TMI Tax Updates - e-Newsletter
June 7, 2013

Case Laws in this Newsletter:

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

TMI SMS

• Ressessment - before issuance of notice reasons were recorded for one issue only - reaons for other two issues were recorded after issuance - notice quashed -HC

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• Cenvat Credit - no provision in the CCR to deny proportional credit on the inputs which were used in providing output service on which recovery is pending - Tri

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• Tribunal was not right in ordering that the appeal shall stand automatically dismissed in case the amount as directed by the Tribunal is not deposited. - HC

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News

1. More than 1 lakh households get LPG subsidy through DBT

2. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

3. Government Calls for Comments/Suggestions on the report of the Financial Sector Legislative Reforms Commission by 15th July, 2013

4. India Committed to be a Steadfast Partner of Myanmar: Anand Sharma

5. Anand Sharma Meets Aung San Suu Kyi on Sidelines of Wef on East Asia 2013, Discusses Energy Cooperation with Myanmar Energy Minister

Notifications

Central Excise

1. 20/2013 - dated 5-6-2013 - CE

Amends Notification No. 12/2012-Central Excise, dated the 17th March, 2012

Customs

2. 31/2013 - dated 5-6-2013 - Cus

Amends Notification No. 12/2012-Customs, dated the 17th March, 2012

3. 59/2013 - dated 6-6-2013 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from June 07, 2013

DGFT

4. 16 (Re 2013)/2009-2014 - dated 6-6-2013 - FTP

Amendment in Para 2.35 (b) of Foreign Trade Policy, 2009-2014.

Circulars / Instructions / Orders

Customs

1. F. No. 450/25/2009 - Cus IV - dated 31-5-2013

Regarding 24x7 Customs Operation at Major Ports and Airports

Highlights / Catch Notes

Income Tax

• High Court Rules Settlement Commission Cannot Amend Its Own Orders; Exceeds Jurisdictional Powers.

  Case-Laws - HC : Order of settlement commission - power to rectify its own order - impermissible and beyond the jurisdiction of the Commission - HC
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• High Court: No Penalty for Claiming Expenditure as Revenue u/s 271(1)(c) of Income Tax Act.

  Case-Laws - HC : Penalty u/s 271(1)(c) - merely for the reason that the assessee has claimed the expenditure to be revenue will not render the assessee liable to penalty proceedings. - no penalty - HC
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• DEPB Scheme Benefits Deemed Independent Income, Impacting Deductions u/ss 80IA and 80IB, Says High Court.

  Case-Laws - HC : Deduction u/s 80IA and 80IB - the benefits of DEPB would constitute independent source of income beyond the first degree nexus between the profits and the industrial undertaking - HC
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• Court Rules Section 41(1) Cannot Be Invoked Without Prior Allowance or Deduction in Taxpayer's Assessment.

  Case-Laws - HC : Addition u/s 41 - no allowance or deduction had been made in the assessment of the assessee in any earlier year - Consequently, there is no question of invoking section 41(1) - HC
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• High Court Rules Interest from Surplus Share Investments as Taxable Income from Other Sources, Not Business Income.

  Case-Laws - HC : Interest income - zero coupon money - interest earned by investing the surplus share money in bank deposits, such interest is taxable as income from other sources and not as business income - HC
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• Court Quashes Tax Notice Due to Procedural Non-Compliance in Assessment Reopening u/s 148 of Income Tax Act.

  Case-Laws - HC : Re opening of assessment - before issuance of notice u/s 148 reasons were recorded for one issue only - reaons for other two issues were recorded after issuance of notice - notice quashed - HC
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• Directors Not Liable for Interest or Penalties u/s 179(1); Not Considered Assessees u/s 2(7).

  Case-Laws - HC : As per S. 179(1) a director cannot be held liable for interest/penalty and thereupon be treated as an assessee u/s 2(7) as a person by whom any tax or any other sum of money is payable - HC
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Customs

• High Court Reviews Conflict Between Customs and State Police Over Bonded Warehouse Stock Discrepancy.

  Case-Laws - HC : Private bonded warehouse - discrepancy in stock register - customs authorities and the Police Department of the State opposing each other in a petition instituted by the customs authorities - HC
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Corporate Law

• Supreme Court Affirms Central Chit Funds Act Supremacy Over State Laws, Clarifies Legal Principle of Repugnancy.

