Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 28, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Assessee has offered the gross amount on sale of land/ building/IT Park as revenue receipt for taxation purposes and there is no deduction of land cost from it, taxing the cost of the land once again amounts to double taxation - AT
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Computation made by the assessee for disallowance u/s 14A(2) was not in accordance with Rule 8D and the AO has duly noted it in the assessment order - action of AO sustained - AT
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Section 10A deduction is to be done u/s 28 to 44B but separately and independent of computation of profits and gains from eligible business and without factoring unabsorbed depredation - AT
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Minimum alternate tax (MAT) - profit from sale of agricultural land, which is not a “Capital Asset”, cannot be included for the purpose of computing book profit u/s 115JB - AT
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Goodwill - assessee has got the additional share capital allotment without bringing anything to the assignee - the pre-requisite laid down in section 47(xiv) has not been complied with - goodwill is taxable as STCG - AT
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Revision u/s 263 – IT was not justified in setting aside the order and directing for investigating the facts afresh without pointing out any specific fact which required further investigation - AT
Customs
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Refund of SAD - the applicant mentioned in the sale invoice “ADC not passed on”. Prima facie, it appears that ADC (Additional Customs Duty) was not passed on to the customers. - AT
Service Tax
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Waiver of penalty invoking section 80 - courier service - delayed payment of service tax with interest - penalty waived - AT
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Valuation - Steamer Agent’s Service - inclusion of various charges collected - Applicant could able to make out a prima facie case for total waiver of predeposit of the dues adjudged - AT
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Cargo Handling Services - Mining services - Although the transportation is one of the link of the contracts, but it does not constitute the essence of the contracts, and the essence of the contracts is handling of iron ore - prima facie case is against assessee - AT
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Management, maintenance or repair service - appellant disclosed 30% of the consideration received, assuming that 70% of the consideration received to represent the value of good, prima facie case is in favor of assessee - AT
Central Excise
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Duty demand - CENVAT Credit - Clandestine removal of SS Flats - As per best established legal principles, fraud and justice do not dwell together. Further fraud nullifies everything. - AT
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Applicants are putting Motorcycles and scooters to electrolyte and charge the battery of the two-wheeler - Prima facie this activity cannot be considered as manufacture of motorcycles.- AT
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Issue of reversal of credit arises only when the final product destroyed in fire - in this case the goods are in semi-finished condition lost in flood - appellants are not required to reverse input credit - AT
VAT
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Exemption from trade tax - Textile fabrics impregnated, coated covered or laminated with PVC (polyvinyl chloride) are treated as textile fabric. - HC
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Liability of VAT / tax - Whether the supply of foodstuff to the students is a business or not - ither a commercial activity nor a trade nor does it amount to “business“ - not taxable as not a dealer - HC
Case Laws:
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Income Tax
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2014 (6) TMI 780
Rectification of mistake - Determination of cost of land – Any expenses relating to allotment of land not debited – Held that:- The expenses reflected in Schedule-K are in the nature of stamp duty, registration fee incurred for registration of title deed and bank guarantee commission - This does not tantamount to incurring of any expenditure towards allotment of land by the Government - the assessee has offered the gross amount on sale of land/ building/IT Park as revenue receipt for taxation purposes and there is no deduction of land cost from it, taxing the cost of the land once again amounts to double taxation - if the assessee is not charging cost of land to the Profit and Loss A/c. and offered the receipt from sale of land/building/IT Park as revenue receipt, then the claim of the assessee could be allowed – the AO is directed to verify whether the assessee has charged any cost incurred for allotment of land in its books of account as an expenditure and if it is not charged any expenditure towards allotment of land to Profit and Loss A/c., then the claim of the assessee is to be allowed - Decided in favour of Assessee.
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2014 (6) TMI 779
Recalling of the order - Condonation of delay – Delay of 1757 days – earlier ITAT without addressing the issue of delay has disposed of the appeals on merits. - Held that:- The assessee has explained that the belated filing of appeal was due to the fact that relevant papers were misplaced by one of the office staff and the appeals could be filed only after the papers were traced out - there is ‘sufficient cause’ for condoning the delay - the assessee trust is created by the Government of Andhra Pradesh for the benefit of the archakas - so far as the object of the trust is concerned, there is no doubt with regard to the charitable nature of such object as the DIT(E) has himself granted registration u/s 12A of the Act, prospectively – thus, the delay needs to be condoned, as otherwise, the assessee trust would be deprived of substantial justice – Delay condoned. Grant of registration u/s 12A of the Act – Prospectively or from the date of creation of the Trust – Held that:- Following AP Endowments Archakas and other Employees Welfare Fund Trust, Versus Director of Income-tax (Exemption) -I, Hyderabad [2012 (11) TMI 337 - ITAT, HYDERABAD] - the authorities who are in the knowledge of things have not advised the assessee regarding the person to whom the application should have made nor did they forward the application to the correct authority, leading to the delay in filing of application to the correct authority by the assessee - the assessee was pursuing the matter with CBDT and the Central Government - the earlier order of the Tribunal was recalled due to technical reasons and not for any error of judgment or error in decision making process, hence, the conclusion drawn by the bench still holds good - the delay in filing application for registration before DIT(E) is condoned and the matter is remitted back with a direction to consider assessee’s claim for grant of registration u/s 12A of the Act from the date of creation of trust – Decided in favour of Assessee.
