TMI Tax Updates - e-Newsletter
June 3, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Levy of SAD on stock transfer by SEZ unit - goods is not covered within the definition of “sale” - eligible for exemption from the payment of SAD - AAR

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• Condonation of delay -CESTAT is wrong to observe that Doctor in question is a skin specialist, medical cert. issued by him for Hepatitis, is mis-conceived -HC

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News

1. RBI to post on its website clarifications on New Banks Licensing Guidelines

2. Check before Depositing Money with Financial Entities: RBI Advisory

Notifications

Customs

1. 57/2013 - dated 31-5-2013 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

DGFT

2. 14 (RE-2013)/2009-2014 - dated 31-5-2013 - FTP

Amendmen in Paragraph 2.1.2 of the Foreign Trade Policy

Circulars / Instructions / Orders

Income Tax

1. DBOD.NO.LEG.BC.100/09.07.005/2012-13 - dated 31-5-2013

Banks are advised to give an acknowledgment at the time of receipt of Form 15-G/15-H

Highlights / Catch Notes

Income Tax

• Taxpayer's Net Profit Margin and Arm's Length Price Difference Under 5%, No Income Adjustment Required.

  Case-Laws - AT : Arm's length price for royalty - since the difference between the NPM declared by him and the ALP determined by the TPO is less than 5%, no addition is called for. - AT
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• Assessing Officer Can Deem Unexplained Credits as Income Without Proving Source Origin.

  Case-Laws - HC : Where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to show that the income is from any particular source - HC
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• Assessing Officer Must Rely on Concrete Evidence, Not Best Judgment, in Block Assessment Cases.

  Case-Laws - HC : Block assessment - It is not open for the A.O. to compute the income on the basis of best judgment. - HC
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• Court Rules Income Tax Assessments Must Consider All Available Information Collectively, Not in Isolation.

  Case-Laws - HC : Block assessment - the sentence “such other materials or information as are available with the Assessing Officer", cannot be bisected or taken in isolation for the purpose of computation. - HC
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• Penalty u/s 271(1)(c) Not Automatic for Disallowed Expenses; Requires Additional Consideration Beyond Expense Addition.

  Case-Laws - HC : Penalty u/s 271(1)(c) - Levy of penalty is not an automatic consequence when an addition is made by disallowing an expense and by not accepting the interpretation given by the assessee. - HC
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• Assessment Orders Issued on Validity of Search and Income Addition, Dispatched Within Limitation Period on Dec 31, 2010.

  Case-Laws - AT : Validity of search - addition of income - assessment orders were passed on 31.12.2010. - dispatched as on 31.12.2010 - not barred by period of limitation - AT
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• Discussion on Section 271(1)(c) Penalty: Due Date for Filing Returns Considered as Extended Date u/s 139(4.

  Case-Laws - AT : Penalty u/s 271(1)(c) - declaration of additional income u/s.132(4) - due date of filing of return - Once the legislature has not specified the “due date“ as provided in section 139(1) in Explanation 5A, then by implication, it has to be taken as the date extended under section 139(4). - AT
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• Writ Petition Denied as High Court Finds Alternative Appeal Route Available, Declares Petition Non-Maintainable.

  Case-Laws - HC : Maintainability of appeal - writ petition against revision order - availability of the alternative remedy by way of appeal before the Tribunal, the present writ petition declined. - HC
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Customs

• SEZ Stock Transfers Exempt from Special Additional Duty as They Aren't Classified as Sales Under Notification No. 45/2005.

  Case-Laws - AAR : Levy of SAD on stock transfer by SEZ unit - goods is not covered within the definition of “sale” - eligible for exemption from the payment of SAD under Notification No. 45/2005. - AAR
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• Bank Guarantee of Rs.16 Crores Ruled Excessive Compared to Calculated Duty Amount, Deemed Harsh and Burdensome.

  Case-Laws - HC : Condition of furnishing a bank guarantee in the sum of Rs.16 crores is clearly harsh and burdensome being far in excess of even the differential duty amount as computed by the respondents. - HC
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Corporate Law

• High Court Rules Objector Lacks Legal Standing to Challenge Amalgamation Scheme; Only One Unsecured Creditor Opposed It.

  Case-Laws - HC : Scheme of Amalgamation - only one unsecured creditor voted against it - as objector he has no locus standi to raise objections on the basis that he is shareholder or as a creditor - HC
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Service Tax

• CESTAT Condones Delay Due to Inappropriate Medical Certificate from Skin Specialist for Hepatitis Case.

  Case-Laws - HC : Condonation of delay - CESTAT observed that the Doctor in question is a skin specialist, the medical certificate issued by him for Hepatitis, is mis-conceived - CESTAT not being an expert in examining that Certificate - delay condoned - HC
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• Service Tax Rate Determined by Rate in Effect on Date Service is Provided.

  Case-Laws - AT : Rate of service tax - the rate of tax applicable is rate applicable on the date of providing taxable service. - AT
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• High Court Dismisses Appeal Due to Non-Compliance with Section 35F Pre-Deposit Requirement in Service Tax Case.

  Case-Laws - AT : Extension of time for pre-deposit - matter pending before high court - appellant wants to evade the mandate of Section 35F CEA as applicable to ST appeals - appeal dismissed for non compliance - AT
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Central Excise

• Cenvat Credit Covers All Original Equipment Goods, Excluding Fuel for Vehicle Operation Under Specific Rule.

  Case-Laws - HC : Cenvat Credit - Tool Kits - What is excluded is the fuel which is to be consumed for running of the vehicle. All goods which are part of the original equipment are entitled to Cenvat credit - HC
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• Sequential Approach Essential for Correct Goods Valuation Under Valuation Rules 2000 in Central Excise Regulations.

  Case-Laws - AT : Under valuation of the goods - application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. - AT
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• Court Dismisses Claim of Assessee's Intentional Neglect of Financial Records; Lack of Evidence for SSI Exemption Violation.

