TMI Tax Updates - e-Newsletter
July 2, 2014

Case Laws in this Newsletter:

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

Articles

1. APPOINTMENT OF MANAGERIAL PERSONNEL UNDER COMPANIES ACT, 2013

   By: DR.MARIAPPAN GOVINDARAJAN

2. Corporate Governance - Audit committee (AC) - Vigil Mechanism

   By: hardeep sandhu

News

1. India Signs Loan Agreement with World Bank for IBRD Assistance of US$ 500 Million for National Highways Inter-Connectivity Improvement Project (NHIIP)

2. RBI Reference Rate for US $ and Euro

3. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

4. Notification relating to Companies (Cost Records and Audit) Rules

Notifications

Central Excise

1. 07/2014 - dated 30-6-2014 - CE

Seeks to amend notification No. 50/2003- Central Excise dated 10.06.2003

Companies Law

2. F. No. 1/40/2013/CL-V - dated 30-6-2014 - Co. Law

Companies (cost records and audit) Rules,2014

3. F. No. 1/21/2013-CL-V - dated 30-6-2014 - Co. Law

Companies (Prospectus and Allotment of Securities) Amendment Rules, 2014

Customs

4. 48/2014 - dated 30-6-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Circulars / Instructions / Orders

VAT - Delhi

1. 04/2014 - dated 26-6-2014

Allocation of court work of 2A-2B mismatch to Special Objection Hearing Authority (SOHA)

FEMA

2. 08/2014-15 - dated 1-7-2014

Master Circular on Remittance Facilities for Non-Resident Indians / Persons of Indian Origin / Foreign Nationals (Amended up to January 22, 2015)

3. 02/2014-15 - dated 1-7-2014

Master Circular on Non-Resident Ordinary Rupee (NRO) Account

4. 04/2014-15 - dated 1-7-2014

Master Circular on Acquisition and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals of Non-Indian Origin (Updated upto March 11, 2015)

5. 15/2014-15 - dated 1-7-2014

Master Circular on Foreign Investment in India ((Amended upto April 08, 2015)

6. 151 - dated 30-6-2014

Remittances to non-residents – Deduction of Tax at Source

Companies Law

7. 27/2014 - dated 30-6-2014

Clarification regarding filing of Form DPT4 under Companies Act, 2013.

Highlights / Catch Notes

Income Tax

• High Court Rules No Addition to Taxable Income from Currency Conversion Gains on Repatriated Foreign Funds.

  Case-Laws - HC : Gain from conversion of currency - accrual of income - Use of repatriated funds – entire funds were raised abroad - no addition - HC
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• Tax Deduction at Source Isn't Income Disclosure Without Reporting in Filed Returns, Court Clarifies.

  Case-Laws - HC : Mere deduction of tax at source, doest not amount to disclosure of income, nor does it indicate the intention to disclose income most definitely when the same is not disclosed in the returns filed - HC
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• Salary Income Not Disclosed by Assessee is "Undisclosed Income" u/s 158B(b), Taxed at 60% Rate.

  Case-Laws - HC : Non-disclosure of the income received by the assessee by way of salary was required to be treated as “undisclosed income” within the meaning thereof in Section 158B(b) under Chapter XIV-B of the Act liable to tax at 60% - HC
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• High Court Clarifies: Section 153C Doesn't Allow Income Assessment Based Solely on Document Possession by Tax Authorities.

  Case-Laws - HC : Interpretation of section 153C - power of AO to assess the income of any other person – merely because the document evidencing the transaction was in possession of the Department, it could not have issued notice to any other person within the meaning of section 153C of the Act particularly so as to reopen the concluded issue - HC
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• Business Car Fleet Depreciation Partially Disallowed; Only 25% Affected Due to Potential Personal Use.

  Case-Laws - AT : Depreciation - fleet of cars which was kept ready for use - disallowance on account of personal use of the car could have been made to some extent on estimated basis but not the entire depreciation - 25% disallowed - AT
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• Section 10A Depreciation & Losses: No Offset Against Section 10B Eligible Unit's Current Profit for Deductions.

  Case-Laws - AT : Brought forward unabsorbed depreciation and losses of the unit, the income of which is not eligible for deduction u/s 10A of the Act, cannot be set off against the current profit of the eligible unit for computing deduction us/ 10B - AT
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Customs

• Application to Change Firm Status from Proprietorship to Private Limited Company for CHA License Rejected; Change Should Be Allowed.

  Case-Laws - AT : Rejection of application for change of constitution of the firm proprietorship to private limited company in the CHA licence - change to be allowed - AT
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Service Tax

• Penalty Imposed Under Sec 77 for Non-Payment of Collected Service Tax; Waiver Denied Due to Lack of Justification.

  Case-Laws - AT : Penalty u/s 77 - Waiver of penalty u/s 80 - no reasonable cause shown - what prevented them from making payment of service tax when the same has been recovered from the service recipient in the invoices - no waiver - AT
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• Penalty Waived for Pre-SCN Tax Payment: Section 73(3) of Finance Act, 1994 Applied to Service Tax Case.

  Case-Laws - AT : Levy of penalty - Since service tax and interest was paid before issue of SCN, the instant case, the case is covered under Section 73 (3) of the Finance Act, 1994, the case merits for waiver of penalty. - AT
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• Service Tax Penalties on RBI Bonds and Mutual Funds Commissions Removed u/s 80 Provisions.

  Case-Laws - AT : Penalty - belated payment of service tax - commission received on sale of RBI bonds and mutual funds - invoking the provisions of Section 80, the penalties imposed under Sections 76, 77 and 78 are set aside - AT
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• Pre-deposit waiver debated for service tax on rental income from immovable property services. Is it applicable?

  Case-Laws - AT : Waiver of pre-deposit - nature of amount received - renting of immovable property services - prima facie liable for service tax - AT
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Central Excise

• Appellant Permitted to Suo-Moto Take CENVAT Credit; Case Remanded for Further Verification.

  Case-Laws - AT : CENVAT Credit - credit reversed earlier - While holding that the appellant could suo-moto take credit in the facts and circumstances of the case, matter remanded back for verification - AT
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• Fly Ash Marketability Doesn't Equal Manufactured Goods Status for Central Excise Duty, Key for Tax Implications.

  Case-Laws - AT : Duty demand - Fly ash - Marketability of fly ash - Merely because fly ash is marketed, it cannot be concluded that fly ash is “manufactured goods” - AT
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• CENVAT Credit Dispute: Nexus Questioned Between Dredging Services and Manufacturing Activities for Jetty Construction.

