TMI Tax Updates - e-Newsletter
July 11, 2014

Case Laws in this Newsletter:

Income Tax Service Tax Central Excise CST, VAT & Sales Tax

Articles

• Snapshot on Budget 2014-15 on Mega Exemp NT 25/2012 dt 20th June 2012
• IDT - Template for Applicability
• RULES UNDER THE COMPANIES ACT, 2013 – AN ANALYSIS

News

• Budget 2014-2015 - Service Tax Notifications & Circulars

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• Budget 2014-2015 - Central Excise Notifications & Circulars

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• Budget 2014-2015 - Customs Notifications & Circulars

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• National Industrial Corridor Authority to be Set-Up Smart Cities Along Industrial Corridors Proposed Export Promotion Mission to be Set-Up

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• Institution for Mainstreaming PPPS will be Set-Up Shipping, Inland Navigation, Airports and Roads Sector Given Priority

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• All Households to be Provided with Banking Services Banks to be Encouraged to Extend Long Term Loans to Infrastructure Sector RBI to Create A Framework for Licensing Small Banks Six New Debt Recovery Tribunals to be Set up

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• Rs 100 Crore Allocated for Technology Development Fund

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• Energy Sector given due Importance in Budget 2014-15Ultra-Modern Super Critical Coal Based Thermal Power Technology Scheme to be Launched Measures Taken to Provide Adequate Quantity of Coal to Power Plants Ultra Mega Solar Power Projects to be Set Up

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• Reforms in the Food Sector will be Taken up on Priority Stocks in the Central Pool are Adequate to Meet any Exigency

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• National Industrial Corridor Authority to be Set-Up Smart Cities Along Industrial Corridors Proposed Export Promotion Mission to be Set-Up

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• Basic Custom Duties Reduced on Certain Items to Encourage Investment and Domestic Production

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• Budget Estimates for 2014-15 Project Fiscal Deficit of 4.1% and Revenue Deficit of 2.9% of GDP Gross Tax Receipts of ₹ 13,64,524 Crore Estimated ₹ 5,75,000 Crore Plan Expenditure – An Increase of 26.9 Per cent Over Actuals of 2013-14

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• More Services Bought in the Service Tax Net, Indirect Taxes to Yield ₹ 7525 Crore

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• Finance Minister Proposes ₹ 200 Crore for Power Reforms and ₹ 500 Crore for Water Reforms to Make Delhi a World Class City

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• Personal Tax Exemption Limit Raised by ₹ 50,000/- ; No Change in the Rate of Surcharge; 15% Investment Allowance to Manufacturing Companies, to Incentivize Small Entrepreneurs and Income from Foreign Portfolio Investors to be Treated as Capital Gains.

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• Rs. 100 Crore for Development of Organic Farming and ₹ 1000 Crore for Development of Rail Connectivity in the North Eastern Region

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• Special Economic Zones will be Strengthened

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• Allocation for Modernization of State Police Forces Raised to ₹ 3,000 crore A sum of ₹ 2,250 crore Allocated to Strengthen and Modernize Border Infrastructure

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• Micro, Small and Medium Enterprises Sector will be Revamped Technology Centre Network to be Established

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• Defence Allocation Raised to ₹ 2,29,000 crore Capital Outlay for Defence Modernization Increased by ₹ 5,000 crore

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• Handlooms Trade Facilitation Centre and Crafts Museum will be Set Up at Varanasi

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• More Funds for War Memorial and National Police Memorial

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• Rs.200 Crores Allocated For The Statue Of Unity

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• Technology Driven Second Green Revolution with Focus on “Protein Revolution” Finance to 5 lakh joint Farming Groups of “Bhoomi Heen Kisan” Rs 50 Crores each for the Development of Indigenous Cattle Breeds and Inland Fisheries

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• Measures to Increase Investment and Credit Flow into Agriculture Sector Farms Credit Target Raised to rs 8 Lakh Crore

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• National Adaptation Fund to be Established for Climate Change Rs 500 crores for Price Stabilization Fund States to be Encouraged to Develop Farmers’ Markets

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• Deendayal Upadhyaya Gram Jyoti Yojana

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• Shyama Prasad Mukherji Rurban Mission

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• Soil Health Card Scheme for Every Farmer 100 Mobile Soil Testing Laboratories to be Set up

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• Swatchh Bharat Abhiyan

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• A Dedicated TV Channel ‘Kisan TV’ to be Launched for Farmers

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• Pradhan Mantri Krishi Sinchayee Yojana

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• Multi Skill Programme – Skill India to be Launched

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• 2 Agriculture Research Institutes in Jharkhand and Assam and Agri-Tech Infrastructure Fund of ₹ 100 Crores to be Setup 2 Agricultural Universities and 2 Horticulture Universities To Be Established

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• Rs. 200 Crore Set Aside in the Current Financial Year for Developing World Class Sports Stadiums in Jammu and Kashmir; Rs. 100 Crore Provided for Setting Up A Sports University in Manipur; “A Young Leadership Programme” Initiated in the Budget

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• Real Estate Investment Trust and Infrastructure Investment Trust to be Incentivised

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• Allocation of ₹ 7060 Crores for Smart Cities

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• Several Steps Announced to Promote Foreign Direct Investment (FDI) in Select Sectors

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• Rs. 500 Crore Set Aside in the Current Financial Year to Create Five Tourist Circuits; Special Programmes Prasad and Hriday Launched for Religious and Heritage Cities

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• Kisan Vikas Patra (KVP) Re-Introduced

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• Finance Minister Sets Up an Integrated Ganga Conservation Mission ‘Namami Gange’ with an Outlay of ₹ 2037 Crore; Rs. 100 Crores Provisioned for Ghat Development and Beautification of Riverfronts; Rs. 100 Crore Set Aside for Detailed Project Reports for Linking Rivers Across the Country;

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• Digital India Programme Launched to Bridge the Divide Between HAVES and HAVE – NOTS New Scheme to Support 600 New and Existing Community Radio Stations

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• E-Visa to be Introduced at Nine Airports

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• Pending Insurance Laws (Amendment) Bill to be Tabled in Parliament Soon; FM

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• Fresh Cases Arising Out of Retrospective Amendments of 2012 to be Scrutinised by High Level Committee:FM

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• Welfare of Girl Child on Upmost Priority of the Government: FM National Savings Certgificatge with Insurance Lunched and Kishan Vikas Patra Reintroduced

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• Public Sector Undertakings (PSUs) to Invest ₹ 2,47,941 Crores in the Current Fiscal

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• Enactment of Indian Financial Code Necessary for Better Governance and Accountability: FM

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• Capital of Public Sector Banks to be Raised Through Sale of Shares

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• Higher Budgetary Allocations have been Made for Rural Road and Water Sectors

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• Budget 2014-2015 - Speech of Arun Jaitley Minister of Finance July 10, 2014

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• Government Reiterates Its Commitment to the Welfare of SCs & STs

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• Legislative and Administrative Changes Proposed to Reduce Litigation in Direct Taxes

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• Housing for All by 2022

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• Beti Bachao, Beti Padhao Yojana Launched

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• Government Attaches Top Priority for Free Drug and Diagnosis Services to Achieve the Goal of Health for All

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• Five New IITs and Five New IIMS will be Set Up in the States

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• Government to Constitute an Expenditure Management Commission to Look into Various Aspects of Expenditure Reforms:FM

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• Government to Spend 50,000 Crore Rupees for Development of Urban Areas 100 Crore Allocated for Metro Projects in Lucknow and Ahmedabad

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• Target of Fiscal Deficit of 4.1 Per Cent for 2014-15

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• Government Committed to Achieve Fiscal Deficit of 4.1% for 2014-15. Subsidy Regime to be made more Targeted for Full Protection to the Marginalized, poor and SC/ST. Government to Promote FDI Selectively in Sectors.

