TMI Tax Updates - e-Newsletter
July 22, 2013

Case Laws in this Newsletter:

Income Tax Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. REVISED PROFIT AND LOSS ACCOUNT CANNOT BE IGNORED EVEN IF REJECTED NEPC MADRAS HIGH COURT

   By: DEVKUMAR KOTHARI

2. INTEREST ON REFUND OF SEIZED CASH

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Basic Statistical Returns of Scheduled Commercial Banks in India - Volume 41, March 2012

2. Special IT Return Receipt Counters for Salaried Tax Payers With Income Upto Rs. 5 Lakh

3. Common Written Examination for Recruitment of POS/MTS (CWE PO/MT-III) for the Vacancies in Participating Organisations for the Year 2014-15;

4. RBI Reference Rate for US $ and Euro

Highlights / Catch Notes

Income Tax

• Section 220: Timely Tax Recovery Payments Require Individual Action, Not Just High-Level Meetings.

  Case-Laws - HC : Curtailing of time to pay recovery amount - section 220 - Mere discussion in a meeting of several high ranking tax officers chalking out certain action plan for timely recoveries would not satisfy such a requirement which must be observed individually - HC
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• High Court Confirms Shareholder Land Transfer as Legal, Even for Tax Avoidance; Section 10(38) Exemption Applies.

  Case-Laws - HC : Exemption u/s 10(38) - If the share holder chooses to transfer the lands and part with the land to the purchaser of the shares, it would be a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable devise or a sham transaction or an unreal transaction - HC
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• Statements in Section 133A Survey Insufficient for Income Adjustments Without Corroborating Evidence When Cash Found with Employee.

  Case-Laws - HC : Validity of statement made during survey u/s 133A - When cash was admittedly found in possession of the employee of the assessee, it cannot be stated that additions were made on the basis of bare statement recorded under section 133A - HC
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• Commercial Complex Shop Sales Classified as Business Income, Not Other Sources; Tax Implications Apply.

  Case-Laws - HC : Classification of Income - Business income or income from other sources - the purpose of construction of the commercial complex and the sale of shops was done with the sole intention of engaging itself into a commercial activity and the construction and sale of shops was only with a view to earn profit to increase the revenue - taxable as business income - HC
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• Income from Joint Venture Property Use Taxed as Business Income, Not House Property Income.

  Case-Laws - HC : Nature of income - Income from house property or business income - The assessee had not rented out property but had allowed its use thereof for the purpose of joint venture business - taxable as business income - HC
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• Court Rules No TDS Deduction Needed u/s 194C Due to Lack of Contractor-Subcontractor Relationship.

  Case-Laws - HC : Payment to contractors and sub-contractors - TDS u/s 194C - vital requirement of relationship of a contractor and sub-contractor between the assessee and the transporters was missing - no TDS - HC
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• High Court affirms Assessing Officer's power to initiate reassessment u/s 147 despite intimation u/s 143(1).

  Case-Laws - HC : Reopening of the assessment u/s 147 – failure to take steps u/s 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation u/s 143(1) had been issued - HC
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Wealth-tax

• Land Valuation for Wealth-Tax: Rule 8 Conditions Must Be Met Before Assessing Authority Uses Rule 20 for Value Determination.

  Case-Laws - AT : Valuation of land - It is only if any condition under Rule 8 is satisfied, that the assessing authority could have referred to and determine the value under Rule 20 - AT
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Service Tax

• Interest Required on Service Liability Refunds Unpaid Over 3 Months from Application Date, Per Section 11B(1).

  Case-Laws - AT : Interest on refund - Service liability under protest - interest is liable to be paid, wherever any refund is due or ordered and remains unpaid for 3 months from the date of receipt of a refund application, under Section 11B(1) - AT
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• Entity Reclassified from Market Research Agency Service to Business Auxiliary Service as Commission Agent u/s 65(69).

  Case-Laws - AT : Nature of service – Market Research Agency Service u/s 65(69) - they were working merely as a commission Agent and their activities fall under Business Auxiliary Service - AT
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Central Excise

• Court Sets Aside Rs. 1.85 Crore Demand Due to Lack of Evidence in Clandestine Excisable Goods Case.

  Case-Laws - AT : Clandestine removal – Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, quantification of duty on clandestinely removed goods also becomes essential. - Demand of an amount of Rs. 1,85,10,861/- set aside - AT
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• Court Rules Installation Part of Manufacturing for SSI Exemption; Affects Turnover Calculation in Central Excise Context.