  Case-Laws - AT : CENVAT Credit - input service - service tax on “dredging services“ - construction of jetty on the water front - nexus between the dredging services and the manufacturing activities - prima facie case is against the assessee - AT
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• Industrial Unit Exempt from Pre-Deposit Duty on E.T. Sludge from Effluent Treatment Plant Clearance.

  Case-Laws - AT : Waiver of pre-deposit amount of duty - Clearance of E.T. sludge - “Sludge” obtained in effluent treatment plant belonging to an industrial unit is exempt - AT
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• Interest on Delayed Refund to Be Calculated from Three Months Post-Filing Date, Submitted on May 29, 2007.

  Case-Laws - AT : Claim of interest on belated refund - refund claim was filed on 29-5-2007 before the original authority and therefore, the interest has to be paid calculating 3 months from that date - AT
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• SSI Exemption: Initial Full Duty Payment Doesn't Disqualify Businesses from Future Benefits.

  Case-Laws - AT : Small scale (SSI) exemption - initial clearances at full rate of duty will not result in denial of SSI Exemption benefit for the entire period - AT
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VAT

• Switchboards fall under entry 113 of Schedule II-A in the Gujarat Sales Tax Act, 1969, not entry 41.

  Case-Laws - HC : Taxability of goods - Classification - sale of switch board would be taxable as falling in entry 113 of Schedule II-A of the Gujarat Sales Tax Act, 1969 and not under entry 41 - HC
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• High Court Rules Patasa, Harada, Sakaria, Alchidana as 'Sugar'; Exempt from VAT Due to Over 90% Sucrose Content.

  Case-Laws - HC : Whether items such as patasa, harada, sakaria and alchidana, would fall within the term 'sugar' - Held yes - items containing more than 90% sucrose are considered as sugar - exempt from payment of VAT - HC
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Case Laws:

• Income Tax

• 2014 (7) TMI 14
  Revision u/s 263 - commencement of period of limitation from the date of original assessment or date of reassessment u/s 147 - revenue contended that AO failed to consider new ground during the course of reassessment proceedings which were not included in the notice u/s 148 and therefore the order is erroneous and prejudicial to revenue - Held that:- The Commissioner of Income Tax was aware that the period of limitation provided for in sub-section (2) of section 263 would commence from the date of original assessment which is on 22nd March, 2004 - The order of the Commissioner of Income Tax under section 263 of I.T. Act, is dated 30th March, 2009. It is in these circumstances, that we are of the opinion that the finding of fact recorded by the Tribunal on the point of the limitation, cannot be said to be vitiated by an error of law apparent on the face of the record nor it can be termed as perverse. – no substantial question of law arises for consideration - there is no question of explanation (3) being noticed by the Tribunal – Decided against revenue.

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• 2014 (7) TMI 13
  Deduction u/s 80HHC – Interest income - interest was earned from the EEFC account - assessee contended that the amount of interest is pending the utilization of the Account for the purpose of export - Held that:- The proceeds of the EEFC account are to be utilized for bona fide payments by the account holder subject to the limits and the conditions prescribed. It is in these circumstances, that the interest which had arisen as a result of the deposits maintained in the EEFC account, cannot be regarded as representing the business income of the assessee. The business of the assessee consists of manufacture and export of garments. The interest income which was generated from the deposits held in the EEFC account would not fall for classification as income under the head of business and profession but would fall for classification as income from other sources - Decision in the case of Shah Originals [2010 (4) TMI 216 - BOMBAY HIGH COURT] followed – Decided against assessee.

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• 2014 (7) TMI 12
  Gain from conversion of currency - accrual of income - Use of repatriated funds – entire funds were raised abroad for financing the companies' ongoing and future capital expenditure programmes - funds were repatriated to India as per the requirement of Reserve Bank of India - Held that:- The gain arose merely due to conversion of the currency of one country into the currency of another country - The gain is on capital account and not in the nature of income - If the Notes were issued for meeting capital expenditure, and remained outside India, the taxability has to be determined at the point of time when the profit arose - Their subsequent utilization was not relevant - the failure of the assessee to explain the utilization of the funds repatriated was held to be a factor not against the assessee - merely because an entry was made in the Profit and Loss Account on the credit side does not change the nature of the receipt – thus, the order of the Tribunal is upheld – thus, no substantial question of law arises for consideration - Decided against Revenue.

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• 2014 (7) TMI 11
  Reassessment - Applicability of Explanation 1 to Proviso 1 of Section 147 of the Act - Failure to disclose material facts – Held that:- It is required to be noted that, as such, in the reasons recorded by the AO for reopening the assessment u/s 148 of the Act, it was not the contention of the AO that there was any failure on the part of the assess to disclose the material facts truly and correctly - it is required to be noted that, as such, there are concurrent findings recorded by both the authorities that reassessment proceedings were initiated / assessment was reopened beyond a period of four years - the view taken by the CIT(A) and ITAT is upheld that the reassessment was opened after a period of four years and if that be so, unless and until it was alleged or established that there was any failure on the part of the assessee to disclose the material facts truly and correctly, it was not permissible to AO to reopen the assessment u/s 148 of the Act - even in the reasons recorded by the AO, it is not alleged that there was failure on the part of assessee to disclose the material facts truly and correctly - no error has been committed by the CIT(A) and ITAT in holding that the reassessment proceedings were bad in law – thus, there was no reason to interfere in the order of the Tribunal and no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (7) TMI 10
  Non-disclosure of income - levy of tax @ 60% on salary income – Applicability of provisions of section 158BB(1)(c) of the Act - Whether non-disclosure of the income by not filing the return of income on which the TDS is deducted, whether the same can be treated as “undisclosed income” within the meaning of Section 158B(b) under Chapter XIV-B of the Act and for which the block assessment proceedings is permissible or not – Held that:- The Tribunal has committed a grave error in directing that the income earned by way of salary by the assessee cannot be treated as undisclosed income for levying tax at 60% on the salary income as undisclosed income – Following THE ASSISTANT COMMISSIONER OF INCOME TAX AND OTHERS, CHENNAI Versus M/s AR ENTERPRISES [2013 (1) TMI 345 - SUPREME COURT]. The tax to be deducted at source is computed on the estimated income of an assessee for the relevant financial year, such deduction cannot result into disclosure of the total income for the relevant assessment year and therefore, mere deduction of tax at source, doest not amount to disclosure of income, nor does it indicate the intention to disclose income most definitely when the same is not disclosed in the returns filed for the concerned assessment years - Non-disclosure of the income received by the assessee by way of salary was required to be treated as “undisclosed income” within the meaning thereof in Section 158B(b) under Chapter XIV-B of the Act liable to tax at 60% - Decided in favour of Revenue. Reduction of addition of unexplained investment – Held that:- At the time of search unexplained investment it was found and even after the search the assessee did not file the return of income and declared the same at the time of filing the return after the block assessment proceedings were initiated - the intention of the assessee is to be presumed that he was not to disclose the income and therefore, the same is required to be treated as undisclosed income within the meaning thereof in section 158B(b) under Chapter XIV-B of the Act - no specific reasons and/or evidence on record to reduce the addition on account of unexplained investment – the Tribunal has materially erred in reducing the addition on account of unexplained investment – Decided in favour of Revenue.