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• RBI Reference Rate for US $ and Euro

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Notifications

Central Excise

• 20/2014 - dated 11-7-2014 - CE
  Recession of Notification No.3/2010, dated the 22nd June, 2010 - Effective rate of Clean Energy Cess leviable on goods

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• 19/2014 - dated 11-7-2014 - CE
  Amendment in Notification No.67/95-Central Excise, dated the 16th March, 1995 - Exemption to all capital goods and specified inputs if captively consumed within the factory of production

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• 18 /2014 - dated 11-7-2014 - CE
  Amendment in Notification no. 23/2003 CE dated 31.3.2003 - EOUs/EHTP/STP Units - Excise Exemption on Goods Cleared to DTA - Exemption extended to Education Cess

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• 17/2014 - dated 11-7-2014 - CE
  Amendment in notification No. 16/2010 - Capacity based rate of duty - unmanufactured tobacco, bearing a brand name - chewing tobacco

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• 16/2014 - dated 11-7-2014 - CE
  Amendment in Notification No. 42/2008-Central Excise, dated the 1st July, 2008 - Specified rate of duty payable on the basis of capacity of production on Pan Masala and Gutkha

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• 15/2014 - dated 11-7-2014 - CE
  Amendment in Notification No. 15/2010- Central Excise, dated the 27th February, 2010 - Exempts all items of machinery, and components, required for initial setting up of a solar power generation project or facility or solar energy production

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• 14/2014 - dated 11-7-2014 - CE
  Amendment in Notification No. 33/2005- Central Excise, dated the 8th September, 2005 - Goods required for for compressed bio-gas (Bio-CNG)

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• 13/2014 - dated 11-7-2014 - CE
  Exemption to certain Drugs, Diagnostics and Equipments required for National AIDS Control Programme funded by Global Fund to fight AIDS, TB and Malaria(GFATM)

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• 12/2014 - dated 11-7-2014 - CE
  Amendment in Notification No. 12/2012-Central Excise, dated the 17th March, 2012 - Effective rate of duty of central excise

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• 11/2014 - dated 11-7-2014 - CE
  Amendment in Notification No. 108/95-Central Excise, dated the 28th August, 1995 - Exemption to Goods supplied to UN/International Organisations or Projects

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• 10/2014 - dated 11-7-2014 - CE
  Amendment in Notification No.64/95-Central Excise, dated the 16th March, 1995 - Exemption to goods supplied for defence and other specified purposes

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• 09/2014 - dated 11-7-2014 - CE
  Amendment in the Notification No. 2/2011-Central Excise, dated the 1st March, 2011 - Option to pay duty at 6% (earlier 5%) with cenvat credit

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• 08/2014 - dated 11-7-2014 - CE
  Amendments in the notification No. 1/2011-Central Excise - Effective rate of duty 2% (earlier 1%) on certain items without availing cenvat credit.

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• 22/2014 - dated 11-7-2014 - CE (NT)
  Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Second Amendment Rules, 2014.

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• 21/2014 - dated 11-7-2014 - CE (NT)
  CENVAT Credit (Sixth Amendment) Rules, 2014

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• 20/2014 - dated 11-7-2014 - CE (NT)
  Central Excise Valuation (Determination of Price of Excisable Goods) Amendment Rules, 2014

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• 19/2014 - dated 11-7-2014 - CE (NT)
  Central Excise (Third Amendment ) Rules, 2014

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• 18/2014 - dated 11-7-2014 - CE (NT)
  Resident private limited company specified as class of person for the purpose of Advance Ruling

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• 17/2014 - dated 11-7-2014 - CE (NT)
  Amendment in Notification no. 49/2008 dated 24-12-2008 - MRP bases duty of Excise - Prescribes rate of abatement

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Customs

• 25/2014 - dated 11-7-2014 - Cus
  Project Imports (Amendment) Regulations, 2014.

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• 24/2014 - dated 11-7-2014 - Cus
  Amendments in notification no. 51/96-Customs dated 23.7.1996 - Exemption to research equipments imported by public funded research institutions or a university of an Indian Institute of Technology or Indian Institute of Science, Bangalore or Regional Engineering College, non commercial institutions etc

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• 23/2014 - dated 11-7-2014 - Cus
  Exemption to certain Drugs, Diagnostics and Equipments required for National AIDS Control Programme funded by Global Fund to fight AIDS, TB and Malaria(GFATM)

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• 22/2014 - dated 11-7-2014 - Cus
  Amendments in notification no. 84/97 Cus dated 11.11.1997 - Exemption to Imports by U.N. or International Organisation for execution of projects in India

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• 21/2014 - dated 11-7-2014 - Cus
  Amendments in Notification no. 21/2012 Cus dated 17.3.2012 - Exempts import of goods from additional duty leviable u/s 3(5) - setting up of a solar power generation

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• 20/2014 - dated 11-7-2014 - Cus
  Amendments in Notification no. 39/96 Cus dated 23.7.1996 - Exemption to specified goods imported by National Technical Research Organisation, (hereinafter referred to as NTRO) or Indian Offset Partner (hereinafter referred to as IOP) of the contractor to the National Technical Research Organisation, (hereinafter referred to as NTRO)

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• 19/2014 - dated 11-7-2014 - Cus
  Amendments in Notification no. 14/2012 Cus dated 17.3.2012 - Exemption from whole of Secondary and Higher Education Cess

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• 18/2014 - dated 11-7-2014 - Cus
  Amendment in Notification no. 13/2012 Cus dated 13.3.2012 - Exemption from whole of Education Cess

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• 17/2014 - dated 11-7-2014 - Cus
  Amendment in Notification No. 10/2008-Customs, dated the 15th January, 2008 - Prescribes effective rate of duty (concessional rate of duty) on certain goods imported from Singapore

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• 16/2014 - dated 11-7-2014 - Cus
  Amendment in Notification No. 9/2012-Customs, dated the 9th March, 2012 - Duty free re-import of cut and polished diamonds into India

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• 15/2014 - dated 11-7-2014 - Cus
  Amendments in Notification No.27/2011-Customs, dated the 1st March, 2011 - Effective rate of export duty on Bauxite (natural)

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• 14/2014 - dated 11-7-2014 - Cus
  Amendments in Notification No. 1/2011 dated the 6th January, 2011 - goods required for solar energy production or generation of power using solar energy

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• 13/2014 - dated 11-7-2014 - Cus
  Amendments in the notification No. 81/2005- Customs, dated the 8th September, 2005 - Exemption to specified goods required for initial setting up of a project for generation of power using non-conventional materials

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• 12/2014 - dated 11-7-2014 - Cus
  Amendments in Notification no. 12/2012 Cus dated 17.3.2012 - Prescribes effective rate of duty on import of goods

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• 11/2014 - dated 11-7-2014 - Cus
  Amendments in the notification No. 24/2005- Customs, dated the 1st March, 2005 - Exemption to specified goods to Chapter 38, 84, 85 and 90 and all goods for the manufacture thereof

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• 51 /2014 - dated 11-7-2014 - Cus (NT)
  Resident private limited company specified as class of person for the purpose of Advance Ruling

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• 50/2014 - dated 11-7-2014 - Cus (NT)
  Baggage (Amendment) Rules, 2014

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Service Tax

• 15 /2014 - dated 11-7-2014 - ST
  Resident private limited company specified as class of person for the purpose of Advance Ruling

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• 14/2014 - dated 11-7-2014 - ST
  Place of Provision of Services (Amendment) Rules, 2014

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• 13/2014 - dated 11-7-2014 - ST
  Point of Taxation (Amendment) Rules, 2014

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• 12/2014 - dated 11-7-2014 - ST
  Prescribes rate of Interest for late payment of service tax - Section 75

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• 11/2014 - dated 11-7-2014 - ST
  Service Tax (Determination of Value) Amendment Rules, 2014

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• 10/2014 - dated 11-7-2014 - ST
  Amendment in Notification No. 30/2012 - Notification under sub-section (2) of section 68 - Reverse Charge

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• 09/2014 - dated 11-7-2014 - ST
  Service Tax (Amendment) Rules, 2014

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• 08/2014 - dated 11-7-2014 - ST
  Amendment in Notification No. 26/2012 - Abatement rates

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• 07/ 2014 - dated 11-7-2014 - ST
  Amendment in Notification No.12/2013 - Exemption on services provided to SEZ authorised operations

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• 06/2014 - dated 11-7-2014 - ST
  Amendment in Notification No.25/2012-Service Tax - Mega exemption notification

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Circulars / Instructions / Orders

Service Tax

• 178/4/2014-ST - dated 11-7-2014
  Manner of distribution of common input service credit under rule 7(d) of the Cenvat Credit Rules, 2004 - regarding.
• D.O.F. No. 334/15/2014-TRU - dated 10-7-2014
  Union Budget, 2014-15: Changes in Service Tax - reg.