  Case-Laws - SC : Constitutional bench - Central Chit Funds Act - supriority of Central Law over state laws - Repugnancy arises on the making and not commencement of the law - SC
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Indian Laws

• Section 29 RDDB Act: Income Tax Rules Guide Debt Recovery, But Not Universally Applicable in All Cases.

  Case-Laws - SC : Debut recovery - auction - Suffice it to say that the use of the words “as far as possible“ in Section 29 of RDDB Act simply indicate that the provisions of the Income Tax Rules are applicable except such of them as do not have any role to play in the matter of recovery of debts recoverable under the RDDB Act. - SC
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Service Tax

• CENVAT Credit Rules Lack Provisions to Deny Proportional Credit for Inputs Used in Output Services Awaiting Payment.

  Case-Laws - AT : Cenvat Credit - There is no provision in the CENVAT Credit rules to deny proportional credit on the inputs which were used in providing the output service on which recovery is pending. - AT
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• Penalty for Short Service Tax Payment Set Aside After Pre-Notice Payment u/s 73(3).

  Case-Laws - AT : Penalty - Short payment of service tax - payment prior to issue of show cause notice (SCN) - section 73(3) - penalty set aside - AT
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Central Excise

• SSI Exemption Issue: Appeal on Duty Rate Determination Not Maintainable in High Court.

  Case-Laws - HC : Maintainability of appeal before High Court - SSI Exemption - whether issue of SSI exemption is an issue of determination of rate of duty - Held yes, appeal not maintainable before HC - HC
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• Refund Claims Denied for Not Challenging Production Capacity; Case Remanded for Further Review.

  Case-Laws - HC : Refund - The refund claims were declined only on one ground, without challenging the determination of annual capacity of production, the processor could not have sustained refund claim - matter remanded back - HC
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• Tribunal Error: Mandating Automatic Dismissal of Petitioner's Appeal Over Non-Deposited Amount is Incorrect.

  Case-Laws - HC : Tribunal was not right in ordering that the appeal of the petitioner shall stand automatically dismissed in case the amount as directed by the Tribunal is not deposited. - HC
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VAT

• Court Upholds Strict VAT Compliance; Equity Can't Override Harsh Tax Laws Despite Filing Challenges.

  Case-Laws - HC : Hardship in following VAT Rules - filing of Forms - it is well settled that equity has no place in taxing laws - a statutory rule cannot be said to be unreasonable merely because in a given case it operates harshly - HC
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Case Laws:

• Income Tax

• 2013 (6) TMI 134
  Order of settlement commission - power to rectify its own order - Waiver of interest under section 234B - held that:- The appropriate course of action for the Revenue ought to have been to challenge the order of the Commission perhaps by way of certiorari. An application for rectification under section 154 of the Act was, however, impermissible and beyond the jurisdiction of the Commission, as held in Brij Lal [2010 (10) TMI 8 - SUPREME COURT]. - On the aforesaid analysis, the order of the Settlement Commission dated February 26, 2004, cannot be sustained and is accordingly quashed. - Decided in favor of assessee.

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• 2013 (6) TMI 133
  Penalty u/s 271(1)(c) - there is no change in the amount of tax payable by the assessee as the ultimate return of the assessee remains less than the amount assessable under section 115JB of the Act. - held that:- The assessee has disclosed the nature of transactions in its return. It was on the basis of the interpretation of the provisions of the statute, the Assessing Officer found that such expenditure claimed by the assessee is not the revenue expenditure but the capital expenses. There is a fine distinction as to when an expenditure can be treated as a revenue or a capital expenditure. Therefore, merely for the reason that the assessee has claimed the expenditure to be revenue will not render the assessee liable to penalty proceedings. - no penalty - decided against the revenue.

