TMI Tax Updates - e-Newsletter
June 30, 2014

Case Laws in this Newsletter:

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

Articles

1. EXEMPTION TO SPECIFIED SERVICES DONE ON RICE

   By: Dr. Sanjiv Agarwal

2. Waiver of interest by assessee does not detract Revenue’s statutory obligation to grant interest on belated refund

   By: Bimal jain

3. Indirect tax laws: A civil statute or Criminal statute and need for amendments in sections dealing with criminal liability.

   By: Pramod Kumar Rai

Highlights / Catch Notes

Income Tax

• Failure to Deduct Full TDS May Lead to Default Status u/s 201, But No Disallowance u/s 40(a)(ia).

  Case-Laws - AT : If there is any shortfall in deducting TDS, the assessee can be declared to be an assessee in default u/s 201 and no disallowance can be made by invoking the provisions of section 40(a)(ia) - AT
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• Exemption Granted: Section 54 Long-Term Capital Gains for Housing Property, Not Agricultural Land, Based on Door Number Assignment.

  Case-Laws - AT : Exemption u/s 54 – LTCG - Nature of Property sold is housing property or agricultural land - once a door number is allotted to the premises, this itself makes it clear that it is not an agricultural property - exemption allowed - AT
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• Belated Tax Return u/s 153C Valid for Assessment: Information Can Be Used in Evaluation Process.

  Case-Laws - AT : Filing of belated return in response to notice us/ 153C - the information contained in such belated return can also be considered for completing the assessment - AT
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• Assessee wrongly denied section 11 exemption; section 12A registration upheld, no valid section 13 case made.

  Case-Laws - AT : Once no case is made out for application of provisions of section 13 – AO was not correct in denying exemption u/s 11 in assessee’s case and registration granted to assessee u/s 12A is intact - AT
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• Tax Authorities Consider Assessee's Alternative Deduction Claim u/s 10A After Section 10B Rejection.

  Case-Laws - AT : Allowability of deduction u/s 10A - AO rejected the claim for deduction u/s. 10B – alternative claim made by the assessee claiming deduction u/s 10A should be considered by the tax authorities - AT
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• Income from Sub-Letting Business Service Centers Classified as Business Income for Both Assessment Years by Assessing Officer.

  Case-Laws - AT : Treatment of income earned from sub-letting of business service center – AO directed to treat the impugned receipts in both the assessment years under the head business income - AT
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• Embroidery Machines Qualify as Manufacturing Activity for Additional Depreciation Under Income Tax Laws.

  Case-Laws - AT : Additional depreciation - whether embroidery work earned on embroidery machines is manufacturing activity or not - installation of embroidery machines - additional depreciation allowed - AT
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• Court Rules Advance Payments Aren't Automatically Income; Case Remanded for Review.

  Case-Laws - AT : Accrual of income - advance received before commencement of professional work – additions made simply on the belief that no client would give money to an Advocate unless some work is done by that Advocate - matter remanded back - AT
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Customs

• Court Rules Against Offsetting Refund Against Penalty, Citing It Nullifies Stay Order's Effect.

  Case-Laws - HC : Adjustment of penalty amount with the refund payable to the assessee - Allowing Department to adjust the refund against the said liability would virtually nullify the effect of the stay - HC
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• Waiver Granted for Pre-Deposit Duty on Synthetic Casting Tapes; Classified Under Chapter 30 for Import.

  Case-Laws - AT : Waiver of pre-deposit of duty - Import of Synthetic Casting Tapes - Classification of goods - import of Synthetic Casting Tape would come under Chapter 30 - AT
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Service Tax

• Applicant Alleges Non-Payment of Consignment Agency Charges; Preliminary Assessment Favors Assessee in Dispute with Company.

  Case-Laws - AT : It is the claim of the Applicant that even though they have entered into the consignment agreement with M/s. Tata Steel Ltd. they have not received any consignment agency charges - prima facie case is in favor of assessee - AT
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• Refund Claim for Service Tax Denied Due to Nexus Issue Not in Original Notice; Authorities Exceeded Jurisdiction.

  Case-Laws - AT : Input services - Refund claim - nexus with the output service - ground not taken in the show-cause notice and therefore both the lower authorities have travelled beyond the show-cause notice - AT
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• Works Contract Composition Scheme Eligibility Unaffected by Services Before June 1, 2007.

  Case-Laws - AT : Works Contract Composition Scheme - The classification of services rendered prior to 01.06.2007 cannot affect the assessee’s entitlement to the Composition Scheme in respect of services rendered after 01.06.2007. - AT
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• Services for Overseas Exhibitions and Inspections Exempt from Service Tax as Activities Occur Outside India.

  Case-Laws - AT : Business Exhibitions conducted abroad - Technical Inspections were done outside India - Since, these services are performed outside India there is no service tax liability on the services - AT
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Central Excise

• Refund Claim Under Cenvat Credit Rules Allowed After Registration Surrender, Subject to Verification u/r 5.

  Case-Laws - AT : Whether refund claim filed by the appellant under Rule 5 of the Cenvat Credit Rules, 2004, after surrender of the registration, is admissible or not - refund to be allowed subject to verification - AT
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• EOUs Entitled to Benefits Under CENVAT Credit Rules; Excise Duty Payments Clarified for 100% Export Units.

  Case-Laws - AT : Nature of duty paid by the 100% EOU - when the statute itself provides that what is being paid by a 100% EOU is excise duty, the question of denial of benefit of Notification or the CENVAT Credit Rules does not arise. - AT
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• Freight Charges Separately Recovered via Debit Notes Align with Rule 5 of Valuation Rules.

  Case-Laws - AT : Valuation of goods - freight charges are separately recovered from the customers by issuing debit note, therefore the respondents are fulfilling the conditions imposed under Rule 5 of the Valuation Rules - AT
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VAT

• Tata Motors' Nano Project Receives Government Loan as Fiscal Incentive, Not a Tax Refund, Says New Ruling.

  Case-Laws - HC : Grant of loan equal to VAT / CST - fiscal incentives to the Tata Motors Limited for Nano project - Amount of loan paid by the Government does not amount to refund of tax. - HC
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• High Court Allows Amnesty Scheme Benefits Under KGST Despite Early Tax Payment Timing.