Customs

• D.O.F.No.334/15/2014-TRU - dated 10-7-2014
  Changes in Customs and Central Excise law and rates of duty - Budget 2014-15

Central Excise

• D.O.F.No.334/15/2014-TRU - dated 10-7-2014
  Changes in Customs and Central Excise law and rates of duty - Budget 2014-15

Highlights / Catch Notes

Income Tax

• Interest to partners and depositors for the funds used for acquiring capital assets cannot be said to be cost of acquisition or cost of improvement or cost of transfer - AT
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• Penalty u/s 271(1)(c) of the Act – Filing of inaccurate particulars – claim for liquidated damages - explanation given by the respondent assessee cannot by any stretch of imagination be termed as bona fide - HC
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• Reopening of notice u/s 147 r.w. section 148 of the Act – As both the grounds in respect of which the notice has been issued fall no addition can be made on some other grounds - HC
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• Depreciation on additional construction - proof - assessee contended that, unaccounted sales proceeds of scrap were utilized for the construction of factory building - depreciation not allowed - AT
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• TDS on Lease premium u/s 194I - lease premium paid as a price for obtaining the lease – lease premium paid by the assessee not being in the nature of rent as contemplated in section 194-I - AT
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• Reopening of assessment u/s 147/148 - Valuation of closing stock - since the Assessee has not followed the mandatory requirement of provisions of s. 145A - the AO was fully justified in resorting to the reopening of assessment - AT
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• Penalty u/s 271(1)(c) – No satisfactory explanation about foreign loss - after receiving notices u/s 142/143 if the assessee admits some income it cannot be taken as voluntary disclosure - AT
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• Rental income from office premises – it is difficult to understand as to how a corporate entity has shown income from a premises that was neither owned by it nor was it taken on rent by it - AT
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• Addition u/s 69C – addition on the ground that assessee deducted TDS on higher value and issued TDS certificate for higher amount - assessee explained the reasons - no additions - AT
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• Addition u/s 40A(3) - Payment not made in cash but paid to third parties on behalf of supplier of goods – AO was not justified in invoking the section 40A(3) - AT
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Indian Laws

• Budget 2014-2015 - Service Tax Notifications & Circulars
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• Budget 2014-2015 - Central Excise Notifications & Circulars
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• Budget 2014-2015 - Customs Notifications & Circulars
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• Budget 2014-2015 - Speech of Arun Jaitley Minister of Finance July 10, 2014
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Service Tax

• Maintaining the activities of subsidiary companies in which they have 70% to 100% stock is in their own interest - The services are clearly covered by the definition of ‘Management Consultancy Services’ - AT
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• Fabrication of steel storage tanks and steel structures would amount to manufacture and their erection and installation would certainly not be covered by Business Auxiliary Service. - AT
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• CENVAT Credit - manpower supply service - payment of salary through another company - it cannot be said that appellants have provided the manpower supply services to the IGTPL - AT
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• Waiver of pre deposit - Demand of service tax - Service of imparting flying training - appellant have not been able to establish prima facie case in their favour. - AT
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Central Excise

• Whether the canvas canopies specially designed for lorries, tool bags and web equipment of textile material are classifiable under sub heading 6306/6307 and hence fully exempt from duty - held yes - AT
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• Refund claim - Adjustment of differential duty in refund sanctioned - adjudicating authority rightly adjusted the refund claim against the demand of differential duty - AT
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• Refund of CENVAT Credit - export of goods - earlier credit was reversed treating the goods as exempt - appellant is entitled to take the amount in cash - AT
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• Valuation of goods - Inclusion of freight charges - invoices show the freight charges separately - freight charges not to be included in the value - AT
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Case Laws:

• Income Tax

• 2014 (7) TMI 367
  Banakhat cancellation charges – Cost of acquisition of land – Held that:- There is no obligation on the part of the assessee to pay any compensation as per the banakhat agreement, and it is not the assessee who has opted out from the banakhat agreement and it is the buyer on whose behest the banakhat cancellation agreement was executed - AO has rightly held that these payments of banakhat cancellation charges cannot be construed as payment made to retain the lands and in any case, it cannot be attributable to the cost of transfer of land, which has been added in the computation of capital gain in total acquisition cost. – Decided against Assessee. Interest payment paid to partners and depositors – Cost of acquisition of land – Held that:- As per the provisions of section 48, the assessee is allowed deduction on account of cost of acquisition of capital assets, cost of improvement and cost of transfer - The interest paid for the funds used for acquiring capital assets cannot be said to be cost of acquisition or cost of improvement or cost of transfer - It may be considered as carrying cost, but no deduction is allowable in this regard as per section 48 for the purpose of computation of capital gain. In fact, carrying cost is taken care of by way of allowing indexation benefit while computing long term capital gain – there was no reason to interfere with the orders of authorities – Decided against assessee.

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• 2014 (7) TMI 350
  Penalty u/s 271(1)(c) of the Act – Filing of inaccurate particulars – claim for liquidated damages - Held that:- The Tribunal’s reasoning which accepts the assessee’s contentions with a further rationale that it could have committed a silly mistake, is unsustainable - There was no material on the record to support the assessee’s return which claimed an allowance on the basis that the total quantity to be supplied was 3 lakh MT - The first explanation that the figure included the moisture content, is not borne out from the record - it also does not appear to be a part of any condition agreed to between the parties - Commissioner who had occasion to go into the aspect, found it to be untrue – there was no infirmity with the conclusion of the AO and subsequently the Commissioner that the claim for liquidated damages on the basis that 3 lakhs MT were to be supplied, amounted to furnishing inaccurate particulars - The explanation given by the respondent assessee cannot by any stretch of imagination be termed as bona fide so as to escape the mischief of Section 271 (1) (c) of the Act - the order is set aside – Decided in favour of Revenue.

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• 2014 (7) TMI 349
  Release of silver weighing 251.380 kg – silver has not be released despite the order of assessment has been passed - Held that:- The AO had already passed an order to release 251.380 kg of silver - revenue has submitted that however in view of the fact that 251.380 kg of silver, which is required to be returned to the petitioner, is not identified and/or verified, as at the initial stage when the cash, gold and silver were seized, all were mixed, on proper identification and verification with the assistance of the representative of the petitioner and on producing the indemnity bond of the like amount so that in future if anybody claims the same, the same can be recovered from the petitioner, the respondents have no objections and as such cannot have any objection to return 251.380 kg of silver to the petitioner –revenue is directed to release and/or return 251.380 kg of silver, which was seized under panchnama which was drawn dated 03/03/2004 – Decided in favour of Assessee.

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• 2014 (7) TMI 348
  Notice for reopening of assessment u/s 148 of the Act – Held that:- The assessee has already filed an Appeal to the CIT(A) against the order and the remedy of appeal is an efficacious remedy - It would be open to the assessee to urge all points before the CIT(A) including the validity of the re-opening of the AY 2007-08 - the CIT(A) would take into account all the factors while deciding the Appeal filed by the Petitioner before him - there is no reason to believe that the CIT(A) would not consider and apply – Relying upon Asian Paints Limited. Versus Deputy Commissioner of Income Tax and Another [2007 (1) TMI 159 - BOMBAY High Court] - after rejection of the objections, no re-assessment proceedings would be commenced for a period of four weeks - The decisions of the Court are binding on all the authorities functioning in the State - The fact that the AO was passed in less than ten days of the rejection of objections and that also without indicating how and why the decision of the Court in Asian Paints is not applicable would lead one to conclude that the assessee has not been treated fairly – appeal dismissed since alternate remedy is available - Decided against Assessee.

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• 2014 (7) TMI 347
  Refund of excess tax with interest – Held that:- The entire issue of the orders of ITAT, AO orders giving effect to ITAT orders and Mr. S.M.Kandhar paying the tax as directed by the tribunal would require determination into questions of fact - It is only then that the amount of the refund if any due to the assessee can be determined - This would require examination of each ITAT orders and the consequence of it – revenue is directed to consider application/representation for refund dated 12.6.2012 in the light of the various orders passed by the ITAT and to examine whether or not Mr. S.M. Kandhar has paid taxes on the peak amounts assessed in his hands if so as directed by the ITAT - Decided in favour of Assessee.