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• 2013 (6) TMI 132
  Calculation of profits from transfer of DEPB licenses - what treatment the DEPB credits should be given for the purpose of computing assessee’s claim of deduction u/s 80IA and 80IB - whether Tribunal erred in not applying the ratio of judgment of Topman Exports vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] & relying on Liberty India [ 2009 (8) TMI 63 - SUPREME COURT] - whether Tribunal erred by not holding that the ratio of decision in case of Liberty India [supra] and Topman Exports (supra) not consistent with each other and can coexist and in-fact supplement each other? - Held that:- Tribunal did not commit any error. The question which the assessee raises in the present Tax Appeal was precisely before the Apex Court in the case of Liberty India (supra) wherein context of the deduction u/s 80IA and 80IB held that the benefits of DEPB (as also duty drawback, rebate, etc.) would constitute independent source of income beyond the first degree nexus between the profits and the industrial undertaking. Thus this decision leaves no scope for any doubt or debate. In contrast, the decision in the case of Topman Exports (supra) was rendered in the background of deduction u/s 80HHC. The question was to what extent the receipts of sale of DEPB scrips should be ignored for the purpose of computing such deduction. It was in this background the Supreme Court held not the entire sale proceeds but the profit margin, which would be a part of the sale proceeds, should be ignored while computing the deduction. Both the judgments, therefore, operate in different fields. The Tribunal correctly applied the ratio laid down in Liberty India (supra) since the facts in the present appeal are identical. - Decided against the assessee.

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• 2013 (6) TMI 131
  Renewal of extension u/s 80-G rejected - registration under section 12-A also canceled - Held that:- According to the finding recorded in the impugned order, the corpus donation received by the Trust upto 31.5.2005 was Rs. 5,33,000/- as it was formed of Rs. 5000/- only. Most of it was utilized in constructing the shopping complex. The balance sheet as on 31.5.2005 further reflects that an amount of Rs. 7,96,821/- has been spent on construction. On the other hand, the petitioner had applied only meager amount of its income for running homeopathic dispensary. Though petitioner is making tall claims of dispensing medicines free of cost, but it had spent small amount of Rs. 12,325/- on medicines in the year 2004-05 and Rs. 9490/- on medicines during the period of 2003-04. Admittedly, till date, the entire so called charitable activities of the petitioner-Trust remained confined to two rooms on the ground floor of premises No 33/70-72, Topi Bazar, Chowk, Kanpur which were admittedly made available to it free of cost since the Trust came into existence. Thus admitted fact of record reveals that there has been no expansion of any charitable activities. On the other hand, the petitioner-Trust under the guise of constructing a Homeopathic hospital and dispensary has rather constructed shopping complex and major part of it has already been let out. The petitioner-Trust also does not dispute that its expenditure on medicines during successive years had remained static and also could not place any material to show that the figures mentioned in the impugned order relating to the expenditure made in the name of charity is in any manner perverse - CIT had rightly withdrawn the exemption granted under section 80-G of the Act. Challenge the notice u/s 12A (3)- Held that:- Suffice it to say that it is merely a show cause notice and challenge to it at this stage is premature. It is open to the petitioner to file its reply to the show cause notice against purposed action before the CIT and in such proceedings it is open to the petitioner to produce all such evidence which may justify its claim for continuation of its registration as a charitable institution. See Madhya Pradesh Madhyan Vs. CIT.(2002 (2) TMI 56 - MADHYA PRADESH High Court) - writ petition is dismissed with liberty to the petitioner to file its reply to the show cause notice.

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• 2013 (6) TMI 130
  Profits chargeable to tax - unclaimed unsecured loans - addition u/s 41 deleted by CIT(A) - Held that:- The very first condition for invoking section 41(1) is that an allowance or deduction ought to have been made in the assessment for any year in respect of any loss, expenditure or trading liability incurred by the assessee. In the present case it is an admitted position that no allowance or deduction had been made in the assessment of the assessee in any earlier year. Consequently, there is no question of invoking section 41(1) and the Tribunal as well as CIT(A) were correct in deleting the addition - no substantial question of law arises for consideration. In favour of assessee.

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• 2013 (6) TMI 129
  Interest accrued on equity funds deployed with the Bank - zero coupon money - nexus of funds invested in FDR - income from other sources OR capital receipt - Held that:- Interest earned by the assessee before commencement of business on short term deposits with banks, even out of term loans secured from financial institutions, is an income chargeable under the head “income from other sources” and would not go to reduce the interest payable by the assessee which would be capitalised after the commencement of commercial production. See Tuticorin Alkali Chemicals & Fertilizers Ltd Versus CIT [1997 (7) TMI 4 - SUPREME Court] & M.P. State Industries Corporation (1968 (4) TMI 2 - MADHYA PRADESH High Court) wherein held that the interest earned by investing the surplus share money in bank deposits, such interest is taxable as income from other sources and not as business income. Also see Shree Krishna Polyster Ltd (2004 (10) TMI 42 - BOMBAY High Court). Not a fit case for filing an SLP before the Apex Court. The prayer made by the appellant is rejected.