  Case-Laws - HC : Benefit of Amnesty Scheme under KGST - revenue refused to grant the benefit of amnesty scheme since the tax was paid before the effective date on which scheme came into force - benefit allowed - HC
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Case Laws:

• Income Tax

• 2014 (6) TMI 812
  Disallowance u/s 40(a)(ia) of the Act – shortfall in deducting TDS - Revenue was of the view that the assessee was only acting as agent and received commission for arrangement of transport – Held that:- if there is any shortfall in deducting TDS, the assessee can be declared to be an assessee in default u/s 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) – Relying upon COMMISSIONER OF INCOME TAX, KOLKATA-XI Versus M/s SK. TEKRIWAL [2012 (12) TMI 873 - CALCUTTA HIGH COURT] - Decided in favour of assessee. Non deduction of TDS - bonafide mistake - Held that:- where the certificate u/s 197 has been issued, the assessee can claim that it has a bonafide belief that tax is not required to be deducted on the basis of the certificate for the payment exceeds the exemption limit specified in the certificate. - Ld.CIT(A) is not justified in confirming the disallowance made by the AO on this count. - Decided in favor of assessee. Disallowance u/s 40A(3) of the Act – Cash payment eceeds limit on single day – Held that:- section 40A (3) has been w.e.f 01/04/2009 providing that all the payments made to a person in a single day would be considered for making the disallowance - The amendment is not applicable so far as the case in hand being related to the AY 2008-09 - In the absence of a provision conferring the power to aggregate all the payments made in a single day for making the disallowance during the year under consideration and in view of the position that section 40A (3) as applicable in for the assessment year permits only single payment during the day has to be considered for disallowance - CIT(A) is not justified in confirming the action of the AO in aggregating the sums paid on a day for making the disallowance - the AO is directed to identify each of the payment made by the assessee less than Rs.20,000/- and allow the expenditure – Decided in favour of Assessee.

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• 2014 (6) TMI 811
  Claim of exemption u/s 54 – Nature of Property sold is housing property or agricultural land - Held that:- The reasons for not treating the property as residential is, the built up area viz-a-viz total land and description of land given in purchase deed - The property is situated within the municipal limits of Sholinganallur, door number has been allotted to the property by Municipal Authorities - once a door number is allotted to the premises, this itself makes it clear that it is not an agricultural property - the property (Long Term Capital Asset) transferred by the assessee is a residential building with land appurtenant there to - The assessee has satisfied all the conditions laid down in section 54 - the assessee is eligible for claiming exemption u/s 54 of the Act – Decided in favour of Assessee.

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• 2014 (6) TMI 810
  Disallowance u/s 14A of the Act – Dividend income – Held that:- Expenditure has no direct relationship with the income that may arise on its incurring or from investment, so that estimating the expenditure that stands incurred in relation thereto with reference to income arising there-from is without basis, both on facts as well as in law, even as observed by us during hearing - the Revenue also must bear in mind that the disallowance u/s 14A is only of the expenditure actually incurred, so that the assessee’s claim of having in fact not incurred any expenditure or a lower expenditure would need to be examined on merits, and the estimation per rule 8D made, having regard to the common expenditure actually incurred, i.e., on activities yielding taxable income and income which does not form part of the total income under the Act, which would therefore need to be apportioned, and toward which r. 8D stands prescribed by law - Relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the matter is to be remitted back to the AO for fresh adjudication –Decided in favour of Assessee.

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• 2014 (6) TMI 809
  Stay application – Stay of outstanding demand – Held that:- The outstanding demand has arisen as a result of various additions made to the total income of the assessee which mainly include disallowance u/s 40(a)(i), difference in AIR reconciliation and TP adjustment - the assessee has a good prima facie arguable case - the balance of convenience clearly lies in favour of the assessee and it is a fit case to grant stay of outstanding demand subject to payment of Rs. 30 lacs by the assessee against the outstanding demand in order to make the recovery of original outstanding demand to the extent of 50% - Partial stay granted

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• 2014 (6) TMI 808
  Deletion of penalty u/s 271(1)(c) of the Act - Facts properly not appreciated – Held that:- The addition in the second round of litigation on the basis of absence of correct address of the parties and in the absence of PAN - the CIT(A) has deleted the penalty u/s 271(1)(c) on the ground that there was clear difference of opinion between the two CIT(A)’s - when there were two divergent opinions are possible on an issue, penalty u/s 271(1)(c) could not be levied - CIT(A) has observed that the assessee has offered an explanation regarding sundry creditors which was not found acceptable by the AO - there is no mistake in the order of the CIT(A) while deleting the penalty u/s 271(1)(c) of the Act, as the assessee has disclosed all the material facts before the AO and there were clearly two divergent opinions in separate two rounds of litigation before the CIT(A)s’ and the lease rentals received from the same sundry creditor parties were accepted by the AO – thus, the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (6) TMI 807
  Estimation of profit in real estate business proceedings u/s 153BC - search and seizure operations - Held that:- the satisfaction of the assessing officer has to emerge from the material found during the course of search operation. - During the course of search in the premises of Jain Housing Constructions Pvt Ltd, documents disclosing the receipt of 6.5 crores by assessee was found and seized. On the basis of this information, the assessing officer issued notice u/s 153C of the Act since the assessee is not the searched person. Therefore, the contention of the assessee that no material was found during the course of search operation is not correct. - Decided against the assessee. Filing of belated return in response to notice us/ 153C - Held that:- the belated return filed by the assessee after the expiry of the time limit for filing return of income given is also an information came to the knowledge of the assessing officer in the course of the assessment proceedings. Therefore, the information contained in such belated return can also be considered for completing the assessment. - the contention of the assessing that the assessing officer cannot act upon the belated return filed by the assessee on 19-08- 2009 has no merit at all. - Decided against the assessee. Estimation of profit - real estate business - assessee acted as aggregator of land for ETL Infrastructure Services Ltd and Jain Housing Construction Co Pvt Ltd. - Held that:- Taking into consideration the total volume of transactions and the expenditure incurred by the assessee for development of land,etc. this Tribunal is of the considered opinion that estimating the net profit at 1.25% on the receipts from ETL Infrastructure Ltd would meet the ends of justice. - Decided partly in favor of assessee. Estimation of profit - in addition to acting as an agent / facilitator in purchasing the land has to fill up the land, construct compound wall, road, bridge, etc. - Held that:- Since the assessee has to carry out some developmental work on the land like construction of compound wall, bridge, etc. in addition to facilitating the purchase of land the profit ratio would be little more than that of acting a mere broker. The assessee is not a civil contractor. - CIT(A) has rightly taken into consideration all the material facts with regard to the nature of transaction and work undertaken by the assessee and righty restricted the profit at 5%. Decided against the assessee.