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• 2014 (7) TMI 346
  Notice for reopening of assessment u/s 148 of the Act – Speaking order - Held that:- The decision in GKN Driveshafts (India) Ltd. Versus Income-Tax Officer And Others [2002 (11) TMI 7 - SUPREME Court] followed - it is incumbent upon the assessing officer to controvert the plea against the reasons recorded to provide an opportunity at the threshold may have effect to terminate many proceedings at primary stage. The assessee is entitled to the reasons on which the proceedings of reopening or of reassessment are initiated - No assessee is required to undergo the cumbersome proceedings of process of reopening, unless the assumption of jurisdiction in respect of the same is based on valid legal base - the preliminary objections raised against the notice and also in relation to the reasons recorded must be considered and all objections raised by the assessee by speaking order needs to be disposed of - the AO instead continued with the reassessment proceedings by issuing notice u/s 142(1) and when his attention was drawn to the fact that objections have not been disposed of, he observed by communication dated 6.11.2006 that such objections would be disposed of at the time of framing the reassessment - CIT(Appeals) for the assessment year 2002-03 on the very issue recorded in the reasons of reopening and concluded in favour of the petitioner assessee on 9.5.2006 - For completion of reassessment u/s 147 in respect of the AY 1999- 2000, the last date was 31.12.2006. The stage of considering the objections and disposing of the same in wake of not only the averments made in the objections raised but also based on surrounding circumstances of facts and law was given a go by completely – revenue was needed to pass a speaking order, which not only is obligatory but that would have saved enormous time and resources as the appellate authority decided the very issue under reopening in favour of the assessee – thus, assessment made pursuant to the proceedings under section 148 set aside - matter remanded back – Decided in favour of assessee.

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• 2014 (7) TMI 345
  Reopening of notice u/s 147 r.w. section 148 of the Act – additions on some other grounds - Filing of separate reports - Deduction u/s 80IA(iv) of the Act on generation of electricity – Held that:- In Income-tax Officer v. VXL India Ltd. [2008 (8) TMI 273 - GUJARAT HIGH COURT] it has been held that provision of section 80HHC of the IT Act requires that the report of a chartered accountant in the prescribed form should be attached along with the return of income, certifying that the deduction has been correctly claimed in accordance with the provisions of this section, but, that would not mean that such report if is not attached along with the return of income and if is produced before the Assessing Officer during the course of assessment proceedings, the entitlement of the assessee for deduction u/s 80HHC would go away - to obtain the report of the chartered accountant is a condition precedent and it is mandatory in nature. The assessee had submitted a separate report for all the undertakings claiming deduction u/s 80IA, during the course of assessment proceedings - the first ground of reopening, interest from the trade debtors would be qualified for deduction u/s 80IA only on the furnishing of separate reports cannot be upheld - once the notice for reopening is issued and is allowed to be proceeded, the AO can also open other issues, other than those for which the reasons have been recorded and, therefore also, ordinarily in a writ petition, the Court would be slow in interfering with such notices - for assuming jurisdiction u/s 147 of the Act what is essential is a valid reopening of a previously closed assessment and If the very foundation of the reopening is knocked out, any further proceeding in respect to such assessment naturally would not survive. As both the grounds in respect of which the notice has been issued fall and both these reasons recorded in the reopening of the assessment - the AO would not be in a position to make any additions on some other grounds which never formed part of the reasons recorded by him - a valid reopening of previously closed assessment is a must for assuming jurisdiction u/s 147 of the Act - When the very foundation of such reassessment are both the reasons recorded and by virtue of binding decisions, neither of the grounds is sustainable, permitting such notice to be pursued would be an exercise in futility and the Court cannot disregard such vital aspects while addressing the challenge to the notice of reopening – thus, the notice for reopening of assessment is set aside – Decided in favour of Assessee.

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• 2014 (7) TMI 344
  Depreciation on additional construction - proof - assessee contended that, unaccounted sales proceeds of scrap were utilized for the construction of factory building – Held that:- The decision in SV. Business Pvt. Ltd. C/o Shankarlal Jain and Associates Versus Dy. Commissioner of Income Tax [2014 (6) TMI 144 - ITAT MUMBAI] followed - There was no infirmity in the order of CIT(A) confirming the disallowance made by AO on account of assessee’s claim for depreciation on additional construction of factory building in MIDC, Dombivili - the unaccounted sales proceeds of scrap were partly used for building purposes – it was not by itself sufficient to establish that the amount was incurred by the assessee on the construction of additional factory building in MIDC, Dombivili - The onus was on the assessee to substantiate its claim for the expenditure incurred on the construction of additional building by producing the relevant documentary evidence such as bills, vouchers etc. - Even if such bills /vouchers were not maintained by the assessee in support of expenditure incurred outside the books of account, the assessee could have and should have substantiated its case by Producing valuation report or building plans showing that the additional construction was indeed made at its factory building situated in MIDC, Dombivali. It is not a case where the statement or relevant seized documents are partly accepted and partly rejected by the authorities as sought to be contended by the assessee - It is the case where the statement and the relevant seized documents were not sufficient to establish the case of the assessee of having spent an amount for the construction of additional factory building and the claim of the assessee for depreciation on such additional building as disallowed by authorities below on the ground that the assessee failed to substantiate the claim by bringing any documentary evidence - thus, there was no infirmity in the order of the CIT(A) in disallowing the assessee’s claim of and confirming the disallowance – Decided against the assessee.

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• 2014 (7) TMI 343
  TDS on Lease premium u/s 194I - lease premium is in the nature of rent or not – Held that:- Following Income Tax Officer(TDS) Versus M/s Shah Group Builders Ltd. [2014 (1) TMI 1497 - ITAT MUMBAI] - The premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease - it cannot be equated with the rent which is paid periodically - the assessee has made payment for acquiring leasehold land and additional built up area – CIT(A) rightly of the view that the lease premium paid by the assessee not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act – Decided against Revenue.

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• 2014 (7) TMI 342
  Reopening of assessment u/s 147/148 of the Act - Valuation of closing stock u/s 145A of the Act - Unutilized CENVAT credit – Held that:- No evidence of reversal before Excise Authority has been filed even during the Appellate proceedings - there has been a failure on the part of the appellant to disclose fully and truly all the material facts even in respect of second ground of reopening - certain discrepancies were noticed in the excise accounting of the appellant, as a result of which correct amount of addition u/s 145A needed to be enhanced to ₹ 40, 95, 280 - notice of enhancement U/s 251 (2) of the I T Act was issued on 08.08. 2012 - The appellant has claimed to reversal of the credit taken during the year itself, while the credit continues in the Excise Records - Since the appellant follows "Exclusive Method 'of accounting, it may still take credit for the same in future. Assessee had not included the value of excise while valuation of stock - provisions of s. 145A are mandatory and it mandates that the valuation of purchase and sale of goods and inventory shall be in accordance with the method of accounting regularly followed by the assessee and it should include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods to the place of its location and condition on the date of valuation - since the Assessee has not followed the mandatory requirement of provisions of s. 145A - the AO was fully justified in resorting to the reopening of assessment - CIT(A) by a well-reasoned and detailed order has rightly upheld the order of Assessing Officer and enhanced the income of the Assessee by the amount of ₹ 40,95,280/- as per the provisions of Section 145A of the Act – Decided against Assessee.

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• 2014 (7) TMI 341
  Adjournment application – Held that:- It is important to ascertain as to whether on the date when CIT(A) proceeded to decide the appeal filed by the assessee, whether there is default on the part of the assessee for non-representation - According to the adjournment application assessee has sought adjournment in respect of both the appeals - the assessee deserves to be heard by CIT(A) – thus, the order of the CIT(A) is set aside and the matter is remitted back with a direction to re-adjudicate after giving the assessee a reasonable opportunity of hearing – Decided in favour of Assessee.

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• 2014 (7) TMI 340
  Penalty u/s 271(1)(c) of the Act – No satisfactory explanation about foreign loss - Wrong claim of expenses incurred on vessels in Tonnage scheme – Held that:- Assessee had claimed forex loss on Tonnage Vessel under the Non-Tonnage Income - Provisions of the Act are very clear about the loss that could be claimed or not claimed under the Tonnage income/non Tonnage income - it was not voluntary compliance of the provisions of the Act - after receiving notices u/s 142/143 if the assessee admits some income it cannot be taken as voluntary disclosure - penalty under the Act is of not of criminal nature - AO and FAA have given a clear finding that the assessee not offered any satisfactory explanation about the forex loss claim. The decision in MAK Data P. Ltd. Versus Commissioner of Income Tax-II [2013 (11) TMI 14 - SUPREME COURT] followed - It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year - The AO had recorded a categorical finding that he was satisfied that the assessee had concealed the true particulars of income and was liable for penalty proceedings u/s 271 of the Act – Decided against Assessee.

