TMI Tax Updates - e-Newsletter
July 19, 2013

Case Laws in this Newsletter:

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

Articles

1. RELEVANT INTERPRETATION PRINCIPLES FOR SERVICE TAX (PART- V)

   By: Dr. Sanjiv Agarwal

2. AGRICULTURAL EXTENSION PROJECT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government of India Signed an Agreement with ADB for A $60 Million Loan for North Karnataka Urban Sector Investment Program

2. RBI Reference Rate for US $ and Euro

3. An Ordinance to Amend the Securities Laws Promulgated; SEBI would have now Powers to Regulate any Pooling of Funds Under An Investment Contract Involving A Corpus Of Rs.100 Crore Or More, Attach Assets In Case Of Non-Compliance And Chairman SEBI would have Powers to Authorize The Carrying out of Search and Seizure Operations, As Part of Efforts to Crack Down on Ponzi Schemes

Notifications

Customs

1. 35/2013 - dated 18-7-2013 - Cus

Seeks to amend notification No. 46/2011-Customs, dated 1st June, 2011

2. 78/2013 - dated 19-7-2013 - Cus (NT)

Designates Sh.G.S.Sarna as DG(Safeguard) & DG(Specific Safeguard)

3. 77/2013 - dated 19-7-2013 - Cus (NT)

Designates Sh.G.S.Sarna as DG(Safeguard) & DG(Specific Safeguard)

4. 76/2013 - dated 18-7-2013 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from July 19, 2013

Circulars / Instructions / Orders

Income Tax

1. Press Release - dated 18-7-2013

Guidelines for Weighted Deduction @ 150% of the Expenditure Incurred on skill Development Under Section 35ccd of the Income-Tax Act, 1961

Customs

2. 26/2013 - dated 19-7-2013

Standard Unit Quantity Code (UQC) - regarding.

Highlights / Catch Notes

Income Tax

• High Court affirms Appellate Tribunal's decision: Advances for booking shops/offices not deposits u/ss 269SS & 269T.

  Case-Laws - HC : Penalty u/s 271E - Advances repaid by assessee - Contravention of Section 269T - Whether the Appellate Tribunal has substantially erred in holding that advances against the booking of shops and offices is not deposit within the meaning of section 269SS and 269T - Held No - HC
  Visit to Get Source

  ---

• High Court Confirms ITAT Ruling: Spending of Exempted Amount Irrelevant u/s 10(23c)(iiiad) Exemption Order Validity.

  Case-Laws - HC : Exemption u/s 10(23c)(iiiad) - Tribunal held that so long as exemption order stands, which is available under Section 10 (23c) (iii ad) the question as to how amount was spent is not of relevance for the purposes of framing assessment - Order of ITAT sustained - HC
  Visit to Get Source

  ---

• CIT Must Record Specific Reasons for Error in Assessment Order u/s 263 to Deem It Erroneous.

  Case-Laws - HC : Revision of Assessment order u/s 263 - An order is not erroneous, unless the CIT hold and records reasons why it is erroneous - An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous - HC
  Visit to Get Source

  ---

• Taxpayer Penalized for Concealing Income by Obtaining Bills Without Goods, High Court Confirms Penalty u/s 271(1)(c.

  Case-Laws - HC : Penalty u/s 271(1)(c) - One has to see whether the attitude of the assessee in obtaining only the bills and not the materials/goods would amount to concealment of particulars of income or furnishing of inaccurate particulars in order to attract the provisions of section 271(1)(c) - Order of ITAT reversed - penalty confirmed - HC
  Visit to Get Source

  ---

• Court Quashes Notice: Department's Failure to Revise Order u/s 144A and Invoke Section 263 Deemed Unsustainable.

  Case-Laws - HC : Reopening of assessment - the Department did not take steps to revise the order passed u/s 144A by invoking the provisions of section 263, the notice u/s 148 issued cannot be sustained thus set aside and quashed - HC
  Visit to Get Source

  ---

• Reopening of Income Tax Assessment Allowed if Procedure Followed, Even if Previously Quashed by Appeals Commissioner.

  Case-Laws - HC : Reopening of assessment - earlier CIT (Appeals) has quashed the notice - there is no bar against reopening the assessment once again on the same grounds after following due procedure in accordance with law. - HC
  Visit to Get Source

  ---

• Tax Liability and Exemption Depend on Exact Wording of Statute, Based on Tax Law Interpretation Principles.

  Case-Laws - SC : It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute - SC
  Visit to Get Source

  ---

• Blank Cheques Not Considered Assets u/s 69A; Provisions Deemed Inapplicable in Recent Case.