  Case-Laws - HC : SSI Exemption - Determination of turnover - manufacturing of D. G. Sets - whether Installation and commissioning is a different activity and shall not form part of assessable value - Held No - HC
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• Manufacturers Can Claim Full Cenvat Credit on Duty Paid, Even If Goods Are Discounted Later.

  Case-Laws - AT : Cenvat Credit - The entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise - AT
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• Extended Limitation Period Inapplicable When Favorable Decisions Exist; No Suppression Allegations Allowed for Assessee.

  Case-Laws - AT : Extended period of limitation - where there are decisions in favour of the assessee during the relevant period or there are contrary decisions or the matters are referred subsequently to the Larger Bench, no allegation of suppression can be attributed to the assessee - AT
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• Exporters Can Choose Cenvat Credit or Service Tax Refund; Notification 41/2007-ST Supports Flexible Reclaim Options.

  Case-Laws - AT : Refund of service tax - export - Notification No. 41/2007-ST is in the alternative i.e. the exporter can either choose to avail the credit or to seek refund of the same. The notification cannot be adopted as a support to deny the Cenvat credit claimed by the exporter on the ground that the exporter should have followed the system of refund in terms of the said notification. - AT
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Case Laws:

• Income Tax

• 2013 (7) TMI 560
  Deduction u/s 80P(2)(a)(i) - Income from non-SLR funds - Tribunal held income from non-SLR funds is income from Banking Business and consequently exempt u/s 80-P(2)(a)(i) - Held that:- The question as to whether the business is derived from or attributable to SLR or non-SLR funds would not make any difference for the purposes of qualifying the interest earned by the cooperative bank under Section 80P (2) (a) (i) as the deposits of surplus idle money available from working capital, including reserves, excess collection of interest tax and other incomes are all attributable to the business of banking. The interest from such deposits cannot be said to be beyond the legitimate business activities of the bank - Following decision of Commissioner of Income-Tax Versus Baroda Peoples Co-operative Bank Ltd. [2005 (7) TMI 33 - GUJARAT High Court] - Decided against Revenue.

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• 2013 (7) TMI 559
  Constitutional validity of Section 64(1A) - Minor's income clubbed with mother's income - Held that:- When provisions are made to block loopholes for any possible tax avoidance, the Legislature is competent to have a wider field of discretion not only for the substantive provision but for procedural provisions as well - Section 64(1A) is a provision for computation of income of an individual whose minor child is having income and that by itself constitutes a different class. Instead of providing a separate slab, it is provided that the income of such minor would be included in the income of the individual. There is no lack of competence in the Legislature for providing such a legislation. The object sought to be achieved is to tax the income and simply because by including the income of the minor in the hand of either of the parents, he or she has been subjected to a higher tax burden, it cannot be considered to be unconstitutional - Appellant could not point out any illegality to the provisions of clubbing the income of the minor child, earned by him in his own right, in the income of the parents - Following decision of K. V. Kuppa Raju And Others Versus Government Of India And Others [1999 (9) TMI 47 - KARNATAKA High Court] - Decided against Assessee. Natural guardian - Whether income of minor should only be included in income of father to achieve object of Section 6 of Hindu Minority and Guardianship Act - Held that:- The expression natural guardian has been defined in Section 4(c) as noticed above to mean any of the guardians as mentioned in section 6 of the Act of 1956. This section refers to three classes of guardians viz., father, mother and in the case of a married girl the husband. The father and mother therefore, are natural guardians in terms of the provisions of Section 6 read with Section 4(c) - Under the Hindu Law both mother and father are the natural guardians of the minor sons or daughters. It cannot be said that the mother is not the natural guardian during the lifetime of the father or until he is disqualified from being the natural guardian - Following decision of Ms. Githa Hariharan & Anr. Versus Reserve Bank of India & Anr. [1999 (2) TMI 64 - SUPREME Court] - Decided against Assessee. When both mother and father are natural guardians, then adding the income of the minor child in the income of the parent, whose income is greater, cannot be said to be arbitrary, artificial or evasive of the object sought to be achieved

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• 2013 (7) TMI 549
  Unexplained investment - Difference in G.P. Rate and discount rate - Tribunal substituting the GP rate from 20% to 19.8% and discount rate from 5% to 6.66% and deleted addition - Held that:- books of accounts were not rejected, nor any doubts were raised on the method of accounting. The assessee had explained the profit rate and discount rate to be calculated for the whole year and not that of survey for the month of March, 2004, only. The assessee in his revised computation had explained the average GP rate at 19.8% and discount rate at 6.66% - No substantial questions of law arises - Decided against Revenue.