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• 2014 (7) TMI 339
  TDS on payment made to Doctors - TDS u/s 192 or 194J - Relationship of employer and employee - Assessee in default u/s 201 and 201(1A) of the Act – Held that:- A fixed monthly amount was paid by the assessee as remuneration and it is no way concerned with the fees received from the patients treated by them - The appointment letter was issued to the concerned doctor on the basis of their application - The doctors are governed by the service rules of the assessee - Their leave entitlement is also in accordance with the assessee's rules- the remuneration paid in their respective books of account is not conclusive to decide the nature of the remuneration which on the basis of relation between the assessee and the doctors and not on any other basis. The real intention of the parties herein as already discussed with reference to the terms of the appointment letter issued to the doctors in the light of service regulations of the assessee hospital was to have an employer and employee relationship between them and it was not a case of appointment of consultants - there was an employer and employee relationship between the assessee and the doctors - the remuneration paid to them was chargeable to tax under the head 'salaries' and liable for deduction of tax u/s 192 of the Act and not under the provisions of section 194J of the Act - wherever the assessee issued appointment letter and the doctor’s appointment is governed by the service rules of the assessee hospital, it is to be considered that the relationship between the doctors and the assessee is as employee-employer relationship and the assessee is liable to deduct TDS u/s. 192 of the Act. Relying upon Deputy Commissioner of Income-tax Versus Yashoda Super Speciality Hospital [2010 (6) TMI 642 - ITAT HYDERABAD] - terms of appointment clearly indicate appointment of professionals for providing consulting services and not appointment of employee - The Doctors are not precluded from pursuing the professional pursuits elsewhere as long as there is no conflict of interest - Once the Doctors achieve some seniority and standing, their remuneration is a percentage of fees collected from patients consulting him - the services rendered by the Doctors are more appropriately classifiable as professional services and therefore Assessee had correctly deducted tax at source from payment to Doctors u/s 196J. The doctors or professional consultants working under contract for rendering professional services and the payments made by the assessee company to the professional doctors does not constitute salary - the assessee would not be responsible for deducting tax at source on the payments treating them as (salaries) in terms of section 192(1) of the I.T. Act - there is no master and servant relationship between the consultants/ professionals and that of the assessee and hence, the agreements entered into by the assessee with the professionals as one of “contract for services” - there is no employer-employee relationship between the assessee and the professionals – Decided against Revenue.

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• 2014 (7) TMI 338
  Rental income from office premises – income taxable in the hands of assessee or company - Held that:- The assessee had not produced any evidence before any authority including us to prove that he was compelled to receive the rent in the name of a corporate entity – it is difficult to understand as to how a corporate entity has shown income from a premises that was neither owned by it nor was it taken on rent by it - returns filed by both the parties do not depict their true incomes - the assessee had not shown the income accrued to him in the return – thus, FAA was justified in holding that income from the Oberoi Gardens property was to be assessed in his hands – Decided against Assessee. Annual letting value of adjacent self-occupied house property – Held that:- There were two agreement for the flats no. 1301 and 1302 for the residential property situated at Hurray Nirmal Lifestyle - the assessee has made a claim that they were being used a single unit, that they had common entrance - AO had made no inquiry in this regard at the time of assessment – thus, the matter is liable to be remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee. Annual value of self-occupied house property – Held that:- The AO and the FAA have not denied the fact the property remained vacant for the year, that the AO had adopted ALV based on cost of acquisition of the property, that the assessee had taken Municipal ratable value for ALV purposes - method adopted by the assessee was as per law - As the property remained vacant , so, adopting municipal ratable cannot be termed incorrect method of calculating House property income – thus, the order of the FAA is set aside – Decided in favour of Assessee. Taxability of Net receipts on surrender of LIC pension policy – Capital receipt or not - assesssee contended thatm, no claim was made u/s. 80CCC when money was deposited – Held that:- AO had admitted that the assessee had not claimed deduction under the provisions of chapter VI A of the Act, that he had had received an amount in dispute by surrendering lifetime pension policy and life insurance policy from ICICI Prudential life insurance - These two factors in themselves are sufficient to hold that money received by the assessee is a capital receipt and not taxable - Provisions of section 2 of the section 80CCC are very clear – Decided in favour of Assessee.

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• 2014 (7) TMI 337
  Grant of application u/s 112AA of the Act – Object of Trust – Charitable purpose u/s 2(15) of the Act - Held that:- DIT(E) has held that the aforesaid objects are not specific and cannot be accepted as charitable but, on what basis he has come to such a conclusion has not at all been discussed - the allegation of the DIT(E) that the assessee has not indicated with certainty the objects and classification of the objects under different heads appears to be vague - it is not clear whether the DIT(E) has granted adequate opportunity to the assessee to substantiate its claim in respect of the campaigns stated to have been undertaken by it - it will clarify all issues by removing doubts/apprehensions of the DIT(E), if another opportunity is given – thus, the matter is liable to be remit back to the DIT(E) for fresh adjudication - If at all the DIT(E) comes to an opinion that objects of assessee do not come within the meaning of charitable purpose as provided u/s 2(15), he must provide adequate reasons for coming to such conclusion – Decided in favour of Assessee.

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• 2014 (7) TMI 336
  Addition u/s 69C – addition on the ground that assessee deducted TDS on higher value and issued TDS certificate for higher amount - assessee did not claim the whole expenditure during the year as deduction as part of the expenses was reversed - Held that:- merely because the TDS was deducted at a higher amount and paid to the credit of the Central Government is not a ground to make the addition in the hands of the assessee company without any basis - The only reason advanced by the AO while making the addition was that TDS has been deducted and has also been paid to the Government Account, thus, income on account of repairing of ₹ 10,20,000/- has arisen to the company which has not been shown correctly. The Tribunal in the hand of the recipient of the amount on account of repairing charges has held that there was bonafide mistake committed by the assessee in the books of account which was rectifiable at any point of time - the assessee company M/s. Silicon Computech Private Limited has rectified the same and passed necessary entries in the books of account and hence there was no justification for making any addition on this ground - M/s Silicon Computech Private Limited has paid correct amount of repairing charges - the addition u/s 69C made in the hands of the assessee on account of unexplained expenditure under the head repairing expenses by lower authorities was not justified - the addition of ₹ 5,95,000 is set aside – Decided partly in favour of Assessee.

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• 2014 (7) TMI 335
  Show room renovation/repair expenses – Held that:- CIT(A) was rightly of the view that the assessee and on perusing the copies of the bills has given a finding that the expenditure incurred by the Assessee was by way of replacement/repairing of old existing furniture and fixtures and modification made to facilitate the display of changed models of products of companies which are sold by Assessee – revenue could not controvert the findings of CIT(A) and thus we find no reason to interfere with the order of CIT(A) – Decided against Revenue. Disallowance of interest u/s 36(1)(iii) of the Act – Held that:- CIT(A) noted that the furniture deposit was old amount given to Sales India and M/s Santosh Trading for using the existing furniture of these concerns without payment of rent - the deposits have been given for the purpose of business and there was no justification of disallowing the notional interest – revenue could not controvert the findings of CIT(A) and therefore there was no reason to interfere with the order of CIT(A) – Decided against Revenue. Advertisement expenses u/s 40A(2)(b) of the Act – Held that:- CIT(A) noted that the similar expenditure paid for advertisement to Arts India has been allowed in the preceding years in scrutiny assessment except in A.Y. 90-91 where disallowance of 25% was made by AO but the same was deleted by CIT(A) - nothing has been brought on record to demonstrate that against the order of CIT(A) for A.Y. 90-91- no material has been brought to demonstrate as to how the payment made by Assessee to Arts India was excessive – revenue has not brought any material on record to controvert the findings of CIT(A) – there was no reason to interfere with the order of CIT(A) – Decided against Revenue. Unexplained expenditure on advertisement u/s 69C of the Act – Held that:- CIT(A) while deleting the addition has noted that the information gathered by the AO u/s. 133(6) from various newspapers was not made available to the Assessee nor any explanation was sought from Assessee and therefore the question of giving any justification by the Assessee does not arise - on perusing the account of Arts India that the payments received by Arts India could have been for the year under consideration as well as old outstanding dues since there was opening credit balance shown as payable by the Assessee and there was balance outstanding at the close of the year - in the absence of proof of incurring expenditure out of the books by the Assessee, no case of addition u/s. 69C has been made by the AO - Revenue has not brought any material on record to controvert the findings of CIT(A) – thus, there was no reason to interfere with the order of CIT(A) – Decided against Revenue.