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2014 (6) TMI 778
TDS deducted u/s 194J instead u/s 192 of the Act – Doctors treated as consultants – Assessee in default u/s 201(1) and 201(1A) of the Act - Held that:- Following ACIT, Cir-15(2), Hyderabad Versus M/s. Yashoda Super Speciality. Hospital, Hyderabad [ 2010 (6) TMI 642 - ITAT HYDERABAD] - the agreement between the assessee and the Doctors is one for providing professional services, and there is no element of employer and employee relationship existing - tax has to be deducted u/s 194J as fee for professional services and not as salary - the relationship between a hospital and its employee depend on the terms of contract between them - for the purpose of treating Doctors as employees not only they should be given specific assignment but there should be specific working hours, rules and regulations and they should be on the rolls for PF and they should be given leave as per the statutory provisions besides gratuity etc. - there is nothing on record to suggest that full time consultant Doctors are either provided with specific working hours or subject to any rules and regulations - there is no employer and employee relationship between the hospital and the consultant Doctors, at least the facts on record do not establish any such relationship, it cannot be said that fees paid to full time consultant Doctors are in the nature of salary - subject to deduction of tax at source as per the provisions of section 192 of the Act – thus, the order of the CIT(A) is set aside - Decided in favour of Assessee.
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2014 (6) TMI 777
Disallowance made u/s 14A r.w. Rule 8D of the Act – Voluntary disallowance of expenses by the company – Held that:- Rule 8D is mandatory - The legislature has prescribed Rule 8D with effect from 24th March, 2008 as the method for determination of amount of expenditure incurred in relation to exempt income - by using the word "shall" in sub-section (2) of Section 14A, the legislature has made it mandatory for the AO to determine the amount of expenditure incurred in relation to exempt income as per the method - the legislature has provided in Rules the method for apportionment of the expenditure between the exempt income and taxable income - the AO as well as the other statutory authorities under the Income-tax Act are also required to determine the amount of expenditure in relation to exempt income as per the method prescribed in the Rules – Relying upon Bharat Hari Singhania Vs. CWT – [1994 (2) TMI 55 - SUPREME Court] – Decided against Assessee. Computation of disallowance made by the AO – Held that:- The AO noted that the assessee has received substantial exempt income and the disallowance u/s 14A r.w Rule 8D is called for - the disallowance has three components and aggregate of all the three components is the amount which is to be disallowed - assessee has considered only the first component i.e., the amount of expenditure directly relating to exempt income. He has not considered Part (ii) and (iii) of Rule 8D(2) – thus, the computation made by the assessee for disallowance u/s 14A(2) was not in accordance with Rule 8D and the AO has duly noted it in the assessment order and thereafter proceeded to compute the disallowance as per Rule 8D. The expenses which assessee claimed to have been not incurred for earning of exempt income have not been considered by the AO at all - the disallowance itself is ₹ 65,36,743 - assessee has not disputed the value of investment as taken by the AO for the purpose of computing the disallowance at half per cent as provided by Rule 8D(2)(iii) - whether the working of the disallowance of interest as per Rule 8D(2)(ii) is correct or not is of academic interest – thus, the disallowance worked out by the AO which was the aggregate of three components as prescribed under Rule 8D(2) was ₹ 99,45,325 - finally, the AO restricted the disallowance to ₹ 52,56,197 – thus, no relief is due to the assessee from the disallowance made by the AO at ₹ 52,56,197 – Decided against Assessee.
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2014 (6) TMI 776
Assessment of STCG – assessment in the hands of individual member or AOP (assessee) - income escaping assessment - Revision of return u/s 139(5) - return of loss - Held that:- the assessee has brought in the value of the first, second and third floors in the books of account of assessee AOP and has claimed depreciation - there should not be any dispute that the “AOP” is not a legal person in the eyes of law and only for the purpose of income tax purposes, it is treated as a separate “person” - the immovable properties have to be necessarily to be held by the members of AOP on behalf of the AOP - once the value of immovable property is brought into the books of the Association of Persons shall be treated as the property of the AOP for the purposes of income tax - Decided in favor of revenue. With regard to ground floor and land - the value of ground floor were not shown in the books of AOP - Held that:- the issue relating to the Ground floor and the land requires fresh examination – thus, the matter is to be remitted back to the AO for re-computation of the amount of Short term Capital gain – Decided in favour of Assessee.
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2014 (6) TMI 775
Grant of deduction u/s 10B of the Act – Set off of carry forward loss and unabsorbed depreciation – Held that:- Following CIT Vs. Himatsinghika Seide Ltd [2006 (8) TMI 125 - KARNATAKA High Court] - the context of provision of section 10A of the Act that the process ascertaining the total income where section 10A deduction is involved would comprise by computing profits and gains derived by the unit and in this process the unabsorbed deprecation which is not part of the deprecation of the impugned assessment year is not to be factored, then the deduction as computed will be available for carrying out set off of unabsorbed depreciation - Section 10A deduction is to be done u/s 28 to 44B but separately and independent of computation of profits and gains from eligible business and without factoring unabsorbed depredation – revenue has no alternative but to upheld the findings of the CIT(A) – Decided against Revenue.
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2014 (6) TMI 774
Computation of profit u/s 115JB - Minimum alternate tax (MAT) - Inclusion of profit on sale of agricultural land – Held that:- The land is not a “Capital Asset” in terms of sec. 2(14)(iii) of the Act – as decided in assessee’s own case for the earlier assessment year, Singhai Rakesh Kumar v. Union of India [2000 (11) TMI 2 - SUPREME Court] was followed - the income arising on the transfer of agricultural land is not exigible to capital gains tax, being in the nature of agricultural income - there is complete parity of facts, so that there was no reason to take a different view of the matter - The provisions of Chapter XII-B of the Act do not operate to extend the scope of `total income’ per section 5 on which the charge to tax u/s 4 is attracted, but is only toward providing an alternative basis for computing the same – the inclusion of profit on account of sale of agricultural land is not a capital asset u/s 2(14), in the computation of book profit u/s 115JB of the Act -the profit from sale of agricultural land, which is not a “Capital Asset”, cannot be included for the purpose of computing book profit u/s 115JB of the Act – thus, the decision of the CIT(A) is upheld – Decided against Revenue.