  Case-Laws - AT : Addition made u/s. 69A - blank signed cheques were found during survey - blank cheques cannot be considered as money/ bullion/ jewellery other available articles and provisions of Section 69A are not applicable - AT
  Visit to Get Source

  ---

• Taxpayer Allowed to Claim Depreciation on Principal Portion of Lease Rental, Not Just Interest Portion.

  Case-Laws - AT : Deprecation - While claiming the depreciation allowance, the assessee has offered the principal portion of the lease rental also for taxation - Otherwise, it was sufficient for the assessee to offer the interest portion alone, as income for taxation - claim to be allowed - AT
  Visit to Get Source

  ---

Service Tax

• CENVAT Credit Refund u/r 5: Export of Services Considered Complete on Foreign Exchange Receipt Date.

  Case-Laws - AT : Refund of cenvat credit - Rule 5 of CCR - Period of limitation of one year - In case of export of Services export is complete only when foreign exchange is received in India - relevant date of export of services is date of receipt of foreign exchange - refund allowed - AT
  Visit to Get Source

  ---

• Penalty Confirmed for Service Tax Delay: Interest Unpaid Before Show Cause Notice Issued u/s 73(3.

  Case-Laws - AT : Penalty - Relief u/s 73(3) - Order clearly states that Show Cause Notice ought to have been issued after tax has been paid with interest - interest on delayed payment amounting to Rs.771/was not paid before issue of Show Cause Notice (4.3.2008) - levy of penalty confirmed - AT
  Visit to Get Source

  ---

• Penalty Upheld for Late Interest Payment; Section 78 Penalty Waiver Denied Due to Unmet Conditions u/s 80.

  Case-Laws - AT : Penalty - Waiver of penalty u/s 80 - liability of service tax and a penalty u/s 78 - no force in the contention of the appellant that the penalty should not be levied on them since they have deposited service tax but interest has been deposited later on - AT
  Visit to Get Source

  ---

Central Excise

• Interest on Delayed Government Payments Chargeable Post-May 14, 2003, Per Section 11DD; No Interest Before This Date.

  Case-Laws - AT : The question of charging of interest for the period of delay in paying the same to Government would be governed by Section 11DD only which came into effect from 14.05.2003 - Interest would be demandable only for the period from 14.05.2003 under Section 11DD and for the period prior to 14.05.2003 the interest would not be chargeable. - AT
  Visit to Get Source

  ---

• Court Grants Stay on Export Conditions for Exempted Goods, Clarifies Procedures Under Bond Scheme.

  Case-Laws - AT : Stay Application – Export under bond - conditions and procedures - export of exempted / non excisable goods - Having regard to the fact that ultimately the goods removed without payment of duty used for export which is the objective of the scheme and there can be views on the issue as to whether conditions and procedure can be separated - stay granted - AT
  Visit to Get Source

  ---

• No Penalty for Appellant: Cenvat Credit Error u/r 15(4) Deemed Unintentional, No Evidence of Knowing Violation.

  Case-Laws - AT : Penalty under Rule 15(4) of Cenvat Credit Rules, 2004 - Appellant taken Cenvat credit in respect of certain input services, which according to the Department was not admissible to them, it cannot be concluded that the credit had been taken knowing very well that the same was not admissible, unless there is some evidence in this regard - No penalty - AT
  Visit to Get Source

  ---

• Exemption Affirmed: Wind-Operated Electricity Generators and Components Exempt from Central Excise Duty Under Notifications No.3/2001-CE & No.6/2002-CE.

  Case-Laws - AT : Manufacturing of Windmill doors - The notification No.3/2001-CE & No.6/2002-CE provides exemption from payment of Central Excise duty in respect of wind operated electricity generators and its components and parts thereof - benefit of exemption allowed - AT
  Visit to Get Source

  ---

VAT

• Higher Court Challenges Tribunal's Local Sale Ruling on Interstate Goods Movement Under Central Sales Tax for Lift Manufacture.

  Case-Laws - HC : Works contract - interstate movement of goods - local sale or CST - As the sale is already effected and as the manufacture of the lift at Ghaziabad is only in pursuance of job order evidencing interstate sales, the question of further sale by branch office does not at all arise herein. - Tribunal has erroneously concluded that it is local sale - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2013 (7) TMI 486
  Penalty u/s 271E - Advances repaid by assessee - Contravention of Section 269T - Whether the Appellate Tribunal has substantially erred in holding that advances against the booking of shops and offices is not deposit within the meaning of section 269SS and 269T - Held that:- amount of returned by the assessee to various parties was by of advance and the assessee also reflected the said amount of advance received in its balancesheet, which came to be accepted by the Department in the earlier years, it is rightly held that section 269T of the Act would not be applicable and, therefore, no penalty under section 271E of the Act can be levied for breach of section 269T - No reason to interfere with the impugned judgment and order passed by the ITAT in confirming the order passed by the CIT(A) - Following decision of CIT vs. Rugmini Ram Ragav Spinners P.Ltd. [2007 (7) TMI 237 - MADRAS HIGH COURT] - Decided against Revenue.

