TMI Tax Updates - e-Newsletter
June 6, 2014

Case Laws in this Newsletter:

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

Articles

1. Sale value of carbon credit is capital receipt and cannot be considered ‘income’ under any head of income, and as per Constitution of India also point of view of author fortified by recent order of Andhra Pradesh High Court.

   By: DEVKUMAR KOTHARI

News

1. A story that teaches us... - Memories of an Indian about Indian politicians!

2. RBI Reference Rate for US $ and Euro

3. Union Finance Minister Holds his First Pre-Budget Consultation Meeting with the Representatives of Agriculture Sector; Various Suggestions Received to Boost Agriculture Growth

4. RBI to conduct 28-day Special Term Repo Auction for Rs. 20,000 crore on June 6

Notifications

Indian Laws

1. F.No.9 (4)-B(S)/2014 - S.O. 1424(E) - dated 2-6-2014 - Indian Law

Amend the Order number S.O. 31(E), dated the 2nd January, 2013

Highlights / Catch Notes

Income Tax

• High Court Affirms Reassessment Validity Under Income Tax Act Section 147 for False Information, Allows Notice u/s 148.

  Case-Laws - HC : Reassessment u/s 147 - where the information furnished is found to be false, there could not be possibly any objection to the notice u/s 148 - HC
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• Court Rules Current Repairs Costs Not Eligible for Depreciation Benefits as Written Down Value.

  Case-Laws - HC : Current repairs – assessee cannot claim the benefit of written down value of the cost of construction which he had incurred under the head Current repairs - HC
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• High Court Stresses Fair Play in ACIT Attachment Orders u/s 226(3), Balancing Revenue Protection and Taxpayer Rights.

  Case-Laws - HC : Attachment order passed by ACIT u/s 226(3) – AO is a prospector of the Revenue and he is no doubt expected to protect the interests of the Revenue zealously, but such zeal has to be tempered with the rules of fair play and an anxiety to ensure that an opportunity is not lost to the assessee - HC
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• Tax Actions Against Deceased: Legal Reps Can Continue Proceedings Started Before Death Under Income Tax Act Sec 159(1.

  Case-Laws - AT : Interpretation of section 159(1) – Legal representatives - only those proceedings for making assessment or levying any sum may be taken against the deceased, so that they may be continued after his death, which have been taken in his lifetime - AT
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• Assessee's Market Cess Tax Payment Timely, No Disallowance Under Income Tax Act Section 43B Proviso.

  Case-Laws - AT : Scope of section 43B - Market cess tax or not - since the Assessee has paid the amount before the due date of filing of return as per proviso to Section 43B, no disallowance u/s 43B can be made - AT
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• Penalty Removed for Disallowed Labor Payments u/s 271(1)(c) Due to Insufficient Grounds for Penal Action.

  Case-Laws - AT : Deletion of penalty u/s 271(1)(c) of the Act – Payment as labour charges made disallowed u/s 40A(2)(b) - estimation at 15% being made merely on estimation do not attract the penal provisions - AT
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• High Court Recalls Order for Correction Due to Legal Change, Ruling in Favor of Assessee.

  Case-Laws - AT : Recall of order - Rectification of mistake apparent on record -when law changed by the reasons that High Court has decided the issue in favour of the assessee, then it is a matter of rectification - AT
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Customs

• High Court Affirms Deputy Director General's Authority to Impose Penalty u/s 11.

  Case-Laws - HC : Imposition of penalty u/s 11 - Jurisdiction - Deputy Director General of Foreign Trade was well within his competence to take action under Section 11 and pass order of penalty. - HC
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• Appellant Exempt from Additional Customs Duty; Demand Set Aside Due to Limitation Period Under Customs Tariff Act Section 3(5.

  Case-Laws - AT : Exemption from additional duty of customs u/s 3(5) of the Customs Tariff Act, 1975 - appellant could have entertained a bona fide belief that their activities would not amount to manufacture under SEZ Act - demand set aside on the ground of period of limitation - AT
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Indian Laws

• Indian Citizen Shares Insights on Political Challenges, Urges Public Engagement and Awareness in Shaping Society's Future.

  News : A story that teach us... - Memories of an Indian about Indian politicians!
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Service Tax

• Service Tax Confirmed on Management Consulting for Group Companies; Penalty Imposed; Case Law References Included.

  Case-Laws - AT : Nature of services provided to group companies - activities covered under the definition of management consultant. - demand confirmed with penalty - AT
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• New Entry in Tax Tariff Doesn't Affect Previous Business Support Service Payments; Tax Classification Remains Valid.

  Case-Laws - AT : Business Support Service - Infrastructural Support Service - it cannot be said that the tax being paid by them was incorrect, just because from 2008 onwards a new, specific entry was introduced in the tariff. - AT
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• System Error in Tax Filing: Omission of CENVAT Credit Details Should Not Lead to Penalty for Unpaid Service Tax.

  Case-Laws - AT : CENVAT Credit - omission in the return regarding cenvat details due to system error - just because of some omission in the returns, there cannot be a situation wherein an assessee is to be treated as not having paid the service tax at all. - AT
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Central Excise

• Certain Items Classified as Toys Under Heading 9503 of Central Excise Tariff Act, 1985; Others as Games.

  Case-Laws - AT : Classification - these items are classifiable as Toys under Heading 9503 of CETA, 1985:- 1. City of Games (Paris), 2. City of Games (London), 3. Games of States (USA), 4. Games of States (India), 5. Match & Move Memory, 6. Mould & Paints, 7. Game of Games and 8. Go To The Heads of Class. - others are as game - AT
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• Cutting Jumbo Rolls into Smaller Sizes Not Considered "Manufacture" Under Central Excise Law Sections 4811 & 8546.

  Case-Laws - AT : Manufacture - legislature did not intend to treat cutting and slitting of jumbo rolls of products falling under 4811 and 8546, to smaller sizes so as to make them useable by the user as amounting to ‘manufacture' - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 118
  Validity of notice of reopening of assessment u/s 148 of the Act – Share trading business – Failure in disclosing facts - Held that:- The AO on the basis of the material provided by the investigating wing, particularly the statement recorded under section 131(1)(a) notices the falsehood in the disclosure made by the assessee at the time of original assessment – the AO had rightly assumed the jurisdiction of initiating the reassessment proceedings – AO on the basis of information subsequently having come to his knowledge, recognized untruthfulness of the facts furnished earlier, he surely cannot be said to have changed his opinion on the same facts – Relying upon Sri Krishna P. Ltd. v. ITO reported in [1996 (7) TMI 2 - SUPREME Court] - what amounts to "full" and "true" facts, the SC was of the view that the Income-tax Officer can issue notice u/s 148 of the Act, proposing to reopen an assessment only where he has reason to believe that on account of either the omission or failure on the part of the assessee to file the return or on account of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year, income has escaped assessment. The existence of the reason to believe is intended to be a check, a limitation, upon his power to reopen the assessment - where the information furnished is found to be false, there could not be possibly any objection to the notice u/s 148 - Till completion of scrutiny assessment, the information provided mentioned clearly that investments made by the petitioner were from the funds of the companies and, therefore, there was no question of treating them as bogus - subsequently when on an investigation, after completion of assessment under sub-section (3) of section 143, the same is found to be bogus, notice u/s 148 of the Act deserves to be held valid - To a limited extent, the court has looked into the conclusion arrived at by the AO in examining whether there was any material available on the record for the AO to form a requisite belief and whether such material had any rational link with the income that escaped assessment and from such scrutiny, no inference is called for. Proceedings of reassessment initiated by the AO on the basis of subsequent information which is found to be relevant and specific and when the AO after recording the reasons for formation of his belief that in the original assessment, the assessee failed to disclose fully and truly facts - the income chargeable to tax escaped assessment has correctly exercised the jurisdiction provided u/s 147 of the Act – Decided against Assessee.

