of profession of accountancy. The persons are students who are perusing their accountancy degree/diploma or even as interns. It is economical for the employees to engage such persons, who would come, do the basic work of a paid employee, prepare some details/reports and go in 3-4 months time. Thus assessee has made payments to such students or small time accountants, who take up office job work at certain period of times & shall not attract deduction of tax at source and hence would not be hit by section 40(a)(ia). In favour of assessee.
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2013 (6) TMI 569
FBT on expenses incurred on non- employees - Held that:- As decided in CIT Vs Tata Consultancy Ltd. [2013 (6) TMI 516 - ITAT MUMBAI] employer/employee relationship is a pre-requisite for the levy of fringe benefit tax. Thus as no employer-employee relationship exists with non- employees payment deserves to be kept out side the purview of FBT. In favour of assessee. FBT on fringe benefit which are taxable in the hands of employees - Medical reimbursement & Medical facilities - Held that:- As decided in case of Vijaya Bank [2011 (8) TMI 751 - ITAT BANGALORE] where perquisites/benefits which are fully attributable to the employee and are taxed in their hands, would be continued to be taxed under the existing provisions of Sec. 17(2) of the Act. In the present case, these two items are directly attributed to the personal benefit of the employees therefore deserves to be kept outside the purview of fringe benefit tax. The other three items i.e. education facilities, maintenance of residential colony for employees and Insurance premium paid by employer to keep in force an insurance on health of employees are all perquisites liable to be taxed in the hands of the employees individually thus deserves to be kept outside the purview of FBT. In favour of assessee. FBT on administration expenses incurred on driver/pilot - Held that:- Expenses on repair, running and maintenance of motor car/aircraft do not include remuneration paid to drivers/pilot as supported by the decision of CIT Vs Sholinger Textiles Ltd. [1998 (4) TMI 83 - MADRAS High Court] - exclusion of value of such fringe benefit from the taxable value of fringe benefit. In favour of assessee. FBT on Insurance premium for motor car and aircraft - Held that:- As decided in CIT Vs Tungabhadra Industries Ltd [1991 (11) TMI 6 - CALCUTTA High Court] expenditure incurred on repairs and insurance of car cannot be considered for disallowance u/s. 37(3A) - exclusion of value of such fringe benefit from the taxable value of fringe benefit. In favour of assessee. FBT on pre-operative expenses - Held that:- CBDT in its explanatory note on the provisions relating to FBT answered that expenditure on any capital asset in respect of which depreciation is allowable u/s. 32 does not fall within the scope of sub-sec. (2) of Sec. 115WB. Since the approximate objective of incurring such expenditure is the acquisition of a capital asset therefore, such expenditure is not included in reckoning the value of fringe benefit - exclusion of value of such fringe benefit from the taxable value of fringe benefit - In favour of assessee. FBT on expenses on maintenance of residential accommodation not in the nature of guest house - Held that:- As decided in assessee's own case where the buildings have been used by the employees and other related visitors such as customers, surveyors, contractors, government officials, auditors etc., cannot be considered as guest house as they are connected with assessee's business - exclusion of value of such fringe benefit from the taxable value of fringe benefit - In favour of assessee. FBT on presentation articles distributed to business related persons - Held that:- As these expenses are incurred on persons related to or connected with the business but are not employees exclusion of value of such fringe benefit from the taxable value of fringe benefit directed - In favour of assessee.
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2013 (6) TMI 568
Deduction u/s 80IC - CIT(A) restricting the deduction only at Rs.90,62,385/- in place of Rs.1,14,96,983/- - Assessee is engaged in the business of Engineering running two Units separately one at Faridabad and the other at Rudrapur in Uttaranchal - Held that:- As it is not in dispute that the net profit of the assessee company during the period 31.03.2006 was Rs,.6,30,38,583/- and during the period 31.03.200-7 was Rs.5,10,88,326/-. Thus merely because there was a negative net work of the company does not necessarily mean that the profit generated by the company during the period 31.03.2006 and 31.03.2007 could not have been invested for the purpose of investment in Rudrapur unit. However, at the same time, merely because the loan amount has gradually reduced from 31.03.06 to 31.03.2008 and as because there was profit earned by the company during the years ended 31.03.2006 to 31.03.2008 it cannot be concluded that the investment in the Rudrapur unit was made from the profits so generated only. As the party wise details of the loan on which the interest expenditure of Rs.1,53,25,937/- was incurred by the assessee was not brought on record before us by both the parties & no material to show the purpose for which loan in question was taken by the assessee and how the loan amount for which the interest expenditure was utilized during the period under consideration. The year-wise breakup of investment made in the Rudrapur unit was also not filed by both the parties. Thus in absence of complete details restore this part of the ground of appeal back to the file of the AO for proper verification of the utilization of the loan amount in respect of the interest expenditure - appeal of the assessee is partly allowed for statistical purposes as stated above.
