Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 6, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
News
Notifications
Highlights / Catch Notes
Income Tax
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Re opening of assessment - non inclusion of excise duty in the closing stock - The assessment year being 1997-98 - the provisions of section 145A inserted by the Finance (No. 2) Act, 1998 with effect from April 1, 1999 could not be invoked - AT
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Deduction u/s 80IC - are bases exemption - The inspection by the IT Authorities alone is not sufficient to dislodge the evidences submitted by the assessee regarding running of the factory at the premises, thus the product of the assessee qualifies for deduction u/s 80IC. - AT
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TDS u/s 194C - repairing of transformers - CBDT Circular no. 715 - existence of separate contracts upheld - HC
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Scope of the term Due Date - Payments made to the Provident Fund Authority on account of employees’ contribution disallowed - AO was required to take note of Section 43B(b) - HC
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Leave encashment - whether not an ascertained liability and thus liable to be added to the “book profit” under explanation 1 to Section 115 JB - MAT - Held no - HC
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Depreciation on leased assets - section 32 - Section 2(13) and Section 2(24) the income derived from leasing of the trucks would be business income - depreciaion allowed - HC
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Cancellation of certificate granted u/s 12-A - alternative remedy - The order is appealable under Section 253(1)(c) - However, it is not fit to relegate the petitioner to avail alternative remedy by way of appeal as no useful purpose is going to be served. - HC
Customs
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Liability for demurrage - it is contended that the revenue was not at fault in not registering the Bill of Entry - no fault of revenue - no recovery of demurrage charges from revenue - HC
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Anti dumping duty - Disclosure Statement - Plain Gypsum Plaster Boards - It would not be appropriate for this Court to interefere with the proceedings of the Designated Authority, at the stage of the issuance of the Disclosure Statement - HC
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CHA - prohibitory order - That Order under Regulation 21 was passed in violation of principles of natural justice on the face of it is arbitrary and thus not sustainable in law. - HC
Service Tax
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Cargo handling service - once activity carried out is found to be loading or unloading of cargo such activities is covered by category of cargo handling service - AT
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Valuation - inclusion - forward contract service - the turnover charges and other identical statutory charges are not in the nature of commission or brokerage and should not be taxed - AT
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Refund - provision of services to SEZ - consumption in SEZ - services in relation to authorized operations - refund allowed - AT
Central Excise
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Interest on Refund u/s 11BB - claim of interest on interest - Department cannot avoid the liability of accounting for interest on the delayed payment of interest to the extent the same was paid late. - interest on interest allowed at the rate of 9%. - HC
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Penalty - benefit of reduced penalty of 25% u/s 11AC - option to avail - the assessee should be made aware of the option available to him. - HC
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Tribunal dismissed the appeal despite the adjournment sought by the appellant - The order passed by the Tribunal being contrary to the principles of natural justice - HC
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Rebate claim rejected by the revision authority on the ground that ARE-1 has not been prepared and produced by the petitioner. - matter remanded back for reconsideration - HC
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Clandestine removal - entries in Note Book - The action of the department was on the basis of suspicion alone. Law does not permit additions to be made on that basis. - HC
VAT
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Case against sales tax officer (petitioner) - allegation of undue favor of assessee - it is a case of gross negligence. - disciplinary proceedings for wrong decisions to continue - HC
Case Laws:
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Income Tax
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2013 (6) TMI 115
Re opening of assessment - non inclusion of excise duty in the closing stock - Held that:- As decided in ACIT Vs Narmada Chematur Petrochemicals Ltd. [2010 (8) TMI 263 - Gujarat High Court] Tribunal was justified in excluding the excise duty at the time of valuation of the closing stock of finished goods as no deduction for the liability had been claimed by the assessee. The excise duty payable on the finished goods lying in the closing stock at the end of the relevant accounting period had been paid in the subsequent year before the due date of filing of the return of income and that was how the amount was available considering the fact that the assessment had been framed and the show-cause notice was issued much after the close of the accounting year. The assessment year being 1997-98 the provisions of section 145A inserted by the Finance (No. 2) Act, 1998 with effect from April 1, 1999 could not be invoked - In favour of assessee.
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2013 (6) TMI 113
Transfer pricing adjustment - selection of comparable - Revenue determined ALP of the appellant’s international transaction of provision of software development services to its AE at R 26,93,99,396/- as against Rs 24,48,47,439/- declared by the assessee - benefit of +/-5% denied - Held that:- The amended Proviso denying the benefit has been brought on the statute by the Finance (No. 2) Act, 2009 with effect from 1.10.2009 which would be applicable prospectively and would not apply in respect of the stated assessment year, which is prior to the insertion of the amended Proviso with effect from 1.10.2009 & the proviso inserted by the Finance (No 2) Act, 2009 would not apply to an assessment year prior to its insertion.Thus no justification to deny the benefit of +/-5% to the assessee in terms of the erstwhile Proviso for the purposes of computing the ALP. TPO in computing the transfer pricing adjustment using the financial information of the comparable companies available at the time of assessment - Held that:- No credible or cogent reasoning has been brought out to justify the use of multiple data of prior two years and the manner in which it would influence the determination of transfer pricing in relation to the impugned international transaction. Therefore, unable to accept such objection of the assessee against the action of TPO having used the data of the financial year 2005-06 of the comparable companies in order to benchmark the impugned international transaction. Thus, on this aspect, the assessee has to fail. Selection of Comparable - Compucon Software Ltd - Held that:- As company has a high percentage of Related Party Transactions (RPT) exceeding 25% therefore,even on the basis of the threshold adopted by TPO the said company merits exclusion from the list of comparable companies. Secondly, even adopting the threshold of RPT at 25%, the said company is liable to be excluded. In favour of assessee. Inclusion of ICSA (India) Ltd. as comparable - Held that:- No reasons have been advanced by the TPO to do away with the filter adopted by the assessee wherein assessee has excluded comparables wherein the sales are less than Rs One crore and also where the sale are in excess of Rs 50 crores on the basis of the turnover of the comparables TPO is not justified, on a selective basis, to ignore such filter and adopt a comparable company such as ICSA (India) Ltd. for the purposes of comparing international transaction in question which falls outside the search matrix. Even with regard to the filter applied by the assessee on the basis of the level of R & D expenses the situation remains the same. Therefore, once the TPO has accepted such filters in principle, clearly its application is unjustly ignored by him while including ICSA (India) Ltd. as a comparable company. Therefore, direct the TPO to exclude ICSA (India) Ltd. from the final set of comparables. In favour of assessee. Inclusion of Kals Information System Ltd. as comparable - Held that:- The said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. All these aspects have not been factually rebutted thus the said concern is liable to be excluded from the final set of comparables. In favour of assessee.