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• 2014 (6) TMI 806
  Denial of exemption u/s 11 of the Act – Objectives of Trust - Shortfall in application of income derived from property - Held that:- Following Society of Presentation Sisters Vs. ITO [2009 (9) TMI 75 - ITAT COCHIN] - no distinction is made between charitable and religious purposes in s. 11(1)(a) - a trust which is partly religious and partly charitable is entitled to exemption u/s 11(1)(a) of the Act - even otherwise, maintenance of mosque and church is to be treated as charitable purpose and not purely religious purpose - exemption u/s 11(1)(a) could not be denied to the assessee trusts which exist for various charitable purposes besides maintenance of chapels and mosques, on the ground that they are partly charitable and partly religious trusts, once no case is made out for application of provisions of section 13 – the AO was not correct in denying exemption u/s 11 in assessee’s case and registration granted to assessee u/s 12A is intact - CIT(A) has rightly appreciated the facts and held that the assessee is entitled to exemption u/s 11 – Decided against Revenue. Function hall used for commercial purposes – Held that:- Following CIT vs. Narayana Guruviah Chetty's Estate & Charities [2008 (9) TMI 528 - MADRAS HIGH COURT] - so long as the dominant object is of general public utility and there is no profit motive, it cannot be said that the trust/institution is not established for charitable purpose, even if there is some profit in the activity carried on by the trust/institution – thus, the order of the CIT(A) is upheld – Decided against Revenue. Deletion of corpus donations – Held that:- Following Sukhdeo Charity Estate vs. ITO [1991 (5) TMI 47 - RAJASTHAN High Court] - voluntary contributions received for 'specific purpose' are not assessable as income - even when the assessee had been assessed as AOP and deprived of Section 11 benefits, the AO could assess only net income of the assessee and not gross receipts – thus, the order of the CIT(A) is upheld – Decided against Revenue. Original audit report not consulted – Held that:- The earlier report showed that amount spent on the objects of the trust as NIL - such a mention was made by mistake - CIT(A) has rightly held that the AO has neither shown that the revised report filed was incorrect or that the assessee not applied its income for charitable or religious purposes - thus, the order of the CIT(A) is upheld – Decided against Revenue. Deletion of disallowance of pooja expenses – Held that:- The disallowance will not survive once the assessee’s claim for exemption u/s 11 is allowed - even otherwise, there is no case for the disallowance because once the income from the pooja activity is included, the connected expenditure is to be allowed - the order of the CIT(A) is upheld – Decided against Revenue. Addition u/s 40(a)(ia) of the Act – Held that:- The disallowance will not survive once the assessee's claim for exemption u/s 11 is allowed - even otherwise, the disallowance was made without affording an opportunity to the assessee to rebut the assumption of the AO that the items of expenditure comprised in the amount are liable for disallowance u/s 40(a)(ia). Disallowance out of Administration expenses – Held that:- The disallowance will not survive once the assessee's claim for exemption u/s l1 is allowed - there is no case for separate disallowance because expenditure debited by the assessee is normal administrative expenditure and there is no finding that such expenditure was not incurred or that the same was not vouched etc. – the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (6) TMI 805
  Allowability of deduction u/s 10A - AO rejected the claim for deduction u/s. 10B – Before the first appellate authority, the assessee put an alternative claim, viz., the deduction under sec. 10A - Software Technology Parks of India (STPI) - approval was not granted by a proper authority u/s. 14 of the Industries (Development and Regulation) Act certifying the assessee as 100% Export Oriented Unit (EOU) - Held that:- Following The Income Tax Officer Versus M/s. Device Driven (India) Pvt. Ltd. [2013 (12) TMI 477 - ITAT COCHIN] - the alternative claim made by the assessee claiming deduction u/s 10A should be considered by the tax authorities - the claim requires examination of the eligibility of the assessee to claim the same and further it requires to be seen as to whether the assessee has complied with the procedures prescribed u/s 10A of the Act – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for examination of the claim for deduction u/s 10A of the Act – Decided in favour of Assessee.

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• 2014 (6) TMI 804
  Unexplained income u/s 69 of the Act - Peak credit balance – Held that:- The AO has accepted the contentions of the assessee that the past withdrawals might have been used for making future deposits - the AO has computed peak credit of the bank account and determined that the balance available in the bank account as on 09.11.2004, i.e. Rs.12,73,150/- is the peak amount and assessed the same - the assessee has been declaring income from job works over the years and it is stated that the assessee has not maintained regular books of account for this business - The possibility of making savings out of job works business cannot be altogether ruled out - the AO has assessed the “peak credit amount” shows that he has also accepted the theory of human probabilities, i.e., the AO has accepted the fact that the past withdrawals were utilised to make future deposits, which is a normal human behavior. The claim of the assessee that he has used the withdrawals made in the FY 2003-04 also for making deposits in the FY 2004-05 should be accepted - the claim that he was having savings out of his past income could not also be ruled out - the claim that the gold stock was converted into cash and then reconverted into gold stock is hard to believe - assessee may be given credit for the claim of past savings and for withdrawals made from the bank account in the FY 2003-04 - if the amount available with the assessee as on 1.4.2004 out of past savings and also from out of bank withdrawals made in FY 2003-04 is estimated at Rs.6.00 lakhs - the AO is allowed credit of Rs.6.00 lakhs and assess the balance amount u/s 69 of the Act – thus, the order of the CIT(A) is modified – Decided partly in favour of Assessee.