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2014 (6) TMI 773
Deletion of disallowance of value of surgical instruments – Held that:- CIT(A) rightly held that the nature of items and very short life of the items, if does not make any difference if the same is claimed as expense in the year of issue itself - The method followed during the year is accepted by the AO in all subsequent years in scrutiny assessments which means method followed by the appellant is bona fide and does not require any change on the part of AO - assessee had changed the method of accounting of surgical instruments but at the same time it is also a fact that the changed method has been followed by Assessee in all subsequent years and has also been accepted by Revenue in all scrutiny assessments - Revenue has not brought any material to contradict the findings of CIT(A) – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue. Deletion of higher loss - Accounting of consumption of surgical instruments – Held that:- The accounting treatment followed for accounting the consumption of surgical instruments in AY 04-05 has been followed by the Assessee in all subsequent years and has also been accepted by the Revenue in all the scrutiny assessments - the method of accounting followed by the Assessee in AY 04-05 has been followed consistently and has also been accepted by the Department and no discrepancy being pointed out in the accounting system followed in AY 04-05 and subsequent years which has also been upheld in AY 04-05 hereinabove, we are of the view that the method followed by the Assessee in A.Y. 04-05 be followed for the purpose of valuation of surgical instruments in AY 03-04 also – thus, the matter is remitted back to the AO to work out the consumption of surgical instruments on the basis of the accounting treatment followed in AY 04-05 and subsequent years and thereafter decide the issue – Decided in favour of Revenue. Restriction of disallowance on account of repairs to building – Held that:- Most of the expenses which the Assessee has claimed as revenue expenses were small and were incurred of preserving and maintaining the building - out of the total expenses the aggregate of small expenses were to the tune of Rs. 4,42,421 - CIT(A) noted that Assessee transferred the expenses from building work in progress account and the expenses were of capital in nature - the expenses as not of revenue nature and he thus disallowed the claim with respect to capital expenses incurred and allowed the balance amount as being eligible for deduction - Revenue has not brought any material on record to controvert the findings of CIT(A) – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue. Depreciation on account of repairing of Cath Lab – Held that:- CIT(A) rightly held that the parts were not purchased for new or independent use - these were replaced with existing parts in the system to maintain and preserve its use - Since the expenses have not created any new asset and also did not have any new advantages, these will qualify as current repairs - CIT(A) while granting relief has given a finding that Assessee had existing Cath Lab which was running since earlier years and that the expenses incurred were towards replacement of worn out parts and repairing the system and was not for purchase of new or independent use - the Revenue has not brought any material on record to controvert the findings of CIT(A) – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue.
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2014 (6) TMI 772
Goodwill treated as STCG without appreciating section 47(xiv) of the Act – Self generated goodwill from conversion of proprietary concern – Held that:- The general wordings contained in the recitals of the agreement covers ‘good will’ for the transfer of which negotiation has taken place between the assignor and assignee, the assignment deed does not evidence that a good will is transferred to the assignee - the good will has never been created in the books of the propriety concern of the assessee - the allotment of shares worth exceeding is in the form of excess assets over the assets and liabilities of the assignor - the assessee’s capital account in the OPM had the credit balance only and the assessee has been allotted fully paid up share capital - the assessee has got the additional share capital allotment without bringing anything to the assignee - the pre-requisite laid down in section 47(xiv) has not been complied with - a proper valuation of good will has been done prior to the transfer of assets – thus, there was no justifiable reason to interfere with the order of the CIT(A) confirming the addition/disallowance – Decided against Assessee. Date of investment in new property - Whether the date of agreement i.e., 26.05.2006 or the date of payments has to be taken into account for the purpose of calculating the time frame prescribed u/s 54 of the Act – Held that:- The flat in Presidency Co-operative Housing Society, JVPD, Mumbai has been sold by the assessee on 11.09.2008 - the subsequent payments made in the year 2008 is to be considered for the purposes of section 54 – Following ITO, Ward-II, Gurgaon Versus Dr. Smita Swarup, D/o Shri Shanti Swarup [2014 (6) TMI 559 - ITAT DELHI] - the assessee is eligible to claim the deduction u/s 54 of the Act for the payments made towards the purchase of the property within the permissible time period of limitation though on the date of agreement of purchase, the assessee is not eligible to claim the deduction by virtue of the time limitation provided under the section - thus, the claim of deduction in respect of the payments made within the period of limitation prescribed u/s 54, irrespective of the date of agreement, is to be allowed – Decided partly in favour of Assessee. Claim of interest on housing loan claimed u/s 24(b) of the Act – Held that:- The word used in section 24(b) is ‘acquired or constructed’ and nowhere in the section, the word ‘possession’ is used by the legislature - the authorities are not justified in not allowing the claim of deduction on the ground that the assessee has taken possession of the property only during the FY 2008-09 - the AO is directed to ascertain the date of completion of construction for the purposes of the said provisions and accordingly allow the claim of the assessee – Decided in favour of Assessee.