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• 2014 (6) TMI 117
  Current repairs – Claim of WDV of cost of construction as current repairs – Revenue expenses or not –Held that:- The Tribunal was rightly of the view that the assessee continuing in possession of the property after expiry of the lease period has to be construed as holding over of the property after expiry of the lease period – thus, there is no question of allowing the written down value and the cost of construction as "current repairs" - "current repairs" is an expenditure incurred by the assessee for the purpose of maintaining machinery, building, etc., used for the purpose of business, it cannot be the written down value of the cost of construction – thus, the assessee cannot claim the benefit of written down value of the cost of construction which he had incurred under the head "Current repairs"- no question of law arises for consideration – Decided against Assessee.

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• 2014 (6) TMI 116
  Disallowance of claim of deduction u/s 80HHD and 80IB of the Act – Held that:- Following CIT v. Hotel and Allied Trades P. Ltd. v. Deputy CIT (Assessment) [2007 (4) TMI 120 - HIGH COURT, KERALA] - the Tribunal was of the view that the orders of the AO which came to be confirmed by the CIT(A) was justified - So far as the principle adopted, the eligibility to deduct u/s 80HHD and also the eligibility of deductions u/s 80-IB are the same, the Tribunal was justified in negativing the contentions of the appellant-assessee – Decided against Assessee.

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• 2014 (6) TMI 115
  Attachment order passed by ACIT u/s 226(3) of the Act – Rejection of stay application on the day it was filed - Whether the AO, at the time of passing the garnishee order and rejecting the stay application on February 17, 2014, was aware of the stay application filed by the petitioner on that day – Held that:- Section 220(3) requires an application for extension of time to pay the tax demanded or for permission to pay the same in instalments to be filed before the expiry of the due date for payment - the petitioners filed the applications u/s 220(3) before the AO on February 14, 2014, which satisfies the sub-section - February 14, 2014, happened to be a Friday, the next working day was only February 17, 2014, and it was on this day that the AO rejected the applications - he issued the garnishee order u/s 226(3) to the Citi Bank. This is a case in which technically no fault could be found with the AO, there was an element of impropriety in his action in issuing the garnishee order u/s 226(3) on February 17, 2014, the very day on which he rejected the stay application filed by the petitioner u/s 220(3) - It is expected of him, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments – the AO is a prospector of the Revenue and he is no doubt expected to protect the interests of the Revenue zealously, but such zeal has to be tempered with the rules of fair play and an anxiety to ensure that an opportunity is not lost to the assessee to make alternative arrangements for clearing the tax dues, once the stay applications filed u/s 220(3) are rejected - The AO had acted in arbitrariness, since the stay applications filed by the petitioners are pending before the Tribunal, the AO is directed to reverse the amount recovered from the bank account in Citi Bank and credit the same in the account of the petitioner – Decided in favour of Assessee.

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• 2014 (6) TMI 114
  Levy of surcharge for the block assessment period – Matter pending in Larger bench of the Supreme Court - Held that:- Relying upon COMMISSIONER OF INCOME-TAX v/s K.C.PUTTASWAMY GOWDA, 2011 (7) TMI 572 - KARNATAKA HIGH COURT] - surcharge is payable by the assessee - In the event of the larger Bench of the Supreme Court reversing the judgment of the Apex Court and holding surcharge is not leviable, the assessee is absolved of the liability to pay surcharge - the proper order to be passed is to set aside the order of the Tribunal and remit the matter to the Assessing Authority with the direction to await the judgment of the Apex Court - the substantial question of law is answered in favour of the Revenue and against the assessee – the AO shall await the decision of the larger bench of the Hon'ble Supreme Court and may proceed subject to the outcome of the decision that will be rendered by the Supreme Court – Decided in favour of Revenue.

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• 2014 (6) TMI 113
  Interpretation of section 159(1) of the Act – Legal representatives - Held that:- Section 159(1) clearly shows that it is by a legal fiction created in the provision that the legal representative of a deceased person had been made liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased - only those proceedings for making assessment or levying any sum may be taken against the deceased, so that they may be continued after his death, which have been taken in his lifetime - In his lifetime such proceedings would necessarily be taken against and in the name of the deceased - if the deceased had died before any such proceedings could have been taken against him, the proceedings may be taken against the legal representative of the deceased under the provisions of Sub-clause (b) of Sub-section (2) of Section 159 - assessment under the Act can only be made against an individual assessee who must be a living person. Also in CIT v. Amarchand N. Shroff [1962 (10) TMI 51 - SUPREME COURT] it has been held that the individual has ordinarily to be a living person and there could be no assessment on a dead person – revenue could not bring any material to show that the assessment order was passed after issuing any notice to the legal representative of the deceased individual – Decided against Revenue.

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• 2014 (6) TMI 112
  Validity of Re-opening of assessment u/s 143(3) r.w. section 147 of the Act – Mere change of opinion - Eligibility for deduction u/s 80IA of the Act – Held that:- The assessment originally completed u/s 143(3) was reopened by him without there being any new information or material coming to his possession after completion of the assessment – Relying upon Commissioner of Income-tax-VI, New Delhi Versus Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] - the expression “change of opinion” postulates the formation of opinion and then change thereof - what it implies in the context of section 147 is that the AO should have formed his opinion at the first instance i.e. in the proceedings u/s 143(3) and thereafter by initiating reassessment proceedings u/s 147, the AO proposed to take different view – also in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] it has been held that fulfilment of only condition viz, that the AO should have reason to believe that income has escaped assessment confers jurisdiction to reopen the assessment - It was held that although the power to reopen the assessment is much wider post 1st April 1989, one needs to give schematic interpretation to the words “reason to believe” failing which, section 147 would give arbitrary powers to the AO to reopen assessment on the basis of “mere change of opinion” which cannot be per se reason to reopen. The issue relating deduction allowable to the assessee u/s 80IA was examined by the AO during the course of assessment proceedings originally completed u/s 143(3), the deduction claimed by the assessee us/ 80IA was recomputed by the AO by rejecting the basis adopted by the assessee for apportionment of Overhead of head office and sales depots to the Kanpur Unit and taking turnover as basis for such apportionment - This issue thus was examined and decided by the AO on application of mind and in the absence of any “tangible material” coming to his possession after completion of original assessment, the reopening of the assessment by the AO on recompute the deduction eligible to the assessee u/s 80IA was clearly based on a “mere change of opinion” which is not permissible in law – Decided in favour of Assessee.