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• 2014 (7) TMI 334
  Addition u/s 68 of the Act – Unsecured loan - Creditworthiness of the transactions not proves – Held that:- CIT(A) was rightly of the view that the addition has noted that before AO, Shri Ronak Trivedi the partner of Kesha Developers has informed that he was not filling his return of income and neither could he inform about the source of loan of ₹ 31,00,000/- extended to the Assessee - Kesha construction was left with very meager balances after lending the amount to the Assessee and Kesha Developer was not found existing in the PAN Data Base of the Income-tax Department - Kesha Construction and the Assessee firm were having same set as partners - nothing has been brought on record by the Assessee to contradict the findings of AO and CIT(A) – thus, there was no reason to interfere with the order of CIT(A) – Decided against Assessee.

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• 2014 (7) TMI 333
  Penalty u/s 271(1)(c) of the Act – Amount paid to Nirma Education & Research Foundation – Disallowance of bad debts - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that, The AO rightly made disallowance of advertisement expenses amounting to ₹ 1,00,00,000/- & disallowance of bad debts amounting to ₹ 2,23,63,430/- and also issued notice u/s.274 r.w.s. 271(1)(c) of the Act - assessee submitted that the addition made on the basis of the disallowances of bad debts and advertisement expenses have already been deleted in earlier assessment year - Since both the additions, in respect of bad debts and advertisement expenses have been deleted by the Coordinate Bench of the Tribunal – thus, penalty imposed thereon does not survive – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (7) TMI 332
  Addition u/s 40A(3) - Payment not made in cash but paid to third parties on behalf of supplier of goods – payments have been made by way of crossed-cheques - Held that:- The purchases made by the assessee are not in dispute - The AO has not treated such purchases as not genuine, but he had invoked the provisions of section 40A(3) of the Act for making the addition - the parties from whom the goods were purchased requested the assessee-company to give payments to their suppliers/their borrowers for early and immediate settlement of their dues - the AO was not justified in invoking the provisions of Section 40A(3) of the Act, since the AO has not made any enquiry whether such payments were made at the instance of the parties from whom the assessee-company purchased the goods - there is nothing placed on record that instead of account payee cheques, the assessee-company has made cash payment to the parties from whom the goods were purchased – thus, there is no infirmity in the order of the CIT(A) holding that the AO was not justified in invoking the section 40A(3) of the Act – Decided against Revenue.

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• 2014 (7) TMI 331
  Valuation of closing stock - Addition of unutilized CENVAT credit – Contravention to Sec. 145A of the Act - Method of accounting – Held that:- CIT(A) while granting partial relief to Assessee has noted that Assessee was following inclusive method of accounting for valuation of stock in earlier years but had changed the method in the year under consideration by following exclusive method for valuation of stock - By changing the method of accounting, the value of opening stock, cost of goods sold and raw material and finished product lying in closing stock will have to be changed - After perusing the working due to changed method of accounting, CIT(A) confirmed the addition to the extent of ₹ 24,709 - the Revenue could not controvert the findings of CIT(A) – thus, there was no reason to interfere with the order of CIT(A) – Decided against Revenue.

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• 2014 (7) TMI 330
  Admission of additional evidence under Rule 46A(3) of the Rules – Income from sale of furniture treated as STCG – Held that:- The AO has not discussed about whether the assessee has filed any revised return, however, the CIT(A) has given a finding that the assessee has filed revised return in time and the AO should have considered the same – assessee filed revised return in time, AO should have considered the same - the AO has not given any finding, the issue should be decided by the AO afresh after verifying the claim of the assessee in revised return – Decided in favour of Revenue. Income from house property - House property treated as deemed let out – Held that:- The assessment is based on the basis of original return filed by the assessee, but there is no whisper about the return being revised by the assessee - the assessee candidly conceded that the issue may be restored back to the file of the AO to consider it afresh – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue.

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• Service Tax

• 2014 (7) TMI 371
  Refund of tax paid on input services used in export goods - GTA Service tax - notification no.17/2009-ST dt. 07.07.2009 - Rejection of refund claim - Violation of conditions 2(i)(B), 2(i)(F) of notification no.17/2009-ST - Held that:- It is observed that the appellant had not complied with mandatory conditions 2(i)(B) and 2(i)(F) of the notification no.17/2009-ST as well as other conditions mentioned against GTA Service and CHA service of the said notification. I also find that Business Auxiliary / Support services were not covered by any entry in the said notification for the purpose of refund. The entire admissibility of refund claim is based on the procedural requirements and submission of reconciliation of documents under Notification No.17/2009-ST. As appellant has failed to fulfill the procedural requirement, therefore, refund was correctly denied. - Decided against assessee.

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• 2014 (7) TMI 370
  Management consultancy service - Commissioner held that the activity of the Respondent is not covered by the definition of ‘Management Consultancy Services’ as the Respondent as holding company are maintaining the activities of subsidiary companies in which they have 70% to 100% stock is in their own interest and it cannot be called a service has been provided to the subsidiary companies - Invocation of extended period of limitation - Penalty - Held that:- The Respondent as holding company of their subsidiary companies, are monitoring their performance regularly and take timely corrective actions in case of slippages, provide technology up-gradation plan, research and development plan, customer’s project execution plan etc. in order to diagnose the operational problems and provide solutions in time. The services being provided by the Respondent are clearly covered by the definition of ‘Management Consultancy Services’ under section 65(65) of the Finance Act, 1994. CST, Mumbai Vs. Essel Corporate Services Pvt. Ltd. reported in [2014 (6) TMI 136 - CESTAT MUMBAI]. impugned order setting aside the service tax demand is not correct. Extended period of limitation - since the Respondent are a Public Section Undertaking, the longer limitation period for demand of non-paid service tax under proviso to section 73(1) would not be invokable, as in the circumstances of the case the allegation of wilful mis-statement, suppression of facts or deliberate contravention of the Rules to evade the payment of service tax, cannot be made against the Respondent. Therefore the service tax demand would be confined only to normal limitation period. In view of the circumstances of the case, the penalty also has to be waived by invoking Section 80. - Decided partly against Revenue.

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• 2014 (7) TMI 369
  Demand of service tax - Business Auxiliary service - Fabrication of storage tanks - Held that:- As regards the service tax demand based on the allegation that the respondent have provided Business Auxiliary Service, we find that the activity which has been treated as Business Auxiliary Service, as described in the grounds of appeal, is fabrication of steel storage tanks, dozers, settlers, steel structures, platforms, railing, foundation frames etc. and their erection and installation in the factory. The Department’s plea is that these steel items after being erected and installed become embedded to earth and become non-excisable goods and hence the activity of the respondent would be Business Auxiliary Service. The ground of appeal does not mention as to which clause of the definition of Business Auxiliary Service, as given in Section 65 (19) of the Finance Act, 1994, covers this activity. Probably the department wants to cover this activity under ‘Production or processing of goods for or on behalf of a client, which does not amount to manufacture’. But fabrication of steel storage tanks and steel structures would amount to manufacture and their erection and installation would certainly not be covered by Business Auxiliary Service. As regards the repair and maintenance service - during the period of dispute, this service was taxable when provided in terms of some contract or agreement and according to Commissioner (Appeals)s findings, there is no evidence to show that such repair and maintenance activity was conducted in terms of some contract or agreement - Decided against Revenue.

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• 2014 (7) TMI 368
  Waiver of Penalty - Management maintenance and repair service - Held that:- Appellant was paying service tax on the activity he believed to be liable to tax on construction service and as soon as the omission was pointed out, the appellant paid the tax with interest and also taking note of the submission that appellant is a chemical engineer, we consider that there is reasonable cause for non-payment of tax during the period. Accordingly, the penalty imposed on the appellant is set aside by invoking provisions of Section 80 of the Finance Act 1994 - Decided in favour of assessee.

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• 2014 (7) TMI 366
  CENVAT credit - insurance auxiliary service, outdoor catering service, management, maintenance or repair service, clearing & forwarding agent's service and business support services - Invalid document - registration number and details of recipients/provider are not available - Held that:- regarding invalid document, lower authorities should consider whether the omissions/commissions in the documents can be condoned by invoking the provisions of Rule 9 which empowers the Assistant Commissioners to condone the omission of certain items in the invoices. Denial of credit of difference of figures shown in the letter written to department and figure shown in ST-3 return - held that:- if Commissioner has doubts, the accounts can be brought and proper verification can be done to ensure that the credit has been taken in accordance with law and the figures submitted in the ST-3 returns are correct. Just because there is difference between the two figures, in our opinion, it may not be proper to deny the credit - Matter remanded back - Decided in favour of assessee.