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2014 (6) TMI 771
Disallowance u/s 40(a)(ia) of the Act – TDS on reimbursements - Claim of clearing and forwarding charges – TDS on transportation services was paid by the agent - Held that:- Following CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014 (4) TMI 235 - GUJARAT HIGH COURT] - on the commission paid by the assessee to the agent for clearing and forwarding tax was duly deducted - no part of amount reimbursed was to be disallowed u/s. 40(a)(ia) if tax has not been deducted - expenses were incurred by agent on behalf of assesses -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, the order of the CIT(A) is set aside – Decided in favour of Assessee. Addition of estimated disallowance of freight charges – Held that:- Assessee filed certain details but CIT(A) after scrutinizing them held that the accounts prepared by the assessee were not in order and since all the expenses were not fully vouched, AO was justified in making this adhoc disallowance of Rs. 6,27,500 - no evidence has been furnished to deviate from the findings of lower authorities and the order passed by CIT(A) is hereby confirmed – Decided against Assessee. Addition of 1/5th of total claim – Personal expenses - Held that:- The AO disallowed an amount of Rs. 82,880/- being 20% of the total claim - CIT(A) restricted this disallowance to 10% of total claim - personal element in this type of expenses cannot be ruled out – thus, the order of the CIT(A) is upheld – Decided against Assessee.
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2014 (6) TMI 770
Penalty u/s 271(1)(c) of the Act – Addition made u/s 68 of the Act – Gifts received from various persons - Held that:- There is no discussion in the penalty order in respect of gift of Rs 13,00,000/- received from the seven persons as to why the AO was satisfied that it represents concealed income of the assessee and liable for penalty u/s. 271(1)(c) of the Act - such an order of penalty is unsustainable - penalty proceeding is different from assessment proceeding and the considerations which apply in penalty proceeding is different from the considerations that apply in an assessment proceeding – Relying upon Vasantlal Amrutlal Doriwala (HUF) Prop. of M/s. Nirav Rayon’s Versus Income Tax Officer [2014 (6) TMI 527 - ITAT AHMEDABAD] - the declaration of gift was filed by the assessee. Copies of those declarations are furnished before us in a compilation. Penalty has been levied by invoking the deeming provisions under Section 68 of the IT Act - deeming provisions cannot be extended to hold that the assessee has concealed the income especially when the assessee has placed on record certain evidences such as gift declarations and bank accounts to show that the gift was received under bona fide belief that the same was a genuine gift - it was taxed during assessment proceedings but the penalty u/s 271(1)(c) cannot be levied automatically - no material could be brought on record by the AO to show that the amount added u/s. 68 in the assessment proceedings represents the actual concealed income of the assessee – thus, the penalty levied in respect of entire addition is unsustainable – Decided in favour of Assessee.
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2014 (6) TMI 769
Revision u/s 263 of the Act – Computation for deduction u/s 80HHC and 80IA of the Act – Held that:- Following COMMISSIONER OF INCOME-TAX Versus MAX INDIA LTD. [2007 (11) TMI 12 - Supreme Court of India] - deduction u/s.80HHC has to be computed after reducing the deduction allowed u/s.80IB/80IA - the assessment was originally completed u/s. 143(3) of the Act on 28.10.2005 wherein the assessee was allowed deduction u/s. 80IB at Rs 32,77,522/- and section 80HHC at Rs 53,82,417/-. While allowing deduction u/s. 80HHC, the Assessing Officer has not reduced the amount which was allowed as deduction u/s. 80IA from the ‘profits and gains of business or profession’ - the AO initiated proceedings u/s 147 of the Act and the assessee objected against the initiation of reassessment proceedings and submitted that deduction u/s 80IB and 80HHC allowed in the original assessment. The assessment was originally completed u/s 143(3) of the Act, the assessee was allowed deduction u/s. 80IB and section 80HHC - the CIT was not justified in setting aside the order and directing for investigating the facts afresh without pointing out any specific fact which required further investigation - the CIT could not point out how the view adopted by the Assessing Officer was not a possible view the order of the CIT were contrary decisions of the High Court - It is an established position of law that when two views were possible in respect of an issue and the Assessing Officer has adopted one of the possible views, such an order of the Assessing Officer cannot be deemed as erroneous as well as prejudicial to the interest of the Revenue – thus, the order of the CIT is set aside – Decided in favour of Assessee.
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Customs
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2014 (6) TMI 784
Redemption fine and penalty - dispute relates to quantum of redemption fine and penalty - Valuation of goods - Import of restricted second hand photocopy machine - Confiscation of goods - Held that:- There is no dispute regarding the undervaluation and violation of the EXIM Policy - appellant is a habitual offender insofar as they have imported the same goods on 30.10.2005, 27.12.2006, 26.3.2007 and 6.6.2007 as evident from the impugned order. Considering this fact, I do not find any reason for reduction in the quantum of redemption fine. However, considering the overall facts and circumstances, the penalty is reduced to Rs.2,50,000 - Decided partly in favour of assessee.
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2014 (6) TMI 783
Waiver of pre deposit - duty on broken pieces of wrecked ship - Customs included the cost of the broken ship, salvaging cost, transportation of broken pieces, etc. and as a result, differential duty - Held that:- wrecked ship when purchased had already reached Indian shore and therefore importation has already been taken place. Therefore, the issue is debatable and requires more detailed consideration of relevant provisions, relevant rules, precedent decisions on the subject. - Commissioner (Appeals) could have passed an order without insisting on any pre-deposit. - stay granted.
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2014 (6) TMI 782
Waiver of pre deposit - Refund of SAD / Additional Customs Duty (ADC) - notification No.102/07-Cus. dated 14.09.2007 - violation of the conditions 2 (b) of the Notification - Duty demand - Held that:- words “ADC not passed on” are clearly mentioned in the sale invoices. Clause (b) of para 2 of the Notification provides that the importer while issuing the invoice for sale of goods, should specifically indicate in the invoice that in respect of the goods covered therein, no credit of additional duty of Customs levied thereunder Section 3 (5) of the Customs tariff Act, 1975 shall be admissible. In the present case, the applicant mentioned in the sale invoice “ADC not passed on”. Prima facie, it appears that ADC (Additional Customs Duty) was not passed on to the customers. We find that on an identical issue, the Tribunal in various cases allowed the appeal of the assessee. Hence, pre-deposit of duty along with interest is waived till disposal of the appeal - Stay granted.