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• 2013 (6) TMI 128
  Re opening of assessment - additions in respect of bad debts, unabsorbed depreciation and disallowance under section 14A - Held that:- AO had combined the original recorded reasons and the additional reasons and shown it as one set of reasons. The purported recorded reasons dated 19.01.2010 comprise of two paragraphs numbered as “01” and “02”. The purported additional reasons also comprise of two paragraphs “01” and “02”. It is only in the additional reasons, in paragraph “01” that two sub-paragraphs are referred to as “(a)” and “(b)”. It is, therefore, clear that the AO has conjured up a different set of reasons by combining the original reasons and the additional reasons allegedly recorded sometime in October 2010. This is impermissible and does not behove of the Assessing Officer who is supposed to be fair to the department as also to the assessee and to be honest to the record. AO was also wrong in stating that the reasons as indicated by him involving three issues had been recorded before issuance of the notice u/s 148. To make it clear, the reasons recorded prior to the issuance of the notice under Section 148 pertained only to the issue of bad debts. The other purported reasons pertaining to the issues of unabsorbed depreciation and disallowance under Section 14A admittedly, recorded after the issuance of notice under Section 148. Thus Tribunal was right in concluding that the proceedings under Section 147/148 were itself bad - in favour of assessee.

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• 2013 (6) TMI 127
  Disallowance u/s 40(a)(ia) - Non deduction of TDS on amount paid to MGPL, a group company getting the advertisements done from J.J. Communications on behalf of the assessee company - Held that:- These expenses cannot be disallowed to the assessee if MGEPL has deducted and paid TDS on behalf of the assessee without violating the condition of section 40(a)(ia). Since in this case the assessee has proved that amount of Rs.1,20,84,768/- was paid on behalf of the assessee by its agent no infirmity in the order of the CIT( A) in allowing Rs.1,12,84,318/- out of total disallowance of Rs.1,20,84,768/- made by AO. Tribunal has recorded that the assessee had proved that MGEPL was acting as an agent. The question raised by the AO as to why should MGEPL act without any profit motive is answered by section 185 of the Contract Act which provides that No consideration is necessary to create an agency - in favour of assessee.

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• 2013 (6) TMI 126
  Disallowance of deduction on account of fair market value from the business income of the assessee - Held that:- The assessees & his wife may have occupied equal status initially, but the unequality arose from the fact that in the case of her assessment, AO did not realize the infirmity in her computation which was realized by the AO in the case of the assessee and therefore they became unequals. The infirmity pointed out by the AO was not refuted by the assessee by any cogent evidence. Therefore, the assessee cannot claim equal treatment. The fact that the assessee did not take steps to establish by producing or having the books of accounts of the joint venture produced to show that the sum was received without deducting market value of the land leads to the only inference under section 114(g) of the Evidence Act that the account books were not produced in spite of repeated opportunities because, if produced, they would not have supported the contention of the assessee that the sum of Rs.21,98,141/- was received without debiting the market value of the land. Thus it is to be opined that the CIT (Appeal) had no evidence before him to hold that the sum of Rs.21,98,141/- was received by the assessee from the joint venture without deducting the cost of the land, and therefore, the CIT (Appeal) had no jurisdiction to set aside the order of the Assessing Officer. The Tribunal without going into the matter dismissed the appeal relying on the judgment of Kaumudini Narayan Dalal (2000 (12) TMI 101 - SUPREME Court) which had no manner of application to the facts and circumstances of the case. In favour of revenue.