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2013 (6) TMI 104
Interest income - operating income or not? - Transfer pricing adjustment - Whether loss on sale of fixed assets, interest paid to income tax, office closure cost, amount paid to telephone adalat are abnormal costs to be excluded while computing the operating expenses? - Held that:- Questions concerned are essentially are of fact and do not give rise to any substantial questions of law. Whether a particular activity of the assessee i.e. the interest generating activity in this case, should be taken into consideration in the determination of the ALP is a question which needs to be decided considering the nature of the business of the assessee, which is referred to as “business model” in the transfer-pricing jargon. It has been rightly observed by the Tribunal that such a consideration is not relevant for the purpose of determining the operating income of an assessee for the purposes of transfer pricing regulations. The Tribunal‟s view that in such circumstances the interest income cannot be considered to be its operating income is essentially a question of fact to be gathered from the nature of the assessee's business and its business profile - no substantial questions of law meriting scrutiny of this Court. Whether the appellant is entitled to the benefit of +5% range mentioned in Proviso 92C(2) while computing the Arm’s Length Price - Held that:- This controversy need not detain any more, as it has been put at rest by the amendment made to section 92C by the insertion of sub-section (2A) by the Finance Act, 2012 with retrospective effect from 01.04.2002. Having regard to the amendment made with retrospective effect from the assessment year 2002-03, which is the year before us, no substantial question of law can be said to arise. Expenses relating to closure of the business - whether were abnormal expenses and cannot be considered while arriving at the ALP - Tribunal noted that closure of the Indian units would automatically reduce the costs of the associated enterprisetherefore, would be a relevant issue for inclusion in the operating costs - Held that:- Tribunal failed to keep in mind that even according to the AO the assessee was being compensated for its agency and market support service by way of handling commission and fixed service fee. It seems rather remote that considering the nature of the remuneration received by the assessee from its associated enterprise, the payment of compensation on closure of the Indian offices would have any impact on the transfer pricing issue or in the fixing of the ALP. It therefore, appears that having regard to the nature and manner in which the assessee is remunerated for its services, the payment of compensation to the Indian units on their closure would represent abnormal costs which have to be excluded in the determination of the ALP. The income tax authorities as well as the Tribunal have erred in holding to the contrary - in favour of the assessee. Attribution of the allocation of overhead expenses to trading of goods segment vis-a-vis attributing it to agency support services - Held that:- It is nobody's case that the expenses were not incurred. It is also not the case of the revenue that the bifurcation of the indirect expenses on the basis of revenues is not an appropriate “allocation key”. The decision of both the CIT (A) and the ITAT is based on the undisputed figures submitted by the assessee. These figures have also been scrutinized by the transfer pricing officer. Therefore, no perversity in the decision of the Tribunal because it is based on the evidence embedded in the books of accounts themselves. The charge of perversity raised by the revenue seems to be unjustified. T- no substantial question of law arises.
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2013 (6) TMI 103
Understatement of the sale proceeds - Search u/s 132 - A.O. had determined the income u/s 44 AD and has separately deducted the commission from it - Held that:- Perusing the material in the matter it is found that there was no evidence in the matter that the excess amount, if any, was collected by M/s Goyal Builders or even if it was collected then it was passed on to the respondent. There was no search, survey or seizure of the premises of the assessee. Apart from this, the department had not examined any purchaser or flat owner to verify the correctness of the aforesaid noting that some higher amount was paid by the said purchaser to M/s Goyal Builders or the fact that actual price was much higher to the price which was recorded in the account books. The Tribunal have also found that if any amount was collected in excess to the agreed price then M/s Goyal Builders could have been liable for that and not the assessee which is reasonable. Though there may be some doubt about the price of the flats but until and unless it could have been proved by some evidence, aforesaid doubt cannot take place of proof. Until and unless such noting is corroborated by some material evidence, AO erred in making addition in the income. So far as the applicability of Clause 5 of Section 44 AD is concerned, when the assessee had maintained accounts books, vouchers and other documents as required under Section 2 Sub Section 44 AA and got them audited and furnished it alongwith audit report then such benefit should have been extended to the assessee. In the present case audited accounts books were maintained and there was no question of disbelieving them in absence of any cogent evidence. In favour of assessee.
