Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 27, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Accrual of interest income on delayed payment of compensation for land acquisition the interest received is to be assessed on accrual basis year to year and not to be assessed in its entity in the year of receipt - AT
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Valuation of closing stock - unutilized credit of CENVAT account was adjusted against the excise duty payable in respect of sales made the question of applicability of Section 43B becomes irrelevant - AT
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Assessee could not satisfactorily explain the reason for selling the motor car to its own director at a price less than the WDV as per the record of the assessee short term capital loss on sale of motor car restricted - AT
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Disallowance of building renovation expenses Capital or revenue expenses - the expenses are to be treated as revenue in nature and allowable u/s 37(1) of the Act - AT
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TDS provisions were complied with by agent, who had made payment on behalf the principal assessee - no disallowance of expenses in the hands of assessee - AT
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Set off of business loss against the income shown under the head income from house property u/s. 71 - Conversion of the closing stock into capital asset was essentially sale of the assets, the assessee was carrying on business - AT
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Accrual of capital gain - property given for development of a multi-storied - Only the profits accrued on the sale of the built up area during the year shall be subject to tax - AT
Customs
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Denial of draw back claim - Bar of limitation - A writ proceeding being outside the rigours of various periods of limitation is to be tested by the conduct of the party at whose instance it has been filed. - HC
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Import of fermented and dried Coco Beans - Food Safety and Standards Authority of India (FSSAI) - unless it is cleared by the FSSAI Department, it may not be possible for the petitioner to take release of the goods - HC
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Import of Toyota Land Cruiser Prada Car - Mis declaration of model of the car as 1996 model, which is actually 2003 - applicant failed to make out a prima facie case - AT
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Import of photocopier machines - Non obtaining of license - redemption fine and penalty imposed on the appellant by the adjudicating authority reduced to 10% and 5% respectively - AT
Service Tax
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Adjustment of excess payment of service tax - there is no reason why the excess payment against a particular month cannot be adjusted against short payment during the other months, as there is no unjust enrichment involved - AT
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Technical testing and analysis service - the respondent have tested their own goods and, as such, have not provided any service to the job workers and, hence, no service tax would be chargeable - AT
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Denial of refund claim - Export of services - the contention that Bank Realisation Certificate (BRC) has not been produced in respect of individual receipt is not sustainable, particularly, when the appellants have produced the entire BRC for the complete financial year. - AT
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GTA service - Appellants transport the goods in their own vehicle to the buyer. The buyer is a person who actually pays the freight - The appellant has no liability at all to pay the service tax - AT
Central Excise
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Valuation of goods - Third party inspection - third party's inspection charges initially paid by the appellants and subsequently reimbursed by the buyers is not includible in the assessable value of the goods - AT
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Denial of CENVAT Credit -Defective goods, may be final product, have been subjected to such process which amount to manufacturing - credit allowed - HC
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Valuation - Whether freight charges, which were collected separately as to and fro rate are required to be added in the assessable value of the explosives manufactured by the respondent - held no - AT
VAT
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Determination of rate of tax - tax imposed upon sale of Gutkha in the case in hand treating it to be 'unclassified item' and imposing tax at the rate of 10% is absolutely valid and correct - HC
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Input tax credit - The circular insofar as it interprets section 76(6)(c) to the effect that benefit would only be given to those purchasing dealers who have actually paid the tax to the seller, is patently erroneous - HC
Case Laws:
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Income Tax
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2014 (6) TMI 746
Genuineness of commission expenses Held that:- The assessee has furnished list of names of persons to whom it has claimed to have paid commission, but could not file their complete address (except in a few cases) and also could not file confirmations of the payees of the commission and their addresses - the CIT(A) has deleted the entire addition on the plea that the payment of commission was paid through account payee cheques and the assessee has also deducted TDS as per the provisions of law - the assessee could not prove the genuineness of the payment of the entire commission expenses by it thus, the disallowance out of commission expenses is restricted to Rs.3,00,000 Decided partly in favour of Revenue. Deletion of cessation of liability u/s 41(1) of the Act Disallowance of unproved creditors for expenses - Held that:- The opening and closing balance of the party were same and there is no evidence brought on record that the assessee has derived any benefit in cash or in any other manner whatsoever Following DSA Engineers (Bombay) Vs. ITO [2009 (3) TMI 646 - ITAT MUMBAI] - when the assessee continues to reflect or record the liabilities as still payable to the creditors and decides not to write them off unilaterally, the AO has higher levels of responsibility he has to establish with evidence that the book entries were wrong or not bona fide thus, the order of the CIT(A) is upheld Decided against Revenue. Deletion of disallowance of meeting expenses Held that:- The expenditure was incurred for organizing meetings on regular intervals of all the marketing personnel situated at different locations to co-ordinate its business of the assessee - the assessee-company has incurred the expenditure on cash basis in the year in which the vouchers were received and payments were made - CIT(A) has rightly held that expenses having crystallized during the year are allowable Decided against Revenue. Disallowance of conveyance expenses Held that:- The way of the accounting is unusual and does not inspire confidence with regard to the genuineness of the entire conveyance expenses claimed by the assessee - The onus was on the assessee to prove the genuineness of the expenses claimed by it - the disallowance out of conveyance expenses is restricted Decided partly in favour of Revenue.
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2014 (6) TMI 745
Levy of penalty u/s 271(1)(c) of the Act - Claim of depreciation on plant and machinery - Held that:- The assessee had disclosed the material facts before the AO - when the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars - Relying upon CIT vs. Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - a mere making of claim which is not sustainable in law, by itself, would not amount to furnishing of inaccurate particulars regarding income of the assessee - such a claim made in return is not amounting to furnishing of inaccurate particulars thus, making of addition while framing assessment does not call for levy of penalty u/s 271(l)(c) thus, the order of the CIT(A) is set aside Decided in favour of Assessee.