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2013 (6) TMI 567
Voluminous and frequent purchase and sale of shares - capital gain v/s business income - as per AO in view of the CBDT Instruction No.1827 dated 31.08.1989 the profits from transactions and shares and units of the assessee are treated as business profits - Held that:- By following the order of the Tribunal passed in A.Yr.2004-05 in assessee's own case [2013 (6) TMI 515 - ITAT KOLKATA] allowed the appeal of the assessee by holding that the profits from sale and purchase of shares and units are to be treated as capital gains of the assessee. As DR could not point out any specific error in the order of the CIT(A) or bring any material on record to show that this order of the Tribunal was varied in appeal by any other higher authority no good and justifiable reason to interfere with the order of CIT(A) - appeal of the revenue is dismissed.
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2013 (6) TMI 566
Enhancement of income - disallowance of expenses - Net profit adoption - Held that:- In the absence of supporting material of the books of accounts i.e., bills and vouchers the assessing authority should have rejected books of account and should have framed assessment in terms of section 144 & 145 and for that AO must act honestly and not vindictively or capriciously because he must exercise judgment in the matter but from records it is evident otherwise. Thus a reasonable estimate can be made and the assessee might have made purchases without procuring bills and might have avoided sales tax and other government dues. It means that assessee might have earned a little higher profit than earlier years. As Tribunal has confirmed the application of net profit at 5.35% in earlier year i.e. in AY 2003-04 a reasonable net profit i.e. @ 8% will meet the end of justice. Accordingly direct the AO to re-compute the assessee's income after deleting all the additions as made by AO and enhanced by CIT(A) but restrict the addition only at 8% of gross contract receipts - appeal of assessee allowed partly.
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2013 (6) TMI 565
Work in progress - whether be shown under the caption Land procurement and registration - CIT(A) deleted the addition - Held that:- Assessee had shown a sum under the head land procurement and registration charges in the profit and loss account & had simultaneously included this amount in the work in progress in the profit and loss account. As entire amount of expenses were debited to the work in progress of the assessee thus it shows that the assessee has not claimed any deduction for a sum of Rs.42,36,000/- under the head land procurement and registration therefore no disallowance same could have been made by the AO while computing the income of the assessee. In favour of assessee. Non deduction of TDS - software development expenses, financial consultancy charges and Director's remuneration - Held that:- As form paper book filed by the assessee profit and loss account for the period from 14.06.2006 to 31.03.2007 as filed that the entire expenditure of Rs.1,01,06,389 during the year has been shown as closing work in progress at Rs.1,01,04,668/-. Thus it is seen that no expenditure has been claimed as deduction in the profit and loss account by the assessee. Hence the question of making any disallowance of any expenditure for non deduction of tax at source by invoking the provisions of section 40(a)(ia) does not arise. In favour of assessee.
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Customs
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2013 (6) TMI 589
Penalty u/s 114(i) of Customs Act - export of non-Basmati Rice - Since the export of Non-Basmati is prohibited by DGFT by notification No.93(RE207)/2004/09 dated 1.4.208, therefore, 135 MT of Non-Basmati rice found in five containers valued at Rs. 71,87,400/- were placed under seizure on 6.3.2009 and given in safe custody. - Held that:- The finding arrived at by the Tribunal with regard to connivance between the appellant and exporter is based on no evidence. As a matter of fact, the Commissioner as well as the Tribunal assumed the fact of connivance. The Tribunal has relied on para 10.2 of the trade notice. This paragraph provides that stuffing of container shall be done in presence of Customs house officer and other representative. If the Customs House Officer was not present and the stuffing was carried out, then it was wrong committed on part of the respondent as no stuffing could be permitted in view of paragraph 10.2 in absence of Customs Officer. Instead of fixing the responsibility on the Customs Officer, the Tribunal has shifted the liability on the clearing house agent, when a specific case of the clearing house agent was that he or his representative were not present at the time of stuffing. No mens rea can be attributed to the appellant nor the appellant could be said to have abetted in exporting of prohibited rice - Penalty levied by the Commissioner of Customs and confirmed by the CESTAT against the appellant is set aside. - Decided in favor of assessee.