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• 2014 (6) TMI 803
  Treatment of income earned from sub-letting of business service center – Income from other sources or business income – Held that:- the fact that the assessee running the business centre by exploiting the property is not merely an activity of letting out the property and the fact that the assessee has been showing the rent received from letting out the business centre under the head business income continuously since 1984, we are of the considered view that the authorities below are not justified in treating the impugned receipts under the head income from other sources. - AO directed to treat the impugned receipts in both the assessment years under the head business income as claimed by the assessee. - Decided in favor of assessee. The details of expenditure incurred by the assessee reveals that the expenses are for keeping the premises alive for earning the income from legitimate business of activity of renting - the legal fees expense claimed by the assessee is for the purpose of safeguarding the company’s tenanted properties - the income received from the business centre has to be treated as business income in pursuance of the adjudication and the fact that the expenditures have nexus with the business income, the expenditures claimed by the assessee have also to be allowed as business expenditure – the AO is directed to allow the expenditure claimed by the assessee – Decided in favour of Assessee.

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• 2014 (6) TMI 802
  Additional deprecation - whether embroidery work earned on embroidery machines is manufacturing activity or not - installation of embroidery machines – Held that:- Since the issue has been decided by Hon'ble ITAT Ahmedabad Bench in several cases in favour of the assessee including the decision, no interference is required - Decision in the case of ITO vs. Aswani Industries [2014 (6) TMI 560 - ITAT AHMEDABAD] followed - Revenue has not brought any contrary binding decision in its support of the facts - assessee is eligible for additional depreciation – Decided in favour of Assessee.

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• 2014 (6) TMI 801
  Accrual of income - Addition of advance received before commencement of professional work – It was contended by the Ld. Counsel that since the matter before the SEBI was taken up only in 2009 and the proceedings before the SEBI concluded by its order dt. 23.4.2010, the assessee booked the advance received 12 lakhs as income for financial year 2009-10 pertaining to A.Y. 2010-11 - Held that:- The AO has not considered the chronological events of the case - AO has simply added 12 lakhs on the belief that no client would give money to an Advocate unless some work is done by that Advocate - CIT(A) has confirmed the addition stating that the AO has doubted the genuineness of the evidence filed before him – the issue needs re-adjudication at the assessment level – thus, the matter is required to be remitted back to the AO for adjudication - assessee is directed to file the details of chronological events which took place before the SEBI alongwith confirmations from the parties – Decided in favour of Asssessee.

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• Customs

• 2014 (6) TMI 817
  Adjustment of penalty amount with the refund payable to the assessee - tribunal has granted stay with regard to penalty - Whether in the facts and circumstances of the case, the Tribunal has committed substantial error of law in holding that order of adjustment made by the revenue under section 142 of the Customs Act, 1962 stands nullified by interlocutory order of stay passed by the Tribunal in collateral proceedings and the revenue was obliged to suo motu suggestion and prayed refund claim of the respondent without any delay - Held that:- When the penalty of 25 lakh imposed by the orderinoriginal was unconditionally stayed, it was no longer an amount payable by the respondent to the Department. In that view of the matter, in our opinion, the Tribunal committed no error. Allowing Department to adjust the refund against the said liability would virtually nullify the effect of the stay - Decided against Revenue.

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• 2014 (6) TMI 816
  Maintainability of appeal - Jurisdiction of court - Held that:- As per the provisions of Sec. 129A of the Customs Act, the Tribunal has no power to entertain appeal where the Commissioner (Appeals) has passed orders in respect of goods imported or exported as baggage. Therefore, the appeal filed by the Revenue is dismissed as not maintainable - Decided against Revenue.

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• 2014 (6) TMI 815
  Waiver of pre-deposit of duty - Import of Synthetic Casting Tapes - Classification of goods - Classification under Heading No.9021. 90 90 or under sub-heading no.3005 9040 - Held that:- Heading No.3005 would cover the bandages, impregnated or coated pharmaceutical substances. On the other hand, the Heading No.9021 as claimed by the applicant is applicable for the ‘orthopedic appliances' - The product is used for providing immobility in case of fracture and it is a substitute in place of plaster of paris. On exposure to moisture, the tape hardens and provides firm support. It provides additional facility of ventilation which is not available in the more commonly used plaster of paris casting. It is a tape used for orthopaedic purposes and not an appliance in any sense of the term. Deltalite casting tapes', which are polyester cotton fabric coated with polyurethane resin offering controlled rigidity to provide greater strength at the site of fracture, are not devices/instruments/ appliances and hence cannot be considered to fall within the coverage of heading 90.21 and the Tribunal has held that they are akin to goods covered by heading 30.05 which covers wadding, gauzes, bandages and similar articles impregnated or coated with pharmaceutical substances provided these are put up in forms of packings for retail sale for use of medical, surgical, dental or veterinary purposes - import of Synthetic Casting Tape would come under Chapter 30. - Decision in the case of of Johnson & Johnson Ltd. Vs Collector of Customs, Bombay reported in [1998 (9) TMI 184 - CEGAT, NEW DELHI] followed - stay granted partly.

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• Corporate Laws

• 2014 (6) TMI 814
  Dispensation from convening meetings of equity shareholders, preference shareholders - Scheme of Amalgamation - Held that:- The Board of Directors, of the Transferee Company passed a resolution dated 20.12.2013 approving and adopting the Scheme of Amalgamation of Uniflair India Private Limited with Schneider Electric IT Business India Private Limited, subject to the sanction of this Court and that the assets of the Transferee Company are more than the liabilities and is stated to be financially sound. Hence, the amalgamation would not in any manner, affect the interests of the creditors of the Transferee Company - The convening of the meetings of the equity shareholders and preference shareholders of the Transferee Company are waived. The convening of the meeting of the equity shareholders of the Transferor Company is also waived. - Decided in favour of appellant.