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• 2014 (6) TMI 111
  Income from house property - estimation u/s 23(1)(a) of the Act – Notional interest - Standard rental value of three rented flats – Proper enquiry not made by AO – Held that:- Following COMMISSIONER OF INCOME TAX, Versus MONI KUMAR SUBBA & Miracle Exporters P. Ltd. [2011 (3) TMI 497 - DELHI HIGH COURT] The AO did not examine the cost of assets leased/rented and the adequacy of the rent in comparison to its value and further that whether the interest free deposit was in lieu of rent which was not offered by the assessee - The comparative market rates were not called for and the applicability of section 23(1)(a) was not examined - ordinarily the notional interest that may accrue on the security deposit would not form part of income from house property to determine the fair rent which is reasonably expected to be fetched from the property - The AO has to make necessary enquiries. After having undertaken the necessary exercise in that behalf, it comes out from the facts that the payment of security deposit is to circumvent the real rent then the same may be considered for computing the income from house property - interest earned from security deposit cannot be included in the annual letting value to be determined by the AO - the adding of interest income into the rent would lead to double assessment of the same income – thus, there was no reason to interfere with the finding of the CIT(A) that the estimation of income was wrongly made by the AO – Decided against Revenue.

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• 2014 (6) TMI 110
  Disallowance made u/s 40(a) - Non-deduction of Tax - scope of term payable as on 31st March – TDS u/s 194C - taking looms and other machineries on rent from sister concerns - Confirmation of entire expenses – outstanding expenses - Held that:- A.O has only proceeded on the basis of presumption that the entire expenses are liable for TDS deduction. We are of the view that the entire expenses cannot be considered for disallowance u/s. 40(a)(ia) on the basis of presumption only as there is no material brought on record by the Revenue to suggest that the change in the policy of the Assessee in taking machines and other facilities of sister concern on rent was fictitious and therefore the addition made u/s. 40(a)(ia) is deleted. Further as per the Assessee if the entire expenses are disallowed, the Gross Profit ratio would work out to more than 35% as against the Gross Profit of 2.91% shown by the Assessee which is unrealistic The accounts of Assessee do not reflect the correct state of affairs of the Assessee – ends of justice shall be met if the addition is made at Rs. 20 lacs in the trading result of the Assessee – Decided partly in favour of Assessee.

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• 2014 (6) TMI 109
  Disallowance of claim u/s 80IB(10) of the Act – Assessee not the owner of land – Held that:- The Assessee has claimed deduction u/s 80IB(10) - the project on which Assessee had claimed deduction was the same project on which the Assessee had claimed deduction u/s 80IB(10) in earlier years and for earlier years – Following Commissioner of Income-tax Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] – section 80IB(10) does not provide that the land must be owned by the assessee - the assessee had taken full responsibilities for execution of the development projects and have not acted only as a works contractor - assessee was entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessees - CIT(A) has noted that the issue in the year under appeal is identical with that of A.Y. 06-07 and also pertains to the same project – there was no reason to interfere with the order of CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 108
  Disallowance u/s 43B of the Act – Scope of section 43B of the Act - Market cess tax or not - Held that:- CBDT in order passed u/s 119 of the Act, had allowed the return and reports of audit in the case of companies and firms to be filed up to 15th of November 2007 instead of 31st October 2007 for A.Y. 07-08 - the year under appeal is A.Y. 07-08 and Assessee had electronically filed the Return of Income on 22.10.2007 – the Assessee had deposited the market fees on 7th November 2007 which is well before the extended date of filing of return - since the Assessee has paid the amount before the due date of filing of return as per proviso to Section 43B, no disallowance u/s 43B can be made – thus, there was no reason to interfere in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 107
  Deletion of penalty u/s 271(1)(c) of the Act – Bogus purchases - Disallowance of depreciation – Bad debts written off - Public issue expenses - Held that:- Either the additions on which the penalty has been levied were restored back for reconsideration or decided in assessee’s favour - also in issue of disallowance of depreciation on tangible assets was restored back to the file of the AO to be directed as per the directions given in A.Y. 2002-03 - the issue of bogus purchases has also been decided by the Tribunal in favour of the assessee - The entire disallowance was deleted - In respect of third addition on which the penalty in question u/s.271(1)(c) has been levied pertained to “public issue expenses”, which has also been decided by the Tribunal by holding that a view already taken in assessee’s own case should be followed for this year as well - CIT(A) has deleted the penalty after considering the merits of each addition. As far as the onus on the assessee was concerned for the purpose of levy of penalty, according to CIT(A) all the relevant particulars were disclosed and there was no concealment of facts and the bad debt was erroneously disallowed - the assessee had a bona fide belief that the claim would be allowed in terms of Section 35D of IT Act - On the one hand the quantum additions have not been confirmed by the Tribunal and on the other hand the CIT(A) has discussed the merits of each addition, while disposing off the penalty issue - thus, the deletion of the penalty is confirmed – Decided against Revenue.

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• 2014 (6) TMI 106
  Additions - Job work on behalf of principle - Rejection of books of accounts u/s 145 - non maintaining the stock register of raw material and closing stock - assessee claimed abnormal burning loss during the year and GP rate also have fallen down – Held that:- There was a decline in the GP rate compared to preceding year but converging charges in gross have been increased substantially - The raw material is supplied by the sister concern which has been processed by the assessee on job work basis on behalf of the sister concerned, AIA Engineering Co. Ltd. The ld. A.O. had not brought on record that assessee’s job receipt compared to other parties of similar nature of work, were booked on lower rates – as decided in assessee own case for the earlier year, it has been held that average job work realized has fallen compared to preceding year - The entire job work also subject to TDS - The stock register was impounded by the Department and was possession with the department which could be examined by the AO at the time of assessment - The assesee had maintained day-to-day stock register - The assessee does not have any stock for its own - The entire raw material was given by the Principal which after manufacturing returned back the same to the Principal - The entire burning loss belonged to the Principal not the assessee - The burning loss has not been claimed in the p&l account - the assessee wholly depended on the job work of the Principal - No outside job work was performed by the assessee – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee. Deletion of disallowance of freight inward, outward and octroi expenses – Held that:- CIT(A) rightly was of the view that the freight and octroi expenditure claimed by the assessee has incurred on purchase of consumable and store material, cannot be disturbed - Freight inward did not comprise of any freight paid for raw material on behalf of the Principal - The total consumables purchased during the year was Rs.2.07 crore which includes refractories, ramming mass etc. Octroi of Rs. 7.02 lacs was paid on the stores and consumables purchased during the year - Freight outward was incurred for loading, unloading and freight for moving the used moulding sand and other scrap materials out of factory premises to be taken to a remote place for disposal - Coolie / cartage was paid for loading, unloading and freight for moving the castings in process for job work outside our factory premises for such job work and bringing it back to the factory - The freight and octroi expenditure shown in the agreement was for incoming the raw material and on sending back casting was borne by the Principal - both the expenses are different – the order of the CIT(A) is upheld – Decided against Revenue. Deletion of suppressed conversion charges – Held that:- Following The Deputy Commissioner of Income Tax, Circle-5, Versus M/s. Reclamation Welding Ltd. [2012 (11) TMI 232 - ITAT, AHMEDABAD] - The issue cannot be decided without complete data as the parties have not furnished the industry-wise loss or the history of the loss for last 4/5 years, the loss incurred during various process, percentage of loss in each process, comparison of such loss in difference processes industry wise and various assessment year-wise & other comparative instances and factors like type of machinery used, claim of manufacturer of machines as to the amount of loss likely to occur when work is done on their machines – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue.