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2013 (6) TMI 578
Import of Cottonseed Oil of Edible Grade - food safety - human consumption - reprocessed material after refinement was found to have Iodine content of 97, which is less by 1 as prescribed under the Rules. - Held that:- the sole intention of the earlier order of this Court was to see that the consignment in question is not released so long as it does not meet the standard prescribed by the Rules, 1955, on the basis of testing by that particular Laboratory. In such circumstances, if on refinement on the first occasion, the petitioner’s reprocessed goods could not pass the said standard, another opportunity should be given to the petitioner for further reprocessing, so that on such further reprocessing the consignment can be brought within the norms prescribed under the Rules. Further opportunity given to the petitioner for reprocessing the material further so as to bring it within the norms laid down under the Rules and to present the sample for further examination by the said Laboratory. In other words, so long the Central Food Laboratory, Mysore, will not clear the material on such test after further processing, the Directorate of Revenue Intelligence (D.R.I.) Authority will not release the goods for the purpose of human consumption. The petitioner is, therefore, at liberty to further reprocess the material and to present the sample on such reprocessing for the purpose of testing.
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2013 (6) TMI 577
Refund claim - Whether can filled by the respondent directly, without first challenging the assessment order - benefit of Notification No. 13/2006 denied by the Customs Authorities - Held that:- There was a list between the respondent and the Revenue, which was required to be solved first. The only mode for solving the same was filing an appeal there against before the higher appellate forum. The origination of refund claim would come subsequently, as a consequence of the decision of the higher appellate forum, on the disputed issue. As such, agree with the DR that direct filing of refund claim before settling the dispute on the availability or otherwise of the notification, is not in accordance with the law declared by in the case of Priya Blue Industries Ltd. vs. CC (Preventive) ( 2004 (9) TMI 105 - SUPREME COURT OF INDIA).
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Service Tax
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2013 (6) TMI 590
Cenvat credit of Service Tax relating to rental of immovable property, security guard appointed at the residence of central office and cycle stand, maintenance of registered office at Kolkata and corporate office at New Delhi and telephone/courier services etc. - Held that:- The objection of the lower authorities that such services were not availed at Jaipur but at places other than the place of manufacture, do not carry weight in view of various precedent decision of the Tribunal. In the case of Jaypee Rewa Cement Plant V. CCE, Bhopal [2009 (7) TMI 488 - CESTAT, NEW DELHI], it was observed that input services rendered outside manufacturing premises are eligible for credit if the same are related to business activities. Similarly, in the case of Indian Rail and Industries Ltd. [2006 (8) TMI 7 - CESTAT, MUMBAI], it was observed that there is no such stipulation that the input services must be provided or received in the factory of manufacture. Inasmuch as there is no dispute about the fact that services disputed in the present appeals are covered by the definition of input services, and are used by the appellants in relation to their business activities at Jaipur, the same are eligible cenvatable input services. - Decided in favor of assessee.