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• 2014 (6) TMI 813
  Vacation of interim order - Oppression and mismanagement of company - controversy over the shareholding of the Petitioners - restriction with regard to immovable assets to be mortgaged with the banks/institutions - Held that:- the license to construct the Hydro Power Project was obtained by Respondent No.5 i.e. Spacebars Switchgears Ltd. and the said project seems to have been assigned to Respondent No.l Company. However, the Respondent No.l Company has not been able to start the construction activity on the Hydro Power Project till date and has been paying extension fees of Rs.10,000/- per Mega Watt i.e. Rs.50,000/- per month since 1.7.2008. Presently, the Respondent No.l Company is faced with a situation of cancellation of its license to build, own and operate the Sechi-II 5 MW hydro power project, being its only asset. However, on one side, the Respondent/Applicant Advocate alleged that the malafide intention of the Petitioner is evident from the fact that while they claim to be 14% shareholders, they have suppressed the transfer of all their 14% shares and resignation from Board of directors of the Respondent No.l Company. Construction of 5 MW hydro electric project is a capital intensive project and requires an estimated expenditure of Rs.42 crores and hence, it is the necessity to get funding from banks/financial institutions against the security of immovable and movable assets of Respondent No.l Company. Nonetheless, the argument given by the Petitioners Advocate that the heavy burden or the assets of the company cannot be undone, carries some force. But, it is relevant to highlight that the interest of the Respondent Company is supreme and such interest lies in completion of the 5 MW hydro electric project. Therefore, to part finance the project, there is requirement to raise funds from banks/financial institutions against security of immovable and movable assets of the company. Keeping in view the allegations contained in the Company Petition, facts and circumstances explained supra, I am of the considered opinion that the 5 MW hydro electric project be taken up by the Respondent No.l Company by raising loans from banks/financial institutions and the sums so borrowed be utilised for efficient and effective completion of "this project without involvement of diversion of funds for other purposes - Interim order stands vacated - Decided in favour of company / respondents.

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• Service Tax

• 2014 (6) TMI 835
  Recovery of service tax - non receipt of notice / order - Conclusion of service of order - proper service of notice - change of address - Held that:- In this context it has to be noticed that the address of the 1st petitioner's Registered Office was also known to the respondents, as is evident from Exhibit P5. Exhibit P5 is a communication of the respondent addressed to the Registered Office long before the show cause notice itself was issued. The grievance projected by the petitioner is to be looked into on an analysis of the totality of the circumstances coming to fore. Section 83 of the Finance Act, 1994 contemplates that certain provisions of the Central Excise Act, 1944 would apply to that Act. Section 37C of the Central Excise Act deals with service of decisions, orders, summons, etc. Looking at Section 37C, one of the modes of service is registered post with acknowledgement due. There is no dispute that the Department had attempted service by that mode and if the Section provided only that, then the decision of the Hon'ble Supreme Court would squarely apply. However, the provision specifically took into account the instances where service could not be effected as provided in clause (a); by clause (b), which mandates affixing a copy of the order, summons or notice on some conspicuous part of the place of business. This procedure admittedly has not been followed by the Department. There shall be a stay of recovery proceedings for two months from the date of communication of the certified copy of the order, after which the issue shall be covered by the orders passed in appeal, if one is filed and on failure to do so, shall confer the authority with liberty to proceed for recovery - Stay granted.

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• 2014 (6) TMI 834
  Leviability of Service Tax - consignment agency services - Clearing and Forwarding Agent Service - job of conversion of raw materials into finished goods on job-work basis - Held that:- Applicant are engaged by M/s. Tata Steel Ltd. for conversion of raw material into finished goods and deliver the same to various stockyards. For that the Applicant are paid a fixed conversion charges. We also find an agreement dated 30.03.1998 whereby the Applicant also agreed to provide the service of a consignment agency service to M/s. Tata Steel Ltd. and the remuneration fixed was at Rs.250/275 per M.T. It is the claim of the Applicant that even though they have entered into the said agreement with M/s. Tata Steel Ltd. they have not received any consignment agency charges from M/s. Tata Steel Ltd. beyond the conversion charges received from M/s. Tata Steel Ltd. Case has been built against the Applicant as is clear from the impugned notices that the Applicant had received Rs.250/275 per M.T. as consignment agency charges from M/s. Tata Steel Ltd., but failed to discharge Service Tax as required, under the relevant provisions of Finance Act, 1994. - Applicant had not received the said amount of Rs.250/275 per M.T. even though an agreement to that effect had been entered between the Applicant and M/s. Tata Steel Ltd. In these circumstances, we are of the opinion that the Applicant could able to make out a prima facie case for total waiver of pre-deposit of dues adjudged. Accordingly all dues adjudged is waived and its recovery stayed during pendency of the Appeals - Stay granted.

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• 2014 (6) TMI 833
  Demand of service tax - Rent a cab service - outdoor catering services - Invocation of extended period of limitation - Held that:- Admittedly, the show cause notice issued on 26.4.2006 pertaining to the period 8.7.04 to 3.2.2005 is barred by normal period of limitation. Further, the original adjudicating authority having granted the benefit of section 80 of the Finance Act to the appellant, has held that there was no suppression on the part of the assessee. If there is no suppression, I fail to understand as to how the longer period of limitation would get invoked. - Demand barred by limitation period - Decided in favour of assessee.

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• 2014 (6) TMI 832
  Denial of CENVAT Credit - order beyond the scope of show cause notice - Input services - Refund claim - nexus with the output service - Held that:- Original adjudicating authority as well as the first appellate authority have considered the issue of eligibility of CENVAT credit in respect of services received by them and held that many services cannot be considered as input services since they have no nexus with the output service provided by them. This was not at all the ground taken in the show-cause notice and therefore both the lower authorities have travelled beyond the show-cause notice when they considered the issue of eligibility for CENVAT credit in respect of input service received by them - Therefore, the stand taken by both the lower authorities that certain services could not have been considered as input services cannot be sustained. Accordingly, the decisions of both the lower authorities holding that CENVAT credit of service tax paid on several services is not admissible cannot be sustained and is set aside - Matter remanded back. Appeal filed by the assessee is allowed and the matter is remanded to the original adjudicating authority who shall consider whether the documents on the basis of which credit is taken are complete and other requirements of the Notification have been fulfilled in accordance with the grounds taken in the show-cause notice. - Decided in favour of assessee.