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2014 (6) TMI 744
Accrual of interest income on delayed payment of compensation for land acquisition Held that:- The land belonged to 3 co-owners was acquired by Sardar Sarovr Nigam ltd. - the interest received is to be trifurcated among the three persons - Following Commissioner of Income-Tax, Madras Versus T. NK Govindarajulu Chetty [1987 (2) TMI 3 - SUPREME Court] - the interest received is to be assessed on accrual basis year to year and not to be assessed in its entity in the year of receipt - AO is directed to apportion the interest among the 3 co-owners - The interest apportioned to the appellant shall be spread over the period of delay in paying the compensation - The share of interest accruing to the appellant for the year under consideration shall be assessed to tax revenue was not able to controvert the findings of the CIT(A) Decided against Revenue.
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2014 (6) TMI 743
Valuation of closing stock - unutilized CENVAT credit Provisions of section 145A of the Act not properly appreciated Held that:- CIT(A) while deleting the addition has given a finding that Assessee was following exclusive method of excise duty and had already submitted the reconciliation statement along with the return of income - Assessee has correctly reconciled the position of valuation of stock as per the inclusive method and exclusive method as contemplated u/s 145A of the Act - perusal of reconciliation statement between the inclusive and exclusive method of accounting states that there was no impact on the net position of the profit of Assessee - the unutilized credit of CENVAT account was adjusted against the excise duty payable in respect of sales made thus, the question of applicability of Section 43B becomes irrelevant - Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record thus, there was no reason to interfere with the order of CIT(A) Decided against Revenue.
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2014 (6) TMI 742
Deduction of expenses of shop renovation Current repairs Withdrawal of depreciation Held that:- No new asset has come into being on account of expenditure incurred by the assessee on replacement of old tiles, wooden partition, pest control, colouring, rolling shutter, flat glass, plywood, sanitary ware, hardware and labour charges - The business premises of the assesse were taken on lease - there is no mistake in the order of the CIT(A) in holding that the expenditure incurred by the assessee essentially were revenue in nature and not for acquisition of new asset Decided against Revenue. Deletion of computer software maintenance expenses Withdrawal of depreciation allowance Held that:- The expenditure incurred by the assessee on replacement of old software for ₹ 69,187/- and rest of the expenditure on account of annual maintenance charges - The replacement of latest version of the software does not result in creation of a new capital asset or in expansion of the capital base thus, it has to be allowed as revenue expenditure u/s 37(1) as decided in CIT(A)s order Decided against Revenue. Allowability of STCG on motor car u/s 50 of the Act Held that:- The assessee has not explained the reason that why the motor car was sold at an amount less than ₹ 84,174/- than the WDV of the car to its own director - CIT(A) has deleted the addition by observing that the motor car shown by the assessee in its balance sheet in the previous year and the department has allowed admissible depreciation in the hands of the assessee thus, the assessee could not satisfactorily explain the reason for selling the motor car to its own director at a price less than the WDV as per the record of the assessee thus, the claim of the assessee of short term capital loss on sale of motor car is restricted to ₹ 40,000/- as against the claim of ₹ 84,174/- allowed by the CIT(A) Decided partly in favour of Revenue.
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2014 (6) TMI 741
Genuineness of purchases - Deletion of addition on account of unverifiable purchases Disallowance of fictitious purchases - Held that:- The assessee was able to prove the genuineness of two items of purchase of diamonds from Surat parties - The assessee has filed necessary documentary evidences in support of its claims of purchase in the form of purchase invoices, evidences of payment through banking channels during the year and outstanding amounts in subsequent year, confirmations from the transacting parties and relevant extracts of the bank statements of the transacting parties, books of accounts and stock statements - the purchases of diamond from M/s. Sanjay Enterprises, Surat by the assessee was accepted in scrutiny assessment framed u/s 143(3) of the Act - The sales figures of the assessee have not been disturbed by the department. The CIT(A) has recorded that the AO has not verified the records of the transacting parties which are available in his own Range and the details of which was provided by the assessee - even during the course of remand proceedings, the AO has not verified the facts either from the IT records or by issue of summons u/s 131 of the Act to the transacting parties - there is no mistake in the order of the CIT(A) in holding that the assessee has been able to establish genuineness of the purchases from the two Surat parties Decided against Revenue.
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2014 (6) TMI 740
Cancellation of penalty u/s 271(1)(c) of the Act Disallowance of commission payment Quantum appeal restored - Held that:- In the quantum appeal of the assessee, the Tribunal has restored the issue of disallowance of commission expenditure to the file of the AO for the AY 2005-2006 - The AO in the assessment framed u/s 143(3) r.w.s 254 of the Act, after the assessment was set aside to his file, has accepted the claim of the assessee regarding the allowability of the commission expenditure - since the very basis of imposition of penalty u/s 271(1)(c) of the Act has not been added, thus, the disallowance of commission expenditure has not been added while framing the set aside assessment by the AO thus, there remains no basis for imposition of penalty u/s 271(1)(c) of the Act thus, the penalty is not leviable Decided against Revenue.