  ---

• 2013 (7) TMI 485
  Claim pertaining to liquidated damages - Tribunal passed contradictory orders - Held that:- Income Tax Appellate Tribunal has recorded two different findings in respect of claim - impugned order set aside and remitted back to the Income Tax Appellate Tribunal, Delhi Bench 'B', Delhi, for adjudication afresh and in accordance with law - Decided in favour of Revenue.

  ---

• 2013 (7) TMI 484
  Exemption u/s 10(23c)(iiiad) - Tribunal held that so long as exemption order stands, which is available under Section 10 (23c) (iii ad) the question as to how amount was spent is not of relevance for the purposes of framing assessment - Held that:- since the assessee has already been allowed exemption under Section 10 (23c) (iii ad), therefore, alternate ground taken by the assessee relating to exemption under Section 11 does not require adjudication - If the donations are questioned as doubtful and the amount advanced by the society is found to have benefitted the directors individually through bogus advances treating it to be the amount spent on constructions of building, as alleged in twelve days. Such amount can be added to the income of the directors in their individual capacity. The Commissioner of Income Tax can also on these findings give show cause notice and cancel the registration of the society granted under Section 12AA of the Income Tax Act, and withdrawn exemption - Decided against the revenue.

  ---

• 2013 (7) TMI 483
  Revision of Assessment order u/s 263 - assessee had declared sale consideration of 4 plots at 4 lacs each - However it is alleged by the complainant that the total sale consideration received was Rs.84 lacs - Assessing Officer after conducting inquiry did not make any addition - CIT held order erroneous - Held that:- An order is not erroneous, unless the CIT hold and records reasons why it is erroneous - An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous - material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT - inquiries were certainly conducted by the Assessing Officer - The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called - No substantial question of law arises - Following decision of Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY High Court] - Decided against Revenue.

  ---

• 2013 (7) TMI 482
  Notice u/s 148 - Court previously quashed notice for A.Y 1195-96 and 1996-97 - Held that:- facts and circumstances of the case and the grounds for challenging the notice under Section 148 in this writ petition, are common to the earlier Writ of 2001, which was allowed by this Court - Notice under Section 148 of the Income Tax Act for the assessment year 1997-98 is quashed - Decided in favour of assessee.

  ---

• 2013 (7) TMI 481
  Penalty u/s 271(1)(c) - Whether the ITAT was right in confirming the order of the CIT (Appeals) in deleting the penalty u/s 271(1)(c) in respect of the gross profit addition under the head 'Profits and gains of business' for the A.Y. 2000-01 and 2001-02 - Held that:- The assessee in his assessment has stated that purchases have been made from - In order to test the veracity of the statement made by the assessee and purely relying on the sales of the company, the AO examined the proprietor of the concern - who not only denied the sale of goods but also admitted that he has furnished the bills and not the materials - In order to give an opportunity to the assessee he was allowed to cross-examine but the assessee has not chosen to do the same – Court relied upon the judgement of Kamal Basha v. Deputy CIT (2009 (4) TMI 154 - MADRAS HIGH COURT ) - thus the AO has come to the conclusion that the action of the assessee comes within the meaning of concealment and that the explanation offered is inadequate and accordingly passed the order levying penalty u/s 271(1)(c)- One has to see whether the attitude of the assessee in obtaining only the bills and not the materials/goods would amount to concealment of particulars of income or furnishing of inaccurate particulars in order to attract the provisions of section 271(1)(c) – appeal decided in favour of revenue.

  ---

• 2013 (7) TMI 480
  Reopening of assessment - whether the Department by taking recourse to the proceedings u/s 147/148 can reopen an assessment which was done pursuant to the directions issued by the AC u/s 144A – Held that:- Assessing Officer is trying to reopen and reappraise the assessment on the same set of facts it is a mere change of opinion – the order passed u/s 144A which has a "binding" effect on the AO became final and cannot be reopened by issuing the notice u/s 148 - Court relied upon CIT v. Rao Thakur Narayan Singh (1964 (10) TMI 17 - SUPREME Court) - the Department did not take steps to revise the order passed u/s 144A by invoking the provisions of section 263, the notice u/s 148 issued cannot be sustained thus set aside and quashed – petition allowed in favour of assessee.