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• 2013 (6) TMI 125
  Liability of directors of private company in liquidation - penalty levied against the company under section 271(1)(c) for outstanding demand of Rs. 2.47 lac for AY 1988-89 & Rs. 4.38 lac for AY 1989-90 - whether u/s 179 department has no authority to seek recovery against the director of company any dues of the said company arising out of the penalty order u/s 271 (1)(c) - Held that:- As decided in Maganbhai Hansrajbhai Patel v. Asstt. CIT [2012 (11) TMI 189 - GUJARAT HIGH COURT] language used in section 179(1) with that of section 156 i.e. Notice of demand, it emerges that in section 179, the term used is 'tax due' where as in section 156 which is a recovery provision refers to a notice of demand which would specify the sum payable. The sum payable may as provided in the section itself include tax, interest, penalty fine or any other sum which is payable in consequence of any order under the Act. Section 220 pertains to "when tax payable and when assessee deemed to be in default". Thus it would therefore, not be possible to stretch the language of section 179(1) to include interest and penalty also in the expression 'tax due' as decided in Ratanlall Murarka And Others Versus ITO [1980 (7) TMI 60 - KERALA HIGH COURT]. The director may be considered an assessee under section 2(7) of the Act which provides that assessee means a person by whom any tax or any other sum of money is payable under the Act. However, the same must be qua the tax of the company which was due and remained unpaid. By virtue of section 179(1) of the Act the director cannot be held liable for interest and penalty and thereupon be treated as an assessee under section 2(7) of the Act as a person by whom any tax or any other sum of money is payable under the Act. Against revenue.

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• Customs

• 2013 (6) TMI 124
  Stay - appeal against the order of tribunal directing to predeposit of rs. 25 lakhs - held that:- paragraph 3 to 5 were the short grounds taken regarding the merits of the case which had not at all been adverted upon by the Tribunal. Further, paragraph 7 of the stay application stated about liquidity crunch which the appellant would face. This has also not been taken into consideration. Tribunal was considering the stay cum waiver application and therefore, it was incumbent upon it to have dwelled into all these issues. Following the decision in ITC Ltd. [2003 (10) TMI 70 - HIGH COURT OF ALLAHABAD] , stay order set aside - matter remanded back to tribunal for fresh consideration.

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• 2013 (6) TMI 123
  Private bonded warehouse - discrepancy in stock register - customs authorities and the Police Department of the State opposing each other in a petition instituted by the customs authorities. - held that:- the enquiry by the customs authorities on the premise of alleged breach of the Customs Act, the Rules made thereunder and the terms of the licence of the bonded warehouse is still incomplete and in the meantime the police authorities have put their own seals on the warehouse. Without expressing any opinion on the both FIRs we are of the opinion that the customs authorities should be allowed to complete the enquiry for which we have already granted six weeks’ time in a connected petition. Once such enquiry is over, it would be open for the police authorities, of course, subject to all the rights and contentions of respondent No. 5 as also the customs authorities, to proceed further in accordance with law in connection with such FIRs. Police authorities shall remove their seals on the bonded warehouse to enable customs authorities to complete their enquiry. It would, however, be the duty of the customs authorities to ensure that the goods lying in the warehouse are not permitted to be taken out. They shall also ensure that the necessary records are taken in their custody and are made available for future reference. Once the enquiry is over, the result thereof may also be communicated to the police authorities by the customs authorities.

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• Corporate Laws

• 2013 (6) TMI 122
  Constitutional bench - whether the Kerala Chitties Act 23 of 1975 became repugnant to the Central Chit Funds Act 40 of 1982 under Article 254(1) upon making of the Central Chit Funds Act 40 of 1982 (i.e. on 19.08.1982 when the President gave his assent) or whether the Kerala Chitties Act 23 of 1975 would become repugnant to the Central Chit Funds Act 40 of 1982 as and when notification under Section 1(3) of the Central Chit Funds Act 40 of 1982 bringing the Central Act into force in the State of Kerala is issued? Repugnancy arises on the making and not commencement of the law, as correctly held in the judgment of this Court in Pt. Rishikesh (1995 (5) TMI 245 - SUPREME COURT OF INDIA). On the enactment of the Central Chit Funds Act, 1982, on 19.08.1982, which covered the entire field of "chits" under entry 7 of List III of the Constitution, the Kerala Chitties Act, 1975, on account of repugnancy as enshrined in Article 254(1), became void and stood impliedly repealed. That, on the occupation of the entire field of "chits", the Kerala Legislature could not have enacted the State Finance Act No. 7 of 2002, inserting Section 4(1a) into the Kerala Chitties Act, 1975, particularly on the failure of the State in obtaining Presidential assent under Article 254(2). The Central Chit Funds Act, 1982 though not brought in force in the State of Kerala is still a law made, which is alive as an existing law. By reason of Article 367 of the Constitution, the General Clauses Act, 1897 applies to the repeal. Section 6 of the General Clauses Act, 1897 is, therefore, relevant, particularly Sections 6(b) and 6(c) and consequently, the previous operation of the Kerala Chitties Act, 1975 is not affected nor any right, privilege, obligation or liability acquired or incurred under that repealed State Act of 1975. Thus, after 19.08.1982, the Kerala Chitties Act, 1975 stands repealed except for the limited purposes of Section 6 of General Clauses Act, 1897 If and when the Central Government brings into force the Chit Funds Act, 1982 by a notification in State of Kerala, under Section 1(3), Section 90(2) will come into play and thereby the Kerala Chitties Act, 1975 shall continue to apply only to chits in operation on the date of commencement of the Central Chit Funds Act, 1982 in the same manner as the Kerala Chitties Act, 1975 applied to chits before such commencement.