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2014 (6) TMI 739
Disallowance of building renovation expenses Capital or revenue expenses - Amount not treated as current repairs u/s 30 and 31 of the Act Held that:- Assessee had during the year taken new permissions rent and had shifted the school in the bigger rented premises - From the details of expenses, it is seen that the expenses are with respect to alteration to furniture like glass fittings, repairs to locks, miscellaneous repair works, repairs to furniture, water proofing and other miscellaneous repairs etc. - From the nature of expenses it cannot be said that the expenses have resulted in getting enduring benefit to the Assessee and appear to be of revenue in nature - the Revenue has also not brought any material on record to controvert the submissions of the Assessee thus, the expenses are to be treated as revenue in nature and allowable u/s 37(1) of the Act Decided in favour of Assessee.
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2014 (6) TMI 738
Deletion of disallowance u/s 40(a)(ia) of the Act TDS not deducted - Payments made for freight and forwarding expenses and transport expenses Held that:- The addition has been made by the AO by invoking the provision of section 40(a)(ia) of the Act in respect of reimbursed expenses Following Prayas Engineering Limited Versus The Addl. Commissioner of Income Tax [2014 (5) TMI 268 - ITAT AHMEDABAD] - the commission paid by the assessee to the agent for clearing and forwarding tax was duty deducted - expenses were incurred by agent on behalf of assessee-principal for transportation and other charges, which had been spelt out in bill itself - So far as obligation to deduct tax at source form payment of transport charges and other charges was concerned, same was complied with by agent, who had made payment on its behalf thus, there is no need to interference with the order of the CIT(A) Decided against Revenue.
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2014 (6) TMI 737
Disallowance u/s 40(a)(ia) of the Act Opportunity of being heard not provided - Held that:- CIT(A) deleted the disallowance as he found that the assessee deducted tax at source on Rs 4,44,285/- and not Rs 4,03,891/- for deleting the disallowance of Rs 40,394/-, new material was filed before the CIT(A) which was not filed before the AO and the CIT(A) admitted the same without allowing the AO any opportunity of hearing thus, the order of the CIT(A) is set asdie with respect to the deletion of disallowance of Rs 40,394/- and the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue. With respect to the deletion of Rs 71,797/- the CIT(A) observed that the payment was made in small amounts in respect of which the assessee was not liable to deduct tax at source u/s 194C of the Act there was no material brought by the Revenue to show any error in the finding of the CIT(A) thus, there was no reason to interfere in the order of the CIT(A) in respect of deletion of amount of Rs 5,67,078/- and Rs 71,797 Decided partly in favour of Revenue. Disallowance out of carting and labour charges Held that:- AO could not point out the amount of expenses for which vouchers could not be produced by the assessee or the amount of expenses in respect of which vouchers produced were defective and what was the nature of defect in the vouchers - no basis of making disallowance at the rate of 10% was stated in the order of assessment - the disallowance was made entirely on the basis of arbitrary estimate of the AO - in absence of any material brought on record to show that the estimate of disallowable expenditure made by the CIT(A) is not justified there was no reason to interfere with the order of the CIT(A) Decided against Revenue.
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2014 (6) TMI 736
Validity of proceedings initiated u/s 153A of the Act - No search action at premises - The assessee is a group company of Swastik Pipes Group - the warrants are issued to the premises which are mainly used by the group for conducting business of the company and warrants are issued in respect of premises - There are possibilities that documents and other unaccounted wealth could have been found at any of such premises occupied by the various group companies - once a valid search is conducted u/s 132 against the assessee then the AO has jurisdiction to issue notices u/s 153A and to complete the assessment Decided against Assessee. Deletion of unexplained share application money Creditworthiness of investors and genuineness of transaction not proved Whether in the absence of any incriminating material found during the course of search addition can be made by assessing officer as undisclosed income u/s 153A of the Act - Held that:- When there is no abatement of assessment proceedings then in absence of any incriminating documents or unaccounted wealth or statement against the assessee then no addition can be made in the assessment framed u/s 153A of the Act Relying upon Kusum Gupta Versus DCIT, Central Circle-15 New Delhi [2013 (11) TMI 665 - ITAT DELHI] - merely because a search is conducted and even though no incriminating material is found as a result, the original assessment of the assessee cannot be reviewed or substituted by a change of opinion about any claim of deduction, allowance or claim of exempt income - addition cannot be made u/s 153A as there was no material which could show that share application money received was not genuine or it has come out of the coffers of the assessees unaccounted income. Revenue has not doubted the identity of the share applicant - All the share applicants were on income-tax record having PAN - The ITR details of the same were submitted by the assessee - various documents related to these persons were submitted, which include share application, bank statement, balance sheet and profit & loss account of the shareholders, confirmations, PA, certificate of incorporation, etc. - The AO has not taken any pain to investigate the veracity of the documents - The identity of the share applicants was not in doubt by AO which has not been even disputed in the grounds of appeal taken by the revenue Following CIT vs Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - the AO would have made further enquiries if he was in doubt about the genuineness of the confirmation and creditworthiness of the shareholders - there was a complete lack of enquiry on the part of the AO when the assessee has furnished the relevant material with regard to the share application money - The AO has neither issued summons u/s 131 of the Act nor has he received back any unserved notices from the shareholders thus, the order of the CIT(A) is upheld Decided against Revenue.
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2014 (6) TMI 735
Levy of penalty u/s 271(1)(c) of the Act Disallowance u/s 14A of the Act Held that:- The assessee has not incurred any administrative or interest expenditure for managing such investment - The expenses claimed in the profit & loss account have no relation with the earning of dividend income the AO did not accept the assessees contention but computed the disallowance u/s 14A read with Rule 8D - merely because certain disallowance is made u/s 14A rejecting the assessees contention that no disallowance is called for would not be sufficient to levy the penalty u/s 271(1)(c) - there is no allegation of the Revenue that the assessee furnished any details which are found to be false or inaccurate - Merely because some disallowance is computed as per the formula prescribed under Rule 8D, it cannot be presumed that the assessee has concealed the income or furnished inaccurate particulars of income Relying upon CIT Vs. Reliance Petroproducts Pvt.Ltd. [2010 (3) TMI 80 - SUPREME COURT] Decided in favour of Assessee.