  ---

• 2013 (7) TMI 479
  Reopening of assessment - whether it was permissible for the AO to reopen the assessment on the same grounds on which the assessment was reopened earlier and was quashed by the Commissioner (Appeals) in the assessee's appeal – the order passed by the Commissioner (Appeals) it is apparent that the earlier assessment was set aside on the ground that the AO had not recorded reasons for reopening the assessment which is a condition precedent for issuing notice u/s 148(2) – thus proceedings initiated earlier had been set aside on the ground that the same were initiated without compliance with the mandatory provisions of section 148(2) when earlier order stood annulled on the ground of lack of fulfilment of the basic requirement for exercise of jurisdiction under section 147 - there is no bar against reopening the assessment once again on the same grounds after following due procedure in accordance with law. Limitation on reopening of assessment - whether the reopening of assessment beyond a period of four years from the end of the relevant assessment year is valid – the AO has recorded twin satisfaction as required under the proviso to section 147 - the fact that such income has escaped assessment because the assessee had suppressed the closing stock –escapement is by reason of failure on the part of the assesee to disclose fully and truly all material facts necessary for its assessment - when there is suppression it goes without saying that there is failure to disclose fully and truly all material facts even if the same is not expressly stated in such terms - no infirmity in the action of the revenue in reopening the assessee’s assessment for the assessment year under consideration by issuance of notice u/s 148 – petition decided against assessee.

  ---

• 2013 (7) TMI 478
  Penalty u/s 271 - Period of limitation u/s 275(1)(a) for imposing penalty - Held that:- Questions requires to be answered first by ITAT - Matter remanded back to the Tribunal - Orders of High Court and Tribunal set aside - Decided in favour of Revenue.

  ---

• 2013 (7) TMI 477
  Deduction u/s 80HHC - Export profits - DEPB transfer - Held that:- where the export turnover of an assessee exceeds Rs.10 crores, he does not get the benefit of addition of ninety per cent of export incentive under clause (iiid) of Section 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit - It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee - Following decision of Topman Exports Vs. Commissioner of Income-Tax [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - Decided in favour of assessee.

  ---

• 2013 (7) TMI 476
  Reopening of assessment u/s 148 - the assessment for the year 2005-06 is sought to be reopened by a notice dated 25.09.2009 issued u/s 148 – the material on which the AO has formed the belief as regards escapement of income is the on the date of reopening of the assessment for the year under consideration was set aside by the Commissioner (Appeals) and as such had no existence in the eyes of law - the belief cannot be said to be a bona fide belief nor can the material on which the belief is based be said to have a live link for the formation of requisite belief - reopening of assessment without formation of the requisite belief as regards escapement of income is without jurisdiction and as such the notice u/s 148 as well as any proceedings taken pursuant thereto cannot be sustained be sustained – notice set aside – petition allowed infavour of assessee.

  ---

• 2013 (7) TMI 475
  Unexplained cash credit being loan taken by assessee - CIT(A) deleted the additions - CIT(A) deleted the interest amount paid on loans - Held that:- Amount of Rs 90 lakhs appears in the books of accounts of the the assessee as well as the Sreeji Corporation. It is also an undisputed fact that the impugned cash credit has been repaid by the assessee later in time. Further, it is a settled issue that the assessee is prevented from examining the issue of source of the source of Rs 90 lakhs in the assessee's case. Considering the above stated facts as well as the speaking order of the CIT (A), the decision of the CIT (A)upheld. Regarding the cash credit of Rs 80 lakhs PAN of the loan creditor is AAAHY3767N and the same is evident from the face of acknowledgement of the return of his income. AO merely suspect the loan transaction and otherwise, AO has no evidence against the assessee to conclude that the loan is not genuine as the said amount of Rs 80 Lakhs appears in the books of accounts of the assessee as well as the Sumati Corporation. It is also an undisputed fact that the impugned cash credit has been repaid by the assessee later in time. Further, it is a settled issue that the assessee is prevented from examining the issue of source of the source of Rs 80 lakhs in the assessee's case. The decision of the CIT (A) on this issue does not call for any interference. Claims of payment of interest on the said cash credits is merely consequential in nature as since the addition of cash credits are deleted assessee is entitled to the claim of interest paid to the loan creditors. In favour of assessee.