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Corporate Laws
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2014 (6) TMI 781
Auction sale held during winding up of company - Validity of transfer of right - Objection on Deed of conveyance made in favour of applicant - Held that:- The advertisement was misleading and the applicant having been mislead into believing that the transaction was an outright sale, had proceeded in that fashion. As already pointed out, the lease cum sale agreement executed in favour of the company in liquidation had long expired, which would indicate that it was for the KIADB either to call upon the lessee to complete the sale transaction by paying amounts due under the agreement or to terminate the lease if there was default on the part of the lessee. There was also no clause found in the lease cum sale agreement which would determine the lease as would be the case provided for under Section 111 of the Transfer of Property Act, 1882. In other words, when the company in liquidation was ordered to be wound up by operation of law, the lease would be determined in the event there was a clause in the lease deed, which indicated that the lease would stand determined in the event of the lessee being declared insolvent or going into liquidation. In the absence of any such clause and in the absence of further act on the part of the KIADB to terminate the lease, the lease transaction was in limbo. In that, the only obligation that was outstanding was in terms of clauses 7 and 8 of the lease deed, which required the lessee to execute the sale deed if all other obligations on the part of the lessee had been completed. Apparently, since there is no indication that there was any default in the payment of the lease rent by the lessee, the only obligation that was outstanding on the part of the KIADB was the execution of the sale deed. And the lease hold rights, which were capable of being transferred as on the date of the order, was on a misrepresentation made by the KIADB and this court has overlooked the obvious that the lease deed was not current as on the date of the order and there were no lease hold rights that could be taken over, except the position that had continued with the company in liquidation as on the date of the order and further right to obtain a sale deed pursuant to the lease cum sale agreement. Therefore, the applicant having been considered as the successful bidder and the applicant having complied with such further directions as regards payment of monies, as already stated and this court having affirmed the sale, it is not open for the KIADB to resile and claim that the advertisement issued in respect of the lease cum sale was faulty and was incomplete and therefore, void. It is a bona fide purchaser for value, in that, the advertisement issued with the leave of this court indicated that the property was being auctioned on 'as is where is basis', though it was subject matter of lease cum sale agreement dated 12.3.1973, for a period of 11 years. It would give the impression that the company in liquidation had acquired rights over the property by the time the advertisement was issued. The applicant thereafter having participated and paid substantial amount towards the bid amount and having been lead to believe that it had purchased the property absolutely, being denied the same, on the footing that there was a lapse on the part of the Official Liquidator in not incorporating the condition that the sale was only in respect of the lease hold rights, which in any event, were not available as on the date of the sale, since the lease had long expired, the objection raised by the KIADB to deny the sale transaction and to refuse the execution of the Deed of Conveyance in favour of the applicant is unjust and cannot be sustained. - Decided in favour of appellants.
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Service Tax
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2014 (6) TMI 800
Waiver of penalty invoking section 80 - courier service - delayed payment of service tax with interest - Held that:- The very fact that the matter went right up to the Supreme Court and finally it was decided against the assessee shows that assessee definitely felt that they had a case for non-payment of service tax. That being the position, I am unable to agree that there was willful intention on the part of the assessee not to comply with tax liabilities. - Decided against the revenue. Decision on cross objection filed by assessee - Held that:- Even though the cross-objection has not been numbered and not listed, the learned advocate insisted that the same should be considered as an appeal filed by them. - in the interest of justice, tribunal proceeded with to deal with the issue raised by the learned counsel. Extended period of limitation - disputing the demand in the cross objection - Held that:- in the returns filed, the details were not submitted and the appellants had given the details only on 9.8.2005. After the Supreme Court decision was received, it would be natural for the department to expect that assessee would pay the service tax but when they did not pay, notice has been issued. - Once the assessee is required to do assessments and pay the tax, it cannot be said that he is not aware of the obligation of self-assessment and the consequence of its failure to follow the law. - Decided against the assessee.
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2014 (6) TMI 799
Restoration of appeal - Demand of service tax, interest and imposition of penalty - Appeal was dismissed for want of COD clearance - Held that:- That being aggrieved by the impugned order dated 31.03.2008 passed by the ld.Commissioner, the Department has preferred an appeal as well as the Applicant. At that time, the Applicants choose to file an appeal against the confirmation of the part of the demand against them and elected not to contest that part of the order in favour of them by filing Cross Objection. Now, going through their application seeking condonation of the delay in filing the cross-objection, we do not find any valid reason or cause justifying the delay in filing the Cross Objection. Even in the application, the total number of delays occurred in filing the present Cross Objection, has also not been stated clearly nor any date chart is enclosed explaining the delay. It is barely asserted after narrating the facts that there has been delay in filing the Cross Objection, against the Department’s Appeal and the same be condoned. We agree with the contention of the ld.A.R. for the Revenue that the principle of condonation of delay is equally applicable to Cross Objection also filed under Section 86 of the Finance Act, 1994 - In view of the decision of the Hon’ble Supreme Court in the Living Media India Ltd. case (2012 (4) TMI 341 - SUPREME COURT OF INDIA), the Public Sector Undertaking cannot be given a special status in applying the principle/guideline applicable to others for condonation of delay - Decided against Revenue.