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2014 (6) TMI 734
Loss from business or profession - set off of business loss against the income shown under the head income from house property u/s. 71 - Conversion of the closing stock into capital asset Held that:- The assessee had converted the stock in trade in to capital asset and the unsold flats and office premises became the capital asset of the assessee - Conversion was essentially sale of the assets, the assessee was carrying on business - conversion of stock in trade was not at market value - there was no business in the year - FAA was justified in holding that the assessee had carried out business during the year - business loss claimed by the assessee has rightly been allowed by the FAA - Decided against Revenue. Cessation u/s 41(1) of the Act - Refund of excess Bank processing charges Held that:- Refund of bank processing charges and sundry balances returned back could not be taxed under the head income from other sources, that both the amounts should be assessed under the head income from business - income on cessation of liability pertain to section 41 of the Act, that assessee had rightly claimed the income under the head income from business/ profession - assessee was carrying on business during the year under appeal - both the items are to be treated as part of the business income of the assessee Decided against Revenue.
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2014 (6) TMI 733
Disallowance u/s 14A r.w Rule 8D of the Act Held that:- CIT(A) rightly held that Rule 8D is not applicable for the AY Relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D cannot be applied in the year - a reasonable amount of indirect expenditure can be disallowed for earning such exempt income - the dividend on investments by way of cheques is credited directly to its ECS account the disallowance is restricted thus, there is no reason to interfere in the order of the CIT(A) Decided against Revenue. Addition made u/s 41 (1) of the Act Held that:- CIT(A) has deleted the addition by taking into consideration the fact that the assessee itself has offered the amount to tax in the AY 2010-11 the assessee maintains account on mercantile basis and can make a provision for an expense in the accounts on an estimate basis, once it is determined that the liability on an expenditure has accrued, even the actual determination of amount is not possible Assessee filed computation of total income and Balance Sheet & P&L a/c together with the schedules along with ledger account of miscellaneous receipt which the account has been credited with and it is clear that the appellant has itself credited the account u/s 41(1), with this liability for A.Y. 2010-11 - the assessee has offered the total income of Rs. 13,50,00,000/- inclusive of Rs. 21,88,827/- under the head miscellaneous income comprising of the same amount which has been added by the AO for the year - there is no revenue effect in respect of the amount, thus, the order of the CIT(A) is upheld Decided against Revenue.
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2014 (6) TMI 732
Accrual of capital gain - additions during remand proceedings - property given for development of a multi-storied under the development agreement - Receipt from sale of floor space under valuation - applicability of section 50C - Held that:- Following Mekins Agro Product(P) Ltd. Versus Income-tax Officer [2014 (6) TMI 495 - ITAT HYDERABAD] - in case of development agreement which were executed the capital gains cannot be postponed - the profits/ capital gains arising from development of the land cannot be brought to tax this year, except to the extent the assessee himself has offered for tax in his return - Only the profits accrued on the sale of the built up area during the year shall be subject to tax the Tribunal has issued a clear direction to the AO to compute the profit/capital gains arising from sale of built-up area together with an undivided interest in land, if any made during the year. The assessee has also not produced any material to show the actual date of sale of the constructed area in Mayank Plaza or for that matter the actual built up area sold during the AY - the CIT (A) has not at all dealt with the issue of addition of Rs.18,55,000/- made on account of understated sale consideration and an amount of Rs.9,28,951/- u/s 50C being the difference between the valuation made by the registering authority for stamp duty purposes and sale consideration mentioned in the sale deed - thus, the matter is required to be remitted back to the AO for fresh adjudication any advance received by the assessee towards sale of built up area should not be considered for capital gain - Decided in favour of Revenue.
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Customs
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2014 (6) TMI 758
Denial of draw back claim - Bar of limitation - Non application of mind - Writ petition - Alternate remedy - Held that:- For filing an application under Article 226 of the Constitution there is no fixed period of limitation and as such neither the Limitation Act nor the time limits fixed in the schedule to the Act can be made rigorously applicable to a writ proceeding. The court over the years have only insisted that the conduct of the petitioner must not be blameworthy and there has not been any unnecessary or inordinate delay in approaching the court. A writ proceeding being outside the rigours of various periods of limitation is to be tested by the conduct of the party at whose instance it has been filed. While a court does not encourage a stale claim is to be adjudged after an inordinate delay it does not also lean in favour of curtailing a man's fundamental or statutory right by importing the concept of limitation with reference to the statutory period fixed for filing an appeal. Since the order passed by the respondent no. 4 was pursuant to the direction of a learned single judge of this court it cannot be said to be an order passed under the relevant Act. As a matter of fact the petitioner was given an opportunity of being heard only because the court had directed the concerned respondent so to do as such exercise of power by the respondent no. 4 must be deemed to be pursuant to the direction given by the Supreme Court and not in ordinary course passed under the Act. There appears to be sufficient justification in the uncontroverted allegation made by the petitioner that the respondents were under an obligation to consider the whole case independently and to come to a finding. The order complained of does not really reflect any independent application of mind. appropriate authority directed to consider and dispose of the petitioner's claim for Duty drawback within a period of three weeks from the date of the communication of the order. - Decided in favour of assessee.