  ---

• 2013 (7) TMI 474
  Sale of shares - short term capital gain v/s income from business - Held that:- There are 86 transactions of sale carried by the assessee during the year. The holding period of the transactions varies from one day to 244 days. Out of 86 transactions, the holding period in respect of 42 transactions is upto 7 days. Thus, it is clear that about 50% of the total transactions of sale of share during the year, the holding period is only upto 7 days. The repetitive transactions in the same scrip shows the assessee’s intention of purchase of the shares for resale purposes and book profits at the earliest occasion. The holding period is upto one week as far as 42 transactions out of 86 transactions clearly show that the assessee is earning profit by taking advantage of the volatile market condition and thus it cannot be said that the transactions carried on 42 occasion were with the intention to hold these shares for enjoying of the ownership and yielding of dividend income. Further, the assessee is also engaged in the speculative transactions as business income on account of speculative transactions out of the total business income offered by the assessee at Rs. 9,52,507/-. Therefore, the observations of the CIT(A) is that the assessee is not in the business of trading of shares is contradictory to the facts. Further, the CIT(A) has also observed that the assessee has not employed any person for the purchase of sale of the shares which is also apparently not correct because before the AO one Shri Jayesh Sangoi, Accountant of the assessee company appeared from time to time and participated in the assessment proceedings. Following the decision of New Jehangir Vakil Mills Co. Ltd. v. CIT (1963 (4) TMI 60 - SUPREME COURT) the acceptance of the claim for the earlier year would not operate resjudicata or estoppel on the Assessing Officer for deciding the issue for the year under consideration when the facts are not strictly identical. Accordingly set aside the impugned order of the CIT(A) and restore the order of the AO wherein the income arising from sale of shares has been rightly assessed as business income. Claim of LTCG and STCG - Held that:- There is no such category of 30 days provided in the provisions of Income Tax Act. Even otherwise, when the assessee has not bifurcated its portfolios on the basis of holding period, then 30 days holding period cannot be taken as fixed criteria for determining the nature of transaction when the question of nature of transaction can be determined after taking into consideration various factors and criterias and the holding period is one of the several criterias. Therefore no approval to the action of the authorities below in bifurcating the transactions on the basis of 30 days holding period; however, since the claim of the assessee in respect of STCG has been accepted by the Assessing Officer, which has been confirmed by the CIT(A) remains undisturbed, despite the nature of transaction as trading and not as investment. Against assessee.

  ---

• 2013 (7) TMI 473
  Addition made u/s. 69A - Held that:- It is a fact that blank signed cheques were found at the business premises of the assessee and same were inventoried by the survey team. After considering the submissions of both the parties, blank cheques cannot be considered as money/ bullion/jewellery other available articles and provisions of Section 69A are not applicable. Secondly, endorsing view of the FAA that once Books of Accounts are rejected and income is estimated u/s.144 no addition can be made u/s. 69A of the Act. Ground No.1 is decided against the AO. Estimated rate of Gross Profit - 20% or 8% - Held that:- While adopting the GP rate of 20% AO had not considered the direct expenses incurred by the assessee and in our opinion without considering such a vital factor GP rate cannot be determined.FAA has after considering all the relevant facts estimated the rate of gross profit at 8%, thus his order does not need any interference. Upholding the order of the FAA Ground decided against the AO. Disallowance of selling and administrative expenses - 40% on the basis that Books of Accounts of the assessee were not produced for verification - Held that:- Even Books of Accounts are not reliable, the expenditure claimed have to be allowed, if same is incurred for running the business. FAA has given a finding of fact that expenses claimed by the appellant were bank charges,auditor's remuneration, service charges, godown rent, brokerage to bank, salary and wages.In our opinion, if the amounts incurred on the said items are verifiable, no disallowance can be made. As this aspect needs further verification remit back the matter to the file of the AO - partly allowed in favour of the AO. Rejection of Books of Accounts - assessment order passed u/s. 144 - FAA had upheld the order of rejecting the Books of Accounts - Held that:- It is the duty of the assessee to produce Books of Accounts during the assessment proceedings before the AO for determining the right tax liability. In the case under consideration, neither before the survey team nor before the AO required Books of Accounts were produced. In these circumstances, upholding the order of the FAA, decide Ground against the assessee. Estimation of Closing Stock - Held that:- During assessment or appellate proceedings before the AO/FAA, he had not explained the deficiency of stock not found during the survey operations. In these circumstances, departmental authorities were right in holding that there were un recorded sales during the assessment year under consideration. AR has submitted that only GP could be added and not the entire sales. Argument of the assessee that only GP should be added is a clear admission that assessee was indulging in selling goods out of the books. Therefore, upholding the order of the FAA, decide Ground against the assessee. As far as the alternative submission of the assessee to consider the GP only for making addition, we are of the opinion that whole of sale proceeds cannot be treated as income of assessee. AO is therefore directed to re- calculate the profit @ 8% for determining the exact addition under the head 'Un- recorded Sales' as held by the FAA during the year under consideration.

  ---

• 2013 (7) TMI 472
  Notional interest - Whether notional interest on total security deposit should be added to the annual value of property - Held that:- no addition to the annual letting value can be made on account of notional interest on interest free deposit with the landlord u/s.23(1)(a) - Following decision of COMMISSIONER OF INCOME TAX, Versus MONI KUMAR SUBBA & Miracle Exporters P. Ltd. [2011 (3) TMI 497 - DELHI HIGH COURT] - Decided against Revenue.