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2014 (6) TMI 798
Waiver of pre deposit - valuation - Steamer Agent’s Service - inclusion of various charges collected - Advance Manifest Charges (AMS), Bunker Surcharges (BS) and Currency Adjustment Factor (CAF) Charges from the Shippers in India and transferred the said amounts to the Overseas Liner - Business Support Service - Held that:- prima facie, the Applicant could able to show that Bunker Surcharges (BS) and Currency Adjustment Factor (CAF) Charges are nothing but the charges relating to Ocean Freight, which though collected by them on behalf of the overseas liner from the Indian shippers, but transferred in its entirety to the liners. Also, prima facie, we find that the ‘Collection/Commission Charges’ against these services rendered by the Applicant to the Overseas Liners, had been included in the ‘Steamer Agent’s Services’ and appropriate service tax were duly discharged by the Applicant. In these circumstances, the Applicant could able to make out a prima facie case for total waiver of predeposit of the dues adjudged. Accordingly, predeposit of all dues adjudged is waived and its recovery stayed during the pendency of the Appeal - Stay granted.
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2014 (6) TMI 797
Waiver of predeposit - mining and post mining services - Cargo Handling Services - Mining of Mineral Oil or Gas Services - transportation of iron ore at their iron and manganese mines, hiring of rock-breakers with excavator at the mines, hiring of machineries for shifting/removal of over-burdens and excavation/loading, shifting and unloading - shifting, loading and transportation and removal of ROM and over-burdens to the fines/sized ores from different filling mines to railway siding - Held that:- Analyzing the relevant contracts of loading and transportation works and the representative invoices, it is observed that the distances required to be covered, was very short, i.e. within 2 to 8 Kms., for which the charges varied from Rs.22 to Rs.50 per MT. Although the transportation is one of the link of the contracts, but it does not constitute the essence of the contracts, and the essence of the contracts is handling of iron ore. Consequently, following the Circular No.B11/1/2002-TRU dated 01.08.2002 issued the Board, demand is confirmed - and applicant could not able to make out a prima facie case for total waiver of predeposit of the dues adjudged - stay granted partly.
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2014 (6) TMI 796
Management, maintenance or repair service - Exclusion of value of material - appellant disclosed 30% of the consideration received, assuming that 70% of the consideration received (asserted by the appellant to be on the basis of an 'industry norm') to represent the value of goods and raw materials deemed to have been sold to the recipient of the service. - Held that:- wherever there are complex transactions including components of service and sale of goods (actual or deemed), the taxable value for levy of service tax would be only the component of service but excluding the component of sale of goods. Accordingly, on this interpretation of the provisions of Section 67 the value of goods sold or deemed to have been sold, requires to be excluded from the taxable value for computation of service tax liability. Consequently, provisions of Notification No. 12/2003 merely explicate the inherent intent of Section 67 of the Act - appellant is entitled to claim exclusion of the value of the goods and raw materials claimed to have been sold to the recipient of the service as part of the management, maintenance or repair agreements and works executed in pursuance thereof. Since the adjudication order proceeds on the flawed premise and presumes that the value of goods and material deemed to have been sold is not liable to exclusion either under the provisions of Section 67 or qua Notification No. 12/2003, the order invites invalidation and is accordingly quashed. The matter is however, remitted to the adjudicating authority for denovo disposition - Decided in favour of assessee.
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2014 (6) TMI 795
Denial of refund claim - Exemption of CHA and Port Services by virtue of Notification No. 41/2007-ST - Commissioner (Appeals) allowed refund claim - Held that:- refund under Notification No. 41/2007-ST cannot be denied by reviewing the correctness of the Service Tax payment at the end of service providers - Following decision of Commissioner of Central Excise, Indore Vs. Anant Commodities Pvt. Ltd. & others reported in [2009 (10) TMI 229 - CESTAT, NEW DELHI] it is concluded that the Commissioner (Appeals) has rightly allowed the refund claim in full having considered the Board's circular dated 21.12.2009 - decided against Revenue.
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Central Excise
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2014 (6) TMI 792
Duty demand - Demand of differential duty - Reclassification of goods - Suppression of facts - Mis declaration of goods - Penalty - Availment of MODVAT Credit - Whether IOCL was eligible to pass on credit as per the provisions of Rule 57E of the Central Excise Rules, 1944 - Held that:- A perusal of the Tribunal’s Order does not suggest that the issue of passing of credit as per the provisions of Rule 57E, though raised by the appellant, was adjudicated by the Tribunal and have thus attained finality. This para only conveys Tribunal s observation that the issue could not be taken up by the Tribunal in view of limited scope of appeal filed by the appellant on the issue of imposition of penalty. Therefore, we agree with the Ld. Advocate of the appellant that this issue was not adjudicated by the Tribunal and thus the question of attaining its finality does not arise. It has thus to be held that impugned credit was admissible to IPCL. On the date of payment of differential duty on 09.02.2000, and also during the period of demand, erstwhile Central Excise Rules, 1944 were in force. The differential duty liability was cast on IOCL vide Order dated 25.08.1999 along with interest under Section 11AB and penalty under Section 11AC. Therefore, on receipt of the said order-in original dated 25.08.1999, also IOCL could not issue certificate in terms of Rule 57E of the Central Excise Rules, 1944 in force during material time on account of exception clause contained in the prevailing Rule 57E(3) of the Central Excise Rules, 1944 because penalty on account of suppression etc. under Section 11AC was imposed on IOCL by the adjudicating authority. IOCL paid differential duty of Rs.14,36,74,091/- on 09.02.2000 against OIO dated 25.08.1999 but filed an appeal with the CEGAT against imposition of interest and penalty. Certificate was issued by IOCL on 18.09.2006, and MODVAT Credit was taken by IPCL in November, 2006 as a result of prolonged litigation which ended only on 17.05.2005 as per the final order passed by CESTAT in the case of the appellant IOCL. In view of the above observations and the case law of CCE Vs. Oil & Natural Gas Limited (2012 (11) TMI 864 - CESTAT, MUMBAI) we hold in the peculiar facts and circumstances of these appeals that IOCL has correctly issued certificate dt. 18.09.2006 and IPCL has correctly taken credit. So far as imposition of penalties upon the appellants are concerned it is held that once on merit credit has been held to be admissible there is no point of imposition of penalties upon the appellants - Decided in favour of assessee.