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• 2014 (7) TMI 365
  CENVAT Credit - manpower supply service - payment of salary through another company - Penalties under Section 76 and Rule 15 - Held that:- appellant handed over the entire container terminal to M/s. India Gateway Terminal Pvt. Ltd. (IGTPL). While doing so, the employees who were already working in the terminal were also required to be employed by IGTPL as per the agreement between the appellant and IGTPL. The agreement stipulated that the employees would continue to be under the same conditions of employment; their wages will not be reduced and promotions etc. which are their rights would not be affected. The salary and all other benefits were to be paid by only IGTPL and the employees ceased to be the employees of the appellant. The arrangement is co-terminus with the period during which IGTPL would run the Rajiv Gandhi Container Terminal (RGCT)(container terminal). After going through the terms of agreement, we find that as contended by the learned counsel, this is nothing but handing over the operations of the container terminal and in the absence of any payment required to be made by IGTPL to the appellant for supply of man power and in view of the relationship between the employees and IGTPL being one of master and servant, it cannot be said that appellants have provided the manpower supply services to the IGTPL. Therefore we consider that the appellants have made a strong case in their favour and this demand cannot be sustained. - Decided in favor of assessee. Renting of immovable property - Held that:- Appellant is not contesting the taxability but their grievance is that service tax has been demanded even on the amount not received by them but deposited with the court because of litigation. The service tax is payable only on receipt of the service charges and therefore proportionate demand relating to the demand on the amount not received may not be sustained. - Matter remanded back - Decided in favour of assessee.

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• 2014 (7) TMI 364
  Waiver of pre deposit - Demand of service tax - Service of imparting flying training - appellant impart training to the students in take off, landing, flying, handling aircrafts and ground examinations and prepare them for the examination conducted by the DGCA for the issue of private pilot licence, commercial pilot license etc - Held that:- Prima facie of the view that appellant are covered by the definition of "commercial training or coaching centre" under Section 65 (27). We find that same prima facie has been taken by the Bombay Bench in the case of Bombay Flying Club Vs CST Mumbai (2012 (7) TMI 669 - CESTAT, MUMBAI). As regards the Board's Circular No. 164/15/2012-ST dt. 28.8.2012, the same is in respect of the provisions of Section 66D of the Finance Act, 1994 which were not there during the period of dispute. Thus so far as the demand of service tax on the appellant's activity of providing flying training to the students is concerned, the appellant have not been able to establish prima facie case in their favour. Appellant have provided repair and maintenance service in respect of the aircrafts of the Govt of Tamil Nadu, and they have also provided ‘airport service' to the Govt of Tamil Nadu by making available their hangars for parking of the aircrafts and helicopters of the State Government against rental, these activities are not denied by the appellant and we are prima facie of the view that the amount received for the services would attract service tax. - stay granted partly.

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• Central Excise

• 2014 (7) TMI 359
  Duty demand - Clandestine removal of goods - Held that:- appellants are manufacturing more than 300 varieties of MS pipes. The stock taking was done by comparing the stock with the computer data maintained by the appellants and not with the stock entry in RGI Register. It is also seen that immediately after stock taking, the appellants addressed a letter dated 29.11.2003 to the Asst. Commissioner, Central Excise, Rohtak - in the absence of any evidence corroborating the charges of clandestine removal neither confirmation of demand on the short found goods nor confiscation of the excess found goods is to be upheld - Decided in favour of assessee.

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• 2014 (7) TMI 358
  Duty demand - Clandestine removal of goods - Held that:- Applicant had issued parallel invoices in relation to total clearances of 42,800 kgs.of tea, details of which are shown in the Annexure to the Notice. One of the Consignee mentioned in the said invoice has admitted to have received the goods from the Appellant. The Appellant could not furnish any reasonable explanation in stating the circumstances under which the excise invoices having same serial numbers were issued to other consignees. Similarly, sample of around 45,740 kgs. had been cleared without payment of duty. It is the plea of the Appellant that the samples were drawn from the duty paid stocks cleared and not separately removed without payment of duty. However, the Appellant could not produce any evidence to this effect. Similarly the clearances made from the factory as weighment slip involving quantity of 5,855 kgs. could not be properly justified by the Appellant. Therefore, the quantity of 42800kgs. involving duty of ₹ 55,640/- removed on parallel invoice, 5,855 kgs. involving duty of ₹ 7,612/- removed on weighment slips, and 45,740 kgs. involving duty of ₹ 59,462/-removed as samples, had been cleared without payment of duty, are liable to be confirmed against the Appellant. Consequently, the total duty confirmed against the Appellant is accordingly works out to ₹ 1,22,714/- (Rs.55,640+Rs.7,612/-+Rs.59,462/-).The penalty imposed under Section 11AC is accordingly reduced to ₹ 1,22,714/- and interest under Section 11AB, as applicable. - Decided partly in favour of assessee.

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• 2014 (7) TMI 357
  Classification of goods - whether the canvas canopies specially designed for lorries, tool bags and web equipment of textile material are classifiable under sub heading 6306/6307 and hence fully exempt from duty under Notification No. 30/2004-CE or the same are classifiable as 'accessories of motor vehicle' under heading 8708 - Held that:- these canopies made from canvas tarpaulin, are basically the tarpaulins cut into special shapes for covering goods loaded into open lorries of different models. All tarpaulins are covered by heading 6306 of the Central Excise Tariff. This heading of Central Excise Tariff is identical to heading 6306 of the HSN. In terms of HSN explanatory notes to HSN heading 6306, tarpaulins are used to protect goods stored in the open or loaded in ships, wagons, lorries, etc. against bad weather, that they are generally made of coated or uncoated man-made fiber fabrics, or heavy to fairly heavy canvas (of hemp, jute, flex or cotton) and are waterproof, that tarpaulins are generally in the form of rectangular sheets, hemmed along sides and may be fitted with eyelets and that the Tarpaulin which are specially shaped (e.g. for covering hayricks, decks of small vessels, lorries etc.) also fall in this heading provided they are flat . The canvas Tarpaulins, in question, are specially shaped for different model of lorries and though the Department's contention is that the same are not flat, no evidence in this regard has been produced. In our view, therefore, these Tarpaulin would be correctly classifiable under heading 6306 and not as 'parts or accessories of motor vehicles' under heading 8708. - Decided in favour of assessee.

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• 2014 (7) TMI 356
  CENVAT Credit - paper transaction to enable fake credit - Equivalent penalty - Held that:- The view of Commissioner (Appeals) holding that in view of payment of invoice price has been made by the dealer and such payment has been made through banking channel and of passing of the credit by such dealer on valid invoices could not be disputed are not correct. - His observation that the appellant have taken due care while procuring the duty paid inputs and Cenvat credit on such invoices cannot be denied simply on the ground that invoices were issued by the dealer fraudulently, is also not acceptable. Once the fraud is involved, it vitiates the transactions and no benefit can accrue on such invoices. Commissioner (Appeals)’s finding that credit will be available even fraud at dealer stage is involved is not acceptable at all. Sachin Aggarwanshi floated the company to undertake paper transactions and these paper transactions have been proved by the confessional statements. It also came out that all these Central Excise transactions have been organized in such a way to facilitate illegal availment of credit by M/s Ved Trading Company. The role of Sachin in this fraudulent activity is clearly manifested. His subsequent actions and behavior in prolonging investigation and non-cooperation with the Department and later taking recourse to the legal forums to contest the Department s allegations have proved false as nothing substantive was found by the Police authorities who later closed the investigation. Mr. Sachin clearly became liable for penal action for executing fraudulent activities. Further investigations have clearly brought out that the paper transactions have taken place without actual movement of goods and credit has been passed on fraudulently. Such illegally availed credit requires to be reversed back along with penal action as whole fraud has been pre-mediated and executed with the sole intent to defraud the revenue. - Decided in favour of Revenue.

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• 2014 (7) TMI 355
  CENVAT Credit - Custom House Agent service - Whether appellants are eligible to avail cenvat credit of service tax paid on CHA, Courier services and C&F service - Held that:- Tribunal in the case of Nirma Ltd. [2007 (9) TMI 253 - CESTAT AHEMDABAD] had denied credit on this issue. But, in the latest decision of "Pokarna Ltd." (2013 (3) TMI 504 - CESTAT, BANGALORE) after discussing the scope of place of removal as mentioned in section 4 of the Central Excise Act had allowed the credit of service tax on CHA service. I find force in the submission of Ld. advocate that the goods cleared through consignment agent would be treated as "place of removal" under Section 4 of the Central Excise Act. Therefore, prima facie, I do not find reason to deny credit on these services. Accordingly, I waive predeposit of duty along with interest and penalty till disposal of appeals - Stay granted.