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• 2014 (6) TMI 105
  Restriction of various expenses - Disallowance of expenses - 25% of labour wage and 20% of direct expenses – Held that:- Following Sh. Sandeep S. Nanvati [2014 (5) TMI 919 - ITAT AHMEDABAD] - The CIT(A) restricted the disallowance on the ground that the AO rejected the books of account on the ground that evidences regarding rendering of services and co-relation of expenses with volume of work done has not been established by the assessee without asking the assessee to carry out such exercise and therefore drawing adverse conclusion was not correct - expenses have been incurred in cash and that in the statement of facts, the assessee does mention that all bills and vouchers were not possible to be produced since these had been destroyed after the floods - many of the vouchers are self-made - there was likelihood that some portion of the expenditure could not be justified and it would be reasonable if disallowance of Rs 3,00,000/- was made out of the claim of labour charges and other expenses – Decided against Revenue. Deletion of unaccounted purchases – Held that:- CIT(A) was of the view that the notices issued by the AO were served on the concerned parties which establishes identity of the parties - The assessee produced ledger accounts, bills and payment details before the AO which establish the genuineness of the transaction - the assessee could not be held responsible for non-receipt of replies from the parties when the assessee provided all the related evidences - in any case, the confirmations were received though belated and copy was submitted which takes care of the reason for disallowance - the disallowance was made by the AO on a wrong footing – revenue could not produce any material to show further steps taken by the AO to verify the genuineness of purchases even when no reply was received from the suppliers though no summons or notices were duly served upon them – it cannot be inferred that the purchases were bogus – the order of the CIT(A) is upheld – Decided against Revenue. Restriction of disallowance of business expenses – Telephone and vehicle expenses – Held that:- The disallowance was made by the AO because of inability of the assessee to produce vouchers in respect of above expenses - no material was brought on record by the Revenue to show the basis on which the AO made the disallowance at the rate of 20% - the assessee could not bring any material to show that the expenses claimed under these heads were reasonable when compared to the past accepted position and volume of the business secured during the year – thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 104
  Addition of notional annual value – Deemed let out u/s 23(4) r.w.s. 23(1) of the Act – Held that:- House nos.3 & 4 were alternatively opted for deemed to be let out - CIT(A) had taken fair market value of the both immovable property for determining ALV – Relying upon Shailesh I Shah vs. ITO [2011 (2) TMI 1310 - ITAT MUMBAI] - in case of self-occupied property, municipal retable value has to be adopted for the purpose of ALV - the municipal reteable value as ALV of the property as against Rs.3 lacs estimated by him - The AO himself has accepted that husband of the assessee, namely, Shri Gautambhai K. Desai who has 50% share in the said properties ALV on the basis of Municipal ratable value- the AO should assess ALV on the basis of Municipal ratable Value – Decided in favour of Assessee.

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• 2014 (6) TMI 103
  Deletion of penalty u/s 271(1)(c) of the Act – Payment as labour charges made disallowed u/s 40A(2)(b) of the Act – Quantum addition deleted - Held that:- The quantum addition has been deleted by the Tribunal - thus, the penalty for the year does not survive - the assessee had not preferred an appeal before the Tribunal, but still mere not filing of an appeal before the Tribunal do not alter the legal position in respect of the invocation of the provisions of Section 40A(2)(b) as decided by the Respected Co-ordinate Bench in the past years in favour of the assessee - the facts relating to the payment of labour charges to the concern were very much on record and the genuineness was not doubted by the AO but only held that the payment was unreasonable – estimation at 15% being made merely on estimation do not attract the penal provisions – the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (6) TMI 102
  Recall of order - Rectification of mistake apparent on record - Computation of deduction u/s 80HHC of the Act - Exclusion of 90% of other income – Held that:- Now Clause (iii) of Section 28, as inserted by the Finance Act, 2005 with retrospective effect 01.04.1998 has been struck - Following Topman Exports v. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - profit should be assessed on the transfer of duty entitlement pass book scheme - 90% receipts have to be excluded under Clause baa of other income referred of explanation is to be considered net not gross - for the purposes of Section 80HHC, the DEP Credit is not to be included as an entire amount received for calculation of deduction and also 90% on profit alone to be deducted, 90% of net interest or is to be included in the profit - when law changed by the reasons that High Court has decided the issue in favour of the assessee, then it is a matter of rectification – thus, the order is recalled – Decided in favour of Assessee.

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• 2014 (6) TMI 101
  Deletion of gross profits on enhanced turnover – Held that:- The addition under the Income Tax Act has been made on the basis of enhancement of sales by the Trade Tax Authority - the assessee has pointed out that the appellate authority under the Trade Tax has deleted the enhancement of sales - If it is so, then there would be no case for any addition of the gross profit in the case of the assessee - revenue was of the view that whether the first appellate authority deleted the entire addition and whether his order has become final, requires verification – thus, the matter is remitted back to the AO – Decided in favour of Revenue.

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• 2014 (6) TMI 100
  Disallowance of deduction u/s 80IB of the Act – Factory license issued on 19/05/04 – Manufacturing activity not started on or before 31/03/04 – Held that:- The assessee applied for license in March 2004 but was granted in the month of April 2004 - Following Commissioner of Income-tax Versus Jolly Polymers [2012 (4) TMI 398 - GUJARAT HIGH COURT] - the authorized representative of the assessee was given to understand that the appeal shall be sent back to the file of AO for the purpose of verifying as to whether the appellant had actually moved an application for obtaining Factory's License on or before 31/03/04 and on that basis, the hearing came to be concluded – as per the decision the assessee is fully entitled to gent deduction u/s 80IB of the Act – thus, the miscellaneous application is allowed – Decided in favour of Assessee.

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• Customs

• 2014 (6) TMI 125
  Personal Penalty on employee - appellant submitted that the penalty has been imposed on the basis of statement of co-noticee without independent corroboration. It was also urged that in the absence of recording of the statement of the appellant, no penalty could be levied - Held that:- It was not disputed that the appellant Shri Sushil Sharma was an employee as Assistant Commercial Manager and authorised signatory of M/s Fashion World International Ludhaina. He was looking after the work of import and export made by the above company. Investigation into the premises of the appellant company made by the department revealed that polyester fibre did not reach the factory premises. Shri Sushil Sharma had knowledge about non receipt of the goods in the factory. It was noticed by the Tribunal that since the appellant was fully involved in the affairs of the company, his role could not be ruled out in causing loss of duty to the customs. Therefore, considering the totality of facts and circumstances of the case, the Tribunal reduced the penalty from Rs. 6 lacs to Rs. 2 lacs in case of the appellant - appellant has not been able to show that the said findings are illegal, perverse or erroneous in any manner. Consequently, no substantial question of law arises - Decided against appellant.