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2013 (6) TMI 588
Constitutional validity of levy of service tax - construction and sale of flats - prospective buyers - Explanations to clauses (zzq) & (zzzh) and clause (zzzzu) of sub-Section 105 of Section 65 inserted by the Finance Act, 2010 - Held that:- it cannot be said that sale or intended sale of a completed building after grant of completion certificate by the Competent Authority stands on the same footing as that of a building, before, during or after construction but before grant of completion certificate. Hence, it cannot be said that equals are being treated unequally or that the classification does not rest on a valid basis. The 'Completion Certificate' is the differentia which keeps apart the constructions to which the Act does not apply. There is nothing discriminatory or arbitrary in excluding completed constructions, from the purview of service tax, for which no sum is received from the prospective buyer before grant of completion certificate. - The reason for exclusion appears to be that no element of service relating to the construction is involved after completion of the Construction. Regarding valuation - Held that:- The measure of tax is also not notional as contended; it is the gross value of construction charged by the service provider. Hence, the judgment of the Supreme Court in Rajasthan Chemist Association (2006 (7) TMI 17 - SUPREME COURT OF INDIA) is of no assistance to the petitioners. Any standard having a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy. Character of the levy being service tax on Construction, the gross value of construction clearly will have nexus with the element of service involved in the construction. It is stated that presently 75% of the gross value of Construction is exempted from service tax vide Notification dated 22.06.2010, issued by the Central Government in exercise of the power under Section 93(1) of the Finance Act, 1994. Be that as it may. As all the contentions fail, the writ petitions are liable to be dismissed - Decided against the assessee.
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2013 (6) TMI 587
Renting of immovable property - levy of service tax - dispute between landlord and tenant - tenant refused to pay as per the terms of contract - Held that:- The most crucial aspect which is material for decision of the present case, as noticed by us, is that service tax is neither a property tax nor an outgoing in respect of the premises; it is on the commercial activity carried on. The two expressions property tax and outgoings in respect of the premises are in fact of a common species. Clause 7.1 thus only deals with taxes which are relatable to the property and not the activity carried out in the premises, which is on what service tax is levied. As service tax on commercial rented properties is an indirect tax and the jurisprudence on indirect tax tells us that the primary liability of the landlord to pay the tax to the Income Tax Authorities can be passed on to the tenant which enhances the utility to the tenant with respect to the property which attracts service tax on commercial properties. Tenant has to bear the incidence of the service tax and not the landlord. There is no dispute about the quantum of the amount of service tax which already stands paid by the appellant which is ₹ 37,42,954/- and ₹ 48,27,777/- in the two appeals respectively which will now thus have to be paid by the respondent to the appellant. Since the premises were vacated on 30.09.2011, we consider it appropriate to grant interest from 01.10.2011 till date of payment at the rate of 9% per annum simple interest.
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2013 (6) TMI 586
Constitutional validity of Levy of entertainment tax and service tax on DTH Service - simultaneous levy - whether DTH services is not entertainment - Held that:- even though we have held that by reason of the imperfections pointed out as to the absence of chargeable event not being specified in explicit, unambiguous and clear terms in Section 4-I, the charge cannot be effectuated, yet, on the grounds of violation of Article 14 and the imperfection in the Section creating the impression as though the charge is in the nature of service tax and hence, colourable in character, we have no hesitation in declaring the provision as unconstitutional. As far as the contentions on Article 19(1)(a) and 19(1)(g) are concerned, we do not find any good ground to accept the plea of the petitioners that levying tax on entertainment is a tax on the premium of expression. On the question of the chargeable event not specified in Section 4-I of the Act, as to the colourable character of Section 4-I, and on the violation of Article 14, we allow the writ petitions holding Section 4-I of the Tamil Nadu Entertainments Tax Act as unconstitutional. Regarding levy of Service Tax - Held that:- the petitioners have also challenged Section 4-I, stated in the affidavit in paragraph No.4, that the questions raised as to whether the activity of the petitioner would attract service tax liability and whether the levy by the State under the Tamil Nadu Entertainments Tax Act would amount to transgression of powers under Entry 62 List II of Seventh Schedule to the Constitution of India. When the contrary stand taken as regards the challenge on service tax was pointed out to the attention of the learned senior counsel, initially, we were informed that the petitioner had filed a Writ Petition before the Delhi High Court in July, 2012 questioning the levy of service tax. When the petitioner was asked to file an affidavit explaining their conduct in not disclosing the above-said facts of taking diametrically opposite stand from the one conceded before the Delhi High Court, the petitioner had filed an affidavit stating that realising that 88th Constitution Amendment introducing Entry 92C of List I of VII Schedule to the Constitution of India was not notified, the imposition