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2013 (6) TMI 102
Deduction u/s 80IC - are bases exemption - AO concluded that the assessee has not carried out any manufacturing activities at the factory premises - as per AO considering the span of purchase of raw materials and sale of finished goods, it was not possible to manufacture the articles shown by the assessee in the return of income - Held that:- This was the third year of the existence of the assessee firm. The assessee has filed the various documents to establish that it was engaged in the business of manufacturing of perfumery/aromatic compounds at, Uttarankhand as confirmed by a copy of licence from Directorate of Industry, Kotdwar which shows that the assessee was categorized as unit producing Natural Atras and Perfumery Compound. This licence was issued on 27.11.2006. The address in this licence is B-14, Balbhadrapur Industrial Area, Kotdwar, Garhwal. This registration was w.e.f. 26.11.2006. The other document filed by the assessee is Form ST-2 Certificate for Registration u/s 69 of the Finance Act, 1994 issued by the Superintendent of Customs & Central Excise Range Kotdwar, other documents like order of the Commercial Tax Department, Uttarakhand u/s 25 (7) and Section 9(2) by Shri S.S. Negi, Deputy Commissioner, Vanijya Kar, Kotdwar, where the tax liability by the assessee has been decided decalring product is self produced perfumery oil. The tax liability of the assessee had been made of ₹ 94,64,794/- and after making the adjustment to a prepaid taxes of ₹ 8,11,044/-, the balance was to be paid. In this order, the details of the raw material also elaborated, i.e. the Jari Booti, DOP, LLD, Gas, Packing Material and Imported Perfumery Compound. The assessee has also filed request dated 07.12.2006 for obtaining no objection certificate from Fire Department again mentioning the place of the industry at B-14, Balbhadrapur Industrial Area, Kotdwar also confirmed by no objection certificate from the Fire Department. Revenue had not established any thing contrary to these documents. The assessee has also placed documents with regard to the dispatch of finished goods by railway parcel bill from Kotdwar to Delhi establishing that product was sold out and also dispatched from Uttarakhand. Confirmations from debtors and creditors are also filed which were not questioned by AO. The assessee also submitted the rent agreement in respect of the factory. The main raw material was Rose Kashmir which was used in production of perfumery compound along with Jari Booti, DOP, Gas, Small Drum and P. Compound. The assessee has also placed certificate from Chartered Engineers in respect of the production of finished goods in short period wherein the process of mixture of all the material is boiled in a vessel through gas or fire wood heat treatment process and vapor generated in this process which is called extract. The utensils at the premises of the assessee were for the capacity of more than 500 kgs. and more. All these facts show that the assessee has submitted independent evidences regarding the existence of the production unit at B-14, Balbhadrapur Industrial Area, Kotdwar during the relevant period. The inspection at the later day by the IT Authorities alone is not sufficient to dislodge the evidences submitted by the assessee regarding running of the factory at the premises, thus the product of the assessee qualifies for deduction u/s 80IC. Moreover on the rule of consistency where the assessee has already enjoyed the benefit of section 80IC in the immediate presiding year and there is not change in the position of law and facts then it shall not be proper to deny the benefit of section 80IC. Also see DCIT vs. Natural Fragrances [2013 (1) TMI 158 - UTTARAKHAND HIGH COURT]. Decided in favor of assessee.
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2013 (6) TMI 101
Penalty u/s 271(1)(c) - held that:- this is not a case which would attract penalty under Section 271(1)(c) of the Act. The question whether gains arising out of exercise of cashless options was long term capital gains or short term capital gains could have been a contentious issue at the material time. Further the facts of this case do not indicate that the assessee had furnished inaccurate particulars or concealed income. This court has also considered the issue of penalty in a similar situation in the case of Commissioner of Income Tax v. Jaswinder Singh Ahuja [2013 (2) TMI 581 - DELHI HIGH COURT] - Decided in favor of assessee.
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2013 (6) TMI 100
Processing charges - whether be excluded from the computation of turnover as well as eligible profit so as to have the effect of reducing the assessee's claim under Section 80 HHC to NIL? - true and correct interpretation of the provision of Section 254 for the Tribunal to pass the impugned order which has the effect of reducing the relief under Section 80 HHC to "NIL" - Held that:- The assessee is manufacturing and exporting plastic woven fabric bags and paper reinforced bags & processing charges received is on account of conversion of granules to woven fabric/liners or bags and also printing of bags which can not be treated as having any nexus with the export activity of the assessee. As assessee has separately shown a sum of Rs.46,31,715 as processing charges and not included it as part of sales in the P/L account filed alongwith the return. By not treating the processing charges as part of the total turnover, the assessee has itself treated it as receipts in the nature of income from other sources. There is no denying the fact that the deduction u/s 80 HHC is only meant for assessee who earned profits from exports. Any business profit other than export activity is not eligible for deduction u/s 80 HHC. AO has rightly treated the processing charges as separate head of income as it was not linked to export activity of the assessee reducing 90% of it from the business profits for calculating the deduction u/s 80 HHC. The order of the A.O. in excluding the processing charge from the "business profits" for the purpose of computation and deduction under Section 80 HHC appears reasonable. Enhancement of addition by Tribunal - rectification of order - Held that:- In the instant case, the A.O. has allowed the claim of deduction by an order passed u/s 154 on 17.06.2004 for a sum of Rs.16,89,778/-. Thus, the benefit of this amount was allowed by the A.O. and the same was enhanced by the first appellate authority to Rs.28,15,3162 vide order dated 14.02.2005, but the Tribunal has not allowed either one. The relief which was given by the A.O. was also declined by the Tribunal and the same is not permissible in the eye of law. Hence, the deduction allowed which was already allowed by the A.O. vide order passed u/s 154 dated 17.06.2004 for a sum of Rs.16,89,778/-. The assessee is entitled to get this relief. For this purpose, the impugned order passed by the Tribunal is modified. Except the relief for Rs.16,89,778/-, the impugned order passed by the Tribunal upheld - in favour of the revenue partly.