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• 2014 (7) TMI 9
  Disallowance u/s 43B - CIT(A) cancelled the order u/s 154 – Held that:- while confirming the order of CIT(A), tribunal has heavily relied upon its earlier order passed with respect to the AY 1989-90 - against the order, granting similar benefits, the Revenue has not carried the matter further and the order passed by the Tribunal for the AY 1989-90 has attained finality – Decided against Revenue.

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• 2014 (7) TMI 8
  Interpretation of section 153C - power of AO to assess the income of any other person – Transferable development rights - post search and seizure assessment - Held that:- a casual resort to section 153C of the Act is impermissible. There must be some basis for proceeding under section 153C of the Act - The Tribunal referred to the seized documents - the seized documents referred to a transaction in relation to transferable development rights - the TDR was taken over by the retiring partner - Tribunal was rightly of the view that the seized documents may relate to the TDR that may have been handed over or taken over by retiring partner - merely because the document evidencing the transaction was in possession of the Department, it could not have issued notice to any other person within the meaning of section 153C of the Act particularly so as to reopen the concluded issue - there must be some basis for proceeding u/s 153C of the Act - every single observation and finding of the order of the Tribunal must be read in the backdrop of the facts peculiar to the case of the assessee and not laying down any general rule or law so also the controversy based on construction or interpretation of the provisions not being gone into – thus, no substantial question of law arises for consideration - Decided against Revenue.

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• 2014 (7) TMI 7
  Contract charges paid – Charges paid to father for rendering services – Held that:- CIT(A) was rightly of the view that there was failure on the part of the assessee to prove that there was any business consideration for making payment of contract charges to his father - services agreed to be rendered by his father to the assessee are very general in nature and there is no evidence whatsoever brought on record to show that any of the said services were actually rendered by the father of the assessee for the purpose of assessee’s business - the onus is on the assessee and the assessee has failed to discharge the same by producing any documentary evidence to support his claim for the expenditure of Rs. 20 lacs on contract charges – thus, there was no infirmity in the order of the CIT(A) confirming the disallowance made by the AO – Decided against Assessee. Rate of depreciation on BMW car – Held that:- The vital fact has been overlooked that the car rental income of Rs. 3,16,700/- received during the year was duly offered by the assessee to tax in his return of income - there was no justifiable reason to doubt the claim that the BMW car was put to commercial use - the assessee was entitled to full depreciation at the specified rate of BMW motor car and the disallowance made by the AO on account of depreciation to the extent of 50% was not sustainable – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee. Depreciation on Skoda motor car – Held that:- The basis given by the AO to disallow the entire depreciation claimed by the assessee on Skoda car was untenable inasmuch as if at all no record was maintained by the assesse to show that the Skoda car was used for the purpose of his business or profession, the disallowance on account of personal use of the car could have been made to some extent on estimated basis but not the entire depreciation merely because the assessee was maintaining a fleet of cars which was kept ready for use for the purpose of his business or profession - a disallowance of 25% of the total depreciation claimed by the assessee on Skoda car on personal use is to be allowed – the order of the CIT(A) is modified – Decided partly in favour of Assessee. Expenses on motor car and fuel expenses – Held that:- CIT(A) rightly upheld 75% for personal use, and the AO is directed to restrict the disallowance at 75% to 25% - Decided partly in favour of Assessee.

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• 2014 (7) TMI 6
  Business expenses – Computation of business profits – Declaration of additional income – Held that:- Following M/s. Shreeshay Engineers Pvt. Ltd. Versus ACIT 10(2), Mumbai [2014 (1) TMI 876 - ITAT MUMBAI] - the expenses comprised of expenses incurred during the post survey period under various routine heads including the major amount of interest on unsecured loans for which provision was made by the assessee on estimated basis while computing profit for the purpose of advance tax - all the facts and figures appearing in the relevant financial statements clearly show that the amount expenses were claimed by the assessee as regular business expenses incurred during the post survey period against regular business income which resulted in reduction of its regular business income for advance tax purpose to that extent - the AO and the CIT(A) misconceived the claim of the assessee for the expenses as that of against the additional income declared during the course of survey and made disallowance of the said expenses on the basis of this misconception without considering or examining the claim on merit being the claim for regular business expenses of post survey period against regular business income – thus, the matter is to be liable to be remitted back to the AO with a direction to consider and allow the claim of the assessee for the expenses as regular business expenses on merit – Decided in favour of Assessee.

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• 2014 (7) TMI 5
  Penalty u/s 271(1)(c) of the Act – Addition of interest – Held that:- Although the disallowance made by the AO on account of interest expenditure is accepted by the assessee apparently for the reason that there was a huge loss resulting into no tax liability even after the disallowance, all the facts relevant to the issue as borne out from the record are not very clear – the claim of the assessee was brushed aside by the AO simply on the ground that every assessment year is separate without looking into as to how and on what ground the claim of the assessee for interest paid on the same loan amount was allowed in the earlier years even on scrutiny in the assessments completed u/s 143(3) of the Act - This aspect was relevant to find out the bonafide of the assessee to claim deduction for interest expenditure claimed in the year especially in the context of imposition of penalty u/s 271(1)(c) of the Act - new contention raised also requires verification for deciding the issue relating to imposition of penalty u/s 271(1)(c) of the Act – thus, it would be fair and proper to remit back the matter to the AO for fresh verification of all the relevant facts and giving a clear finding – Decided in favour of Assessee.