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• 2014 (6) TMI 831
  Works Contract Composition Scheme - whether the appellant is eligible for ‘Composition Scheme’ under the ‘Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007’ for a works contract entered with M/s. Essar Oil Limited when some advance payments were received by the appellant prior to 01.6.2007 i.e. before introduction of Works Contract Service. - Extended period of limitation - Held that:- in respect of the services provided after 01.06.2007, which alone are regarded as ‘Works Contract Service’, the appellant had opted to pay tax at the Composition rate and not at the standard rate and was thus eligible for the composition benefit in respect of services provided after 01.06.2007. - Decision in the case of Nagarjuna Construction Company Limited vs. GOI [2012 (11) TMI 404 - SUPREME COURT] followed - Appellant has correctly availed the Composition Scheme for the Works Contracts for which the option and payment of service tax was exercised after 01.6.2007 and no service tax was paid before 01.6.2007 - Decided in favor of assessee. The classification of services rendered prior to 01.06.2007 cannot affect the assessee’s entitlement to the Composition Scheme in respect of services rendered after 01.06.2007. However, in respect of advance received prior to 01.06.2007 which tantamounts to provisions of service prior to 01.06.2007, the benefit of composition rate could not have been claimed, on the said advance and in view of our findings recorded herein above, Service Tax on the same was payable under the head of Commercial or Industrial Construction Services, as has been held by the respondent. As such, the appellants contention that they were entitled to pay tax at the composition rate on advances received prior to 01.06.2007 cannot be accepted. Extended period of limitation - held that:- The alternative question whether the appellant would have been eligible for abatement computing the tax liability only advance payments is not being analyzed by us as we find that the entire demand on this count is hopelessly barred by limitation as the factum of the advance having been received prior to 01.06.2007 and in respect of the same tax having been discharged under the composition scheme was specifically stated in the Service Tax return. It is settled law that when there is no deliberate suppression of facts, the extended period of limitation cannot be invoked. The appellant had, in fact, clearly stated in the ST-3 return that Service Tax was not discharged in view of the fact that the service in the contract was an indivisible ‘Works Contract’. - demand set aside - Decided in favour of assessee.

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• 2014 (6) TMI 830
  Business Exhibitions conducted abroad - Technical Inspections were done outside India - Import of services - reverse charge - service tax liability under Section 66A of Finance Act, 1994 - parties located abroad - Held that:- payments made by the appellant were in respect of exhibitions conducted abroad. Similarly it is seen that the Technical Inspections were done outside India. - as per the provisions of the Rule 3 (ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, these two services are considered to be imported into India when the service provider is located abroad and service is performed in India. - Since, these services are performed outside India there is no service tax liability on the services in view of the above provisions - Following decision of Paramount Communication Ltd. Vs. CCE, Jaipur [2011 (9) TMI 762 - CESTAT, NEW DELHI] - Intas Pharmaceuticals Ltd. Vs. CST, Ahmedabad [2009 (5) TMI 73 - CESTAT, AHMEDABAD] - Decided in favour of assessee.

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• Central Excise

• 2014 (6) TMI 827
  Validity of Tribunal's order - Ex parte order passed - Held that:- On the application for modification of the earlier order, the Tribunal found that it was listed on 17th April 2012. On that date, a written request was filed to list the application on 18th April 2012. Therefore, on the Appellant's written request, the matter was postponed to 18th April 2012. On the postponed date, none appeared on behalf of the Appellant meaning thereby both the Appellant and Advocates were absent. In such circumstances, the Tribunal cannot be faulted for proceeding ex-parte. Waiver of pre deposit - Clandestine production and removal of goods - Held that:- Prima facie, the Tribunal found that the demand was based on the Appellant's contradictions noted in the books of accounts. The adjudicating authority, prima facie, took into consideration the other material as well. In these circumstances, the Tribunal found that this is not a case of complete waiver of pre-deposit but a partial one. We do not find that the direction to deposit a sum of 38,00,000/- out of the total demand of 2,30,36,528/- can be said to be unreasonable, arbitrary, leave alone capricious, enabling us to exercise our jurisdiction. The Appeal does not raise any substantial question of law and it is, accordingly, dismissed - decided against assessee.

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• 2014 (6) TMI 826
  Denial of refund claim - Surrender of registration - Whether refund claim filed by the appellant under Rule 5 of the Cenvat Credit Rules, 2004, after surrender of the registration, is admissible or not - Held that:- First appellate authority has rejected the refund claim of the appellant on the ground that appellant has not produced any evidence to prove that the goods have been exported under bond and the unutilized credit has accumulated due to export under bond. It is observed from the case records that the facts available on records clearly suggest that the goods were supplied to 100% EOU under CT-3 certificates as a result of which Cenvat Credit got accumulated in the records of the appellant. These facts are not disputed by the adjudicating authority and Commissioner (Appeals) has clearly gone beyond the scope of the show cause notice to raise the issue of export of goods is not under bond. Refund claim can be filed once in a year and it is not obligatory to file periodical refund claims as prescribed under Notification No.5/2006-CE(NT). It is the case of the appellant that refund claim is filed within a period of one year from the relevant date as specified in Explanation (B) of Section 11B of the Central Excise Act, 1944 - As there is no clarity from the rival submissions made by either sides whether refund claim was filed by the appellant within one year or not. This verification can only be done by the adjudicating authority. For getting this verification made, the matter is required to be remanded back to the adjudicating authority - Decided in favour of assessee.

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• 2014 (6) TMI 825
  Confiscation of goods - provisional release of the seized goods in the factory premises - Execution of bank guarantee - Held that:- Finished goods which are ready for dispatch are goods which are meant for export as well as for home clearance. As regards the raw material, we do find that the Commissioner (Appeals) has recorded that most of the raw material is procured against advance licences. Needless to say that when the goods are procured against advance licences, they are secured by way of bond to the Customs authorities. To that extent, Revenue's interest seems to be secured. Even if the raw materials which, according to the Revenue, are unaccounted, the said raw materials having been recorded as stock available with the assessee, can be accounted for, subsequently in records and consumption can be watched. We agree with the view of the ld. Commissioner (Appeals) that the order of releasing the goods on executing the bond backed by a bank guarantee shall not come in the way of investigation which is being carried out by the Department and they may do so. - the bank guarantee should be executed for Rs.20 lakhs. - goods to be released provisionally - Decided conditionally in favour of assessee.