  Case-Laws - HC : SSI Exemption - the conclusion that the assessee had deliberately not maintained the accounts under the excise law could not stand and such a finding could be said to be baseless. - HC
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• High Court Upholds Excise Duty on Previously Exempt Goods Under Finance Act, 2011; Traders' Petition Dismissed.

  Case-Laws - HC : Levy of excise duty @1% or 5% on exempted goods vide Finance Act, 2011 - petition by the traders - levy on purchase of coal - decided against the purchasers / traders - HC
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• High Court Emphasizes Right to Be Heard and Waiver of Pre-Deposit in Central Excise Cases.

  Case-Laws - HC : Opportunity of being heard - waiver of pre-deposit - one is not wise who claims that he is wise. One is wise who makes efforts to become more wise. - HC
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VAT

• Local Dealers Buying from Manufacturers Don't Pay Entry Tax; No Sale Refusal Required by Manufacturers.

  Case-Laws - HC : Levy of entry tax - If a dealer registered within the same local area, purchases goods from the local manufacturer with intent to sell goods within the same local area, then the purchaser is neither obliged to deposit entry tax with the manufacturer nor the manufacturer is under obligation of law to refuse to sell the goods to him. - HC
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Case Laws:

• Income Tax

• 2013 (6) TMI 22
  Addition on account of payment related to OTS (one Time Settlement) for intention paid to District Coop Banks under Interest subvention scheme - Held that:- It is settled principle of law that an item of expenditure or income has to be dealt in accordance with principle of law and not with the accounting treatment given by the assessee in the books of account. See Kedarnath Jute Manufacturing Co. Ltd. V CIT [1971 (8) TMI 10 - SUPREME Court] & Sutlej Cotton Mills Limited Versus CIT [1978 (9) TMI 1 - SUPREME Court]. As at the same time it is also a fact that scheme as well as calculation of interest etc. was not available before the Assessing Officer - set aside the order of the ld. CIT(A) and restore the matter to the file of AO to decide then issue after going through the documents filed by way of additional evidence. In favour of assessee for statistical purposes. Disallowance of general charges - Held that:- This expenditure cannot be treated as revenue expenditure. Money was paid towards extension charges to HUDA for non construction of the building. At best it can be called "improvement of asset" i.e. the appreciation in the value of land because Bank seems to retain the land without committing the funds towards building to realize appreciation in the land. Nothing wrong with the order of the CIT(A) in confirming additions - against assessee.

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• 2013 (6) TMI 21
  Other income with regard to computation of arm's length price for royalty - Whether TPO was justified in making addition - Held that:- The assessee has an option to adopt a price which may vary from arithmetical mean of ALP up to five per cent. The difference between the net profit of the assessee and NPM of the arm's length price is certainly less than 5% and, therefore, the assessee has a right to claim that the NPM of the assessee i.e. 5.02% should be adopted as arm's length price. The TPO had determined the arm's length price of royalty by TNMM. Thereafter, he worked out the addition which may be required to be made under the head 'royalty' and then he compared the royalty paid by the assessee and the ALP of royalty determined by him. However, as find that the proviso refers to the arm's length price determined by various methods and adopting of the mean of such method and then the assessee had been given an option to adopt a value which should not vary more than 5% from the mean of the ALP determined by the TPO. Therefore, what is to be varied is the percentage of the ALP determined by the TPO as per most appropriate method. In this case, the TPO considered TNMM to be the most appropriate method and accordingly determined the arm's length price at 6.23%. Therefore, the assessee has a right to adopt the ALP within the variation of 5% from 6.23%. The NPM declared by the assessee is 5.02% and, therefore, as per proviso to Section 92C(2), the assessee is fully justified to claim that since the difference between the NPM declared by him and the ALP determined by the TPO is less than 5%, no addition is called for. Therefore, agree with the assessee's contention and uphold the order of CIT(A) deleting the addition made by the TPO. In favour of assessee.

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• 2013 (6) TMI 20
  Reopening of assessment - addition made of credits appearing in three bank accounts of the assessee u/s 68 - Held that:- Assessee was not able to file proper information regarding persons from whom purchases were made even then the entire deposits in the bank account cannot be taxed as income of the assessee as in that case theory of peak credit should have been applied. In view of the facts and circumstances the case of the assessee be re- adjudicated by the AO and addition if any on account of deposit in banks be made after considering withdrawals made by the assessee and peak amount after considering withdrawals. In favour of assessee for statistical purposes. As regards interest from M/s Nishan Bearing Co. Pvt. Ltd. vide letter dated 21st December, 2009 assessee had himself admitted that it was omitted to be shown in the computation of income and TDS was also not claimed. Therefore, addition on account of interest was rightly made by the AO. Against assessee.