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• 2014 (7) TMI 354
  Stay application - Waiver of pre deposit - Availment of inadmissible/fraudulent cenvat credit - Bogus invoices - Held that:- dealers have indulged in the issuance of bogus invoices showing transport of goods in the vehicles which were not capable of doing so. The statement of owner/driver of the vehicle numbers HR 55 0076 and HR 55 H 7767 reinforced the claim of revenue that discrepancies were found in the records maintained by drivers of the respective vehicles and the appellants - Elaborate investigations have clearly manifested manipulation and fraudulent activities in support of non-transport of Cenvatable material. It has been brought out that capacity of HR-55-0076 was 4 MT but they have shown transportation by that vehicle were of 10MT, 18MT, 20MT same is the case with HR 55 H 7767. Further there is no substance in the contention of dealers that they cannot be held responsible for illegal activities of their employees. They could not escape consequences. Similarly employee can also not escape responsibility on the plea that they are mere employee as illegality in paper transactions could not be completed without their active involvement. This is not a case for waiver of pre-deposit of penalty - stay granted partly.

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• 2014 (7) TMI 353
  Refund claim - Adjustment of differential duty in refund sanctioned - Held that:- In terms of Rule 7 of the Central Excise Rules, 2002 the provisional assessment was finalized and the differential duty had to be paid and for the excess payment of duty, the assessee is required to file a refund application. In the present case, it is seen that the adjudicating authority after examining the provisions of Section 11B of the Act had sanctioned the refund amount, which was adjusted against demand of differential duty arising out of finalization of provisional assessment. Section 11 of the Central Excise Act provides recovery of some dues to Government. In the present case, there is no dispute that the differential duty short paid is recoverable from the appellant and, therefore, the adjudicating authority has rightly adjusted the sanctioned refund amount from the differential duty in terms of Section 11 of the Act - adjudicating authority rightly adjusted the refund claim against the demand of differential duty - Following decision of Excel Rubber Ltd. Vs Commissioner of Central Excise, Hyderabad reported in [2011 (3) TMI 527 - CESTAT, NEW DELHI (LB)] - Decided against assessee.

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• 2014 (7) TMI 352
  Refund of CENVAT Credit - export of goods - earlier credit was reversed treating the goods as exempt - claim of refund filed after decision of tribunal held that supply of Indian Navy is export - Held that:- appellant is an exporter and the said CENVAT credit is accumulated in the CENVAT credit account due to the exports only. It is also a fact on record that the factory is closed therefore, the appellant is not able to utilize the amount lying in the CENVAT credit account. Accordingly, as per the Circular cited above, the appellant is entitled to take the amount in cash. Therefore, I direct the concerned authorities to issue the refund in cash to the appellant. - Decided in favour of assessee.

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• 2014 (7) TMI 351
  Valuation of goods - Inclusion of freight charges - Held that:- Appellant are mentioning the freight amount separately in the invoices issued by them to their customers. From the facts narrated in the Show Cause Notice and in the Order-in-Original as well as in Order-in-Appeal, it is seen that what the Department seeks to include in the assessable value of the gases sold by them, is the differential freight i.e. difference between the amount charged by the appellant from their customers during 2005-2006 to 2009-2010 period as freight and the actual expense incurred on running of the tankers for delivery of gases to the customers. However, the differential freight would be includible only if the freight from the factory gate to the customers premise is includible in the assessable value and this can be done only if sales are on FOR destination basis in the sense that during transit, the risk of the loss of goods or damage to the goods is of the seller- manufacturer and the ownership of the goods during transit is of the manufacturer and freight is integral part of the value of the goods. It is not the case of Department that the invoices themselves mention the sales as FOR sales or that the supply orders placed by the customers mention the supply of gases on FOR basis. In fact, the invoices show the freight charges separately. In view of these circumstances, just because the customer wanted the appellant to supply the gases at their premises, it would not be correct to presume that sales were on FOR basis. There is also no allegation that the part of value of the goods was being recovered as freight charges by under declaring the value of the goods and inflating the freight charges. In the circumstance of the case running of the tankers for supply of gases has to be treated as an independent activity and therefore the differential freight would not be includible in the assessable value - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (7) TMI 363
  Revision application - Procedure for filing revision - Affidavit of service - Service of notice not done properly - Held that:- affidavit of service has to accompany revision application, but proviso to sub Rule 2 provides, that, if due to lack of time or for any other sufficient reason, affidavit of service is not accompanying the application filed by Commissioner of Trade Tax, such affidavit must be filed within three weeks' of the date of institution of application. Therefore, a revision would be treated to be validly filed by an assessee if it is accompanied by affidavit of service, but in case of revision filed by Commissioner of Trade Tax, affidavit of service must accompany revision, but for valid reasons, this condition would stand dispensed with, but, the affidavit of service then, must be filed within three weeks' of the date of institution of application. It is true that revision filed by Revenue, may not be dismissed for technical reasons, but where service has not been effected upon assessee for several years all together and Commissioner of Trade Tax apparently has failed to comply with the statutory requirement of filing affidavit of service, this Court finds no justification, still to continue with said revision to remain pending and give further opportunity to Revenue, after such a long time - This revision was filed in 2007 and till date affidavit of service has not been filed - it is fit case where this Court must reject revision having not been filed in accordance with rules and for non-compliance of requirement of Chapter 27 Rule 5(2) of High Court Rules - Decided against Revenue.

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• 2014 (7) TMI 362
  Condonation of delay - Delay of 1360 days - Delay due to government work mechanism - Held that:- The Department appears to have sent a proposal to the Finance Department, which had approved it on May 3, 2010 and after the same was received back along with necessary papers and orders permitting the office of the Government Pleader to file tax appeal, it appears that the tax appeal which was to be filed within the period of limitation prescribed under the law, came to be filed after a huge delay of 1,360 days. What is stated for explaining such delay is that due to Government administrative mechanism, within the statutory time period, tax appeal could not be filed. In absence of any specific details and explanation, this explanation in general terms does not satisfy us. There can be no straightjacket formula adopted which can be applied uniformly in all matters, without considering the facts and circumstances of the case. In absence of any satisfactory explanation coming forth for condonation of delay, we are of the opinion that no liberal attitude requires to be adopted; particularly considering the inordinate delay in preferring this application. Only because the applicant is the State, it cannot be absolved of its responsibility to fulfil the mandate of law. Even if day today explanation is not desired, for a long period after the sanction of Finance Department also, nothing emerges on record to indicate due care or diligence to satisfy the requirement of explaining sufficiency of cause. - Condonation denied.

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• 2014 (7) TMI 361
  Cancellation of registration - non-payment of tax - sufficient time for filing the evidence regarding payment of tax not given - Whether the MPCTAB is correct in confirming the order cancelling registration of the appellant on assumption of wrong facts regarding non-payment of balance tax which in fact was already paid by the appellant and whether the order passed by MPCTAB is not perverse to the extent - Held that:- before the Tribunal the appellant had filed the relevant documents and had sought time to produce the evidence about deposit of tax, however, the Tribunal declined to interfere in the matter on the ground that before the authorities below inspite of repeated opportunities, the appellant could not produce the documents and could not also produce the evidence for the deposit of tax. - It is not in dispute that the tax was already paid by the appellant but the proof to that effect could not be submitted. As regards the relevant documents the same were also filed but at appellate stage - Matter remanded back - Decided in favour of assessee.

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• 2014 (7) TMI 360
  Exemption under notification dated March 6, 1991 - manufacturing of super enameled copper wire and insulated copper wire - Revenue contends that assessee had produced enameled wire therefore, the product should be treated as "electric wire" - Demand of differential tax and interest - Held that:- The notification dated March 6, 1991 had clearly exempted from tax the sale of any product of copper provided it fulfils three conditions. For the purpose of this case, condition No. 1 is relevant which is that such copper is used as raw material in the manufacture of "any other products of copper" within the State of Rajasthan. According to the appellate authority, the assessee purchased the copper wires which were rolled, and the same were used as a raw material. Further, the assessee had sold the super enameled copper wire to M/s. Meter & Instrument Ltd., Chandigarh, for being used in meters. Therefore, the wires being produced by the assessee were nothing but "the product of copper", although the said product of copper was enameled and insulated. Considering the fact that the copper which were rolled were bought, considering the fact that they were insulated and enameled, nonetheless they continued to be "copper product". Therefore, they would fall within the exemption notification. Hence, the learned Board and learned appellate authority were fully justified in holding that the assessee would be entitled to the exemption under the said notification. - no substantial question of law is involved in the present case - Decided against Revenue.

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