of service tax thus not valid, after obtaining advice from the senior counsels in Delhi, the petitioner has filed the Writ Petition in W.P.No.4302 of 2012 before the Delhi High Court also. Thus the petitioners made the plea that in the absence of Entry 92C List I of VII Schedule to the Constitution of India notified, the Union cannot impose service tax. Before this Court, the petitioner conceded that being a subject falling under Entry 62 List II of VII Schedule to the Constitution of India to tax entertainment, the exclusive power to tax entertainment rested with the State, and the Centre cannot levy service tax. As already seen from the extract from the judgment of the Delhi High Court, the petitioner conceded about its liability to service tax and all that it challenged was the levy of entertainment tax under the Delhi Entertainments and Betting Tax Act. Regarding non information of case in Delhi High Court - The affidavit states that the lapse in not specifically referring to the stand taken before the Delhi High Court was unintentional and bona fide. The petitioner further states that during the course of the arguments, earnest attempts were made by the petitioner to demonstrate the error in the judgments of the High Court and lapse was there in the affidavit in not specifically referring to the inconsistent stand and there was no intention to suppress the material. We do not appreciate the attitude shown by the petitioner in suppressing the material fact about its conceding a particular state of affairs on its liability under the Service tax levy. Even though learned counsel appearing for the petitioner submitted that there was no intention, the question is not one of intention, but a question of fairness to the Court in the matter of placing statement of facts truthfully, which, we think, is the basis of the justice delivery system. We may once again point out that but for the State's argument pointing out to the different stand taken, the case would have gone for further argument from the petitioners' side. We wish that the petitioners do not repeat the same tactics before other High Courts. In the light of the material suppression made, we do not find that the petitioners would be justified in advancing its argument further on its challenge on the levy of service tax. We may also point out that when this Court pointed out to the appeal filed before the Supreme Court challenging the levy of entertainment tax, there is no direct answer explaining the conduct of the petitioners. The petitioners cannot speak in two tongues. Writ petitions challenging levy of service tax dismissed for suppression of facts from the High Court. - Decided against the assessee.
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2013 (6) TMI 585
Rent-a-Cab service - appellant ut their buses at the disposal of PRTC - Held that:- the stand of the appellants themselves is that they are not providing transport service to PRTC but have given their buses on hire. In view of this, following the ratio of the Tribunal judgment in the case of Deepak Transport Bus Service vs. CCE, Pune -III (2012 (6) TMI 390 - CESTAT, Mumbai) we hold that the activity of the appellants would be taxable as rent a cab service under Section 65 (105) (o) and readwith Section 65 (20) and 65 (91) of the Finance Act, 1994. While upholding that the service provided by the appellants is taxable as rent a cab service, we remand the matters to Commissioner (Appeals) for considering the appellant's plea with regard to their eligibility for the benefit of Notifications No. 1/2006-ST and 6/2005-ST and re-quantification the duty liability and also redetermination of the quantum of penalty which would be proportionate to service tax demands upheld.
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2013 (6) TMI 584
Stay - Commercial and Industrial Construction Services - period 2004-05 to 2009-10 - Held that:- the issue needs to be gone into details as the appellant is claiming the contracts executed by them as a works contract services and service rendered to Government Organizations which are not of commercial in nature. We also have to go into the appellant's claim as to that extended period of limitation cannot be invoked by the lower authorities. All these things will take some time and needs to be considered only at the time of final disposal of appeal. - Appellant directed to make pre-deposit of Rs. 50 Lacks.
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Central Excise
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2013 (6) TMI 583
Removal of damaged aluminium tubes - duty on waste and scrap - Held that:- As is apparent, while the show-cause notice demands duty on the assumption by Revenue that the assessee had cleared damaged aluminium tubes without accounting for and paying duty thereon, the adjudicating authority dropped the demand as proposed in the show-cause notices for the reasons recorded, which we have already adverted to. The appellate authority, for reasons that the sequence of litigative events in respect of the earlier period did not come in the way of adjudication for the current period; that the 11 show-cause notices involved for the current period and decided by the adjudication order (dated 19.01.2009), were issued on the ground that the respondent assessee was required to pay duty on the value of aluminium scrap which were cleared without accounting and payment of duty and that the earlier order of the Tribunal dated 12.05.2005 (for the earlier period) did not bar such proceedings. As a consequence of this reasoning recorded, the appellate authority set aside the adjudication order dated 19.01.2009. The primary order is effaced and that by itself does not impose any liability on the assessee to remit tax. As a consequence the assessee suffers no prejudice nor is assessed to any duty, interest or penalty. In the circumstances, we find no reason to set aside the appellate order as no civil consequences are visited on the assessee.