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• 2013 (6) TMI 19
  Fees paid to ROC for increase in authorized share capital - CIT(A) allowed part relief - Held that:- There is no dispute that there was no fresh inflow of funds to the extent of Rs. 35 crores in regard to increase in equity shares capital of the company and, therefore, ROC fees and other related expenses on this account of increase in authorized share capital was revenue in nature, in view of the decision of General Insurance Corporation Ltd. [2006 (9) TMI 116 - SUPREME Court]. As regards the fresh cash infusion during the year towards preference share, CIT(A) has treated the expenditure incurred towards ROC fees etc. as capital in nature as relying on Punjab State Industrial Development Corporation Ltd. vs. CIT (1996 (12) TMI 6 - SUPREME Court) and Brooke Bond India Ltd vs. CIT (1997 (2) TMI 11 - SUPREME Court) - No interference in CIT(A) conclusion required. Against revenue. Contribution to the employees provident fund - was required to be deposited on 20.02.2005 but was deposited on 21.02.2005 as 20.02.2005 was Sunday - CIT(A) allowed the claim - Held that:- No reason to interfere with his order of CIT(A) because, as rightly observed by him, even otherwise the deduction was allowable to assessee by the decision of CIT vs. Aimil Ltd [2009 (12) TMI 38 - DELHI HIGH COURT]. The grievance of the department that since assessee had not claimed in the return of income this deduction, the same was not allowable in view of the decision of the Goetze India Ltd (2006 (3) TMI 75 - SUPREME Court) is misplaced because this decision does not put any embargo on the powers of appellate authority to allow a legally. In favour of assessee. Related party transaction - Addition computed at the rte of 6% towards interest - CIT (A) deleted the addition following the order of assessment year 2007-08 - Held that:- As department has not brought on record for distinguishing features from the earlier year to persuade a different view therefore, respectfully following the decision for assessment year 2007-08 wherein held that there is no nexus between the borrowings made by the assessee company and advance given to M/s. Hero Global Design Ltd. Similarly, the outstanding sums extracted represents the sales consideration of assets, technical know-how, rent etc. which are not the advance given by the assessee out of the borrowed funds. In such circumstances, no disallowance can be made. In favour of assessee.

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• 2013 (6) TMI 18
  Validity of proceedings initiated u/s 16 of the Gift Tax Act, 1958 - reopening of assessment - addition on account of deemed gift deleted by Tribunal by holding that the transfer of property was made for adequate consideration - Held that:- The fact that the property that is transferred has to be other than cash is borne out by computation provision in the latter part of the said clause. The computation provision contemplates that the property that is transferred must be capable of being valued in the manner laid down in Schedule II of the Act. A perusal of Rule 1 of Schedule II further makes it clear that the said Schedule prescribed the methodology for determining the value of properties other than cash. A fortiori, property referred to in the opening words of Section 4 (1) (a), is capable of being evaluated in terms of Schedule II and hence, as the subject matter of the alleged transfer in the present case is cash, section 4 (1) (a) can have no application whatsoever. In view of the legal proposition laid down in Reva Investment Pvt. Ltd. versus CGT [2001 (5) TMI 49 - SUPREME Court], CGT versus Indo Traders & Agencies (Madras) Pvt. Ltd. [1979 (6) TMI 8 - MADRAS High Court] and CGT v. A. Hafsa Banu [1998 (9) TMI 31 - MADRAS High Court], it is imminently clear beyond doubt that the burden lies on the revenue to establish that the conditions of Section 4 (1) (a) are complied with. In favour of assessee.

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• 2013 (6) TMI 17
  Disallowance of unsubstantiated sundry creditors - ITAT deleted the addition - ex-parte assessments been made u/s 144 due to non-cooperation of the assessee - Held that:- There was no cooperation by the assessee before the AO. On 01.12.2005, the balance sheet and profit & loss account were filed. The balance sheet filed with the return shows sundry creditors to the turn of Rs. 23,14,417/-. These creditors are not verifiable in absence of their full names and complete addresses. As per balance sheet the details of creditors appears available "as per Schedule C", but no such schedule attached therewith. The perusal of record shows that right from start of firm business the assessee though mentioning (in balance sheet) about availability of details of creditors as per preschedule but no such schedule has ever been enclosed with the audit report/return. Bogus liability has been created in the garb of sundry creditors whose name & balances are not known to assessee. This also indicates that no regular books of account have been maintained by the assessee, as not a single detail from the books of account has been furnished in the past fifteen months. The creditors are, therefore, not verifiable. The assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid. Case of CIT vs. Devi Prasad Vishwanath Prasad [1968 (8) TMI 5 - SUPREME Court] observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to show that the income is from any particular source - order passed by the Tribunal set aside and remit the matter back with a direction to examine the identity, creditworthiness and genuineness of the transactions of the sundry creditors - in favour of revenue for statistical purpose.

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• 2013 (6) TMI 16
  Block assessment - Suppression of receipts and inflation of expenses - search conducted - Tribunal deleted the two additions - assessee is a practicing medical doctor having different sources of income such as income from agricultural activities, medical profession and pathology etc. - Held that:- A search was conducted at the residential premises of the assessee and survey was conducted at the business premisses. During the search, no cash, bullion, Jewellery or any material including the investment were found, which can be considered as undisclosed income. The additions were made on estimate basis after seizing the register from the business premises of the assessee. Regarding the addition pertaining to the Blood Bank, it appears that the same was made on estimate basis. No document, register or material was found except the registers mentioned herein above. The A.O. has estimated the profit and made the addition without rejecting the books of accounts. Hence, in this regard, there is no reason to interfere in the impugned order passed by the Tribunal. The same is confirmed. Regarding the Charak X-Ray, it appears that the same was lease out and the assessee was showing the income in its return since 16.04.1993 which was accepted by the Department. So, no double addition can be made out. Therefore, in this regard also, there is no reason to interfere with the impugned order. The impugned order is hereby sustained. Considering the case of CIT vs. S. Ajit Kumar (2006 (11) TMI 130 - MADRAS HIGH COURT) clearly indicates that the sentence "such other materials or information as are available with the Assessing Officer & quot, cannot be bisected or taken in isolation for the purpose of computation. Any other material cannot form basis for computation of undisclosed income of the block period. Hence, Commissioner as well as the Tribunal have the issue in accordance with the statutory provisions, and requires no interference. The appeal is accordingly dismissed. Also see CIT vs. R. M. L. Mehrotra (2009 (9) TMI 3 - ALLAHABAD HIGH COURT). In favour of assessee.