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2013 (6) TMI 99
TDS u/s 194C - repairing of transformers - CBDT Circular no. 715 - one consolidated contract or two separate and district contract for repair and supply of material - held that:- the view taken by the Tribunal is perfect and justified. The Tribunal has recorded a finding that TDS was rightly deducted only with reference to the labour charges involved and there was no short deduction. It is found that the contract in question was divided into 4 components on supply of leg coil, transformer oil, various supply items and labour charges which negated the claim of the department on the ground that no fee was charged by the contractors.
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2013 (6) TMI 98
Payments made to the Provident Fund Authority on account of employees’ contribution disallowed - delay in payment as obligation discharged in the next accounting year but before filing of return for the accounting year when obligation accrued - Held that:- The due date referred to in section 36(1)(va) must be read in conjunction with section 43B(b) which states that the due date is the due date any time before filing the return for the year in which the liability to pay accrued alongwith evidence to establish payment thereof. AO proceeded on the basis that “due date”, as mentioned in section 36(1)(va) is the due date fixed by the Provident Fund Authority, whereas in the matter of culling out the meaning of the word “due date”, as mentioned in the said section, AO was required to take note of Section 43B(b) and by not taking note of the provisions contained therein committed gross error, which having been rectified by the Appellate Authority and confirmed by the Tribunal, there is no scope of interference.
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2013 (6) TMI 97
Leave encashment - whether not an ascertained liability and thus liable to be added to the “book profit” under explanation 1 to Section 115 JB - MAT - Held that:- As decided in Bharat Earth Movers Versus Commissioner of Income-Tax [2000 (8) TMI 4 - SUPREME Court] if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. Thus provision for meeting the liability for encashment of earned leave by the employee is an admissible deduction.
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2013 (6) TMI 96
Penalty u/s 271(1)(C) - difference in value of disclosure of sale price as compared with valuation of stamp valuation authorities - ITAT deleted penalty levy - Revenue contended that the assessee had a choice to dispute the valuation on the basis of the deemed value, but the assessee did not take that opportunity - Held that:- The assessee had a choice or he could have litigated. The fact remains that the actual amount received was offered for taxation. It is only on the basis of the deemed consideration that the proceedings under Section 271(C) started. The revenue has failed to produce any iota of evidence that the assessee actually received one paise more than the amount shown to have been received by him.In favour of assessee.
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2013 (6) TMI 95
Reassessment proceedings - entitlement to depreciation claim u/s 32 on leased assets - Held that:- The assessee is a leasing company which leases out trucks that it purchases. Therefore, on a combined reading of Section 2(13) and Section 2(24) the income derived from leasing of the trucks would be business income, or income derived in the course of business, and has been so assessed. Hence, it fulfills the aforesaid second requirement of Section 32 viz. that the asset must be used in the course of business. In view of judgment of I.C.D.S Ltd. vs. Commissioner of Income Tax [2013 (1) TMI 344 - SUPREME COURT] assessee satisfied the condition that it must use the asset for the purposes of business. It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 would stand satisfied. In favour of assessee.
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2013 (6) TMI 94
Cancellation of certificate granted u/s 12-A - the objects of the petitioner's society is not charitable as opined by AO - Whether the writ petition maintanable against the availability of alternative remedy by way of appeal as provided for under Section 253(1)(c) - Held that:- The impugned order dated 17th March, 2009 cancelling the registration of the petitioner is totally without jurisdiction and illegal in view of the law as it then stood as it has been held that regarding cancellation of registration which was granted on April 1, 1999, u/s 12A it is true that there was no express provision in section 12A for cancellation of the registration. The Court took note of the applicability of Section 21 of the General Clauses Act, 1897 and held that the registration cannot be cancelled in exercising of power under Section 12-A. See CIT Versus Manav Vikas Avam Sewa Sansthan [2010 (2) TMI 882 - Allahabad High Court]. Finding substance in the argument of petitioner that the impugned order is liable to be quashed as it is totally without jurisdiction as the proceedings giving rise to the present writ petition was initiated on facts noticed by the Assessing Authority during assessment proceedings in AY 2005-06 as carried in appeal successfully by the assessee. The department carried the matter in further appeal before the ITAT who on 13th May, 2011 has restored the matter back to the C.I.T. (A) with directions on some other issue, not in issue here. The scope of inquiry by the C.I.T.(A) has been restricted to some calculation part. Thus this fact as it transpired during the course of argument for the purpose of record only. The impugned order is appealable under Section 253(1)(c) - However, it is not fit to relegate the petitioner to avail alternative remedy by way of appeal as no useful purpose is going to be served. The order is without jurisdiction. In view of the decision Whirlpool Corporation vs. Registrar of Trademarks Mumbai & others [1998 (10) TMI 510 - SUPREME COURT] the objection raised by the respondent is overruled.In favour of assessee.