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2014 (6) TMI 751
Confication of goods - fermented and dried Coco Beans - Assessee contends that Food Safety and Standards Authority of India (FSSAI), on inspection, found that coco beans were contaminated with fungal growth. As per the prescribed standards, the materials should be free from fungus - Held that:- respondent states the measures that are to be taken while importing food products. It is inter alia stated that import of all edible/ food products including tea, domestic sale and manufacture of which are governed by Food Safety and Standards Act, 2006 and Rules thereunder, shall also be subject to the conditions laid down in the aforesaid Act and Rules framed thereunder and the import of all these products will have to comply with the quality and packaging requirements as laid down in the Act. As it is indicated that Cocoa Beans comes under `food product', coming within the schedule to the said Act, unless it is cleared by the FSSAI Department, it may not be possible for the petitioner to take release of the goods - there is no reason to permit release of the aforesaid goods to the petitioner - Decided against assessee.
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2014 (6) TMI 750
Waiver of pre-deposit of duty and penalty - import of Toyota Land Cruiser Prada Car - Mis declaration of model of the car as 1996 model, which is actually 2003 - Held that:- Toyota Land Cruiser Prada Car was imported vide Bill of Entry No. 758637, dated 15.02.2005 under Transfer of Residence (TR) Scheme and valuation was determined after allowing trade discount and depreciation on this basis of 1996 manufacture as declared by the importer. Subsequently, DRI officers during investigation found that the said car in 2003 Model as evident from Registration Certificate of the car. Thus, it is a clear case of misdeclaration of year of manufacture of car. Accordingly, in the present proceeding the valuation of car was re-determined and demand of duty was raised and penalty was imposed. We find that earlier a proceeding was initiated in respect of the said car on different context, which has no relevant in the present proceeding - applicant failed to make out a prima facie case for waiver of pre-deposit of the entire amount of duty, interest and penalty - Conditional stay granted.
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2014 (6) TMI 749
Confiscation of goods - Redemption fine - Import of photocopier machines - Non obtaining of license - Held that:- As per the Notification 31/2005 and the import of 2nd hand photocopier machines is required license prior to the import. Admittedly, in this case the appellant has not obtained the license. - the Notification is a binding force as observed by the Honble Apex Court in para 21 in the cased of Atul Commodities Pvt. Ltd. (2009 (2) TMI 18 - SUPREME COURT) - there is no infirmity in the impugned order for holding that the impugned goods are restricted at the time of their import. - impugned goods are liable for confiscation which can be redeemed on payment of redemption fine and penalty. - However, penalty imposed on the appellant is on the higher side. Therefore, relying on the decision in the case of CC v. Dilip Ghelani [2009 (2) TMI 681 - CESTAT, BANGALORE] - redemption fine and penalty imposed on the appellant by the adjudicating authority reduced to 10% and 5% respectively - Decided partly in favour of assessee.
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Corporate Laws
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2014 (6) TMI 748
Winding up of company - Inability to pay debts - Bonafide defence - Held that:- Respondent has seriously disputed its liability, only with reference to any undertaking to pay a certain amount of money, in the face of other attendant circumstances and the negation of the very basis for any such liability in the first instance being in the nature of a debt. - It is well settled that a creditor may seek the assistance of the company court under dection 433 of the Act, to compel payment of monies due to him. But, where a debt is bona fide disputed and where the claim appears to the court as not just, it is open to the court to refuse the request for a winding up order and to leave the parties to their remedies, to have their claims adjudicated before the appropriate forum. - prima facie, that the defence raised is bona fide and is likely to succeed in a civil court. Hence the petition is rejected - Decided against Petitioner.
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2014 (6) TMI 747
Winding up of Company - Inability to pay debts - Default under the terms of the Bonds by failing to make payment of interest in respect of the Bonds - Respondent contends that petitioner is not a creditor - Held that:- contract, in any other court or courts with jurisdiction, the declared forum of choice was the English court. This court would certainly have jurisdiction over the respondent company as it is a company registered within the jurisdiction of this court, if this be the reason for the petitioner to have instituted the petition before this court as stated at paragraph no. 16 of the petition, it was incumbent on the petitioner to have incidentally stated as to the reason for not having instituted the proceedings in the forum of choice, exclusively and expressly reserved. More importantly this court is called upon to try the case and determine the insolvency of the respondent and its inability to pay its debts-in relation to the payments due under the contract and with reference to the terms of the contract. The third point framed for consideration, as above, would in fact require this court to firstly decide whether an "event of default" had occurred and whether the petitioner had satisfied the conditions after such default by the respondent, in order to present the petition and thereafter to adjudicate on the dispute whether there was an irrefutable liability which the respondent is unable to satisfy etc., this would be inconsistent with the intention and the admitted position that the contract is declared to be governed by the English law. It would be appropriate if the petitioner should approach the competent English court in this regard. If once there are findings of fact arrived at with reference to the contract on the application of the English law, as to the liability and inability on the part of the respondent to pay its debts - such findings could possibly be the basis of a winding up petition before this court. It could even be with reference to winding up proceedings under the Companies Act, 1956, subject to the petitioner satisfying that there has been an adjudication and findings on the assertions as to the breach of contract, the liability thereof and the inability on the part of the respondent to pay its debts, with reference to the English law, by a competent court with jurisdiction - on which this court could act. - Decided against Petitioner.