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• 2013 (6) TMI 15
  Penalty u/s 271(1)(c) - expenditure incurred on renovation or improvement or repairs on the leasehold premises disallowed - Held that:- The issue raised by the assessee was debatable and capable of two views. The assessee had an arguable case or had taken a bonafide plea. The assessee had given his explanation and categorically and clearly stated the true and full facts in the return itself. He did not try to camouflage or cover up the expenses claimed. It is not uncommon and unusual for an assessee to bonafidely claim a particular expenditure as a revenue deduction and expense but not succeed. Every addition or disallowance made does not justify and mandate levy of penalty for concealment under Section 271(1)(c). Levy of penalty is not an automatic consequence when an addition is made by disallowing an expense and by not accepting the interpretation given by the assessee. Explanation 1 clearly stipulates that the penalty can be imposed when the details furnished by the assessee are found to be incorrect, erroneous and false. Merely making a claim which is held as not sustainable under law should not lead to penalization, when the assessee had furnished full details in the return itself and the claim is a debatable, reasonably plausible or may well have been accepted. See CIT vs. Reliance Petro Product Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT], CIT vs. Dharampal Premchand Ltd. [2010 (9) TMI 155 - DELHI HIGH COURT], CIT Versus SOCIETEX [2012 (7) TMI 664 - DELHI HIGH COURT], Price Water House Coopers Pvt. Ltd v. CIT [2012 (9) TMI 775 - SUPREME COURT] - decided in favour of assessee and held that penalty u/s 271(1)(c) is not justified.

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• 2013 (6) TMI 14
  Maintainability of appeal - Held that:- The instruction dated 15.5.2008 fixing monetary limit for filing appeal has statutory flavour thus as tax/revenue effect in the instant appeal is less than Rs. 4,00,000/- appeal need to be rejected.

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• 2013 (6) TMI 13
  Validity of search - addition of income - as per assessee assessment order is barred by limitation - Held that:- As the assessee has urged this issue for the first time before the CIT(A) after a gap of almost three years from the date of search it is well settled proposition that the retraction should be made at the earliest possible opportunity. On perusal of the case of Cochin Plantations Ltd Vs. State of Kerala [1997 (2) TMI 76 - KERALA High Court] would show that the assessment order would become complete and effective, if it is issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein, meaning thereby, the assessment order should leave the hands of the AO. The date of service of the same is the date on which it becomes operational or takes effect for the consequences arising there from. In the instant case, the impugned assessment orders were passed on 31.12.2010. It is not shown that the said orders remained in the hands of the assessing officere even after 31.12.2010. On the contrary, the D.R has submitted that they have been dispatched on that date itself leaving them beyond the control of the assessing officer to make any change or modification. Under these set of facts, the impugned assessment orders have become complete and effective on 31.12.2010 itself, in which case, they cannot be considered as barred by limitation. Accordingly, reject the grounds raised by the assessee on this issue. Rejection of book results - Held that:- The gold and silver ornaments are high valued items and hence all traders are vigilant over the stock kept by them. Hence, at any point of time, a gold merchant would be in a position to tell the aggregate quantity of stock held by him. If a prudent business man follows a systematic method of accounting only a portion of purchase and sales, then it would be difficult for anybody to find any defect in the books of accounts. In the instant case also, even if the AO did not point out any defect in the books of accounts, other factors as the assessee claims that the excess stock actually belong to the partner of the assessee firm, veracity of which requires examination, yet the fact remains that the assessee did not account for the same in its books of account, even as per its claim thus the books of accounts maintained by the assessee are not reliable. Hence, CIT(A) was justified in confirming the action of the AO in rejecting the books of accounts of the assessee for all the years. Estimation of income of the assessee - Held that:- It is a fact that the AO did not bring on record any other material was brought on record except the estimation slips yet there is some basis in the estimate made by the AO, though they cannot be considered as conclusive proof. The CIT(A), however, has not brought on record any material to support his view to reduce the estimated turnover to five times of the declared turnover. Under these circumstances, it is forced to estimate the total turnover on a via media manner. Accordingly, on a conspectus of the matter the total turnover may be estimated at six times of the declared turnover and it would meet the ends of justice. Since the AO has himself has determined the rate of Gross profit @ 20% as against the G.P. declared by the assessee at higher rates on the reasoning that a normal business man could realize Gross Profit to that extent only, no interfere with the decision of CIT(A) in upholding the rate of gross profit @ 20%.

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• 2013 (6) TMI 12
  Penalty proceedings u/s 271(1)(c) - declaration of additional income during statement u/s.132(4) - assessee's own working of the WIP - due date of filing of return - whether CIT(A) erred in deleting the penalty on the ground that the assessee did not file the return of income till the date of search which took place on 16- 10-2008, as the time for filing of return u/s.139(l) was 30-09-2008 due to which the additional income was detected otherwise the assessee would have concealed the additional income declared? - Held that:- Once the legislature has not specified the "due date" as provided in section 139(1) in Explanation 5A, then by implication, it has to be taken as the date extended under section 139(4). In view of the above, it is held that the assessee gets the benefit / immunity under clause (b) of Explanation to section 271(1)(c) because the assessee has filed its return of income within the "due date" and, therefore, the penalty levied by the AO cannot be sustained on this ground. Even though the findings and the conclusions of the Commissioner (Appeals) cannot be affirmed however penalty is deleted in view of the interpretation of Explanation 5A to section 271(1)(c). Consequently, the ground raised by the Revenue is treated as dismissed.

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• 2013 (6) TMI 11
  Maintainability of appeal - assessment order has been revised by the CIT/(A) in exercise of power conferred u/s 263 - present writ petition filed claiming a writ of certiorari quashing the order of CIT(A) - Held that:- There is no justifiable reason for the petitioner not to approach the Income Tax Appellate Tribunal by way of statutory remedy of appeal or to invoke the extra-ordinary jurisdiction of this Court under Article 226 of the Constitution of India. At the present moment, there is no tax liability for the Assessment Year in question. According to the petitioner, it has already submitted the reply to the queries raised by the AO which are sufficient. Only, an assessment order has to be framed after giving an opportunity of hearing. Still there is ample time provided the petitioner cooperates with the Assessing Authority and if need be, the proceedings may take place out of turn, on day to day basis. It is for the Assessing Authority to respect the time limit for completing the assessment proceedings. The case on hand does not fall in either of exceptions as provided for in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others, (1998 (10) TMI 510 - SUPREME COURT) for exercise of writ jurisdiction. The explanation given to the queries is sufficient or not lies in the realm of the Assessing Authority or the Appellate Authority but certainly it does not lie within the realm of the writ jurisdiction. The Income Tax Authorities are well trained to appreciate the intricacies of accounting and no reason not to relegate the petitioner to statutory forum. Thus availability of the alternative remedy by way of appeal before the Tribunal, the present writ petition declined.