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Customs
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2013 (6) TMI 93
Liability for demurrage - it is contended that the appellant (revenue) was not at fault in not registering the Bill of Entry of the respondent No.1 on the ground that the earlier Bill of Entry with respect to the same goods, had been filed by the respondent No.3 and since DRI enquiry was underway against the sister concern of the respondent No.3. Held that:- matter to be no longer res integra and being covered by the judgments in International Airports Authority of India Vs. Grand Slam International [1995 (2) TMI 70 - SUPREME COURT OF INDIA] and Union of India Vs. Navshakti Industries P. Ltd. [2013 (5) TMI 41 - DELHI HIGH COURT]. - Resultantly, the judgment of the learned Single Judge cannot be sustained. Unfortunately, before the learned Single Judge, attention to Grand Slam International was not drawn and the same does not find mention in the impugned judgment. - Decided in favor of revenue.
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2013 (6) TMI 92
Anti dumping duty - Disclosure Statement - Plain Gypsum Plaster Boards (hereinafter referred to as the `subject goods'), originating in or exported from China PR, Indonesia, Thailand and United Arab Emirates - writ petition - territorial jurisdiction of high court - held that:- petitioners have shown that they have sufficient cause of action for this Court to entertain the writ petitions. It has been shown that the petitioners are carrying on their business operations having their offices in Chennai, in the State of Tamilnadu. It has also been shown that certain imports of the subject goods are being made through the Chennai and the Tuticorin Ports. Provisional Anti-Dumpting Duties have also been levied on the imported goods, by the authorities in Chennai. As such, it can be held that, atleast a part of the cause of action for the filing of the writ petitoins had arisen within the territorial jurisdiction of this Court. Further, it is noted that, on certain earlier occasions, this Court had entertained writ petitions, wherein, similar issues had arisen, as in the present cases. Therefore, the contentions raised on behalf of the respondents concerned stating that this Court does not have the jurisdiction to entertain the writ petitions cannot be accepted. Accordingly, this Court holds that the writ petitions are maintainable, before this Court. It would not be appropriate for this Court to interefere with the proceedings of the Designated Authority, at the stage of the issuance of the Disclosure Statement, by the said authority, under Rule 16 of the Anti Dumping rules, especiallly, in view of the fact that the petitioners have not shown sufficient cause or reason for such intereference. As such, the writ petitions are found to be premature in nature and that they have been filed based on a mere apprehension that the impugned Disclosure Statement issued by the Designated Authority would have an adverse effect on the petitioners, at the later stages of the proceedings. - writ petition dismissed.
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2013 (6) TMI 91
CHA - prohibitory order - requirement of issuance of Show cause notice - The order passed by the commissioner challenged only on the ground that before passing the prohibitory order against the petitioner, an opportunity of hearing was not given to the petitioner. - Held that:- It is now well-settled law that even administrative orders which affects the rights of a party can be passed only by following the principles of natural justice. That Order under Regulation 21 was passed in violation of principles of natural justice on the face of it is arbitrary and thus not sustainable in law. - liberty is granted to the respondent to pass fresh order in accordance with law.
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Corporate Laws
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2013 (6) TMI 90
Penalty u/s 15H(ii) of SEBI Act, 1992 - case of SEBI that all the 7 allottees acted in concert with each other for the purpose of acquiring a huge number of shares of PCL Comp through preferential allotment but failed to come out with a public announcement to acquire the said shares as per Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - penalty of ₹ 20 lacs on 11 appellants and 4 more noticees guilty of violating the provisions of Regulation 10 of the SAST Regulations, 1997 jointly and severally - Held that:- As it is evident that all seven allottees had bank accounts with Vinayak Sahakari Bank & all the bank accounts had negligible balance in them before the date of the allotment. Few of them even opened their bank accounts just before the date of allotment of the shares. There was a common pattern of circular fund flow, involving Hirak Biotech Ltd. and Sarang Chemicals Ltd, both of which are group concerns of PCL Comp. All the seven allottees were funded by Hirak and one was funded by Sarang. All the shares allotted were pledged with the Ahmedabad Peoples' Bank against loans taken by PCL Comp and its group companies, including Hirak and Sarang. The address of another allottee, Rudra Securities, prior to 11/11/2008 was the residential address of the 1st Appellant. No cogent explanation has been provided by the Appellants with regard to the receipt of funds, the application and the allotment of shares, except to say that they raised debt to apply. It is the admitted position before the adjudicating officer that 'no documents were available' in support of this contention. Thus a minute perusal of the impugned order thus makes it abundantly clear that the 7 allottees in question acted with a common purpose and design in the matter of allotment of 2.90 crore preferential shares in question. It is established by the learned adjudicating officer beyond doubt that all the 7 persons functioned as a one entity for all practical purposes and intents. All the three companies in the appeals, who acted through individual directors only, are equally responsible for the wrongful acts in question and hence liable to pay the penalty imposed upon them by the impugned order. Violation of the principles of natural justice - Held that:- As it is noted that all the relied upon documents, which were asked for by the appellants, were supplied to them by the adjudicating officer. Adjournments on personal grounds to the appellants for personal hearing were also liberally granted by the adjudicating officer in consonance with the principles of natural justice. Therefore, the plea regarding violation of principles of natural justice being raised at this stage is an afterthought and hence liable to be rejected. Breach of Article 14 read with Article 21 of the Constitution of India - Held that:- The adjudicating officer has given convincing reasoning regarding exoneration of Shri Ashok H. Shah and Ms. Neha Shethwala appreciated by Tribunal Therefore there is no violation of Articles 14 and 21 of the Constitution of India. No arbitrary or unreasonable approach adopted by the adjudicating officer towards any of the appellants or noticees. The argument of the appellants, regarding infringement of Art.14, therefore, stands rejected. In the facts of the present case, even if the expression "personal liberty" is interpreted to include in its ambit the "right to livelihood", as pressed by appellants, the same cannot be extended to allow the appellants to carry on trade or business in shares against the statutory and regulatory norms prescribed lawfully by the SEBI. It would, otherwise, be injurious to public interest and may also have insidious effect on the capital market. Therefore, the plea advanced by the appellants based on Art. 21 also fails. Appeal dismissed.