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• 2014 (7) TMI 4
  Set off of brought forward loss and unabsorbed depreciation – Income from Profits and gains of business or profession – Deduction u/s 10B of the Act – Held that:- Brought forward business loss cannot be set off against the profit of the eligible unit for computing deduction u/s 10B of the Act and such profit is to be determined after set off of brought forward unabsorbed depreciation - CIT(A) decided in favour of the assessee holding that the brought forward business loss cannot be set off against profit of the eligible unit for the purpose of computing deduction u/s 10B of the Act - the issue only relating to set off of unabsorbed depreciation against the profit of the eligible unit for the purpose of computing deduction u/s 10B of the Act. Relying upon The Commissioner of Income Tax-10 Versus Black & Veatch Consulting Pvt. Ltd. [2012 (4) TMI 450 - BOMBAY HIGH COURT] - brought forward unabsorbed depreciation and losses of the unit, the income of which is not eligible for deduction u/s 10A of the Act, cannot be set off against the current profit of the eligible unit for computing deduction us/ 10B of the Act - the issue relating to set off of brought forward unabsorbed depreciation against the profit of the eligible unit for computing deduction u/s 10B of the Act - the AO is directed to allow the claim of the assessee for deduction u/s 10B of the Act on the profit of the eligible unit without setting off the brought forward unabsorbed depreciation - Decided in favour of Assessee.

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• 2014 (7) TMI 3
  Profits and taxable income received from firm – Disallowance u/s 14A of the Act – Held that:- The AO made disallowance taking into account the entire expenses debited to Profit & Loss A/c - the Assessee has received income from profession and also received remuneration from partnership firm M/s. Amarchand Mangaldas & Suresh A. Shroff & Co. - the Assessee has not incurred any expenses towards becoming partner in the firm and as such no expenses were incurred against the remuneration received/ share of profit received from the firm - Whatever expenditure is incurred is for carrying out his professional consultancy in his personal name for which Assessee was receiving a fee of Rs.1.55 crores - against the income assessee claimed expenses only of Rs.51.80 lacs which is 33.5% of professional income - assessee made capital investment of Rs.16.00 lacs by way of fixed capital in the partnership firm and has not paid any interest on borrowings for the purpose of making investment in the partnership firm - investment was made out of own funds/non-interest bearing funds which is evident from Profit & Loss A/c - interest expenditure debited to Profit & Loss A/c was in respect of car loan - thus no disallowance is warranted u/s 14A - no expenditure was claimed in Profit & Loss A/c which can be directly or indirectly attributed to earning of share of profit from the firm – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (7) TMI 2
  Interest expenditure – Calculation of book profit u/s 115JB of the Act - minimum alternate tax (MAT) – Held that:- Following Hitesh S. Mehta Versus DCIT Central Circle- 23, Mumbai [2013 (10) TMI 1065 - ITAT MUMBAI] - books of accounts produced by the assessee during the assessment proceedings has been held to be unreliable - Whether the interest liabilities constitutes ascertained one or not is also linked to the issue of rejection of books of accounts as the books of account is the basis for computation of book profits u/s 115JA of the Act – thus, the order of the CIT(A) is set aside and the matter is remitted back for fresh adjudication – Decided in favour of Assessee.

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• 2014 (7) TMI 1
  Applicability of rate of tax on foreign company – Held that:- Following M/s. Credit Lyonnais (through their successors : Calyon Bank) and Others Versus The Asstt. Director of Income-tax (International Taxation) - 1(2) And Others [2013 (5) TMI 639 - ITAT MUMBAI] as it has already been decided against the assessee thus, the ground of the appeal is dismissed – Decided against Assessee. Disallowance of loss on valuation of securities – Held that:- CIT(A) has decided the issue against the assessee and resultantly there was no occasion for the Revenue to challenge the same - it is simple and plain that when deduction has been allowed on account of loss arising on revaluation of investments in earlier years, the subsequent write back of the same amount cannot escape taxation - the amount is chargeable to tax - the loss on valuation of securities was held to be allowable in the earlier years, therefore, the subsequent write back of the amount cannot be allowed and is chargeable to tax – the AO is directed to ensure that the same amount is not tax twice. Transfer pricing adjustment - Fee or commission for the services performed towards foreign currency loans granted by the overseas branches – Held that:- The role of the assessee in the transactions of foreign currency loan under ECB was to provide financial analysis of the borrowers, general market conditions and regulatory environment - the role of the assessee is not merely facilitation of conclusion of loan agreement or signing thereof but the services provided by the assessee are the core-basis for taking the decision of granting the loan by the syndicate - The assessee provided the services regarding clients creditability analysis, its capacity so as to consider the capacity to repay the loan and risk involved in the loan transaction - the role of the assessee in providing such a crucial service is inevitable for taking the decision of providing loan and as such cannot be said to be a mere facilitation of conclusion of the loan agreement or signing. The TPO as well as CIT(A) has not brought out any comparable for determination of the arms length price but took the total income comprising interest as well as other fees charged by the foreign branches for allocation/attribution to the assessee - the ALP has not been determined by taking into consideration uncontrolled similar transaction - the interest cannot be taken into account for attribution of income towards service charges/fees - only the fee charged by the foreign branches can be taken into consideration for making adjustment under transfer pricing provisions - the AO/TPO is directed to make adjustment in respect of the services performed by the assessee for foreign currency loan arranged for its existing clients by taking into account only the fee and other charges received by the foreign branches from the borrowers - none of the parties have come out with the suitable comparables, the estimation made by the CIT(A) at the rate of 20% is just and proper – Decided partly in favour of Assessee. Expenditure attributable to tax exempt income – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been rightly held by the CIT(A) that the assessee had sufficient interest free funds available with its disposal for making investment in such tax free securities/shares from which dividend income was earned - the assessee has made investment in such securities/shares from which exempt income was earned, out of its own interest free funds, there can be no disallowance u/s 14A - the AO did not make any disallowance on account of other expenses in relation to exempt income, there cannot be any question of sustaining any such disallowance when the AO himself has not made it – Decided against Revenue.