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• Customs

• 2013 (6) TMI 10
  Levy of SAD on stock transfer by SEZ unit - Clearance of goods by way of stock transfer from the SEZ unit to own DTA manufacturing unit - whether would be eligible for exemption from the payment of SAD under Notification No. 45/2005 Cus dated May 16, 2005? - Held that:- It is conceded position that goods imported by the applicant are not exempted by the State Government from the payment of VAT. It is to be noted that in case of stock transfer two persons are not involved, as the stock transfer is between the units of same legal entity. It is not a “sale” as defined under Section 2(24) of the MVAT Act. The inevitable conclusion is that VAT which is a tax on sale of goods within the state cannot be levied on stock transfer. Thus being a stock transferred no VAT is chargeable. Section 6A mandates that stock transfer of goods is not covered within the definition of “sale” and as such Central Sales-tax is not levied on stock transfer of goods. Thus eligible for exemption from the payment of SAD under Notification No. 45/2005.

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• 2013 (6) TMI 9
  Furnishing of bank guarantee - provisional release of goods - held that:- condition of furnishing a bank guarantee in the sum of Rs.16 crores is clearly harsh and burdensome being far in excess of even the differential duty amount ascomputed by the respondents. Therefore, that condition has to go. However, a reasonable condition may be imposed. In the case of Navshakti Industries (2011 (5) TMI 149 - SUPREME COURT) the Supreme Court imposed the condition of furnishing a bank guarantee to the extent of 30% of the differential duty. We feel that such a condition would be appropriate in the present case also. - Decided in favor of assessee.

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• Corporate Laws

• 2013 (6) TMI 8
  Scheme of Amalgamation - the proposed scheme of amalgamation as prayed for it came to be approved by 94.74% majority - only one unsecured creditor voted against it - objector has filed an affidavit of objections in his capacity as shareholder, creditor and also in public interest against the proposed scheme of arrangement - Held that:- As it appears from the record that the objector was part of IBPL and he has resigned and has signed the share transfer forms, and has received money on such transfer of shares in favour of the purchaser and having expected everything and even having withdrawn the legal notice on 10.09.2011 have filed these objections in the month of June 2012. Even the allegation to the effect that the petitioner companies are run by one family and, therefore, different parameters should be adopted, requires to be rejected outright as Sections 391-394 of the Act provides for complete procedure and there are no different parameters when the scheme involves family run companies. Reliance placed on the ESOP Scheme to object the scheme is also baseless as considering the scope and ambit of Sections 391-394 as it is a contract between the employer and employees and the employees may have right to challenge termination in different proceedings before different forum and that cannot be a ground to disapprove the scheme of amalgamation and, therefore, the objections raised by the objector deserve to be negatived. Also as borne from the record that the ESOP Scheme has been terminated by IBPL on 02.08.2011 ans thus as such a scheme does not exist and the shares of IBPL are admittedly not listed and, therefore, by no stretch of imagination, it cannot be presumed that the ESOP Scheme is in existence and that the objector is a shareholder. As objector asserts that in lieu of the consultancy dated 01.07.2010 even if the said agreement is terminated before the time the objector is entitled to Rs. 3,00,000/- for the months of August-September, 2012, which has not been paid by IBPL. The said contention raised by the objector is disputed by IBPL. It is stated by IBPL that the consultancy agreement came to be terminated and, therefore, in the months of August-September, 2012 no consultancy was derived from the objector and, therefore, he is not entitled to Rs. 3,00,000/- for the said months. Considering this aspect the case of the objector that he is a creditor is disputed. Even if it is presumed that the objector is a creditor of IBPL it has rightly been contended by IBPL that the same would be even less than 0.01% and even if the objector would have objected to the scheme the same would not have affected the majority view and voice of the creditors, who have approved the scheme. As the scheme also further provides that liability of the transferor companies shall stand transferred to the transferee company. It may also be noticed that the claim raised by the objector is a disputed claim and unless such a dispute or liability are crystallized and settled in appropriate court or forum in appropriate proceedings, the scheme cannot be held or stopped or delayed as decided by the Bombay High Court in the case reported in Emco Ltd.'s case (2004 (5) TMI 312 - HIGH COURT OF BOMBAY). Further the objector has not brought on record any material to show that IBPL has admitted that Rs. 3,00,000/- is payable nor the objector has initiated any proceedings for recovery of such an amount. The objector contention that IBPL has disposed of shares at a higher value, whereas the objector has been paid less amount is not essential to be considered while considering the scheme for approval of the scheme under Section 391 of the Act. The record indicates that the shares of IBPL as well as the other companies were sold to a private person and not to IBPL. The record further reveals that in case of transfer of shares in Celestial Biologicals Limited, ATMRF and Indus Biotherapeutics Ltd. the shares were in the joint names and, therefore, name of the objector has been deleted. Apart from the fact that such transfer of shares is executed wherein the objector has signed transfer forms and the same has been recorded even before the Registrar of Companies the validity of transferors cannot be gone into in the present proceedings. Therefore the objections raised on this ground also deserve to be negatived. The objector has also raised an objection to the effect that IBPL and the transferee company operate in two different areas and, therefore, requires to be rejected. As held by this Court in the case of Core Health Care Ltd. (2007 (3) TMI 369 - HIGH COURT OF GUJARAT) there is no statutory bar or prohibition for amalgamation of companies with different objects. Objector contention that the proposed scheme is not in the public interest and against the interest of stock holders and is mala fide is unacceptable as considering the documents on record of Regional Director and the Official Liquidator, it transpires that the Official Liquidator on examination of the record and on the basis of the report submitted by C.A., has opined that the scheme is not prejudicial to the public at large and that the companies are not engaged in any activities which is prejudicial to the public interest. In view of the above, it cannot be said that the scheme under consideration is mala fide in any manner. Both the authorities have not only examined the record of the companies, which are part of the scheme, but the Official Liquidator has also got it examined by C.A. Thus as objector has no locus standi to raise objections on the basis that he is shareholder. Similarly, the status of the objector as a creditor is also not only doubtful but is a disputed and even if it is presumed, as observed earlier, it is less than even minimal for which the objector has other remedy under law and, therefore, on such ground the scheme cannot be halted. Thus the petitions are accordingly allowed and the sanction is granted to the scheme of arrangement