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2013 (6) TMI 582
Personal penalty - stay - penalty on partners - Held that:- Following the decision in CCE vs. Jai Prakash Motwani [2009 (1) TMI 501 - GUJARAT HIGH COURT], since penalty penalty was imposed on the firm, no penalty can be imposed on partners - stay granted. So far as imposition of penalties upon the authorized signatories and transporter are concerned, it is observed that Commissioner (A) has given elaborate reasons for imposing penalties upon these appellants. Both the authorized signatories and transporter were aware of the clandestine activity being undertaken - An amount of 50% of penalty directed to be pre-deposited.
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2013 (6) TMI 581
Valuation of medicaments - MRP bases valuation - clandestine removal - demand based of statement of chemists - as per revenue the excess collection of cash than the assessable value on which the appellant has discharged duty, stands clearly admitted by the Director of the company - Held that:- appellants have not been able to make out a good prima facie case in their favour so as to dispense with the condition of pre-deposit of the entire amount. - Directed to deposit 50%.
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2013 (6) TMI 580
Modvat / Cenvat Credit - Job Work - Direct sending of the inputs to the job-worker from the factory of the input manufacturer, or from the port of entry - Held that:- as soon as the assessee received the duty paying documents in respect of inputs which were sent directly to the job-worker, the assessee took the credit of goods in RG23 Part I and accounted for them. However, as envisaged under Rule 57G, the assessee did not take credit of duty paid since credit could be taken only after the inputs were received in the factory. CBEC Circular No. 265/99/96-CX dated 12.11.1996, wherein it is clarified that the credit can be taken in respect of inputs sent directly to the job-worker only when the same are received from the job-worker. - Credit allowed - decided in favor of assessee.
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2013 (6) TMI 579
Interest on Refund - price escalation clause - Provisional assessment - supply of LPG cylinders to IOCL, BPCL and HPCL - Held that:- The claim for refund dates back to 26-6-2006, which is the date on which they claimed refund on the basis of the order dated 12-6-2006 of the Commissioner (Appeals), who had directed sanction of Rs. 4,36,364/- to the assessees by setting aside the direction of the adjudicating authority for credit of the above mentioned amount to the Consumer Welfare Fund. It is not for the first time that the assessees claimed refund of the amount in question only in September, 2008, since claim for the amount ultimately sanctioned although reduced, was filed in 2006 June itself. It is clear that there has been a delay in sanction of the refund in December, 2008, well beyond the statutory period of three months. Therefore, the assessees claimed for interest at the appropriate rate due to the delay in sanction of the refund merits acceptance. The assessees are held to be eligible to interest after the expiry of three months from 26-6-2006 till the date of payment of interest at the appropriate rate. - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2013 (6) TMI 576
Form H - sale in the course of Export - Exemption on the purchases of raw hides from unregistered dealer - held that:- the test to be applied is, whether there is an inseverable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under section 5 (3) for exemption from State sales tax is justified, in which case, the same goods theory has no application. The applicant purchased raw goat skins from unregistered dealer and sold to the exporter. The authorities below have recorded the finding that the goods mentioned in the invoices, by which the goods have been sold, are different to the goods mentioned in the bill of ladding and Form 'H'. It means that the goods, which had been exported, were different to the goods sold by the applicant. In Form 'H' the foreign buyer's order number and date are not mentioned. Therefore, Form 'H' filed was incomplete and inadmissible for the transaction in dispute. The copy of the order of the foreign buyer has not been produced before any of the authorities to show that the purchases by the exporter from the applicant was inextricably connected with the export and there existed a bond between the contract of sale and the actual export. Such link is missing in the present case. Therefore, in view of the law laid down by the apex Court, in the case of State of Karnataka v. Azad Coach Builders Pvt. Ltd. And another [2010 (9) TMI 879 - SUPREME COURT OF INDIA], the sale by the applicant to the exporter cannot be said to be in the course of export under Section 5(3) of the Central Sales Tax Act. The Tribunal has rightly held so. - Decided against the assessee.
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