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• Customs

• 2014 (7) TMI 20
  Rejection of application for change of constitution of the firm proprietorship to private limited company in the CHA licence - application for change was made on 23.02.2011 - proprietor Shri K.J. Bhayani expired on 27.11.2011 - Held that:- CHA license No.CHA/JMR/R/ 20/2003 was issued in the name of Shri.K.J. Bhayani and the said license was renewed from time to time and was valid till 28.09.2016. It is seen from the records that the license holder Shri K.J. Bhayani had on 23.02.2011 applied for change in constitution specifically on the ground that he was not maintaining good health due to old age. We also find that 26.02.2011, in furtherance of letter dt.23.02.2011 of Shri K.J. Bhayani, the appellant M/s Ramaans Total Logistics Pvt.Ltd. sought permission from the CC (Prev.) Jamnagar for change in constitution and as also sought permission to continue the licenses till the permission is granted for change in the constitution. On 30.09.2011, the appellant again, on some oral queries, enclosed remaining documents and filed the same in the office of CC (Prev.) Jamnagar. In response to such letter, the authorities vide letter dt.05.10.2011 directed the appellant to file further documents authenticated by appellant, which was done on 12.10.2011. Subsequently, by further correspondences, the appellant on 11.11.2011 complied with all the requirements. We also find that despite so many correspondences with the authorities, the authorities did not change the constitution in the CHA license and vide letter dt.16.01.2012, the office of CC (Prev.) Jamnagar informed Shri K.J. Bhayani to continue the operations in the name of Shri K.J. Bhayani operated by M/s Ramaans Total Logistics Pvt.Ltd till 16.04.2012 and directed the appellant to obtain fresh CHA licenses in the name of the new company. Keeping aside all the semanties which have been taken up by both sides on factual matrix, the office of the CC (Prev.) Jamnagar, had, in fact, was considering positively change in the constitution of CHA license No.CHA/JMR/R/20/2003. Due to delay in the decision making and sad demise of proprietor on 27.11.2011, the Revenue authorities cannot hold that change in constitution would not be possible to be done so, as the issue will now fall under the provisions of Regulation 16(2) of CHALR. In our considered view, this approach of the authorities due to delay in ordering change would be defeating the very purpose of the CHALR where provisions for the change in the constitution of the CHA license were mandated - change in the constitution of the license should not have been denied to the appellant by the authorities - Decided in favour of appellants.

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• 2014 (7) TMI 19
  Confiscation of goods - Redemption fine and penalty - Mis declaration of goods - Whether there was misdeclaration of goods admitted to be exported - Declaration of Non basmati rice as basmati rice - Held that:- Attempt to export non-basmati rice came to record, when the preliminary examination was conducted, that was corroborated by the testing laboratory report dated 12.02.2009. 6 days there after when the appellant would apprehend that the proceeding shall be initiated under section 111 and 114 of Customs Act 1962, it sent a letter to the Commissioner pleading ignorance and finding fault with the workers. Such plea does not have basis, since the appellant did not come out with clean hands to inform the authority before 12.02.2009. That proved misdecaration of the description of goods. Once such misdeclaration is established section 113 shall apply for confiscation of the goods. The authority accordingly, granted redemption option to the appellant. But the said authority has not recorded the value of the non-basmati rice attempted to be exported for determination of redemption fine and penalty. Therefore, we ascertain from the appellant as to the value of the said goods. It is explained that the value shall be Rs.1,50,16,320/-. Considering 10% profit margin, the redemption fine is reduced to Rs.15.00 Lakhs. So far as the penalty of Rs.20.00 Lakhs under section 114 (i) is concerned, invoking of the said section is proper. That rules out applicability of section 114 AA of Customs Act 1962. It may be stated that the appellant took a risk in attempting to export non-basmati rice and there shall be no sympathy for any reduction in penalty. However, considering that the appellant has admitted the misdeclaration, to reduce the litigation, the penalty is reduced to Rs.15.00 Lakhs - Decided partly in favour of assessee.

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• Corporate Laws

• 2014 (7) TMI 18
  Members' voluntary winding up of the Company - Held that:- On the queries put by the Court during the course of consideration of this matter, the Official Liquidator has placed on record a complete copy of Form No.32 as also the postal receipt dated 23.12.2011 whereby the complainant Shri Mahesh Khatri was requested to furnish the comments, if any. The Official Liquidator has also filed the affidavit verifying the fact that postal article sent to the complainant has not been returned undelivered. It is borne out that the Official Liquidator has not received any response from the complainant. As noticed, concerning the other complaint made on behalf of son of Shri Vasudev Khatri, it has been pointed out that the complainant's mother was nominee of late Shri Vasudev Khatri and she had already transferred her shares on the basis of the Will dated 07.03.1999. For the facts and details narrated in the report of the Official Liquidator and taking into consideration the circumstances, this Court is unable to find any basis to proceed with the complaints earlier made in relation to the petitioner-company. On an overall comprehension of the record, this Court is satisfied that the affairs of the company cannot be said to have been conducted in a manner prejudicial to the interest of its members or to the interest of public - Company M/s. Ganga Printex Pvt. Ltd. shall stand dissolved - Decided in favour of appellants.

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• 2014 (7) TMI 17
  Appointment of directors - Oppression and mismanagement - on account of the dispute having been pending before the Hon'ble Company Law Board, the Auditor of the company refused to continue with the audit work till the matter is resolved between the parties and therefore, the facility could not be renewed by the Bank. - Held that:- Auditor is statutorily required to audit the books of account for the financial years ending 31st March, 2012 and 31st March, 2013, as a part of his duties - Auditors to comply with the provisions of section 215 of the Companies Act, 1956, for the approval of the Balance sheets by be Board of Directors before giving the same to the Auditors. Respondent Nos 3 & 4 continued to be Directors despite the issue of their appointment under dispute pending for judicial scrutiny by this Hon'ble Board. On the same analogy, Petitioner Nos 1 & 2 continued to be Directors of the Company. Under these circumstances, the Balance sheets for the financial years ending 31st March, 2012 and 31st March, 2013, may be audited by the Auditors of the Company with due compliance of Section 215 of the Companies Act, 1956, by the Board of Directors consisting of Directors as per statutory records available with the Registrar of Companies and this will not prejudice the right of the Petitioners to challenge the appointment of Respondent Nos 3 & 4 - Decided in favour of appellants.

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• Service Tax

• 2014 (7) TMI 36
  Penalty u/s 77 - Waiver of penalty u/s 80 - Business Auxiliary Service - Whether penalties imposed upon the appellant could be waived as per provisions of Section 80 of the Finance Act 1994 - Held that:- Audit officers of the Dept. gave intimation dated 6/5/2009 to the appellant and called for certain information. Even after follow up by the Dept Officers, appellant did not provide the relevant details for almost one month. The case was subsequently taken over by the HQ (Preventive) and several summons were also issued to the appellant for submitting complete details of the Business Auxiliary Service provided to M/s Ratnamani Metals and Tubes Ltd during the year 2008-09. Only on receipt of such letter, the appellant started discharging their service tax liabilities under Business Auxiliary Service in the month of July 2010 through GAR-7 challans. It is also evident from the facts stated in Para 12 of the OIO dated 27/3/2012 that service tax for the Business Auxiliary Service provided to M/s Ratnamani Metals and Tubes Ltd were recovered in the invoices and appellant was aware of that fact. However, while filing ST-3 returns for the relevant period, service tax payment for these services was shown as Nil by the appellant. From the available case records and the arguments made by the appellant, no reasonable cause has been shown by the appellant to bring out as to what prevented them from making payment of service tax when the same has been recovered from the service recipient in the invoices. Therefore, in the present set of facts and circumstances, it is held that the benefit of Section 80 of the Finance Act 1994 cannot be extended to the appellant - Decided against assessee.