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Service Tax
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2014 (6) TMI 768
Adjustment of excess payment of service tax - CENVAT Credit - Held that:- if during a particular month there is excess payment of tax, it does not mean that the excess paid amount had been recovered from the customers as the service tax has been paid on the estimated bill collection amount and the exact amount of service tax payable is determined only when the accurate figures of collection against the bills are available. When this is the position, there is no reason why the excess payment against a particular month cannot be adjusted against short payment during the other months, as there is no unjust enrichment involved. - Decided in favour of assessee. Regarding Cenvat Credit - Held that:- the bulk of the Cenvat credit is in respect of the service tax paid on the services of repair and maintenance, security, sales and advertisement, installation and commissioning, rent a cab service, air travel agents and rail travel agents etc. received by them all of which are covered by the definition of input service and, therefore, there is absolutely no reason for denying the Cenvat credit in respect of the same - Credit allowed - decided in favor of assessee.
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2014 (6) TMI 767
Waiver of pre deposit - Demand of service tax - Held that:- appellant had deposited an amount as has been claimed and appropriated by the Adjudicating Authority. On perusal of records, we find that the issue is an arguable one and needs to be gone into details as to whether the appellant is liable to tax on receiving/providing various services during the material period. Since the appellant is contesting the issue on merits, we consider the amount deposited by the appellant is enough deposit to hear and dispose the appeal on merits - Stay granted.
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2014 (6) TMI 766
Demand of service tax - Technical testing and analysis service - testing of the samples received from job workers who are manufacturing the goods for the respondent on job work basis and the samples received from their sister concerns abroad for testing - Held that:- As regards the testing of the samples received from the job workers, these samples are from the goods which were being manufactured by the job workers for the respondent on job work basis and there is nothing on record to show that the respondent had charged any amount for testing the samples from the job workers. Therefore, we agree with the findings of the Commissioner (Appeals) that the respondent have tested their own goods and, as such, have not provided any service to the job workers and, hence, no service tax would be chargeable. Even in the grounds of appeal in the Revenue's appeal, it is not mentioned as to whether the respondent had charged any amount from the job workers for testing of the samples and if so, how much amount had been charged. - Decided against Revenue.
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2014 (6) TMI 765
Denial of refund claim - Export of services - use of input services - Health Club and Fitness Centre, Management Consultants, Business Auxiliary Services, Transport of goods by road, Advertising Space or Time Legal Consultancy Service - non fulfillment the conditions of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No.5/2006-CE, dated 14.03.2006 - Held that:- the objection of the Revenue that the Bank Realisation Certificate has not been produced in respect of individual receipt is not sustainable, particularly, when the appellants have produced the entire Bank Realisation Certificate for the complete financial year. Quantum of refund - refund claim by the appellants amounts to Rs.4,52,840/-, while the value of export services is limited to Rs.1,92,912/- - Held that:- the amount of refund is governed by the formula under which unutilised credit is multiplied by ratio of export turnover and total turnover and therefore this contention of the Revenue will not have any force if the amount of refund claim satisfies this formula as provided in the Notification. Co-relation between input services and the services exported - Held that:- Refund is liable to be sanctioned after it is verified that input services have gone into the export services and it has to be seen from the concerned invoices also particularly in the present case since the refund pertain to October, 2010 to March, 2011, there may be cases where input services were received in January and February, 2011 in that case it cannot be said that services has been utilised in respect of the services which are exported prior to receipt of particular input services in previous quarter. As per the decision of the Honble High Court, the matter is required to be verified. In the light of the observations of the Honble High Court of Karnataka, the matter is remanded back to the original authority for re-verification of the claim - Following decision of Shell India Ltd. Vs. CCE, Bangalore reported in [2012 (10) TMI 34 - KARNATAKA HIGH COURT] - Matter remanded back - Decided in favour of assessee.
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2014 (6) TMI 764
Business Auxiliary Service - Whether the appellant is liable to service tax for having provided BAS to other corporate entities - Held that:- The appellant is seen to have been wholly uncooperative and has exhibited a negative attitude in responding to the exercise of lawful authority, in the matter of assessment. It is axiomatic that the appellant being a Public Sector Undertaking, ought to exhibit a sense of responsibility in responding to notices or summons issued by the Assessing Authority ; by furnishing all the relevant information necessary to enable a just and fair assessment of the appellant s liability, if any. As a Public Sector Undertaking, the assessee ought to have been a role model to other assesses, in the matter of providing full and frank disclosure of all the relevant transactions and material, called for by Revenue - Cost of Rs. 50,000 imposed on the assessee - Matter remitted back - Decided in favour of assessee.
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2014 (6) TMI 763
Demand of service tax - GTA service - Appellants transport the goods in their own vehicle to the buyer. The buyer is a person who actually pays the freight. - provisions of Section 68(2) of the Finance Act read with Rule 2(1)(d)(v) of Service Tax Rules, 1994. - Circular No. 95/6/2007-S.T., dated 11-6-2007- Held that:- it is very clear that the legislative intent is to tax only the services provided by a Goods Transport Agent to a customer and not the owner. - Therefore, the appellant has no liability to pay the service tax. In such circumstances, the action of the Commissioner (Appeals) in setting aside the original order is correct, but there is absolutely no need for remanding the matter. The appellant has no liability at all to pay the service tax. Hence, the appeal is allowed with consequential relief. - Following decision of MSPL Ltd. [2008 (9) TMI 148 - CESTAT, BANGALORE] - Decided in favour of assessee.