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• Service Tax

• 2013 (6) TMI 137
  Cenvat Credit - input services - denial of the proportionate credit of Service Tax credit, on the ground that the appellant had written off the certain amount as bad debts from the books of accounts for which input services were utilised. - held that:- Department is trying to co-relate the input services to the output services. It is settled law that there cannot be one to one co-relation in availing of the CENVAT Credit of the input service to the provision of output service. As per Rule 6 of Service Tax Rules, Service Tax is payable when the payment towards taxable services are received. No Service Tax is payable on that part of the payment which is not received. No Service Tax is payable on that part of the payment which is not received. There is no provision in the CENVAT Credit rules to deny proportional credit on the inputs which were used in providing the output service on which recovery is pending. The rule envisages reversal of credit wrongly utilized or erroneously refunded. In this case, the services rendered are taxable services. The credit of inputs/input services availed is utilized in providing taxable output services. Hence, there is nothing wrong in availing and utilization of the credit. Rule 14 does not envisage recovery of credit in situations where Service Tax recovery was pending and written off as bad debts later. - demand not sustainable - decided in favor of assessee.

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• 2013 (6) TMI 136
  Penalty - Short payment of service tax - payment prior to issue of show cause notice (SCN) - section 73(3) - held that:- in Adecco Flexione Workforce Solutions Ltd. (2011 (9) TMI 114 - KARNATAKA HIGH COURT) it was held that, Unfortunately the assessing authority as well as the appellate authority seem to think. If an assessee does not pay the tax within the stipulated time and regularly pays tax after the due date with interest. It is something which is not pardonable in law. Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. They are paid salary to act in accordance with law and to initiate proceedings against defaulters who have not paid service tax and interest in spite of service of notice calling upon them to make payment and certainly not to harass and initiate proceedings against persons who are paying tax with interest for delayed payment. The Parliament has expressly stated that against persons who have paid tax with interest, no notice shall be served. If notices are issued contrary to the said Section, the person to be punished is the person who has issued notice and not the person to whom it is issued. In ignorance of law, the authorities are indulging in the extravaganza and wasting their precious time and also the time of the Tribunal and this Court. It is high time that the authorities shall issue appropriate directions to see that such tax payers are not harassed. If such instances are noticed by this Court hereafter, certainly it will be a case for taking proper action against those law breakers. [HC] Penalty set aside. - decided in favor of assessee.

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• Central Excise

• 2013 (6) TMI 120
  Condonation of delay - SSI Exemption - Brand name - purification of water - held that:- The reasons given in the affidavit explaining the delay are bonafide and the delay was due to error and mistakes which took place in finalising the draft and it cannot be said that the appellant was negligent in filing the appeal. Sufficient grounds have been made out to condone the delay in filing the appeal. - Delay condoned - decided in favor of assessee. Maintainability of appeal before High Court - SSI Exemption - whether issue of SSI exemption is an issue of determination of rate of duty - held that:- since the question raised in the appeal relates to eligibility of the goods manufactured by the assessee for exemption under Notification No.1/93-C.E. dated 28.2.1993 and goods were manufactured without payment of duty and no assessment had taken place, the proceedings initiated under Section 11-A were for determination of duty liability in which the eligibility of the said goods for exemption was disputed. The question of exemption is directly and proximately related to the rate of duty for the purposes of assessment of excise duty payable by the respondent. The appeal on the said question is clearly excluded under Section 35-G and can be filed by the revenue before the Apex Court under Section 35-L of the Act. Thus the preliminary objection of the respondent regarding maintainability of appeal is upheld and Central Excise Appeal Defective No.- 402 of 2005 is held not maintainable under Section 35-G of the Act. - The appeals are maintainable before Apex Court - Decided against the revenue.