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• Service Tax

• 2013 (6) TMI 30
  Works contract - Condonation of delay - CESTAT observed that the Doctor in question is a skin specialist and therefore, the medical certificate issued by him for the person suffering from Hepatitis, is mis-conceived and therefore, there is no explanation for condonation of delay and accordingly, the application was dismissed by the CESTAT. Held that:- The Doctor attached to the petitioner-company gave medical advise to the General Manager and he gives treatment to the employees of the petitioner-company, and he has given a Medical Certificate for taking rest to the General Manager for the ailment of Hepatatis. The CESTAT not being an expert in examining that Certificate, took a view that the said certificate cannot be accepted and therefore, the reasoning given by the CESTAT in dismissing the condonation of delay application is not justifiable. Delay condoned - CESTAT is at liberty to take further course in the appeal filed by the petitioner-assessee. - Decided in favor of assessee.

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• 2013 (6) TMI 27
  Rate of service tax - rate applicable as on the date of service rendered or date on which payment is received - held that:- issue is already settled by the Tribunal where it was held that the rate of tax applicable is rate applicable on the date of providing taxable service.

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• 2013 (6) TMI 26
  Non compliance of or pre-deposit ordered by commissioner (appeals) - utilization of the cenvat credit for the discharge of service tax liability on the GTA services. - held that:- since the first appellate authority has not decided the order on merits, we are precluded from considering the merits and disposing the appeal. - matter remanded back to the first appellate authority to reconsider the issue afresh and pass an order on merits without insisting any amounts as pre-deposit.

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• 2013 (6) TMI 25
  Extension of time for pre-deposit - matter pending before high court - held that:- In answer to a query from the bench, the counsel is not sure whether their appeal against our Stay Order has been admitted by the Hon’ble High Court or not. No copy of any record of proceedings of the Hon’ble High Court has been produced either. The extended period of 2 weeks expired a week ago. In the meanwhile, the appellant could have taken steps for obtaining stay of operation of our direction for pre-deposit. The present prayer of the appellants counsel, in this scenario, does not appear to be acceptable. The appellant wants to evade the mandate of Section 35F of the Central Excise Act as applicable to their service tax appeal. - the appeal dismissed for non compliance - decided against the assessee.

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• 2013 (6) TMI 24
  GTA - exemption - general declaration of the transporter - held that:- regarding giving the general declaration for obtaining abatement of 75% as per Notification No.32/2004-ST dated 03/12/2004, the matter under dispute was settled by the Honble High Court in the case of Cadila Pharmaceuticals Ltd. [2013 (1) TMI 353 - GUJARAT HIGH COURT] where no general declaration was given, hence Service Tax liability along with interest is required to be paid by the appellant. - though demand of service tax confirmed, penalties waived.

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• Central Excise

• 2013 (6) TMI 7
  Clandestine removal of goods - non-inclusion of certain elements to the assessable value as well as discrepancies in recorded operating result - duty demand with equivalent amount of penalty - Held that:- Duty demand and penalties have under gone modification to the extent indicated against each allegation. That calls for re-computation of duty demand and penalty as well as interest on confirmed part of adjudication which shall be carried out by the Adjudicating Authority as soon as he receives this order. He shall only re-do the adjudication in respect of two limited aspects of remand as aforesaid. Penalty against Shri Neeraj Kumar Aggarwal is concerned we are in part agreement with Revenue as it is the established fact that the duty demand of Rs. 24,800/- has not resulted in vain but on discovery of cogent evidence and contumacious conduct of the appellant by investigation. Therefore, plea of the appellant of no mala fide does not get approval. As the questionable conduct and oblique motive of appellant is on record in the preceding paragraphs as well as nexus of both the firm is appreciable from the record in view of mass scale evasion noticed on different counts as aforesaid there should be penalty of Rs. 1 lakh on Shri Neeraj Kumar Aggarwal. His appeal is partly allowed. Penalty imposed on Shri Satyavan Singh is concerned his knowledge is attributable to the evasion. But his pre-meditated mind to cause evasion does not appear to be present in the entire discussion and findings of Adjudicating Authority. No doubt, he was authorised signatory. But, there is no scope to annul penalty fully in his appeal. However, in view of aforesaid appreciation of absence of his ill intent penalty imposed on Shri Satyavan Singh, authorised signatory of Sukalp Agencies is reduced to Rs. 10,000/-.

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• 2013 (6) TMI 6
  Cenvat Credit - Inputs - Tool Kits - Scope of Rule 2(k) - held that:- The goods excluded are light diesel oil, high speed oil and motor spirit which are in the nature of consumables. The final product cannot be given restricted meaning so as to mean as the engine of the vehicle or the chassis but all things which are necessary to make the final product marketable. What is excluded is the fuel which is to be consumed for running of the vehicle. All goods which are part of the original equipment are entitled to Cenvat credit as per definition of 2(k)(i). Decisions in Tata Engineering & Locomotive Co. Ltd. [1994 (4) TMI 78 - HIGH COURT OF PATNA AT RANCHI] distinguished. Confirming the decision of CESTAT in Bajaj Auto Limited v. Collector of Central Excise, Pune [1996 (10) TMI 117 - CEGAT, NEW DELHI] cenvat credit allowed - decided in favor of assessee.