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Central Excise
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2014 (6) TMI 760
Valuation of goods - Third party inspection - whether Pre-Delivery Inspection (PDI) charges recovered by the respondent for conducting test at the instance of the buyer is liable to be included in the assessable value or not - Held that:- circular No. 3/88-CX dated 16-2-88 issued under erstwhile Section 4 of the Act in respect of Pre-delivery Inspection charges has not stood the test of legal scrutiny as Tribunals judgment has been otherwise and consequently CBEC withdrew its subsequent circular No. 355/77/97-CX, dated 19-11-97 and 435/I/99-CX dated 12-1-99 vide Circular No. 681/72/2002-CX, dated 12-12-02 in the context of old Section 4 of CEA, 1944. The CBEC has issued a Circular dated 12-5-00 in which in Para 2.2 it has been clarified that the concept of new transaction value under Section 4 has same scope as that of old Section 4 of the Act and Valuation Rules. - third party s inspection charges initially paid by the appellants and subsequently reimbursed by the buyers is not includible in the assessable value of the goods. I, therefore, hold that duty demand of Rs. 25,125/- on inspection charges along with interest is not sustainable - Following decision of M/s. Choksi Tube Co. Ltd. v. CCE Ahmedabad [2002 (11) TMI 521 - CEGAT, NEW DELHI], M/s. Sunrise Structurals & Engg. P. Ltd. v. CCE, Nagpur [2002 (6) TMI 136 - CEGAT, MUMBAI], M/s. Southern Structurals Ltd. v. CCE, Chennai II [2002 (7) TMI 147 - CEGAT, CHENNAI] and CCE, Jaipur II v. M/s. A. Infrastructure Ltd. [2003 (5) TMI 161 - CESTAT, NEW DELHI] - Decided against Revenue.
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2014 (6) TMI 759
Validity of Tribunal's order for Recalling its earlier order as per the request of revenue - earlier appeal of the revenue was dismissed on technical ground - No proper authorization presented by Revenue - Held that:- appeal was dismissed by the Tribunal presumably on the ground that no proper authorization had been filed by the Commissioner in support of the appeal. The Tribunal having noticed such defect, erred in proceeding to dismiss the appeal on such ground by ignoring its powers available under Rule 11(2) ibid. In all fairness, therefore, the Tribunal should have afforded an opportunity to the appellant (Revenue) to rectify the defects by taking recourse to the powers available to it under Rule 11(2) of the Rules by extending the time. It was not disputed that the Revenue did rectify the defect though after dismissal of appeal. The Tribunal, therefore, rightly entertained the application and restored the appeal for its hearing on merits. Such order could be passed by the Tribunal in its rectification jurisdiction because the order contained an error apparent on its face, it having been passed contrary to Rule 11(2). Substantial justice was done to parties because the Revenues appeal will now be heard on the merits. So far as writ petitioner is concerned, no prejudice is caused to him because no adverse order is passed against them. He will get full opportunity to oppose the Revenues appeal on merits - Following decision of Sangram Singh vs. Election Tribunal [1955 (3) TMI 31 - SUPREME COURT] - Decided against assessee.
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2014 (6) TMI 757
Denial of CENVAT Credit - Denial on the ground the goods on which credit taken was not raw material - Whether in view of the specific provisions under Rules, 173H and 173L of the Central Excise Rules, 1944, re-making, refining, re-conditioning, repairing or similar processes on defective goods returned to the manufacturer of the final products can be treated as an input for purpose of Rule 57A of the Central Excise Rules, 1944 - Held that:- By process of redrawing, reducing the thickness, softening, smoothing hardness etc., a new final product was being obtained and had been cleared on payment of duty. Such process has been treated as manufacturing by the party as well as by the respondent. If such process would not have been treated as manufacturing the final product would not have been taxed and would be exempted from payment of duty. It is not the case of Revenue that such process has not been treated as manufacturing and duty has not been assessed. - modvat credit claimed by the party can not be said to be erroneous. Under Rule 173L of the Rules, the party could claim the refund in case of goods returned but merely because that the refund of the duty paid on the finished goods, which have been returned being defective has not been claimed under Rule 173L of the Rules, the claim of the modvat credit under Rule 57-A of the Rules can not be denied. Defective goods, may be final product, have been subjected to such process which amount to manufacturing within the definition of manufacturing under Section 2(f) of the Central Excise Act and as a result of such process a final product is obtained which is subjected to excise duty. The modvat credit under Rule 57-A of the Rules is admissible, if other conditions of Rule are fulfilled and claimed can not be denied on the ground that the assessee would have claimed refund of duty paid under Rule 173L of the Rules. - Decided against Revenue.
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2014 (6) TMI 756
Genuineness of the review order - whether the Review Order passed under Section 35(2) of the CEA,'44 on 22.01.2007, for filing appeal against Order-in-Original dated 30.12.2005 passed by the Joint Commissioner of Central Excise, Haldia, was barred by limitation or otherwise - Held that:- An unsigned order of the Board communicated by a junior official like the Superintendent cannot be held to be a valid review order passed, by the Board under the statute, specially when after availing so many chances and adjournments, the representative of the Revenue is not able to produce before us the original copy of the order signed by the Board Member nor the review file of the Board has been produced before us despite several directions. The relevant provision under Section 35E(3) at the material time was that no order shall be made under sub-section (1) after the expiry of one year from the date of the decision or order of the adjudicating authority. Following decision of CCE, Trichy vs. Vel Pharma [2012 (7) TMI 31 - CESTAT, CHENNAI] - Decided against Revenue.
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2014 (6) TMI 755
Valuation of goods - whether the fixing charges, received by the appellant from their customers for fixing of Aluminium Doors, Windows and Curtain Frame falling under Chapter 76 are required to be added in the assessable value of the goods or not - Held that:- admittedly fixing charges have no connection with the manufacture of the final product and the same are the activities, which are subsequent to the clearance of the goods and at their customers premises. We find no justifiable reason to add such fixing charges in the assessable value of the goods - Decided in favour of assessee.