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• 2013 (6) TMI 119
  Refund - non finalization of provisional assessment - held that:- In the event of failure of final assessment within the time as above, the provisional assessment shall be deemed to be final assessment and in that case, application for refund will be entertained and examined and amount, if any, refundable shall be quantified immediately thereafter and this exercise must be completed within a week from the date of expiry of two months. - matter restored before adjudicating authority - This should be processed within fortnight after the final order of assessment or after expiry of two months from the date of receipt of this order whichever is later.

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• 2013 (6) TMI 118
  Refund - payment of excess duty - Compounded Levy Scheme - wrong determination of Annual Production Capacity - independent textile processors - held that:- If the determination was not appealable, in our view, it would be incorrect to hold that without challenging such an order, the manufacturer cannot claim refund of duty erroneously collected. The fact that the galleries were included while determining the Annual Production Capacity and as such, the galleries were otherwise not required to be included by virtue of the decisions of the Tribunal and the Apex Court, there is no dispute. In our view, therefore, the petitioners were justified in filing refund claims in terms of Section 11B of the Central Excise Act claiming refund of excess duty collected on the basis of such consideration of galleries in determining Annual Production Capacity and collecting corresponding excise duty on such capacity. In the show cause notice, three objections were raised. The refund claims were declined only on one ground, namely, that without challenging the determination of annual capacity of production, the processor could not have sustained refund claim. In that view of the matter, the Deputy Commissioner did not go into other aspects. Therefore, even while setting aside the orders passed by the Tribunal and the central excise authorities and holding that the refund claims were maintainable without challenging the determination of Annual Production Capacity, we would still like to remand the proceedings to the Deputy Commissioner for further consideration and adjudication on other two issues raised in the show cause notice. - matter remanded back to original authority - decided partly in favor of assessee.

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• 2013 (6) TMI 117
  Automatic dismissal of appeal - Tribunal dismissed the appeal for non compliance of stay order by another party - whether non deposit of pre-deposit would lead to automatic dismissal of appeal - held that:- The Tribunal while adjudicating the stay application of the petitioner had waived the condition of pre-deposit fully. However, M/s. VAL has been directed to deposit Rs. 2.5 crores as a pre-condition for hearing the appeal. In such a situation, the Tribunal was not justified in holding that failure to deposit Rs. 2.5 crores by M/s. VAL would automatically result in dismissal of appeal of the petitioner. Law fastens liability on the defaulter and it is the defaulter who can be penalized for its own act unless otherwise expressly provided under any statutory authority. The respondents have failed to show any provision of law or statutory authority whereby the non-deposit of amount by M/s. VAL would entail automatic dismissal of appeal of the petitioner when the condition of the pre-deposit in the case of the petitioner has been waived completely. Tribunal was not right in ordering that the appeal of the petitioner shall stand automatically dismissed in case the amount by M/s. VAL as directed by the Tribunal is not deposited.

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• CST, VAT & Sales Tax

• 2013 (6) TMI 139
  Hardship in following VAT Rules - filing of Forms - Authorization to re-open the assessment - amendment in U.P. Trade Tax Rules, 1948, specifically in Rules 12-A, 12-B and 12-C. - held that:- the rule is mandatory and the filing of form as per the prescribed procedure is also mandatory. - the aforesaid Rules 12-A, 12-B and 12-C cannot be read down so as to enable a dealer to file Form IIIB in respect of transaction which took place beyond two years of the assessment year in which the form was issued. No doubt some dealer may suffer some hardship by the impugned rules, but it is well settled that equity has no place in taxing laws. It is also well settled that a statutory rule cannot be said to be unreasonable merely because in a given case it operates harshly. - Decided against the assessee.