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Service Tax
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2013 (6) TMI 109
Cargo handling service - service tax demand along with interest and penalties - Department felt that activity of handling coal prior to 01.06.2007 was covered under cargo handling service - assessee is contesting the levy of service tax under Cargo Handling Services as Coal in this case is not cargo - Held that:- As decided in Gangadhar Bulk Movers Pvt. Ltd. case [2011 (11) TMI 358 - CESTAT, MUMBAI] loading of coal is done on tippers by hiring pay-loaders and the tippers transport the coal from one place within the mining area to another place and unload it there. As regard the contention of the Appellants that no manual labour is involved in loading and unloading is not factually correct and is contrary to terms and conditions of work order. Moreover, the definition of cargo handling service place no restriction on loading or unloading by manual or mechanical method. It is pertinent that loading and unloading are not incidental to transportation in this case, since for transportation, there is a separate work order, which is not the subject matter of this case. It is also pertinent that once the activity carried out, is found to be loading and unloading of cargo, such activity is clearly covered under the category of cargo handling service. The cargo is not only goods transported by a vessel or by aircraft, but also goods transported by motor vehicle, and undoubtedly, the tipper is motor vehicle. Thus once activity carried out is found to be loading or unloading of cargo such activities is covered by category of cargo handling service - Revenue’s appeal is allowed.
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2013 (6) TMI 108
Commission for selling the products of AIE - demand of service tax along with interest and penalties under Section 76,77 and 78 - assessee is engaged in buying & selling of products of M/s Amway India Enterprises Pvt. Ltd. (AIE) through a chain of distributors on monthly turn over basis - Held that:- As appellant did not obtain service tax registration and also did not file any service tax return and there by the information regarding the taxable amount received and information of the commission was not declared to the department. Commissioner (Appeal)s findings that appellant deliberately evaded the service tax on such commission received from AIE is sustainable. Appellant contention that since tax along with interest has been paid there was no need of issuance of Show Cause Notice is not acceptable as in such cases Show Cause Notice can be issued as held in case of British Airways Plc. Vs. Commissioner of Service Tax, New Delhi (2012 (7) TMI 670 - CESTAT, NEW DELHI). Contention that no penalty can be imposed u/s 76 and 78 simultaneously also not acceptable as it is found that Section 76 and 78 prior to amendment of Section 78 with effect from 16.05.2008 operated in different fields and penalty is imposable under both the Sections even if offence committed is in course of same transaction as held in case of British Airways Plc. (Supra). As the appellant has not paid the 25% of the tax amount as penalty within 30 days of the receipt of the Adjudication order the appellant is not liable for any concession in penalty. Against assessee.
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2013 (6) TMI 107
Turnover charges & V-SAT Charges - valuation - inclusion - forward contract service - whether would form part of the value for the services rendered by them as said charges are collected by the applicant from its customers and deposited with the respective commodity exchanges - Held that:- As decided in M/s. LSE Securities Ltd. Vs. CCE [2012 (6) TMI 364 - CESTAT, New Delhi] the turnover charges and other identical statutory charges are not in the nature of commission or brokerage and should not be taxed under the said category. Similarly, in the case of Saurin Investments Pvt. Ltd. Vs. CST, Ahmedabad (2009 (5) TMI 99 - CESTAT, AHMEDABAD) has held that the fixed charges collected from the customers and deposited with the stock exchangers will not be added to the value of the services taking note of the Boards Circular No.B-11/2000-TRU dated 9.7.2001.
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2013 (6) TMI 106
Refund - provision of services to SEZ - consumption in SEZ - services in relation to authorized operations - held that:- there is no dispute as to the Service Tax liability having been discharged by the service provider, that the services were received by the appellant, and Service Tax provider is registered with the authorities and raised a proper bill. - the appellant is a SEZ unit, is eligible to receive these services without payment of Service Tax. In view of decision in Tata Consultancy Services Ltd (2012 (8) TMI 500 - CESTAT, MUMBAI) and Zydus Tech. Ltd. [2014 (7) TMI 1014 - CESTAT AHMEDABAD] refund allowed, decided in favor of assessee.
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Central Excise
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2013 (6) TMI 88
Interest on Refund u/s 11BB - claim of interest on interest - long battle for getting refund of amount deposited during litigation - held that:- It is true that the decision of this court in case of Afrique Tradelinks Pvt. Ltd. (2004 (2) TMI 651 - High Court of Gujarat) and the Apex Court in the case of Ranbaxy Laboratories Ltd. (2011 (10) TMI 16 - Supreme Court of India) were rendered subsequent to the Deputy Commissioner taking a contrary view. However, the Departmental clarification itself was sufficiently clear and was binding on the Deputy Commissioner. Reference to the decision of the Tribunal in case of Bharat Heavy Electricals Ltd. (2001 (10) TMI 143 - CEGAT, COURT NO. I, NEW DELHI)was wholly erroneous. All that the Allahabad High Court in case of Super Electronics (1999 (5) TMI 37 - HIGH COURT OF JUDICATURE AT ALLAHABAD) provided was for interest after three months of the date of refund application. The petitioners were made to engage in continuous litigation for years together before initially their refund claims were sanctioned even after the issue of classification by the Board and the appeal was decided in their favour. Thereafter, on such refund, interest was improperly denied. Ordinarily grant of interest flows either from statutory provision or contractual relations between the parties. In the present case, there is no statutory provision providing for interest on interest. In the present case, however, we find that the excise authorities acted rather unjustly and initially delayed not only the refund, but thereafter, unjustly withheld the interest payable thereon. At all stages, the petitioners had to approach higher authorities in further appeals. Department cannot avoid the liability of accounting for interest on the delayed payment of interest to the extent the same was paid late. - interest on interest allowed at the rate of 9%. - Decided in favor of assessee.