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• 2014 (7) TMI 35
  Demand of service tax - Maintenance and repair services - Service provided before being a taxable service - After service became taxable, work done as sub contractor - Held that:- this point was not raised before the adjudicating authority. Secondly, it is not coming out clearly from the case records whether these services rendered before 16.06.2005 were in respect of immovable property or not. The veracity of the appellant’s claim has to be gone through by the original adjudicating authority. Further, it is observed that the entire service tax demand is not for the period prior to 16.06.2005 and certain period of demand is after 16.6.2005 when immovable property was also covered under ‘Maintenance and Repair Services’. Charging of service tax from the sub-contractor - All the services provided by the appellant as sub-contractor may not be provided before 23.08.2007 as per the period of demand mentioned in the appeal memorandum. These factual verifications of entire service tax paid by the main contractor and whether the services were provide before or after 23.08.2007, have to be made and gone into details by the Adjudicating authority in the light of various case laws relied upon by the appellant, for which the matter is required to be remanded back to the adjudicating authority. - Decided conditionally in favour of assessee.

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• 2014 (7) TMI 34
  Levy of penalty - delayed payment of service tax - Clearing and Forwarding Services, Port Services, Goods Transport Agency Service - Held that:- there is a case of delayed payment of service tax. However, the same has been paid before issue of SCN. The assessee has explained the reason for delay, due to the fact that earlier OIO No.92/2007 dt . 25.5.2007 was appealed before the Tribunal and a batch of similar cases was pending before the Larger Bench for its decision. There is no material available that the appellant deliberately delayed payment of duty. Since service tax and interest was paid before issue of SCN, the instant case, the case is covered under Section 73 (3) of the Finance Act, 1994, the case merits for waiver of penalty. However, as regards the demand of interest, the adjudicating authority has rightly held that they have paid interest only on the service tax paid in cash but not on the tax amount adjusted through cenvat account. Therefore, interest liability calculated on the entire amount of service tax is payable - Differential amount of interest confirmed however, penalty is set aside - Decided partly in favour of assessee.

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• 2014 (7) TMI 33
  Penalty u/s 76, 77 & 78 - waiver of penalties u/s 80 - commission received on sale of RBI bonds and mutual funds - appellant paid the amount of service tax before issuance of show cause notice - Held that:- Board issued Circular No. 66/15/2003 dated 5.11.2003 wherein it has been clarified that the benefit of Notification 13/2003-ST is applicable only for commission agent dealing in goods and not to the commission received by the distributor of mutual funds. This circular was subsequently quashed by the Hon'ble Andhra Pradesh High Court in the case of Karvy Securities Ltd. [2004 (9) TMI 604 - ANDHRA PRADESH HIGH COURT]- Tribunal in the case of CST vs. P.N. Vijay Financial Services Pvt. Ltd. reported in [2008 (9) TMI 72 - CESTAT, NEW DELHI] held that mutual fund units being goods as per the definition of Section 65(5) of the Finance Act read with Section 2(7) of the Sale of Goods Act, stand at par with the stock and share and the same are to be treated as goods. In view of the above decision, we find merit in the contention of the appellants regarding imposition of penalties. By invoking the provisions of Section 80 of the Finance Act, the penalties imposed under Sections 76, 77 and 78 are set aside, otherwise the impugned order is upheld - Decided partly in favour of assessee.

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• 2014 (7) TMI 32
  Import of services - reverse charge - Business Auxiliary service – Appellant, exporter of Cotton fabrics, engaged agents to various European countries for canvassing orders and paid commission – Revenue contends that it was taxable under the provisions of rule 2(1) (d) (iv) of Service Tax Rules, 1994 - Commissioner (Appeals) set aside the portion of demand prior to 18.04.2006 - Held that:- dispute is now well settled that prior to introduction of section 66A in Finance Act, 1994, no demand for service tax from recipient of service under reverse charge mechanism as per rule 2 (1) (d) (iv) could be sustained. The position has been affirmed by Apex Court as reported at of UOI Vs Indian National Shipowners Association - [2009 (12) TMI 850 - SUPREME COURT OF INDIA] - already paid more than the actual tax liability which they need to have paid towards tax for the period from 18-04-06 to Sept 06. Appellant is not asking for refund of tax paid - Penalty set aside - Decided in favour of assessee.

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• 2014 (7) TMI 31
  Waiver of pre-deposit - nature of amount received - renting of immovable property services - Revenue contends that appellant had stated that agreement entered by appellant is not for renting of immovable properties but is for a business consideration / conducting and would not fall under the category of renting of immovable properties - Held that:- facts in this case are the agreements though contended by the appellant were for arrangement of business conducting and amenities agreement, prima facie, in our view the said agreement may fall under the category of renting of immovable property services. Coming to the submissions made by the Ld. Counsel as to bonafide belief, this needs to be gone into detail which in our view can be done by us at the time of final disposal of appeals. Be that as may be, by the retrospective amendment brought in by Finance Act, 2010, it can be presumed that the appellant was aware of the service tax liability atleast from that date. Keeping in mind appellant has deposited an amount of Rs.14.83 lakhs during the pendency of the proceedings before the lower authorities and prima facie holding that the appellant has not made out a case for complete waiver of the balance amounts involved, and as the issue is an arguable one, we are of the view that appellant should be put to further condition of depositing an amount - Conditional stay granted.

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• Central Excise

• 2014 (7) TMI 30
  CENVAT Credit - Suo moto credit - whether appellant can take suo-moto credit of an amount which was reversed earlier and as to after how much time such credit can be taken - Held that:- appellant has clearly recorded in ‘Statement of Service Tax Credit’ for the month of September, 2006 that a credit of service tax of Rs. 37,47,071/- and Education Cess Rs. 42,608, taken in September, 2005, is reversed and revised credit of service tax Rs.35,51,684/- and Education Cess Rs. 69,858 for the period from 10.09.2004 to 31.03.2005 and 01.04.2005 to 31.12.2005 is taken. It is observed that there is nothing on record before this bench to show whether the revised credit of Rs. 36,21,542/- taken in September, 2006 was supported by same set of duty paying documents on the basis of which credit was initially taken by the appellant in September, 2005 together with some more documents for the period from October, 2005 to December, 2005. While holding that the appellant could suo-moto take credit in the facts and circumstances of the case for correcting the quantum of admissible service tax credit in view of the decision of the High Court of Madras in the matter of ICMC Corporation Limited Vs. CESTAT, Chennai (2014 (1) TMI 1473 - MADRAS HIGH COURT), and other case laws relied upon by the appellant, the matter is remanded to the adjudicating authority for verification whether the CENVAT credit of Rs. 36,21,542/- taken by the appellant in September, 2006 corresponds to a set of CENVATABLE documents against which CENVAT Credit of Rs. 37,89,679/- was initially taken in September, 2005 together with CENVATABLE documents for the period from October, 2005 to December, 2005 as recorded in appellant’s ‘Statement of Service Tax Credit’ for the month of September, 2006. If the entire credit of Rs. 36,21,542/- is ultimately found to be based on the strength of CENVATABLE documents, the appellant would be entitled to take credit of the same under the CENVAT Credit Rules, 2004. as no time limit for taking credit has been provided in these Rules - Matter remanded back - Decided in favour of assessee.