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• 2013 (6) TMI 138
  Rectification of mistake - rate of tax adopted by the respondent-authority is inconsistent with the rate specified in the First Schedule to the TNVAT Act - department grouped the entire list of commodities under the nomenclature "Petroleum Products" and accordingly assessed the turnover to tax at 30% in the assessment order which is applicable for sale of petrol and not for other petroleum products like Bitumen, Carbon Black Feed Stock (CBFS), CRMB, Hexane, Slack Wax, Wax etc - Held that:- Considering the clarifications issued by the Head of Department of the respondent in respect of the applicability of rate of tax for Bitumen, Carbon Black Feed Stock (CBFS), CRMB, Hexane, all kinds of Wax, scrap and waste, etc. and particularly, when the petitioner agreed for the assessment of CBFS-LE at 12.5% as an unclassified item under Part-C of First Schedule to the TNVAT Act, the petitioner sent a letter dated 16.4.2012 to the respondent, which was followed by various reminders, last of which is dated 1.4.2013, seeking rectification of the error under Section 84 of the TNVAT Act. Thus as the petitioner has raised a grievance in their letter dated 1.4.2013, addressed to the Joint Commissioner (CT), Large Tax Payers Unit, Chennai, stating that there is error in the impugned order, dated 4.7.2012 passed by the respondent-Deputy Commissioner (CT)-III, Large Tax Payers Unit, Chennai, this Writ Petition is disposed of, with a direction to the respondent to consider the petitioner's grievance in their letter dated 1.4.2013, give an opportunity of hearing and pass appropriate orders on merits.

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• 2013 (6) TMI 121
  Suspension of licence - maintainability of appeal - Held that:- The overall circumstances under which such orders are passed and the context in which such expressions are used need to be understood in right perspective. On the facts of the present case, not inclined to invalidate the impugned order passed by the respondent on that ground for the reasons already recorded herein before. Since the petitioner has a right of appeal against the impugned order, no reason to entertain the Writ Petition for adjudication on merits. Writ Petition dismissed with liberty to the petitioner to avail the remedy of appeal.

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• Indian Laws

• 2013 (6) TMI 135
  Debut recovery - auction - Whether Section 29 of the RDDB Act do not apply the Income Tax Rules in the Second Schedule of the Income Tax Act to the recovery proceedings under RDDB Act with full force and that the expression 'as far as possible' appearing in Section 29 vests the Recovery Officer with discretion to apply the said Rules depending upon the fact situation of each case. - held that:- Section 29 of the RDDB Act incorporates the provisions of the Rules found in the Second Schedule to the Income Tax Act for purposes of realisation of the dues by the Recovery Officer under the RDDB Act. The expressions "as far as possible" and "with necessary modifications" appearing in Section 29 have been used to take care of situations where certain provisions under the Income Tax Rules may have no application on account of the scheme under the RDDB Act being different from that of the Income Tax Act or the Rules framed thereunder. The provisions of the Rules, it is manifest, from a careful reading of Section 29 are attracted only in so far as the same deal with recovery of debts under the Act with the modification that the 'amount of debt' referred to in the Rules is deemed to be one under the RDDB Act. For instance Rules 86 and 87 under the Income Tax Act do not have any application to the provisions of the RDDB Act, while Rules 57 and 58 of the said Rules in the Second Schedule deal with the process of recovery of the amount due and present no difficulty in enforcing them for recoveries under the RDDB Act. Suffice it to say that the use of the words "as far as possible" in Section 29 of RDDB Act simply indicate that the provisions of the Income Tax Rules are applicable except such of them as do not have any role to play in the matter of recovery of debts recoverable under the RDDB Act. The argument that the use of the words "as far as possible" in Section 29 is meant to give discretion to the Recovery Officer to apply the said Rules or not to apply the same in specific fact situations has not impressed us and is accordingly rejected. No reason hold that Rules 57 and 58 of the Income Tax Rules are anything but mandatory in nature, so that a breach of the requirements under those Rules will render the auction non-est in the eyes of law. There is, in our opinion, no doubt that there is an apparent conflict between the decisions upon which reliance was placed by learned counsel for the parties. But having regard to the view that we have taken on the question of the validity of this auction itself, we do not consider it necessary to make a reference to a larger bench to resolve the conflict. The cleavage in the judicial opinion is for the present case only of academic importance, hence need not be addressed by us or by a larger bench for the present. - Decided against the appellant.

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