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• 2013 (6) TMI 5
  Cenvat credit availed without cover of any proper document/challan showing short receipts issued by the buyers - waiver of pre-deposit of duty, interest and penalty - Held that:- As the applicant is availing credit of duty paid on the cement which was received short by their customers, the applicant is to show that their customers have received less quantity of cement than shown in the invoice. The applicant has not produced such documents before the adjudicating authority nor before the Commissioner (Appeals) it is not a case for total waiver of duty. Applicant is directed to deposit an amount of Rs.10,00,000/- within eight weeks on deposit of which the pre-deposit of the remaining duty, interest and penalty is waived and recovery of the same is stayed during the pendency of the appeal.

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• 2013 (6) TMI 4
  Under valuation of the goods - whether the goods manufactured by the M/s. Abhishri in terms of agreement entered with M/s. Symphony and cleared to godown of latter during the period November 2009 to March 2011 needs to be valued for the purpose of assessment of duty in terms of Rule 10A of the Valuation Rules, 2000 or Section 4(1)(a) of the Central Excise Act, 1944 as done by M/s. Abhishri - Held that:- There is no dispute as to the fact that M/s. Symphony had supplied moulds to M/s. Abhishri for manufacturing of Air Coolers. Non-inclusion of the amortized cost of such moulds, in the value of Air Coolers sold by M/s. Abhishri to M/s. Symphony, would, at the most require redetermination of value, read with provisions of Rule 6 of Valuation Rules, which talks about determination of correct value, even for the transaction falling under the ambit of Section 4(1)(a) of Central Excise Act, 1944. When apply the said rules, it is found that the provisions of Rule 6 would apply in this case as the said provisions very clearly indicate that the cost of the free supply of moulds needs to be included in the transaction value, for the discharge of duty liability. See case of ISPAT Industries Limited [2007 (2) TMI 5 - CESTAT, MUMBAI]. The said cost of moulds has to be amortized and included in the value of goods manufactured and cleared by M/s. Abhishri. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. Thus by applying such norm, rule 6 of the Valuation Rules should the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared by M/s. Abhishri as invoking the provisions of Rule 10A of the Valuation Rules in this case, does not arise. Thus if any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer.

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• 2013 (6) TMI 3
  SSI Exemption - requirement of registration and maintenance of the accounts for the purpose of central excise - clandestine removal - reliance upon the statement - held that - the statement in question was too weak to be relied on as evidence on law, in absence of any corroboration thereof by cogent evidence. - The solitary statement could not be said to be a cogent and convincing piece of evidence which validly corroborate the confessional statement in the statement of the Director, more particularly when the said statement of M/s. Harish Metals was not referred to and discussed in the show cause. - Moreover, the confessional statement was retracted within reasonable time. Therefore also, the said confession could not have been used as a piece of evidence and there was no basis for inference and conclusion about clandestine removal of goods thereof. Regarding maintenance of records - held that:- The regular accounts under the excise law were not maintained by the assessee considering that since the exemption limit in the said Notification applied to it, maintaining of accounts for the excise purpose was not required. It is not disputed that the assessee was otherwise maintaining the accounts for the purpose of other laws like Sales Tax Act, Sales Tax Registration and its accounts were audited in accordance with the provisions of the Companies Act, 1956. In the Order-in-Original dated 17-6-2009, the adjudicating authority itself observed that there were no statutory records or excise records as they were dispensed with by the department since 2000 as a measure of simplification and the every manufacturer was required to maintain his own records and to device to his own record keeping method depending upon the accounting requirements. In this view and given the facts and circumstances of the case, the conclusion that the assessee had deliberately not maintained the accounts under the excise law could not stand and such a finding could be said to be baseless. Value of clearance - held that:- Even if the case of the department is taken at its best value, admittedly the total clandestine clearance was below the limit of 1.5 crores specified in the notification dated 1-3-2003. The approach of the Central Excise Authority was erroneous and the findings arrived at by the learned Tribunal were not tenable at law. Once the sole basis of confessional statement adopted by the Authority in basing the case against the assessee was found to be an unreliable piece of evidence, inferences and conclusions about clandestine removal of goods fail to sustain. - Demand and penalty set aside - decided in favor of assessee.

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• 2013 (6) TMI 2
  Levy of excise duty @1% or 5% on exempted goods vide Finance Act, 2011 - petition by the traders - levy on purchase of coal - held that:- Division Bench of Gauhati High Court, Guwahati has held that, "It is clear that the appellants are only traders purchasing manufactured goods having no liability to pay central excise duty. Their liability, if any, could arise only on manufacturing and in respect of such liability claim for Cenvat Credit could be made. Till manufacturing was done, question of Cenvat Credit did not arise nor question of exercising option arises. Trader was liable to pay duty element to seller under a contract. The Coal India opted for availing CENVAT facility in respect of inputs used by it and not to avail of concessional rate of exercise duty in terms of notification dated 1-3-2011. In such a situation, Coal India could not be disentitled from reimbursing itself of the central excise duty paid by it." - Decision in ANMOL INDIA LTD. Versus COAL INDIA LIMITED [2012 (11) TMI 817 - GAUHATI HIGH COURT] was upheld. Only 10% of the coal is sold by Coal India Limited to the traders. The Coal India Limited has decided to avail CENVAT credit under the CENVAT Credit Rules, 2004 in order to avoid the cascading effect of the central excise duty, and to ultimate benefits to the end users of 90% of the coal. - Decided against the traders.