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2014 (6) TMI 754
Valuation of goods - Whether freight charges, which were collected separately as to and fro rate are required to be added in the assessable value of the explosives manufactured by the respondent - Held that:- Following decision of Majestic Auto Ltd. v. C.C.E. [2004 (1) TMI 138 - CESTAT, NEW DELHI] - Boards Circular No. 643/34/2002-CX., dated 1-7-2002 cannot be held to be binding on the Tribunal - Decided against Revenue.
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2014 (6) TMI 753
Waiver of pre deposit - CENVAT Credit - Welding Electrodes have been used for repair and maintenance - Held that:- Appellants claim that the MS welding Electrodes were used to fill the holes in MS Ingots is without any supporting evidence. Even as per their statement SS Welding Electrodes are used for making groves in roles. Obviously, this is nothing but maintenance of the roles - contention of appellant at different stages of adjudication and appeal has not been consistent. In view of the said position, appellant have not been able to make out a strong prima facie case - Following decision of Shree Rayalaseema Hi Strength Hypo Ltd. vs. Commr. Of Cus. & C. Ex., Triupati reported in [2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT] - stay granted partly.
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2014 (6) TMI 752
Waiver of pre deposit - Penalty on CHA for abetment - in-eligible availment of Cenvat credit - Penalty under Rule 26 of Central Excise Rules, 2002 - Held that:- Appellant, as a CHA, has filed Bills of Entry along with declaration as has been given by the importer and has discharged applicable Customs duty on the said consignment and cleared the consignment out of the Customs area and handed it over to the importer. After the goods were cleared from the Customs area, even if the appellant herein has directed the transporter to deliver the consignment to some other place other than the place, would not amount to his abetment of the issue of in-eligible availment of Cenvat credit by somebody else. - prima facie provisions of Rule 26 of Central Excise Rules, 2002, cannot be invoked against the appellant for imposition of penalty. - Stay granted.
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CST, VAT & Sales Tax
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2014 (6) TMI 762
Determination of rate of tax - Tax on sale of gutkha - Held that:- in Section 8 of Andhra Pradesh General Sales Tax Act, 1957, there was a provision that a dealer, who deals in the goods specified in the Fourth Schedule thereto, shall be exempt from tax thereunder in respect of such goods. Therefore, all the goods, which were specified in Fourth Schedule of the Andhra Pradesh State statute, levying tax on sales of goods in the State of Andhra Pradesh, were exempted from tax by virtue of a specific provision contained in that statute i.e. Section 8 of Andhra Pradesh General Sales Tax Act. There was an entry no.7 in Fourth Schedule of Andhra Pradesh statute, which mention the word "tobacco". There was an explanation also therein, which says that goods mentioned in Entry 7 "shall be goods included in the relevant heads and sub-heads of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, but does not include goods where no additional duties of excise are levied under that Schedule". - tax imposed upon sale of Gutkha in the case in hand treating it to be 'unclassified item' and imposing tax at the rate of 10% is absolutely valid and correct. - Decided in favor of revenue. Sale of used generator in running condition - whether to be construed as old discarded and unserviceable machinery - held that:- Words "discarded, unserviceable, obsolete" should be read ejusdem generis with the word "old" so as to apply aforesaid notification to such machineries which are virtually unusable, unworkable or unfunctional. However, I do not find any reason to read all these terms ejusdem generis since all these terms have a distinct meaning. Moreover, use of the word "or" between "unserviceable" and "obsolete" clearly shows intention of State that all these words have been used to cover different situations. If an old machinery is sold even if it is in running and usable condition, in my view, it would be covered by entry 29. Therefore, question D is answered in favour of Revenue by holding that sale of generator is covered by entry 29 of notification dated 15.1.2000 as amended by notification dated 17.02.2000 w.e.f. 17.1.2000 - Decided in favor of revenue. Rate of tax on sale of old and used Generator - Held that:- rate of tax would be only 5% and not 8% - Decided in favor of assessee.
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2014 (6) TMI 761
Input tax credit - validity of circular dated April 17, 2008 - Whether the petitioner is entitled for input-tax credit under section 76(6)(c) of the Act on the purchase value of the raw material which the assessee had purchased from a dealer who is exempted from payment of tax under section 4A of the Act - Held that:- liability to pay tax chargeable under section 3 of the Act is different from quantification of the tax payable on assessment. The liability to pay tax and actual payment of tax are conceptually different and if there was an exemption, the dealer would be required to pay the tax in terms of section 3 of the Act. In the light of the aforesaid, the petitioner was liable to pay tax under the Act but for the exemption. Section 76(6)(c) clearly provides that a purchasing dealer would be entitled to input-tax credit of the amount of tax charged and this provision relating to exemption has to be liberally construed. It is not necessary that a purchasing dealer would be entitled to input-tax credit only if he has paid the tax charged in the sale invoice. The purchasing dealer would be entitled for input-tax credit if the said amount is adjusted or set off, as the case may be. The circular of the Commissioner, Commercial Tax, dated April 17, 2008 insofar as it interprets section 76(6)(c) to the effect that benefit would only be given to those purchasing dealers who have actually paid the tax to the seller, is patently erroneous and against the provision of section 76(6)(c) of the Act. - Consequently, the circular dated April 17, 2008 of the Commissioner, Commercial Tax, insofar as it interprets section 76(6)(c), is patently erroneous and to that extent is quashed. Since the notice dated March 3, 2009 was issued on the basis of the said circular, the same is wholly illegal and without any basis and is also quashed. - Decided in favour of assessee.
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