  ---

• 2013 (7) TMI 471
  Disallowance of depreciation - CIT(A) deleted the disallowance of depreciation on financial leased assets - Held that:- While claiming the depreciation allowance, the assessee has offered the principal portion of the lease rental also for taxation - Otherwise, it was sufficient for the assessee to offer the interest portion alone, as income for taxation - It is seen that whether the method already followed by the assessee is accepted or method proposed by the Revenue is accepted, the ultimate effect is Revenue-neutral - Decided against revenue. Nature of Guarantee commission paid by assessee company to holding company - Debt claim - Held that:- payment towards guarantee fee cannot be regarded as income from debt claim - guarantee commission in the light of the Double Taxation Avoidance Agreement cannot be treated as being in the nature of interest or debt claim - Following decision of Vijay Ship Breaking Corporation v. Deputy CIT [2002 (4) TMI 252 - ITAT RAJKOT] - Decided against Revenue.

  ---

• Service Tax

• 2013 (7) TMI 491
  Classification of service u/s 65 - whether respondents are chargeable to service tax u/s 65(28) & (29) for Erection, Commissioning or Installation service - Held that:- The metal Crash Barrier has been erected along road side for a specific purpose of road safety - the same qualifies the definition of equipments and attract Service Tax under the services of erection commissioning & equipments - erection service was brought into service tax net w.e.f 10.09.2004 - the demand was raised against the assesse for the period 23.10.2003 to 23.01.2004 - no fault in findings of the Commissioner (Appeal) that assesse were not chargeable to service tax – appeal decided against assesse

  ---

• 2013 (7) TMI 490
  Refund of cenvat credit - Rule 5 of CCR - Period of limitation - whether claims filed by the assessees are time barred as held by lower authorities or in time as claimed by the assesse - Held that:- All the four claims have been filed with 1 year from the date of receipt of foreign exchange and are therefore filed in time and cannot be held as time barred - for claiming refund under Rule 5 of the Cenvat Credit Rule 2004, output service is required to be exported in accordance with procedure laid down Export of Service Rule 2005 (as per condition 1 of the Appendix to Notification 5/2006) - Section 11B is made applicable for claiming refund under Rule 5 of the Cenvat Credit Rules as per condition 6 of Notification 5/2006 - In case of export of Services export is complete only when foreign exchange is received in India - relevant date of export of services is date of receipt of foreign exchange – appeal allowed in favour of assessees.

  ---

• 2013 (7) TMI 489
  Condonation of delay - grant of stay - appeal was filed along with an application for condonation of a delay of 11 months - notice of hearing was forwarded to the address of the assessee as provided in the memorandum of appeal - notice had been returned by the postal authorities with the endorsement left – notice of condonation of delay deemed to be served – assessee failed to appear - decided against assessee.

  ---

• 2013 (7) TMI 488
  Penalty - Relief u/s 73(3) - whether Commissioner (appeal) is right in concluding that service tax along with interest has been paid prior to the a issue of Show Cause Notice along with some portion of interest Commissioner (Appeal) had misinterpreted – the CESTAT order and the judgement of Nischint Engineering Consultant Pvt. Ltd Vs. Commr. Of C. Ex., Ahmedabad (2010 2010 (5) TMI 90 - CESTAT, AHMEDABAD) both - Order clearly states that Show Cause Notice ought to have been issued after tax has been paid with interest - interest on delayed payment amounting to Rs. 771/was not paid before issue of Show Cause Notice (4.3.2008). - Commissioner (Appeal) was not correct in dropping penalty as requirement of Section 73 was not fulfilled - no justification in dropping the penalty - Order of commissioner (Appeal) set aside – appeal decided in favour of revenue.

  ---

• 2013 (7) TMI 487
  Waiver of penalty u/s 80 - liability of service tax and a penalty u/s 78 - Held that:- It is fit case for invocation of extended period as well as imposition of penalty under section 78 - section 83A only provides monetary limit for imposition of penalty and it has nothing to do with imposition of penalty – no force in the contention of the appellant that the penalty should not be levied on them since they have deposited service tax but interest has been deposited later on - CBEC’s Circular No. 137/167/2006-CX.4 relied upon by the CESTAT clearly supports the contention of the department wherein the provisions of Section 73 have been discussed - Assesse had not been able to conclusively prove that the material facts were in the notice of the department even prior to conduct of audit – appeal decided against assessee.