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• 2014 (6) TMI 124
  Imposition of penalty u/s 11 - Jurisdiction of Deputy Commissioner - whether Deputy Director General was competent to pass the order of penalty or not since it goes to the very root of the matter and renders entire proceedings without jurisdiction if this issue is decided in favour of petitioners - Held that:- This Court has seen that quantum of penalty which may be imposed under Section 11 is with reference to value of good in respect of which contravention is made. The minimum amount of penalty is Rs. 1000/- or five times of the value of goods in respect of which any contravention is made or attempted to be made in view of use of the word, "whichever is more". Therefore, wherever the value of goods is more than Rs. 201/- the penalty under Section 11(2) would always be five times of the value of such goods for the reason that quantum of penalty is five times of value of goods and, therefore, whenever the value of goods exceed Rs. 200/- the amount of penalty would be Rs. 1000/- and more. The value of goods, therefore, is directly related with quantum of penalty. The words "subject to such limits as may be specified" cannot be read as prefixed with word "any penalty" under Section 13 of Act, 1992. The authorization could be made by Central Government, in my view, with reference to quantum of penalty or the value of goods or any other reasonable and relevant indicia. To suggest that "subject to such limits" will always mean that it is and it must be in the context of quantum of penalty, would result in rendering the scope of authorization to be made by Central Government narrowed down to a large extent which, in my view, would not be justified - since value of goods in respect of which contravention has been alleged was more than Rs. 45 lacs but less than Rs. 1 crore, therefore, the Deputy Director General of Foreign Trade was well within his competence to take action under Section 11 and pass order of penalty. It thus cannot be said that order of penalty is without jurisdiction. Time period of passing the order - order passed after more than one decade - Held that:- licence having been issued on 10.02.1994, petitioners were to complete export obligation upto February, 1995 and import obligation upto February, 1997. So far as export obligation is concerned, he was also under an obligation to produce requisite documents in respect of export obligation before licensing authority within 30 days after expiry of period meant for export obligation - The respondents claimed to have issued first letter on 22.06.1998 requesting petitioners to submit requisite export documents for redemption of legal undertaking. As per their stand, petitioners failed to reply the said notice. Another notice claimed to have been issued by respondent-competent authority, i.e., respondent no. 2 on 07.08.1998 and thereafter several reminders were issued on 02.03.2000, 24.05.2000, 16.08.2000, 27.09.2000, 24.01.2000 and 11.06.2003. The copy of first two notices dated 22.06.1998 and 07.08.1998 have been placed on record as Annexures-2 and 3 to the counter affidavit. Since very beginning the department has been pursuing petitioners to furnish requisite documents and several letters and notices were issued. Therefore, it cannot be said that there was an extraordinary undue delay or on account of such delay, petitioners were not in a position to furnish requisite material on account of weeding or loss etc. or for any other valid reason. It thus cannot be said that on mere ground of delay, particularly, when petitioner is equally responsible, the impugned proceedings of penalty can be held illegal or unreasoned. Mens Rea u/s 11AC - since it is penal provision empowering the authority to impose penalty on account of certain violation on the part of petitioners which is subject to imposition of penalty under the statute. A perusal of orders impugned in this writ petition nowhere shows that this aspect has been taken care by authorities concerned before passing impugned orders. Court finds that no valid notice has been issued to petitioners. During course of argument counsel for respondents admitted that copy of notice dated 28.06.2005 which they have filed as Annexure CA-5 clearly shows that it is an incomplete and misprinted notice form and, therefore, the same cannot be said to be a valid notice issued to petitioners and in absence of any valid notice order of penalty cannot be sustained. - matter remanded back for fresh decision - Decided in favour of assessee.

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• 2014 (6) TMI 123
  Denial of refund claim - Claim rejected as pre mature - Held that:- Revenue cannot claim that the refund claim is premature. This Tribunal had directed the revenue to finalise the assessment in terms of quantity received in the shore tank and to grant refund in accordance with law. However, even after a lapse of 9 years, the Revenue claims that the refund claim is premature. Once a decision has been given by the Tribunal clearly indicating the basis for determination of the duty, it was incumbent on the Revenue to finalise the assessment on the basis of those directions and to provide consequential relief to the appellant. Even after 9 years of the passing of the said order, the department has failed to implement the direction of the Tribunal and has rejected the refund claim of the appellant saying that it is premature. This action on the part of the department reveals the utter contempt and judicial indiscipline on the part of the Revenue - Decided in favour of assessee.

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• 2014 (6) TMI 122
  Exemption from additional duty of customs u/s 3(5) of the Customs Tariff Act, 1975 - unit situated at KASEZ - Revenue felt that the appellant had not followed the provisions of law correctly and was engaged in clearance of goods into DTA without carrying out any manufacturing activity as per Section 2(r) SEZ Act, 2005 and as such they were not entitled for the benefit of exemption of additional duty of customs - Bar of limitation - Held that:- show cause notice dated 21-6-2010 issued to the appellant is under Section 28 of the Customs Act, 1962. The provisions of Section 28 requires issuance of show cause notice within period of 6 months from the date of clearance of goods if it is in the normal time limit and extended period of 5 years can be invoked if there is suppression of facts, misdeclaration, etc. with intention to evade duty. Show cause notice dated 21-6-2010 invokes extended period of limitation, on the ground that the appellant had not correctly declared the activities conducted by them on the finished goods which would amount to manufacture - appellant could have entertained a bona fide belief that their activities would not amount to manufacture under SEZ Act. This view is also fortified by the fact that the office of the Development Commissioner of KASEZ had written a letter to the appellant - invocation of extended period of limitation by lower authorities, in this case is incorrect and the findings recorded by the adjudicating authority are also not in tune with the facts, as has been found by us - Decided in favour of assessee.

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• 2014 (6) TMI 121
  Waiver of pre deposit - Encashment of bank guarantee - Assessee submits that if Revenue encashes bank guarantee to the tune of Rs.2.5 crores (Rupees two and half Crores) out of bank guarantee of Rs 9.00 crores, Valid Up to 27.1.2013 laying with Revenue authority, within two weeks from today that may not prejudice interest of Revenue to hear the Appellant on the basis of reply to the Show Cause Notice - Held that:- When aforesaid cooperative proposal comes forward from Appellant and also appreciating that Revenue was in dark when there was non- cooperation of the Appellant in the past to complete adjudication, we direct Id. D.R. to transmit the sealed cover stated to have contained reply to the Show Cause notice to Id. Adjudication authority with an advice to extend his cooperation to the Appellant to encash the bank guarantee of the aforesaid extent within two weeks of receipt of this order - Decided in favour of assessee.