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• 2014 (7) TMI 29
  Duty demand - Fly ash - Marketability of fly ash - Held that:- Merely because fly ash is marketed, it cannot be concluded that fly ash is “manufactured goods”. Inasmuch as the item was held to be non-excisable by the lower appellate authority relying on the decision of the Hon'ble Apex Court in the case of UOI Vs. Ahmedabad Electricity Co. - [2003 (10) TMI 47 - SUPREME COURT OF INDIA], the Revenue has not made out a case for grant of stay of the order - Decided against Revenue.

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• 2014 (7) TMI 28
  CENVAT Credit - input service - service tax on "dredging services" - construction of jetty on the water front - nexus between the dredging services and the manufacturing activities - Held that:- Dredging is undertaken in the navigation channel which leads to the jetty of the appellant. The channel is not the private property of the appellant but belongs to the Maharashtra Maritime Board and the channel is also used not only by the appellant but also by several others and therefore, it cannot be said that the benefit of dredging of the channel accrues only to the appellant and not to others and such dredging is entirely in relation to the manufacturing activity undertaken by the appellant. Various case laws stated by the appellant does not help the appellant's case for the reason that the facts involved therein were different and distinguishable. In an identical matter relating to dredging services in respect of Sanghi Industries Ltd., Vs. CCE, Rajkot - [2008 (8) TMI 277 - CESTAT AHMEDABAD], a co-ordinate bench at Ahmedabad took the view that the issue is contentious and accordingly, pre-deposit of about Rs.10 lakhs against the demand of Rs.55 lakhs was ordered. Therefore, it cannot be said that the issue is settled in favour of the appellant and against the Revenue. However, there is a merit in the contention of the appellant that they had disclosed the fact of availing Cenvat Credit on dredging services as early as in October 2006 and therefore, invoking of extended period of time is not justified - stay granted partly.

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• 2014 (7) TMI 27
  Waiver of predeposit of duty - CENVAT Credit on inputs/raw materials, namely, angles, channels, beams etc., which the Applicant claim to have been used in the fabrication/manufacture of machineries which fall under the headings specified at Rule 2(a) of the CENVAT Credit Rules, 2004, even though the specific headings/sub-headings had not been mentioned in the Chartered Engineers Certificate produced by them - Held that:- Applicant have produced a Chartered Engineers Certificate, which was available to the Department much before issuance of the Show Cause Notice, as had been recorded in the Notice itself. However, no proper verification had been carried out by the Department. Simultaneously, it also cannot be denied that while furnishing the Certificate, the Appellant had not specifically mentioned the particular heading of the machineries, wherein these items were used by them, whereby its eligibility as capital goods could have been verified by the Department, in deciding the case - Matter remanded back - Decided in favour of assessee.

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• 2014 (7) TMI 26
  CENVAT Credit - Sugar Cess Credit - Held that:- So far as recovery of interest is concerned it is observed from both the show cause notices dated 29-8-2012 & 19-9-2012 that it has been specifically mentioned that interest is not required to be paid by the appellant. By confirming the interest in O-I-O adjudicating authority has, therefore, gone beyond the scope of show cause notices. Therefore, order of the appellate authority upholding the payment of interest is required to be set aside because adjudicating authority cannot go beyond the scope of show cause notice. So far as imposition of penalty is concerned it is seen that appellant has debited the entire Cenvat credit taken in a month on the last day of the same month. Once the entire Cenvat credit taken is also reversed in the same month then it has to be held that it is not a fit case for imposition of penalty and the same is also required to be set aside - Decided in favour of assessee.

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• 2014 (7) TMI 25
  Waiver of pre-deposit amount of duty - Clearance of E.T. sludge - Held that:- Appellant is clearing E.T. sludge from the factory premises on commercial invoices. It is the claim of the assessee that the E.T. sludge is arising as a waste after the manufacturing process of paper. We find strong force in the argument that it may be covered under the benefit of Notification No. 76/86-C.E., dated 10-2-1986 as amended from time to time. On perusal of the said notification, we find that the said notification exempts “Sludge” obtained in effluent treatment plant belonging to an industrial unit. Prima facie, we find that the appellant had made out a case for waiver of amounts involved as the item sought to be cleared by them is mentioned as “E.T. sludge” - Stay granted.

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• 2014 (7) TMI 24
  Claim of interest on belated refund - Held that:- Department has taken a view that appellant is eligible for refund from three months from the date of receipt of the order of the Tribunal which attained finality as regards exemption as well as eligibility for refund. In such cases, it is settled law that the interest is payable from the date of filing the refund claim and not from the date of receipt of the final order of the Tribunal. In this case, the subject matter of the dispute itself was interest on the refund claim by the appellant after three months from the date of filing the refund claim. In such a situation, the stand taken by the Commissioner (Appeals) that three months has to be accounted from the date of receipt of the final order of the Tribunal taking a view that interest is admissible is not correct. I find that in the case of Ranbaxy Laboratories Ltd. v. UOI & Ors. [2011 (10) TMI 16 - Supreme Court of India], it has been held that liability of Revenue to pay interest under Section 11BB from the date of receipt of application for refund under Section 11B(1) of the Act. In this case, the refund claim was filed on 29-5-2007 before the original authority and therefore, the interest has to be paid calculating 3 months from that date - Decided in favour of assessee.

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• 2014 (7) TMI 23
  Duty demand - Whether the payment of duty made by the assessee at a price not declared by a price which is not covered by declaration filed under Rule 173C for the period from April, 1996 to February, 1997 is not correct and duty is required to be paid at the rate which was declared in the pricelist declaration filed for the previous year - Held that:- in the absence of any evidence to show that the price/assessable value adopted by the appellant did not fulfil the requirements/conditions under Section 4(1)(a) of the Central Excise Act, 1944, mere non-fulfilment of procedural requirement cannot justify the demand for differential duty. We find that the decisions cited by the learned counsel are applicable to the facts of this case - there is a penalty of Rs. 10,000/- imposed for non-fulfilment of obligations under Rule 173C of the Central Excise Act, 1944. This was a statutory requirement which has not been fulfilled by the appellant and we consider that this penalty has to be sustained - Decided in favour of assessee.