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• 2013 (6) TMI 1
  Whether or not Opportunity of being heard to be provided before deciding the prayer for waiver of pre-deposit condition provided under the proviso to Section 35 of the Central Excise Act, 1944 and for passing the interim order of stay. - held that:- one is not wise who claims that he is wise. One is wise who makes efforts to become more wise. We are constrained to observe as above because of the reason that if Commissioner (Appeals) Central Excise & Service Tax, Ranchi was of the view that he correctly understood the judgment of M/s. Jesus Sales Corporation Ltd. [1996 (3) TMI 194 - SUPREME COURT OF INDIA] and decided the matter without affording opportunity of hearing to the writ petitioner then, it was the heavy duty upon him to update himself with the laws as the said authority himself took the task of deciding the matter without the assistance of the applicant before him and, therefore, the law laid down by the Hon’ble Supreme Court and which has already been interpreted by the various High Courts should not have been ignored, if he updated his knowledge by reading the judgments referred above wherein case of M/s. Jesus Sales Corporation Ltd. [1996 (3) TMI 194 - SUPREME COURT OF INDIA] has been considered and it has been held that M/s. Jesus Sales Corporation Ltd. case has not barred hearing of applicant seeking relief of waiver of condition of pre-deposit, and if the Commissioner (Appeals) C.E. & S.T., Ranchi had no knowledge of those judgments then he is certainly guilty of not keeping himself updated in case where, according to him, he has been given power to decide application having civil consequences, without following principles of natural justice and finding out one old judgment i.e., the judgment delivered in the case of M/s. Jesus Sales Corporation Ltd. which he interpreted in the manner in which he wanted to interpret. Commissioner (Appeals) Central Excise & Service Tax, Ranchi has committed gross error of law in denying the opportunity of hearing to the writ petitioner and because of his act, the proceedings have been delayed in the matter of involvement of the revenue of the Government, as claimed by the Government.

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• CST, VAT & Sales Tax

• 2013 (6) TMI 29
  Claim for deductions in the absence of requisite declarations denied - petitioner's inability to furnish details which was lost because of failure of the computer - Revision application to grant the sufficient time to reconstruct the data dismissed - Held that:- Appellate Deputy Commissioner, Commercial Tax, Indore had specifically directed the Assessing Authority to look into the B-File of the cases and thereafter decide the matter on merits & if B–File is not available then appellant be directed to submit a duplicate copy of the information was not have not been complied with by the Assessing Authority in its correct perspective inasmuch as no finding has been recorded by the Assessing Authority about the availability or non-availability of B–File. True it is the petitioner also did not submit the duplicate documents, but as it is clear from the order that it was the duty of the Assessing Authority to have directed the appellant in case of non-availability of B–File, to submit duplicate. Thereafter, before the Revisional Authority, when the petitioner had submitted an application seeking time to produce the duplicates, the prayer should have been allowed, but it was denied on the ground that no specific period is mentioned in the application within which the petitioner would submit duplicate copy of the declaration and other relevant material. This specific time limit if not asked for by the petitioner could have been fixed by the Revisional Authority itself. Sett aside the order passed by the Revisional Authority with a liberty to the petitioner to submit duplicate declarations and supporting material within two months from the date of appearance of the petitioner before the Revisional Authority. The petitioner shall appear before the Revisional Authority on 26.06.2013.

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• 2013 (6) TMI 28
  Levy of entry tax - Manufacturer of sugar - whether not a 'dealer' within the meaning of Section 2(b) of the Act and not liable to entry tax - The Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 - allegation on assessee selling non levy sugar from its Mawana unit to the dealers of the local area and although non levy sugar attracts entry tax @ 2% but the same has not been deducted nor deposited as per the provisions of section 12 therefore, the Company should show cause why penalty of twice the amount - Held that:- It is noticeable that though section 12 casts an obligation on the manufacturer not to hand over goods to a purchaser, unless entry tax has been paid, but it depends upon the intention of the person making the purchase. If a dealer registered under the Act within the same local area, purchases goods from the local manufacturer with intent to sell goods within the same local area, then the purchaser is neither obliged to deposit entry tax with the manufacturer nor the manufacturer is under obligation of law to refuse to sell the goods to him. All that the manufacturer is required to do is to disclose quantum of such sales to the Authorities while submitting return in Form-E. Thus it can safely be concluded that section 12 has no universal application and will not apply to sales made within the same local area where there is no intention on part of the purchaser to take goods to another local area. As there is no infraction of law on part of the Petitioner Company in not making deductions of entry tax at source from persons/dealers for sales made within the same local area i.e. Mawana, as provisions of sec.12 will not apply to such sales. A fortiori, there is no justification for initiating penalty proceedings against the Petitioner Company. No disputed question of facts are involved and the court has proceeded to decide the controversy assuming the facts mentioned in the impugned notices to be correct. Even then, it has been found that the proceeding initiated on the basis of impugned notices are illegal and an exercise in futility and therefore impugned Notice are hereby quashed. The authorities are restrained from proceeding any further, in pursuance of such notices. The writ petition succeeds and is allowed.

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• Indian Laws

• 2013 (6) TMI 23
  Jurisdiction - power under Article 226 to entertain writ - acquisition of land - interest on compensation - arbitrariness and discrimination on the part of the state government - Whether the writ petition was for "recovery of money" and therefore not maintainable? - Whether the second respondent was justified in awardin interest only at the rate of 3% per annum on th compensation payable under Section 25 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961? - held that:- Primarily the writ petition was of a public law character as it related to the public law functions on the part of the state government and its officers, and therefore maintainable. - Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. respondents directed to pay interest on the compensation amount from the date of taking possession to date of payment, at the rate of 3% per annum for the first twenty years and thereafter (that is from the date of expiry of the period of 20 years) to 31.3.2005 (date of payment) at the rate of 6% per annum.

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