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2014 (6) TMI 791
Duty demand - CENVAT Credit - Clandestine removal of SS Flats - Fraudulent invoices - Held that:- Once duly admitted facts have come on record indicating that no movement of goods have taken place and only invoice having moved, no question of goods showing existence and subsequent movement arises - The material facts, outcome of investigation, gravity of allegation and strength of evidence on record clearly show that Revenue s interests have been prejudiced by the appellants causing loss to it. It is also evident that fraudulent activities have been undertaken. Otherwise also tax evasion is looked at very seriously by courts since that hinders growth of the country. As per best established legal principles, fraud and justice do not dwell together. Further fraud nullifies everything. Passing of fraudulent cenvat credit through fake invoices has been clearly admitted and credit was also deposited back. Confessional statements coupled with fake invoices do not require any other evidence to prove. - Decided against assessee.
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2014 (6) TMI 790
Waiver of pre deposit - Duty demand - Penalty - Held that:- Merely because the person liable to pay duty has discharged the duty liability, the proceedings against others will also get concluded especially when the proceedings are not under section 11A. Such an interpretation would amount to re-writing of the provisions of sub-section (2) of Section 11A. proceedings have been initiated against the appellant for imposition of penalty under the Central Excise Rules, 2002 for his involvement in aiding/abetting the main-appellant which resulted in evasion of duty. This position is also admitted by the appellant. Therefore, we are of the view that the appellant has not made out any case for complete waiver of the penalty imposed. - Conditional stay granted.
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2014 (6) TMI 789
Reversal of CENVAT credit - Availment of credit on inputs which were common inputs and consumed for the manufacturing of exempted final products - Rejection of valuation adopted by assessee - Held that:- Commissioner disposed of appeal which was not good way of dealing - if the Commissioner is not accepting the figures provided by the appellant then he should intimate the appellant the correct figure according to him is required to be considered. - Following decision of Orkay Glass Industries [2012 (2) TMI 438 - CESTAT NEW DELHI] and Rochem Separation Systems (I) Pvt. Limited [2012 (4) TMI 513 - CESTAT MUMBAI] - Matter remanded back - Decided in favour of assessee.
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2014 (6) TMI 788
Waiver of pre-deposit of duty - manufacture - applicants are putting Motorcycles and scooters to electrolyte and charge the battery of the two-wheelers - Demand is confirmed on the ground that this activity amounts to manufacture - Held that:- applicant being dealers only charging the battery by putting electrolyte. Prima facie this activity cannot be considered as manufacture of motorcycles. The pre-deposit of the remaining amount of dues are waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.
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2014 (6) TMI 787
Denial of CENVAT Credit - Issue of debit notes - Non receipt of inputs - Held that:- Lower authorities have mainly relied on statement of Shri Vijay Sehgal made at the time of personal hearing before the adjudicating authority wherein he has stated that he is not aware of the goods having been received back after repairs. Though the appellants grievance is that no statement under Section 108 of the Customs Act was made by the appellants and it was only his submission made before the authorities at the time of personal hearing. In any case, the said statement is only to the effect that he is not aware of the receipt back of the inputs after repair. The said Shri Vijay Sehgal has nowhere stated that the goods were not received back by the appellants. Otherwise also Shri Vijay Sehgal was not in the appellants service during the relevant period and as such was not in a position to make any submission. Apart from the above statement of Shri Vijay Sehgal which cannot be relied upon for the purpose enumerated above, there is no other evidence to show that the goods were not received back by the assessee. Admittedly, the appellants raised debit notes at the time of clearance of the inputs while sending them to the input manufacturer for rectification. The said debit notes were subsequently cancelled. In fact I find that demand stand raised against the appellant on the basis of debit note itself which stand raised by the appellant. If the said debit notes raised at the time of clearance of the inputs are accepted to be true reflection of the correct facts, cancellation of the same after the goods were received back by the appellant is also required to be accepted as the correct reflection of the correct position. There are no inquiries by the Revenue from the inputs manufacturer reflecting upon the fact that inputs sent to them for rectification were never sent back to the appellant. Further, I note that the appellants having entered the inputs in their RG 23A Part I was duty bound to show the consumption of the same. If the appellants have returned the goods to the inputs manufacturer after making entry of the same in RG 23A Part I, it is not possible for them to show utilization of the same in the manufacture of their final product, which stand cleared on payment of duty. No justification for denial of credit to the appellant. However, learned advocate has fairly agreed that inputs involving credit of Rs. 3731/- were not received by them after rectification and the said debit notes raised by them was not cancelled. In view of the above, I confirm the demand of Rs. 3731. Appellant is entitled to the said Cenvat credit, the proper course was to reverse the Cenvat credit at the time of clearance of inputs and to avail the same again at the time of receipt of rectified inputs. As such, the appellants are liable to pay the interest on the said Cenvat credit retained by them during the period of sending the inputs out and receiving the same back. The lower authorities would calculate the interest accordingly - Decided partly in favour of assessee.