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• Corporate Laws

• 2014 (6) TMI 120
  Use of interest accumulated on the SLR amount - Company under winding up proceedings - Payment to the secured creditors under a One Time Settlement Proposal - whether the petitioner can be permitted to take the interest accumulated on the SLR, for the purpose of discharging their liabilities to creditors other than the depositors - Held that:- The only reason as to why the petitioner wants to liquidate and take the SLR investments, is to avail the benefit of One Time Settlement Proposals granted by the Consortium of Banks, some of whom have now assigned the debts to the Asset Reconstruction Company. In the affidavit in support of the writ petition, the petitioner has stated that 5 Banks viz., United Bank of India, State Bank of Patiala, Indian Overseas Bank, State Bank of Saurashtra and Catholic Syrian Bank have assigned the debts in favour of ARCIL and that the amounts repayable to those 5 Banks as on March 2013 was about Rs.43.55 crores and that ARCIL has agreed to take under the One Time Settlement Proposal, a sum of Rs.1,28,02,000. Petitioner has enough justification, at least on facts, for seeking payment of at least the interest accumulated on the SLR reserves. My conviction is further fortified by the offer made by the learned Senior Counsel for the petitioner that the respondent need not even pay any amount to the petitioner or to the Administrator appointed by this Court - if all the secured creditor Banks issue letters of acceptance of OTS Proposals, the respondent cannot have any objection at least to release the amounts claimed by those creditor Banks, most of which are Nationalised Banks and some of them are Scheduled Banks, directly to them. The total amount required for payment to all the 10 Banks under both the Consortiums, works out to only Rs.4,30,40,000/-. Once this amount is paid, the debts to the total tune of about Rs.128,59,13,063/- will get wiped out. The respondent need not even have any suspicion about the motives of the petitioner, since the petitioner is willing to allow the respondent to make payments directly to those Banks. The Reserve Bank of India itself has understood the definition of the word "deposit" to include the interest accrued thereon. If a Statute confers certain special powers upon a Regulatory Authority to issue directions that have a binding force and also confers powers of exemption upon the same authority, then the way in which such an authority had understood a word contained in the Statute, has to be given weightage. It appears that the Reserve Bank had understood the expression "deposit" to include the interest accrued thereon. This is borne out by the columns contained in a printed Form of Return to be submitted by every Non-Banking Financial Company at the end of every quarter. Object and purpose of Chapter III-B is to protect innocent depositors. Therefore, the Court is duty bound to adopt that interpretation which will advance the cause for which Chapter III-B was inserted. However hard the case of the writ petitioner may be, it should not lead me to a slippery slope, where other Non-Banking Financial Companies will have an easy escape route. Therefore, I hold on the first question that the amount of investments (SLR) to be maintained by a Non-Banking Financial Company is to be calculated on the aggregate of the principal amount of deposits together with the interests accrued thereon. Non-Banking Financial Company cannot ask for liquidation of either the principal amount lying in SLR or the interest accumulated thereon, for the purpose of paying off anyone other than the depositors - once the dues of the writ petitioner to the ten secured creditor-banks are discharged under a One Time Settlement, all the other assets including the realisables, will become available for the benefit of the entire body of creditors including the depositors. Such a course of action will only enure to the benefit of the depositors, whose interest alone the respondent is seeking to protect under the impugned orders. Therefore, the respondent has enormous powers, to grant general or special exemption or even to permit the petitioner to substitute securities. It is no doubt a discretionary power vested in them, to be exercised in appropriate cases. But I am of the view that in cases of this nature, where the Company Court is monitoring both the recovery of dues to the writ petitioner-company and the payment of dues to the creditors of the petitioner-company, the respondent is obliged to exercise the discretionary power, so that the sufferings of the depositors are also alleviated. The respondent cannot today suspect that the SLR amount may get siphoned off. The petitioner-company is now not in the hands of its promoters but in the hands of an Administrator appointed by this Court in a company petition for winding up. The Court is actually monitoring the recovery and payment. Therefore, I am of the view that directing the Reserve Bank to release the interest accumulated on the SLR, for the purpose of payment to the 10 secured creditor-banks under the One Time Settlement Proposals, will serve the ends of justice - Decided in favour of appellant.

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• Service Tax

• 2014 (6) TMI 136
  Nature of services provided to group companies - Management Consultancy Services - adjudicating authority has dropped the demand on the ground that the activity of Liaisoning & Representation are not consultancy services - Penalty u/s 76, 77 & 78 - Invocation of extended period of limitation - Held that:- there is no agreement for providing various services. Similarly, there is no invoice to understand the nature of service. However, going through the list of various activities, we note that what is being done is not executory routine or operational functions but the management function wherein the respondent is advising their other group companies to handle a particular issue in a particular manner and they also undertake such discussion with various other organizations such as financial organizations, banks, BCCI, Govt. bodies etc. - activities covered under the definition of management consultant. - Decided against the assessee. Respondents had not taken the registration with the Service Tax department during the said period and therefore, no returns or documents were filed. There was no reason for the respondents not to take the registration. Facts were suppressed from the department. In view of these facts, we find that the conditions stipulated under the proviso to Sec. 73(1) of the Finance Act, 1994 are fulfilled and we therefore hold that the extended period of limitation has been correctly invoked. In view of the said position, penalty under Sec.78 is imposable. We, accordingly, imposed penalty under Section 78, equal to the duty amount. Penalty under Sec.76 as per the provisions existing at that point of time would be leviable. Similarly, penalty under Sec.77 would also be leviable - Decided in favor of Revenue.

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• 2014 (6) TMI 135
  Business Support Service - Infrastructural Support Service - appellants have provided Concrete Pumps on Rental Basis - Held that:- during the period May 2007 to January 2008 the appellants were paying tax under Business Support Service and the definition of the said service includes the "infrastructure support service" and the appellants were providing equipment alongwith operator and prima facie it cannot be concluded that the appellants were not providing infrastructure support service. In fact they were also providing Manpower and it was their duty to ensure proper functioning of the pumps. Under the circumstances prima facie it cannot be said that the tax being paid by them was incorrect, just because from 2008 onwards a new, specific entry was introduced in the tariff. Agreement very clearly states that the rate mentioned are inclusive of all taxes and levies. I have also gone through the invoices produced. It is seen that the appellants have been charging based upon the quantity of the concrete pumped through the equipment installed by them and the rate is fixed on that basis. Thus, the charges are not in the nature of rental for a particular day or particular period but with reference to the work performed. Invoices do not indicate any tax element separately. Under the circumstances, it has to be held that the rates quoted and amount collected are inclusive of service tax. Since the charges were inclusive of all taxes which includes service tax and the appellant has not brought any evidence to indicate that they have refunded any service tax to their customers in my view the doctrine of unjust enrichment would be applicable in the facts and circumstances of the case. Appellant had no doubt about the applicability of tax during the relevant period. The fact that in the balance sheet for 2007-08, which was prepared after filing the refund claim, shows the amount as receivable will not make any difference in the peculiar facts and circumstances of the present case. The calculation sheets produced to prove that tax was not paid as cum tax basis will also not make any difference. - Decided against assessee.

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• 2014 (6) TMI 134
  CENVAT Credit - demand of interest towards amount paid using cenvat credit - omission in the return regarding cenvat details due to system error - Held that:-appellant had maintained the CENVAT credit account and they have taken the credit on the relevant dates and they have also made debit entries and they have also reflected the same in the column 4a and 4b. The only problem that has arisen is column 5a and 5b of the return could not be filled because of the difficulty in taking opening balance and difficulty in making entries. According to Rule 9 of CCR, what is required for availing CENVAT credit is, input service should have been received, the documents should be the one which are recognized as acceptable for availing CENVAT credit and input services should have been utilized for providing the output services. There is not even a whisper about any problem in these areas. If there is substantive compliance with the law and in fact the services have been received and credit entries and debit entries are made in the returns, in our opinion, just because of some omission in the returns, there cannot be a situation wherein an assessee is to be treated as not having paid the service tax at all. Unfortunately, there is no penal provision invoked and no penalty has been imposed, which in our opinion could have been justified especially in view of the arguments advanced by the learned AR that the assessee is at fault since when they faced problems in filing the returns on system, they could have filed returns manually and in such a case legally they would have been perfectly correct. - Decided in favour of assessee.