  ---

• Central Excise

• 2013 (7) TMI 494
  ‘Capital goods’ as defined under Rule 2(a) of the CENVAT Credit Rules (CCR), 2004 for purposes of CENVAT credit - MS angles, plates and rounds used for fabricating structural support to plant and machinery in factory – Held that:- In the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA], the Hon’ble Supreme Court found that the DG set fell under Heading No.85.02 Chapter 85, of First Schedule to the Central Excise Tariff Act and ipso facto got covered under Sl. No.3 of the table ibid. Court further noted that the chimney attached to the DG set was undisputedly covered by Sl. No.5 of the table ibid. On this basis, it was held that the chimney was an integral part of the DG set and, therefore, ms channels, plates, etc., used in its fabrication were to be treated as accessories in terms of Sl. No.5 of the table ibid - The facts of the present case are perfectly analogous to those of Rajasthan Spinning & Weaving Mills Ltd. (supra). It is not in dispute that ms angles, plates, etc., were used to fabricate structural support for machinery which was used for manufacturing excisable goods. It is, again, not in dispute that the machinery is squarely covered by clause (i) of Rule 2(a)(A) of the CCR, 2004 – Consequently held that the ms angles, plates and rounds used for fabricating structural support for machinery would qualify to be’capital goods’ for CENVAT credit – Decided against the Revenue.

  ---

• 2013 (7) TMI 470
  Condonation of Delay Application – Stay Application – Held that(ex-partie):- Neither before limitation nor after expiry thereof appellant seems to be vigilant to pursue its appeal remedy - MA (COD), stay application and appeal are dismissed. Decided against the Assessee.

  ---

• 2013 (7) TMI 469
  Interest u/s 11DD - Differential duty paid on account of revision of price of petroleum products - Appellant i.e. IOC (Rewari) during the period in dispute had received duty paid petroleum products from IOC (Bijwasan) the "differential duty" paid was amount realised by the appellant (IOC Rewari) from customers towards duty which was in excess of the duty originally paid by the IOC (Bijwasan) - The payment of this differential amount to be treated under Section 11D - The question of charging of interest for the period of delay in paying the same to Government would be governed by Section 11DD only which came into effect from 14.05.2003 - Interest would be demandable only for the period from 14.05.2003 under Section 11DD and for the period prior to 14.05.2003 the interest would not be chargeable. Limitation – Held that:- As held by coordinate Bench of the Tribunal in the case of Hindustan Insecticides [2012 (286) E.L.T. 208 (Tri. - Del.)] the interest being by automatic operation of law, the limitation period prescribed would not be applicable .

  ---

• 2013 (7) TMI 468
  Removal of petroleum products without payment of duty from refineries to warehouses was withdrawn w.e.f 6.9.2004. The Revenue raised the demanded duty in respect of the petroleum products which remained in the pipeline namely BPT pipeline and Pirpau pipeline – Issue Involved - Whether the BPT pipeline belongs to the appellant whether the Pirpau Pipeline is within the factory limit of the appellant – Held that:- Facts requires verification afresh by the adjudicating authority hence the impugned order is set aside and matter is remanded to the adjudicating authority - Both sides are at liberty to produce evidence in support of their claim.

  ---

• 2013 (7) TMI 467
  Stay Application – Export under bond - conditions and procedures - export of exempted / non excisable goods - Procedural requirement under Notification No. 42/2001-CE (NT) dated 26.06.2001 - Notification No. 42/2001 has two separate divisions (limbs) namely conditions and procedure - The Notification No. 24/2010-CE (NT) has amended the Condition No. 4 thereby disallowing the exporters of goods which are not liable to duty from exporting under bond - Amendment by Notification No. 24/2010-CE (NT) dated 26.05.2010 - Manufacturers who are exporting the exempted/non-excisable goods cannot export them under bond or LUT - Notification No. 43/2001 which was followed by the appellants only requires the procedure to be followed by the exporters prescribed under Notification No. 42/2001 – Held that:- Having regard to the fact that ultimately the goods removed without payment of duty used for export which is the objective of the scheme and there can be views on the issue as to whether conditions and procedure can be separated - Appellants have been able to make out a prima facie case in their favour for complete waiver – Decided in favor of Assessee.

  ---

• 2013 (7) TMI 466
  Penalty under Rule 15(4) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Demand of interest under rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 - The appellants are availing Cenvat Credit of duty paid on inputs and capital goods as well as Service Tax paid on input services under Cenvat Credit Rules, 2004 - Appellant had paid service tax in terms of Section 66A of the Finance Act, 1994 read with Rule 2(d )( iv) of Service Tax Rules, which was paid as recipient of services on commission paid to foreign agents M/s. Matrix Resources PTE Ltd., Singapore in connection with purchase of Nickel - Appellant availed Cenvat Credit of the said Service Tax even though they had not received physical delivery of the Nickel in their factory - Services were utilized for trading activity but were not used directly or indirectly in manufacturing activity - Held that:- As per the decision in COMMISSIONER OF C. EX., JAIPUR-I Versus PUSHP ENTERPRISES [2010 (11) TMI 835 - CESTAT, NEW DELHI], the ER-1 Returns disclosed the availment of Cenvat Credit but since there is no requirement for enclosing the invoices or giving the details of such credit - Once ER-1 Return is filed, even though it is filed under self-assessment system, the officers are supposed to scrutinize the same – Appellant taken Cenvat credit in respect of certain input services, which according to the Department was not admissible to them, it cannot be concluded that the credit had been taken knowing very well that the same was not admissible, unless there is some evidence in this regard - Moreover, when the quantum of service tax credit availed had been disclosed, the officers were always free to inquire from the respondent about details of the same and satisfy themselves about its correctness – Appeal allowed – Decided in favor of Assessee.