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2013 (6) TMI 87
Penalty - benefit of reduced penalty of 25% u/s 11AC - option to avail - held that:- in its adjudication order the adjudicating authority under the Act should explicitly state the options available to the Assessee under Section 11AC of the Act. Once the choices are made known to the Assessee and it still does not take advantage of the first proviso to Section 11AC of the Act, it will be entirely at its own peril. Therefore, it would be beneficial, both from the point of view of the Revenue as well as the Assessee, if the options available to the Assessee are mentioned in the adjudication order itself. It is seen that these proviso to section 11AC of the Act have been specifically inserted to ensure speedy recoveries of the disputed amount. It is an incentive given to the assessee that if he pays the duty amount along with interest, the penalty is reduced to 25% of the duty . This provision is beneficial to the department as well as the assessee as rightly pointed out by Delhi High Court in K.P. Pouches (P) Ltd. [2008 (1) TMI 296 - HIGH COURT OF DELHI]. and therefore, the assessee should be made aware of the option available to him. It will be open to the appellant assessee to deposit 25% of the penalty determined by the adjudicating authority within 30 days from today to avail benefit of reduced penalty under Second Proviso to Section 11AC of the Act. - decided in favor of assessee.
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2013 (6) TMI 86
Tribunal dismissed the appeal despite the adjournment sought by the appellant - tribunal refused to adjourn the matter without assigning any proper and cogent reason for not adjourning the matter. - held that:- Tribunal has refused to adjourn the mater on 26-12-2012, which has caused great prejudice to the petitioner as the Stay Application could no be argued on merit on behalf of the petitioner and the Tribunal passed ex parte order directing the petitioner to deposit ₹ 40,000,00.00 (Rupees Forty Lacs) within a period of 8 weeks. The order passed by the Tribunal being contrary to the principles of natural justice, is liable to be quashed as direction is liable to be issued for deciding the Stay Application of the petitioner afresh giving opportunity of hearing - decided in favor of assessee.
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2013 (6) TMI 85
Rebate claim rejected by the revision authority on the ground that ARE-1 has not been prepared and produced by the petitioner. - held that:- Government of India in the case of In Re : Commissioner of Central Excise, Bhopal [2005 (11) TMI 102 - GOVERNMENT OF INDIA] has held that where exports have been effected without the ARE-2, the rebate claim of the exporter could be considered. Orders quashed and set aside and the matter is restored to the file of the adjudicating authority for fresh consideration in accordance with law. - the adjudicating authority shall consider the applicability of ratio laid down therein to the facts of the present case.
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2013 (6) TMI 84
Clandestine removal - entries in Note Book - double clearance on the same set of invoice by changing the time of preparation/removal on the said invoices. - held that:- The revenue had sought to make additions only on the basis of certain entries in the note book which they were not able to corroborate from any other independent evidence. The action of the department was on the basis of suspicion alone. Law does not permit additions to be made on that basis. The revenue is required to substantiate with certain material that there has been an attempt to evade excise duty. In the light of the findings recorded by the Tribunal which have not been shown to be erroneous or perverse, no question of law much less substantial arises for consideration in this appeal. - Decided against the revenue.
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CST, VAT & Sales Tax
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2013 (6) TMI 114
Liquor bar license - Inclusion of the name of co-licensee in a license - substitution of the name of the petitioner in place of his deceased mother in the liquor licence - Held that:- As upon the death of the mother licensee her partner being the petitioner would continue to hold the license but till the subsistence of the license the heirs and legal representatives of the deceased mother licensee have to be brought on record appears to be correct. The only condition for consideration at the time would be that if the heirs are brought on record and they become co-licensee as different from co-partners their eligibility has to be considered under the 1968 rules. In case they are eligible they shall be co-licensee with the petitioner in the place of their deceased mother and shall be governed by the 1968 Rules, in case they claim status of partner for the term of the license. Therefore, when the impugned order has actually ordered substitution/mutation of the heirs and legal representatives of the deceased licensee Smt. Sumitra Devi it has not committed an error. However, a co-licensee has to be eligible and his eligibility ought to have been ascertained before passing such an order. The name of respondent no. 2 [Rajesh Kumar Singh] has already been directed to be made in the license. The authority is therefore required to consider whether he was an eligible person to be made as co-licensee/partner under the 1968 Rules and whether he would in any manner be entitled to be considered as partner under the 1968 Rules. The eligibility has to be and should be considered by the authority concerned forthwith.
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2013 (6) TMI 111
Case against sales tax officer (petitioner) - disciplinary proceedings for wrong decisions - allegation of undue favor of assessee - The stand of the petitioner was that 2.5 times of the tax was the maximum penalty which could be levied and thus a wrong discharge of his quasi judicial functions could not be made the subject matter of a domestic inquiry. As regards the tax levied, he stated that since the dealer told him that the end use of the wax was manufacturing candles, he levied the correct tax. Held that:- In the instant case there is no charge of any oblique motive against the petitioner. - As we read the evidence in light of the charge and the Statement of Imputation, we concur with the view taken by the Tribunal that it is a case of gross negligence. We highlight. It is not a case where the stand of the department is that after considering the relevant material a wrong assessment was made. Though the counsel (of the petitioner) did not expressly concede, but tacitly admitted that the petitioner gullibly accepted what fell from the mouth of the owner of the goods. - petition dismissed.