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• 2014 (6) TMI 133
  Maintenance and repair services - CENVAT Credit - Held that:- warranty is provided by the appellant and a service provider is ensuring repairs and maintenance during the warranty period and the service provider has been engaged by the appellant only. The obligation to ensure smooth running of the machinery supplied by them during the warranty period is on the appellant only and not on the service provider. The service has been provided to the appellant only in view of the above position. Having regard to the facts and circumstances of this case which are similar to the facts and circumstances in the case of Danke Products [2009 (7) TMI 137 - CESTAT, AHMEDABAD], appellant is eligible for the Cenvat credit availed by them - Decided in favour of assessee.

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• 2014 (6) TMI 132
  Waiver of pre deposit - mining of coal service - Cargo handling service - Held that:- to attract levy of Service Tax for cargo handling, the service provider has to be a cargo handling agency which is to say the main business must be cargo handling. We are also of the view that the nature of the contract also has to be considered to come to the conclusion whether the service attracts levy of Service Tax or not. In this case the nature of transaction apparently is one of sale. It was vehemently argued by the learned Commissioner (AR) that in this case the service has to be segregated and it is a divisible contract. This according to him is because Silo charges are collected because of a different Notification of Govt. of India. Even though we find some force in this argument, because of the definition of the service and service provider which we have discussed above, we feel that whether consideration of these arguments would affect the main clause or not would also require an in depth consideration and detailed analysis. Further in view of the complex issues involved when the legal aspects which we have discussed above, the Appellant also has a strong case as regards limitation - Prima facie case in favour of assessee - Stay granted.

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• 2014 (6) TMI 130
  Condonation of delay - Whether there was sufficient cause for condonation of delay in filing the appeals before the Commissioner (Appeals) which were belated - Held that:- There was sufficient cause for condonation of delay. The adjudicating authority had decided the matter on 31.1.2011 and a copy thereof was sent to the appellant on the same day. However, the appeal before the Commissioner (Appeals) was required to be filed on or before 30.4.2011, i.e. within the stipulated period of limitation of three months. But the appellant filed the appeal before the Commissioner (Appeals) on 8.1.2013, after a delay of more than 20 months. In the other appeal, there is delay of 24 months in filing the appeal. The plea of the appellant is that the proprietor of the assessee-firm was not in a good state of mind and was going under medical treatment for the last three years and, therefore, could not pursue the matter. Such plea does not stand substantiated in the facts and circumstances of the present case. There has been an inordinate delay of more than 20 and 24 months in filing the appeals - no question of law much less a substantial question of law arises in these appeals - Decided against assessee.

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• Central Excise

• 2014 (6) TMI 131
  Classification of Toys and Games as CSH 9504.90 as games as contended by the Revenue or by CSH 9503.00 as toy/puzzle - educational toys - toys and games of children - 1. Beeline 2. Disney Telespin 3. Disney Sorry 4. Disney Chip N Dale 5. Game of Games 6. Duck Tales 7. Monopoly Junior 8. Pay Day 9. Hotel 10. City Games (Paris) 11. City Games (London) 12. Games of States (USA) 13. Games of States (India) 14. Travel Ludo 15. Travel Snakes & Ladders 16. Travel Chinese Checkers 17. Dragster 18. Stratego 19. Fox & Geese 20. Travel Chess & Draughts 21. Leverage 22. Mould and Paint - Majority order. It is settled law that when a heading in the Central Excise Tariff is based on and is identical to a heading, the explanatory notes to that heading in the HSN have persuasive value for determining the scope of the same heading in the Central Excise Tariff, unless a different intention is indicated on the Tariff itself. Classification of the game ‘Fox & Geese’ - held that:- This game is more like the game of chess and involves skill and its outcome depends mainly upon the skill of the player. There is also an element of competitiveness. - this game has to be classified as a game under sub-heading 9504.90 of the Tariff. Other three games – ‘Chip N Dale’, ‘Duck Tale Disney’, and ‘Rally’, all these games are ‘board games’ i.e. are the games which involve movement of pieces on a premarked surface called ‘Board’ according to a set of rules and usually have a goal which a player aims to achieve. The contention of the appellant is that since in ‘Chip N Dale’, ‘Duck Tale Disney’ and ‘Rally’, there is no element of skill and outcome of these games is dependent only on chance, these games are purely for amusement of children and hence the same have to be treated as ‘toys’ covered by Heading 95.03. - this plea of the appellant is not correct. In terms of the criteria for ‘Games’, as prescribed by the Apex Court in its judgment in the case of Pleasantime Products Vs. CCE Mumbai-I (2009 (11) TMI 5 - SUPREME COURT), this game, which is a board game, has to be classified as a game under sub-heading 9504.90 of the Tariff. In view of majority order, the following items are classifiable as Toys under Heading 9503 of CETA, 1985:- 1. City of Games (Paris), 2. City of Games (London), 3. Games of States (USA), 4. Games of States (India), 5. Match & Move Memory, 6. Mould & Paints, 7. Game of Games and 8. Go To The Heads of Class. The other items, except as mentioned above, would be considered as ‘Games’ classifiable under Heading 9504 of CETA, 1985 and the demand of duty along with interest is upheld and the penalties are set aside. The Hon’ble Supreme Court directed that the demand of duty should be restricted for the normal period of limitation under Section 11A of the Central Excise Act, 1944 - personal penalty imposed on Shri S.K. Pathi set aside - Decided partly in favour of assessee.

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• 2014 (6) TMI 128
  100% EOU - DTA Clearances - whether the appellant is eligible to clear into DTA 50% of their FOB value of exports of deemed exports or not - Held that:- in the case of Gandhi Fibers, this bench vide order dt. 11.06.2009 relying upon the judgment of Virlon Textile Mills Ltd. had allowed the appeal of the assessee holding that assessee is eligible to clear goods to Domestic Tariff Area by taking 50% of the deemed exports value as their eligibility. It is noticed that this judgment of the Tribunal has attained finality in the hands of Apex Court. Since the issue is covered by the judgment of Hon’ble High Court of Gujarat in the case of Gandhi Fibers [2010 (12) TMI 797 - GUJARAT HIGH COURT ] and as also in the case of NBM Industries [2011 (9) TMI 360 - GUJARAT HIGH COURT] and Amitex Silk Mills Pvt. Ltd. [2005 (10) TMI 128 - CESTAT, NEW DELHI], we find that the impugned order is incorrect - Decided in favour of assessee.

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• 2014 (6) TMI 127
  Duty demand - Shortage in stock - Lack of evidence - Held that:- The Director on the spot statement accepted such shortages but did not accept that the same were on account of clandestine removal. In fact immediately on the next day, he explained that the raw material in the furnace was taken as 35 MT whereas the same was to the tune of 80 MT - there is virtually no evidence on record indicating that such short found raw material has been either cleared by the appellant in a clandestine manner or has been used in the manufacture of final product cleared without payment of duty. There are no investigations done by the department and no further evidence stands produced on record. there is no evidence on record that such alleged excess found goods were for clandestine removal, in the absence of which the confiscation of the same cannot be upheld. The same is accordingly set aside. - Decided in favour of assessee.