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• 2014 (6) TMI 824
  Remission of duty - loss/destruction of goods on account of a fire occurred in the factory - Held that:- Tribunal has no jurisdiction to hear appeals arising out of the orders of Commissioner (Appeals) where the appeals relate to loss of goods either in transit or in storage as stated in proviso (a) to Section 35B of the Central Excise Act. - Decided against assessee.

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• 2014 (6) TMI 823
  CENVAT Credit - penalty on dealer - Fraudulent premises - Fake transaction - Fake invoices - Held that:- There are no categorical findings against the appellant so as to prove the charges as alleged in the show-cause notice inspite of there being names available of the alleged supplier in the invoices from whom the appellant allegedly purchased, no enquiry appears to have been done. Further, it is seen that the appellant is situated in Mumbai, whereas the invoices recovered from M/s Accelerated Synthetics Pvt. Ltd. allegedly issued by the appellant are printed by one Ambaji Stationery, Surat. No enquiry has been made with the printer as to who got the stationery printed. Further, the appellant had stated that he had obtained the registration under Central Excise on being inspired by one Chandubhai Patel of Surat, who has also admitted in his statement before the Revenue authorities that he had also registered one firm at Surat with the Excise Department in similar name of ‘Shiv Trading Company'. Chandubhai Patel has been found to be involved in the issue of bogus CENVAT invoices in other names also. It appears that the said Chandubhai Patel has been instrumental in the mischief by using the name of the appellant without his knowledge. Moreover, it is found that the adjudicating authority has imposed penalty without any categorical finding against the appellant. Rather the penalty is imposed on the basis of assumption and presumption which have no legs to stand - Decided in favour of appellant.

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• 2014 (6) TMI 822
  Maintainability of appeal - leviability of interest on the amount of duty paid on the goods lost in transit - recovery of duty on goods lost in transit and interest thereof - Held that:- applicant had preferred a revision application before the Government of India challenging the demand of duty confirmed on the loss of goods in transit and also the levy of interest, confirmed by the lower authorities. The revisionary authority after detailed discussion of all issues raised including levy of interest under Section 11AA and Sec. 11AB, had remanded the matter to the adjudicating authority for the limited purpose of quantifying the interest, under the respective provisions, for the period prior to 11-5-2001 and after 11-5-2001. Pursuant to the said remand order, the adjudicating authority has quantified the interest as Rs. 38,81,792/- for the period prior to 11-5-2001 and Rs. 6,27,339/- for the period after 11-5-2001. We find from the records that the appellant had at no point of time challenged the leviability of interest under Section 11AA or Section 11AB as directed by the revisionary authority, before any other higher forum. The learned advocate for the appellant had submitted that in the present appeal, they are challenging both the quantification as well as leviability of interest. We do not find merit in the said submission of the appellant for the reason that the revisionary authority has discussed in detail the liability to duty as well as interest, on the goods lost in transit, in the revision order and the same, in our view has attained finality. - Appeal not maintainable - Decided against assessee.

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• 2014 (6) TMI 821
  CENVAT Credit - nature of duty paid by the 100% EOU - Revenue has taken a view that entire amount should not have been taken as credit and credit should have been limited to the amount attributable to excise duty(CVD) portion of the total duty paid by 100% EOU - Held that:- According to Section 3 of Central Excise Act 1944, the duty payable by a 100% EOU is excise duty only and the quantum is required to be worked out based on the customs duty leviable on the goods. When the statute itself provides that what is being paid by a 100% EOU is excise duty, the question of denial of benefit of Notification or the CENVAT Credit Rules does not arise. In this view of the matter, we consider that the appellant has made out prima facie case for complete waiver. Accordingly, there shall be complete waiver and stay against recovery of the dues during the pendency of the appeal - Stay granted.

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• 2014 (6) TMI 820
  Duty demand - Penalty - Mis declaration - Suppression of facts - Held that:- Even though the learned advocate argued that non-mention of duty is not mis-declaration, I am unable to agree with this view. Mis-declaration is nothing but making a declaration which is not true. In this case, it is clear that the assessee had mentioned that the amount of duty had been paid which, in fact, had not been paid. Therefore, I agree with the view submitted by learned AR that as far as penalty is concerned, in this case, Rule 25 has been correctly invoked. As regards the liability of Rs. 53,768/-, there is no dispute and learned counsel has fairly agreed that they are required to deposit the amount in cash in view of the decision of the High Court. - appellant is liable to pay Rs. 53,768/- with interest. On payment of this amount, the appellant shall be eligible for taking Cenvat credit which has been reversed earlier, into their account. As regards penalty is concerned, taking into submissions made by both sides, I consider, it is in the interest of justice, that the penalty be reduced to Rs. 30,000 - Decided partly in favour of assessee.

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• 2014 (6) TMI 819
  Valuation of goods - Inclusion of freight charges - Held that:- As per the provisions of Rule 5 of the Valuation Rules, the actual cost of transportation from the place of removal to place of delivery of such excisable goods is excluded from the transaction value provided the cost of transportation is charged to the buyers, in addition to the price of goods and shown separately in the invoices for such excisable goods - freight charges are separately recovered from the customers by issuing debit note, therefore the respondents are fulfilling the conditions imposed under Rule 5 of the Valuation Rules. In these circumstances, we find no infirmity in the impugned order - Decided against Revenue.

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• 2014 (6) TMI 818
  Classification of goods - Refined Palm Stearin - Classification under heading 1511 90 or under heading 3823 11 - extended period of limitation - Held that:- The appellant claims to have had believed during the period of dispute that their product was classifiable under heading 1511 and, hence, they cleared the goods by claiming the benefit of the relevant exemption notification. It further appears from the submissions of both sides that this Bench, in two recent stay orders, granted waiver and stay in favour of similar manufacturers of 'refined palm stearin', having found prima facie case on the ground of time-bar - there was no clearance of the goods during the period from April 2011 to March 2012 and that the impugned demand is practically for the period from September 2008 to March 2011, which is apparently beyond the normal period of limitation, the show-cause notice having been issued as late as on 31.5.2012. - stay granted.