  ---

• 2013 (7) TMI 465
  Penalty - Zinc dross and ash - Excisability / Marketability – appellant is not disputing the legal issue and as such is not challenging the confirmation of demand along with interest. - However, he submits that inasmuch as they were reflecting all the clearances of zinc dross and ash in their returns filed with the revenue, there was no suppression on their part and as such penalty should not have been imposed. - Held that:- As per the decision in case of KEC International Ltd [2012 (12) TMI 426 - CESTAT, NEW DELHI] - Uphold the dutiability of the zinc dross and ash has set aside the penalty on the ground that such clearances were effected with the knowledge of the Revenue - Set aside the penalty - Confirm the duty and interest.

  ---

• 2013 (7) TMI 464
  Manufacturing of Windmill doors - Benefit of Notification No.3/2001-CE date 01/03/2001 at Sl. No. 254 and for the subsequent period, the benefit of Notification no. 6/2002-CE dated 01/03/2002 at Sl. No. 237 in respect of Windmill doors manufactured - Decision of the Hon'ble Supreme Court in Nicco Corporation Ltd. case [2006 (3) TMI 48 - SUPREME COURT OF INDIA] whereby the Hon'ble Supreme Court denied the benefit of Notification No. 205/88-CE dated 25/05/1988 in respect of wires and cables – Held that:- The wordings of the notifications which are under consideration before us are different. The notification No.3/2001-CE & No.6/2002-CE provides exemption from payment of Central Excise duty in respect of wind operated electricity generators and its components and parts thereof – The ratio of Nicco Corporation Ltd not applicable in the facts of instant case - Benefit of notification No. 6/2002-CE is allowed to the tower of wind operated electricity generators – Decided in favor of Assessee.

  ---

• 2013 (7) TMI 463
  Pre-deposit - Job Work - Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Principal supplied the raw material and the applicant are manufacturing metal containers on job-work basis and the metal containers are returned to the principal and the principal further use these containers of packing of their final products, which is cleared on payment of duty – Held that:- As per Indian Extrusions[ 2012 (5) TMI 271 - CESTAT, MUMBAI] which has set aside the demand - Ratio of the above decision is applicable to the facts of this case - In view of the decision, the applicant has made out a strong case, prima facie case – Pre-deposit of the dues are waived and recovery stayed during the pendency of the appeal – Decided in favor of Assessee.

  ---

• CST, VAT & Sales Tax

• 2013 (7) TMI 493
  Partial stay of disputed tax - Non consideration of relevant facts by Tribunal - Held that:- During the pendency of the statutory appeal, the Tribunal is required to look into the prima facie merit of the case as well as financial condition of the revisionist because the condition of deposit will make the purpose of filing of appeal itself nugatory - Decision passed by Tribunal Modified - Decided in favour of Assessee.

  ---

• 2013 (7) TMI 492
  Works contract - interstate movement of goods - local sale or CST - agglomeration of the goods to the immovable property - Exemption u/s 3-B(2)(a) of the Tamil Nadu General Sales Tax Act - Tribunal held sales as local sales - Held that:- customers placed order in the Branch Office in Tamil Nadu and only the Branch Office forwarded the order to the factory at Ghaziabad, wherein, lifts are manufactured according to the specifications of the customers and the factory at Ghaziabad after manufacturing the lifts, dismantled them and stock transferred them in parts to Branch Office in Tamil Nadu - What the Branch Office did was to send technician for the purpose of installation and erection, testing and commissioning of the lifts in the customer's site. The Tribunal failed to see that the consignee name is mentioned as "ECE Industries Limited care of clients address" in the delivery invoice only to indicate that the same is meant for customer's site and not despatched to the Branch Office. As the sale is already effected and as the manufacture of the lift at Ghaziabad is only in pursuance of job order evidencing interstate sales, the question of further sale by branch office does not at all arise herein. The Tribunal has erroneously arrived at the conclusion that the goods were sent to the Branch Office at Tamil Nadu, and it is only the Branch Office, who in turn effected sale to the ultimate customer, thereby, treated the disputed transaction as pure and simple local sales - there are sufficient materials to show that the nature of the transaction is interstate sales cum works contract - Following decision of STATE OF KARNATA AND OTHERS v. ECE INDUSTRIES LIMITED [2004 (11) TMI 518 - KARNATAKA HIGH COURT] - Decided in favour of Assessee.

  ---