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• 2014 (6) TMI 126
  Process that amount to manufacture or not - cutting and slitting of jumbo rolls or log rolls of self adhesive rolls of Chapter 48 and 85 - Held that:- cutting and slitting of a product from jumbo rolls into smaller sizes would not amount to manufacture. In S.R. Tissues Pvt. Ltd's case [2005 (8) TMI 111 - SUPREME COURT OF INDIA], it is also held that the value addition cannot be a criterion for concluding that whether a new product has emerged or not with a distinct character, name or use. There is a third schedule to the Central Excise Tariff Act, wherein a large number of items have been listed and in respect of these items, the activity of labeling, relabeling, packing or re-packing or adoption of any other treatment to render them marketable are deemed as ‘manufacture' under Section 2(f) of the Act. CETH 4811 and 8546 have not been specified in the said Schedule even though similar products falling under CETH 4816, 4818, 8536, 8539, etc. figure in the said Schedule. If the legislature intended the process of cutting and slitting to be amounting to manufacture, then CETH 4811 and 8546 should also have been included in the said Schedule. Further, in various Chapter Notes in the Tariff, wherever the legislature intended cutting and slitting to be amounting to ‘manufacture', specific notes were provided. In the present case, in respect of CETH 4811 and 8546, no such Chapter Note exists. All these points to the fact that the legislature did not intend to treat cutting and slitting of jumbo rolls of products falling under 4811 and 8546, to smaller sizes so as to make them useable by the user as amounting to ‘manufacture' - Decided against Revenue.

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• CST, VAT & Sales Tax

• 2014 (6) TMI 129
  Maintainability of appeal - Alternative remedy available - Rajasthan Excise Act 1950 - Held that:- in view of remedy available to the petitioner under Section 9A of the Act of 1950 before the Excise Commissioner/Tax Board within a period of one month from the date of receiving copy of the order, I am not inclined to interfere with the impugned order. As the petition is pending before this Court and interim protection has been granted to the petitioner, the present writ petition is disposed of with the observations that in case petitioner files an appeal before the competent appellate authority, the same shall be considered and decided by the authority on merit as expeditiously as possible after affording reasonable opportunity of being heard to the petitioner within a period of one month from the date of filing of appeal. The interim protection granted to the petitioner shall remain in currency till decision of the appeal. It is also observed that appellate authority shall consider the prayer for reduction of penalty imposed against the petitioner in the impugned order sympathetically - Decided against assessee.

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• Indian Laws

• 2014 (6) TMI 119
  Cancellation of anticipatory bail - Misappropriation of funds - Amount paid for production of Hindi Film - Execution of agreements with various artists showing inflated amount and expenses incurred while producing the film - Refusal to divulge the details of the financial dealings/payments/expenses incurred out of the funds provided - whether learned ASJ was justified in releasing the respondents Raj Hiremath and Savita Raj Hiremath on anticipatory bail without putting some condition on them in respect of the amount allegedly misappropriated by them which was entrusted by the complainant for production of the film - Held that:- Mere audit of the accounts at this stage will not be of much help to the respondents. Learned counsel for the respondents was also questioned as to whether at any point of time in the Memorandum of Understanding, it was disclosed to the complainant that behind the legal entity Usha Kaal Communication Ltd., the real face was that of the respondents who received the money in the name of that company, learned counsel for the respondent submitted that it was not necessary to disclose about the payments received by the respondents on behalf of Usha Kaal Communication Ltd. The respondents Raj Hiremath and Savita Raj Hiremath allegedly cheated the complainant and misappropriated the amount to the extent of Rs. 1 crore provided by the complainant for direction of the film. The respondents are not disputing the finance to the tune of Rs. 2.95 crores by the complainant and their statement of account reflect the manner and the extent to which the amount provided was allegedly misappropriated. Admittedly nothing has been refunded to the petitioners till date nor the respondents are ready to refund even partially to the petitioner. The petitioner, therefore, continues to enjoy the fruits of their crime. Such persons who continue to reap the benefit of their crime after committing the offence of personal gain and preceded by calculated design need to be put under some restriction by imposing a reasonable condition so that it does not send a wrong message to the potential offenders that even after committing the crime, they can continue to enjoy the ill-gotten wealth. The Court may impose conditions as specified under Section 438(2) of Cr. P.C. - This Court is conscious of the fact that criminal Court is not a recovery forum but in the given case, it is the duty of the Court to safeguard the interest of the society as also of the complainant who has been duped of huge amount. If some reasonable condition is imposed on the respondent while letting them enjoy the benefit of anticipatory bail, it would have the effect of avoiding unnecessary adjournment and delay in trial at the behest of respondents who are accused in FIR No. 158/2011, PS EOW. The impugned order needs to be interfered by this Court for the reason that the reasoning given by learned ASJ while enlarging the respondents namely Raj Hiremath and Savita Raj Hiremath on anticipatory bail, is not on sound judicial principles. But at the same time, cancellation of anticipatory bail at this stage would also not be in the interest of justice. - Taking into consideration the peculiar facts and circumstances of the case, the impugned order is modified to the extent that respondents Raj Hiremath and Savita Raj Hiremath are directed to deposit Rs. 25 lacs each with Registrar General of this Court within 10 days from the date of this order, who shall keep the same in the form of FDR initially for a period of one year which shall be renewed from time to time, as a condition for their release on anticipatory bail - Decided in favour of appellant.

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• 2014 (6) TMI 99
  Validity of Exparte arbitration award - consent for appointment of arbitral tribunal - Unilateral appointment of Arbitrator cum Advocate by one party - Dual capacity of Arbitrator and Advocate of one party - Failure to perform the terms and conditions of MOU - Petitioner remained absent from proceedings therefore, ex parte order passed - Held that:- The requirement of consent, in no way, permits any one party to appoint Arbitrator unilaterally. It is contrary to the terms and the law. Apart from this clause, it is necessary for both the parties to appoint and/or nominate and/or select sole Arbitrator by consent. The appointment of the Arbitral Tribunal without consent itself was contrary to the agreed terms of the contract. The Arbitrator who was Advocate of the Respondents, acted also as the Advocate and also as the Arbitrator. It is just impermissible. Such dual capacity of Advocate and/or even of the Arbitrator is against the basic provisions of the Arbitration Act and/or the arbitration scheme itself. The Advocate by consent can act as Arbitrator, but cannot act in such dual capacity for only one party. Petitioner would have participated in the arbitration proceedings and resisted the claim in all respects. The Arbitrator would have passed the appropriate order. But in this case, the Petitioners having made their position clear in writing and had resisted every steps taken by the Respondents including the steps taken by the Arbitrator, who was no one else, but the Advocate of the Respondents and, therefore, the nonparticipation, in no way, can be treated as deliberate action to avoid the settlement of disputes through the arbitration proceedings. I am inclined to observe that both the proceedings so initiated and concluded is illegal, contrary and perverse. The Award so passed is unsustainable and liable to be quashed and set aside on all counts. - Decided in favour of appellant.

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