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• CST, VAT & Sales Tax

• 2014 (6) TMI 829
  Grant of loan equal to VAT / CST - whether amount to Refund of VAT - fiscal incentives to the Tata Motors Limited for Nano project - Resolution passed to grant loan equivalent to amount of VAT Paid - Whether the Government Resolution dated 1st January, 2009, providing for a loan equal to the gross value of VAT and Central Sales Tax payable to the State Government, amounts to refund of tax, which could be termed as contrary to law or against the public interest - Held that:- A bare perusal of the preamble would indicate the object and the intention behind passing of such resolution. The Government of Gujarat took notice of the fact that the auto sector in the States like Maharashtra, Tamil Nadu and at the outskirts of the State of Delhi has been doing very well over a period of time and all the three States have been dominating in the auto sector. On the other hand, the State of Gujarat has only one such project. Although the State of Gujarat has a strong engineering base and there are number of engineering units in the MSME sector, yet the same are engaged in the supply of auto components as OEMs to the auto manufacturers. The Government of Gujarat noticed that no major industry had been set up in the State during the recent past. As the respondent No.3, Tata Motors Limited is a leading vehicle manufacturing company and has extensive sales network through out the territory of India, the Government of Gujarat found that the investment by the respondent No.3, Tata Motors Limited would provide the State with opportunities for infrastructure development, growth of allied industries and development of the local economy, by providing employment opportunities for skilled and unskilled workers. This appears to be the main objective behind the issuance of the Resolution dated 1st January, 2009. Loan advanced in the instant case by the Government in favour of the respondent No.3 is with a view to encourage the establishment of the automobile industries in the State as a part of its industrialization policy and the establishment of the project in question has encouraged establishment of other industries like Ford India Private Limited and Maruti Suzuki India Limited. - The quantum of VAT and Central Sales Tax recovered is only a measure for determining the quantum of loan to be advanced. We have noticed that the maximum amount of loan, which can be advanced on an year to year basis is made dependent on the sales effected by the respondent No.3. The respondent No.1 State of Gujarat instead of giving a lump-sum loan, has made the entitlement of loan dependent upon the performance of the respondent No.3. No legal bar under any of the provisions of the Motor Vehicles Act, 1988, in transferring a vehicle to a distribution and logistic company so that such a company can in turn transfer the vehicle to the dealers in other parts of the country. We are of the view that this itself would not make the vehicle a secondhand vehicle in the hands of the ultimate purchaser - it appears that the TML Distribution Company Limited was incorporated in March, 2008 as a wholly owned subsidiary with a view to look after the outbound logistic needs of the respondent No.3. It is evident that the said distribution and logistic company was established even before the impugned Resolution dated 1st January, 2009 was passed. The object, according to the respondent No.3 of establishing such a distribution company, is to improve the service levels in respect of logistics and distribution and reduction in chain costs in the longer run. It has been brought to our notice that not only the respondent No.3, but various other companies have also such distribution companies. Amount of loan paid by the Government to the respondent No.3 does not amount to refund of tax. As observed by the Supreme Court itself in Amrit Banaspati Co.Ltd. (supra), that exemption from tax to encourage industrialization should not be confused with refund of tax. In the same manner, deferment of tax to encourage industrialization should not be confused with refund of tax. The amount in the present case paid by the Government to the respondent No.3 is a loan and not refund of tax. There is a fine distinction between the two. - No merit in PIL - Decided against assessee.

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• 2014 (6) TMI 828
  Benefit of Amnesty Scheme under KGST - tax with interest paid after the budget announcement but before the effective date - revenue refused to grant the benefit of amnesty scheme since the tax was paid before the effective date on which scheme came into force - Held that:- "budget proposal" was made as to the introduction of the Amnesty Scheme with effect from April 1, 2010 till June 30, 2010 and it was after the said budget speech, the petitioner volunteered to effect the payment of Rs. 75,000 as a token of bona fides to have the liability settled, simultaneously seeking to keep the revenue recovery proceedings in abeyance till the above scheme was notified and the application to be preferred by the petitioner was considered accordingly, as requested in exhibit P2 dated March 20, 2010. Obviously, the declaration of the scheme and the benefit sought to be extended thereunder, enabling the defaulters to opt for the same, to clear the liability, availing of the benefit of waiver of a substantial portion of the liability was with an intent to generate revenue in a better and effective manner, rather as a measure of "give and take" policy. The success of the scheme notified earlier, with regard to the revenue collection, the factual circumstance that the several persons could not make use of the opportunity because of the time-limit and other adverse circumstances as given in exhibit P1 budget speech, etc., weighed much and the "Legislature" thought it fit to renotify the scheme, providing necessary provisions in the Finance Bill, 2010. Declaration of such scheme is purely a matter of "policy" of the Government. Once such a "policy" was declared and proclaimed to be given effect to from April 1, 2010, the first question that comes up for consideration is whether there could have been any further coercive proceedings under the Kerala Revenue Recovery Act from the part of the respondents, particularly the second respondent. The petitioner was very much at liberty to wait till April 1, 2010, filing necessary application to have his matter considered as to the eligibility and to have satisfied the liability without effecting any "pre-deposit" as done by him in the instant case. If the stand of the respondents is to be accepted, it may have to be said that the person who effects a portion of the liability after announcement of the scheme is being penalized for having effected such payment. This court does not think that such an anomalous situation is contemplated, intended or sought to be implemented by State/Legislature. More so since, once the scheme is announced and specified to be commenced from the first day of the relevant financial year, for a specified period, it may not be proper for the State/Department to augment the revenue collection by resorting to coercive steps before the defaulters get an opportunity to apply for and obtain the benefit of the scheme, which otherwise can only defeat or frustrate the scheme itself and in turn, the "policy" of the Government. The respondents are directed to pass fresh orders quantifying the liability of the petitioner, in the application preferred for extending the benefit under the "Amnesty Scheme", giving credit to a sum of Rs. 75,000 paid by him as payment towards a portion of the liability under the scheme, and effect appropriation, in tune with the terms of the scheme. - Decided in favour of assessee.

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