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• 2014 (7) TMI 22
  Waiver of pre-deposit - personal penalties imposed under Rule 15 of Cenvat Credit Rules, 2004 - Held that:- Adjudicating authority has imposed penalties on both the applicants/appellants under Rule 15 of Cenvat Credit Rules, 2004. On reading of Rule 15 of Cenvat Credit Rules, 2004, we are of the prima facie view that this rule cannot be invoked for imposing personal penalty on an individual for infraction done by an assessee. On this ground itself, the applicants have made out a strong case for waiver of pre-deposit of the amounts involved. The applications for waiver of pre-deposit of amounts involved are allowed and recovery thereof stayed till the disposal of appeals - Stay granted.

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• 2014 (7) TMI 21
  Small scale (SSI) exemption - while raising the first invoice, the person liable for raising the same showed payment of duty of 16%, instead of nil rate of duty - on realizing their mistake, they raised another invoice in respect of the goods cleared, by showing the availment of exemption notification and consequent nil rate of duty - Notification No. 8/99, dated 1-3-1999 - Held that:- The duty paid in the first invoice and availed Cenvat credit by their buyers was reversed by their buyers. The Tribunal in the case of Mistry Brothers reported in [2006 (3) TMI 464 - CESTAT, MUMBAI] has held that the exemption is available automatically to an assessee, who has the option to opt out of the same. Inasmuch as the appellant have not, in clear terms and with a conscious mind, opted out of the small scale notification, the benefit of the same cannot be denied to them. We also note that the appellant reliance on the Tribunal’s decision in the case of Crescent Polymers Pvt. Ltd. reported in 2[2008 (2) TMI 187 - CESTAT, BANGALORE] is appropriate. It was held in the said decision that initial clearances at full rate of duty will not result in denial of SSI Exemption benefit for the entire period - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (7) TMI 37
  Penalty under Section 51 of the Punjab Value Added Tax Act, 2005 - Evasion of tax duty - Duplicate invoices - Detention of goods - Held that:- Assessing Officer, the Commissioner (Appeals) and the Tribunal had come to the conclusion that there was an attempt to evade tax and that there were two invoices of same number and date, i.e. Sr. No. 15105 dated 24.7.2012. Out of the aforesaid two invoices of the same serial numbers, one was issued by Surendra Steel Sales, Zirakpur (Punjab) and the other one was issued by Surendra Steel Sales, Chandigarh and this parallel invoices had been prepared on the printed form. It was not disputed by the owner of the goods that bill No. 15105 dated 24.7.2012 was issued by Surendra Steel Sales, Zirakpur after the detention of the goods. The explanation furnished by the appellant-dealer was held to be not plausible. The finding of fact could not be shown to be perverse and the view taken by the authorities below was a possible view which cannot be faulted. In such circumstances, it cannot be said that any substantial question of law arises in this appeal - Decided against assessee.

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• 2014 (7) TMI 15
  Classification - whether items such as patasa, harada, sakaria and alchidana, would fall within the term 'sugar' for the purpose of entry 47 of schedule-A of the Bombay Sales Tax Act, 1959 - Held that:- The Additional Duties of Excise(Goods of Special Importance) Act, 1957 (here-in-after referred to as "the Act of 1957") was enacted in the year 1957. From the preamble to the Act, it can be seen that the same was enacted to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds among the States in pursuance of the principles of distribution formulated and the recommendations made by the Finance Commission in its report. Section 4 of the Act of 1957 provides that during each financial year, there shall be paid out of consolidated fund of India to the States in accordance with the provisions of the Second Schedule such sums, representing a part of the net proceeds of the additional duties levied and collected during that financial year as are specified in that schedule. After 10.04.1981, exemption was available to sugar falling under entry 42 only when levy and collection of additional duties of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 was not exempted on account of any exemption or drawback granted under that Act. Rate of duty had to be provided for sugar not falling in entry 42. Schedule-IIA pertains to goods, the sale or purchase of which is subject to sales tax or purchase tax and rates of tax. - Parallely, under exemption notification issued under section 49(2) of the GST Act, by virtue of entry 133, sugar covered under entry 3E in schedule-II part A of the GST Act was exempted from payment of whole of the tax. It may be noted that entry 3E of schedule-II part A referred to Sugar as defined in item no. 1 of the first schedule of Central Excises and Salt Act, 1944. Thus the definition of sugar for the purpose of entry 42 to Schedule I and entry 3E to schedule-II part A remained the same. By virtue of these entries, sugar falling under entry 42 would be exempt from payment of tax, if the condition contained in second column of entry was satisfied. If such condition was not satisfied, it would fall under entry 3E and would ordinarily be taxed at the rates specified therein. However, by way of exemption notification issued by the Government, such tax was also waived. We are informed that this was done in view of the representations made by the trade as is apparent from the circular dated 17.9.81 issued by the Government. The circular refers to legislative changes made in entry 42, corresponding insertion of entry 3E in schedule-IIA and issuance of exemption notification on account of difficulties faced by the trade which was brought to the notice of the Government through representations. In a circular dated 3.4.1989 while explaining the changes made after 1.4.1989 in the GST Act, it was explained that in schedule-I in entry 37, 40, 42, 43 and 44, if additional duty of excise is paid, sales tax is not to be levied. The definition of these terms were adopted from Central Excises and Salt Act, 1944. Now with the introduction of Central Excise Tariff Act,1985 in place of Central Excises and Salt Act, 1944, definition of these terms is referred to from the said Act. Interestingly, in the Gujarat Value Added Tax Act also, similar entries and exemptions are provided. In that background, in circular dated 1.8.2012 issued by the State Government, it is provided that by virtue of decision of Supreme Court in case of Sakarwala Brothers (1966 (9) TMI 102 - SUPREME COURT OF INDIA), items such as patasa, harada, sakaria and alchidana containing more than 90% sucrose are considered as sugar and therefore, would be exempt from payment of VAT. When the State Authorities themselves have clarified the situation, as mentioned above, we see no scope for any further debate. Quite independently also, we have given our own interpretation to various entries holding the field. We fully endorse the view of the tribunal. We further hold that even if case of the respondent does not fall under entry 86 of schedule-I, by virtue of condition contained therein not being satisfied, same would fall under entry 8 of schedule-IIA and not in entry 167 - Decided against Revenue.

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