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2014 (6) TMI 786
Condonation of delay - Appeal not filed in proper format - Held that:- appellant had filed the appeal before Commissioner (Appeals) on 29-7-2009, a copy of which is annexed to the present appeal at page No. 44 of the appeal paper book. Ongoing through the same, I find that it was received by the office of Commr. (Appeals) on 29-7-2009. The appellant had filed the appeal along with stay application, but not in the proper format, as prescribed for filing the appeal. However, it is not in dispute that the Department has received the said appeal memorandum and acknowledged the same on 29th July, 2009. No defect memo was issued to the appellant till May, 2010. Pursuant to the defect memo dated 31-5-2010, the applicant had filed the appeal in proper format on 17-6-2010. In these circumstances the date of filing of the initial appeal i.e. 29th July, 2009 be considered as the appeal for the purpose of Section 35A of CEA, 1944 and defects removed thereafter cannot be considered as the date of filing of the appeal before the office of Commissioner, Central Excise (Appeals). Thus, there is no delay in filing appeal before the ld. Commissioner (Appeals). Also, I find that the ld. Commr. (Appeals) has not decided the appeal on merit. In these circumstances, the case is remitted to the ld. Commr. (Appeals) for deciding the issue afresh - Decided in favour of assessee.
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2014 (6) TMI 785
Duty demand - Reversal of CENVAT Credit - Credit on destroyed goods - Goods destroyed in flood - Held that:- Goods lost in flood were semi-finished goods and duty on excisable goods is payable at the time of clearance only. Semi-finished goods cannot be cleared, therefore duty is not payable by the appellants. Following the decision of this Tribunal in Lakshmi Precision Tools Ltd. - [2005 (11) TMI 347 - CESTAT, CHENNAI], this Tribunal has categorically held that stock in progress damaged in fire accident, appellant not intending to claim remission of duty on any goods destroyed in fire accident, hence not filed any remission application nor reported the accident to the Central Excise department. In that circumstance, payment of duty is not sustainable. Further it was held that issue in the case of Elam Pharma Pvt. Ltd. (2010 (6) TMI 473 - CESTAT, AHMEDABAD) this Tribunal held that issue of reversal of credit arises only when the final product destroyed in fire. Admittedly, in this case the goods are in semi-finished condition lost in flood. Therefore, appellants are not required to reverse input credit also. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (6) TMI 794
Exemption from trade tax - Whether 'Cotton Coated Fabric' i.e. 'Textile Fabrics', impregnated, coated, covered or laminated' by PVC is the same thing as PVC fabric for the purpose of taxability under the Act, 1948 - Held that:- A perusal of the said notification indicates that cotton fabrics of all varieties manufactured on power loom have been granted exemption from tax. However, certain items have been excluded. One of the excluded item is PVC/HDPE fabrics - it is relevant to refer to the provisions of Act, 1957 which was enacted by the Parliament to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds thereof among the States - different varieties of "cotton fabrics" are exempted from the tax under the Act, 1948. Textile fabrics impregnated, coated covered or laminated with PVC (polyvinyl chloride) are treated as textile fabric. Even if article is covered by an item which has been excluded, but its species is again covered in an item included in the exemption, the exemption shall not be denied to the species of the item included - although the PVC/H.D.P.E fabrics are excluded, but cotton coated fabrics of all varieties having been included, if the item manufactured by the petitioner is termed as cotton coated fabric, it is exempted from payment of Tax under Act, 1948. Whether the Additional Commissioner has rightly granted permission under Section 21 (2) of the Act, 1948 and as to when the re-assessment proceedings can be initiated under Section 21(2) of the Act, 1948 has been the subject matter of consideration before the Apex Court and this Court in large number of cases - Held that:- There cannot be any dispute to the proposition as laid down in the above two cases. In the proposal submitted by the Assessing Officer, no other fact except the judgment of the learned Single Judge in M/s Laxmi Leather Cloth Industries (2007 (10) TMI 577 - ALLAHABAD HIGH COURT) was relied on. The Additional Commissioner, himself has observed in its order dated 25/11/2011 that the question as to whether the tax has escaped assessment is to be examined by the Assessing Officer for determining as to whether the "Cotton Coated Fabric" manufactured by the petitioner is a PVC fabric or not. Thus, no belief has been formed by the Additional Commissioner that the tax has escaped assessment and the proceedings of re-assessment has been initiated merely on doubt which is not permissible. - "Cotton Coated Fabrics" are different from PVC fabrics and the judgment of the learned Single Judge in M/s Laxmi Leather Cloth Industries (supra) being not attracted in the present case, we are of the view that the re-assessment proceedings against the petitioner cannot be allowed to continue - Decided in favour of assessee.
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2014 (6) TMI 793
Liability of tax - Whether the supply of foodstuff to the students is a business or not - Held that:- Act would be applicable if a sale is made by a dealer or a person who carries on the business of taxable goods. The word "business" or "business activity" has been explained by various courts - from a combined reading of sections 3, 2(6), 2(11), 2(27), 2(40) of the Act, that a tax is leviable on the sale made by a dealer or a person who is carrying on the business of taxable goods. There is no dispute that in the case of the petitioner, the primary and dominant activity is to impart education. This main activity of the petitioner does not amount to a commercial activity nor is a trade or business as held by the Andhra Pradesh High Court in Gowtham Residential Junior College [2007 (4) TMI 642 - ANDHRA PRADESH HIGH COURT]. In the opinion of the court, such education being imparted by the petitioner is neither a commercial activity nor a trade nor does it amount to "business". It cannot be contended that the establishment of an educational institution is a business nor can it be called a trade since no trading activities are being carried out. Main activity of the petitioner is imparting education and is not business. Any transaction, namely, supply of foodstuff to its residential students which is incidental would not amount to "business" since the main activity of the petitioner could not be treated as a commerce or a business. The incidental activity of supplying foodstuff would not come within the meaning of the word "business" as defined under section 2(6) of the Act. Consequently, since no business is being carried out and there is no sale, the petitioner would not come within the meaning of the word "dealer" as defined under the Act. - issuance of notice proposing to make an assessment under the Act on the supply of foodstuff to the residential students is patently without jurisdiction. The said notices are consequently quashed - Decided in favour of assessee.
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