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2013 (6) TMI 110
Tax on Steel Tubes and Pipes @ 4% under UP Act, 2008 - notification dated 29.9.2008 omitting Entry 94 meaning thereby the petitioner has to pay tax @ 12.5% - Thereafter another notification dated 15.9.2008 the Entry 94 was reinserted - Grievance of the petitioner that from 29.9.2008 to 15.1.2009, the goods is being treated as 'unclassified' and 12.5% tax is being levied on it - Held that:- It is now well recognized principle as laid down in Whirlpool Corporation Versus Registrar of Trade Marks, Mumbai & Ors. [1998 (10) TMI 510 - SUPREME COURT] that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. Ordinarily, relief under Article 226/227 of the Constitution of India, is not available, if an efficacious alternative remedy is available to an aggrieved person. As petitioner does not dispute that there is an efficacious statutory alternative remedy by approaching the Commissioner under Section 59 of the Act, but since vires of the notification has been challenged and as such, alternative remedy is not a bar, to which respondents submits that the Appellate Authority, while exercising the appellate jurisdiction, can also look into the legality of the notification and has every power to annul it, if the same is in breach of law. He further added that the Appellate Authority performs judicial functions independently and as such, submissions so advanced by petitioner cannot be accepted. In decided in United Bank of India v. Satyawati Tondon and others [2010 (7) TMI 829 - SUPREME COURT] and Kanaiyalal Lalchand Sachdev and others v. State of Maharashtra and others [2011 (2) TMI 1277 - SUPREME COURT OF INDIA] that the High Court should not interfere under Articles 226/227 of the Constitution of India, if an efficacious alternative remedy is available to any aggrieved person. Thus the petitioner has been able to make out any exception to circumvent the alternative remedy, which is efficacious and speedy. Therefore writ petition is dismissed on the ground of alternative remedy.
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2013 (6) TMI 89
Liquor bar license - Suspension of licence - refusal to record/substitute the name of the petitioner in place of his deceased mother in the liquor licence in absence of succession certificate - interim direction in the revision permitting the license to remain operative in the name of respondent no. 5, co-licensee during pendency of the revision - Held that:- Entitlement of the petitioner to have his name included in the license on the death of Smt. Sumitra Devi as a heir was settled by this Court vide judgment Kamlesh Kumar Singh Vs. State of U.P. and others (2013 (6) TMI 114 - ALLAHABAD HIGH COURT). The Court upholding the view taken by the revisional authority on 13.0.2010 held that on the death of mother, respondent no. 5 would continue to hold the license till it subsists and that the heirs and legal representatives of the deceased mother are to be brought on record but their eligibility as a co-licensee has to be considered under the U.P. Licensing under Surcharge Fees System Rules, 1968. It is for the consideration of the above eligibility alone the matter was remanded but as for as the right of the petitioner to be substituted in the license as a heir of Smt. Sumitra Devi was approved. The above order of the High Court is final. It has been accepted by the parties as it was not challenged any further. Therefore, the right of the petitioner to be included/substituted as heir of Smt. Sumitra Devi in the said licence stood concluded. This leaves no scope for directing to produce the succession certificate. Only the point of eligibility of the petitioner was left open to be considered. None of the authorities so far have held that the petitioner is not eligible under the aforesaid 1968 rules so as to be a co-licensee with respondent no. 5 there was no justification for the appellate authority to have directed for production of the succession certificate - direction to the appellate authority to forthwith consider the eligibility of the petitioner to be included as a co-licensee.
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Wealth tax
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2013 (6) TMI 112
Addition of land to assessee's net wealth - CIT(A) deleted the addition - Held that:- The map of the area, which is now before us, was not before the AO. This is a question of determining the location of the land in question. Therefore, the location of the land in question can be ascertained either by the spot inspection, or by examining the land records of that area. As apparently, the AO has not done any such exercise, hence, there was lack of investigation at the time of assessment. As it was expected from the CWT(A) to appraise the AO all the evidences which were submitted for the first time at the stage of first appeal restore this ground back to the AO for examining the actual location of the land whether it is a land appurtenant to the factory and whether it is used for the purpose of business of the assessee - this ground of the Revenue allowed for statistical purpose. Inclusion of motor car vehicles to assessee's net wealth - CIT(A) deleted the addition - Held that:- There is no fallacy in the finding of the CWT(A)rightly directing the AO to adopt value of the vehicle as per the prescribed rules of W.T.Rules. Against revenue.
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Indian Laws
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2013 (6) TMI 105
Non payment of dues against the company - prosecution against the directors - bail - whether the appellant herein has made out a case for regular bail and whether the High Court is justified in dismissing his bail application. - held that:- we are conscious of the fact that the present appellant along with the others are charged with economic offences of huge magnitude. At the same time, we cannot lose sight of the fact that though the investigating agency has completed the investigation and submitted the charge sheet including additional charge sheet, the fact remains that the necessary charges have not been framed, therefore, the presence of the appellant in custody may not be necessary for further investigation. In view of the same, considering the health condition as supported by the documents including the certificate of the Medical Officer, Central Jail Dispensary, we are of the view that the appellant is entitled to an order of bail pending trial on stringent conditions in order to safe guard the interest of the CBI.
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