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• 2013 (7) TMI 548
  Penalty u/s 271(1)(c) - undisclosed income - Share transactions - Tribunal admitted additional evidence and remanded matter back to A.O. - Held that - According to Section 46A there is no infirmity in Tribunal's orders - Decided against Revenue.

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• 2013 (7) TMI 547
  Refund of seized money with interest - Tribunal ordered refund - IT authorities failed to comply with Tribunal's orders - Held that:- CIT (Appeals) has held that the money belonged to petitioner and the amount seized did not belong to any other person - The department could not have adjusted the amount against the demand payable by respondent No. 5 in view of the findings recorded by the CIT (Appeals) in the order that the amount belonged to petitioner No.1 because it was not the money of respondent No. 5 - case of the respondent No.5 throughout has been that the money does not belong to him and the said finding has been accepted by the first appellate authority under the Act, i.e., the Income Tax Act, 1961 and the order has become final. Prima facie it appears that Section 132(3) is meant to deal with the cases where there is difference or dispute between two or more persons as to whom the money belongs. In the present case, no such issue or question arises - Decided in favour of petitioner.

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• 2013 (7) TMI 546
  Curtailing of time to pay recovery amount - Acc. to Section 220 petitioner was entitled to a period of thirty days to pay the sum, whereas the notice granted a shorter period of 15 days - Held that:- Respondent neither recorded reasons to believe that granting full period of 30 days would be detrimental to the Revenue, nor any previous approval of the Joint Commissioner for curtailing the period was taken - Mere discussion in a meeting of several high ranking tax officers chalking out certain action plan for timely recoveries would not satisfy such a requirement which must be observed individually - Decided in favour of assessee

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• 2013 (7) TMI 545
  Reassessment - Limitation period of reassessment order - Whether the appellate authorities were right in holding that issuance of notice under section 148 was clearly barred by limitation, as the same is beyond the period of four years instead of taking the extended period of six years as per section 149(1)(b) – Held that:- The reassessment proceedings were initiated clearly beyond the four years period. Therefore, the lower appellate authority as well the Tribunal were justified in passing the orders - the case does not fall under Part II of the proviso in order to escape from the limitation. If the conditions stipulated in Part II of the proviso do not exist, then, when an assessment order is passed under sub-section (3) of section 143, no action can be taken under section 147 of the Act after the expiry of four years from the end of the relevant assessment year - The end of the relevant assessment year and four years therefrom expires - When the reassessment order was barred by the law of limitation, the order passed by the authorities are in accordance with law. - Decided against the revenue.

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• 2013 (7) TMI 544
  Deduction u/s 80IA - Notice of re opening issued beyond four years - true and full disclosure of facts - Held that:- Notice has been issued beyond the period of four years from the end of relevant assessment year - Merely because while framing assessment for the subsequent year 2007-08 the Assessing Officer noticed certain irregularity in the claim by itself would not be sufficient to satisfy the requirements of the proviso to Section 147 of the Act - there was no failure on the part of the assessee to disclose truly and fully all material facts - Decided in favour of assessee.

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• 2013 (7) TMI 543
  Exemption u/s 10(38) - Sale of shares - Tribunal held it is a case of colourable device to evade payment of taxation on short-term capital gains - Held that:- DLFCDL paid the market value and purchased the shares from the assessee - Therefore, the transaction of shares is not a nominal one. It is not a sham transaction. It is a real transaction for valuable consideration. The effect of the transaction is DLFCDL having acquired the shares became entitled to enjoy the asset of the company which was held by BFSL - For effecting the said transfer, instead of trading those shares through Bangalore Stock Exchange, it was traded through Magadh Stock Exchange - For each share, the assessee wanted permission from SEBI without being made available to the open public. If BFSL has sold the shares by executing a registered sale deed and received the sale consideration, then, BFSL ought to have paid capital gains on the said consideration. That is one mode through which BFSL could have sold the property belonging to it. The law also provides for transfer of shares by the shareholders and this route the assessee has adopted in the instant case - By transferring 98.3% of shares held by the shareholders, virtually, the complete control of the company has been handed over to the BFSL and they have received the consideration for the shares held by them, may be proportionate to the value of the land on the date of transfer. But that does not make the transaction “colourable” or “unreal” or “sham.” - security transaction tax to Magadha Stock Exchange. Where all these three conditions stipulated under Section 10(38) of the Act are fulfilled, the assessee is entitled to the benefit flowing there from. If the share holder chooses to transfer the lands and part with the land to the purchaser of the shares, it would be a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable devise or a sham transaction or an unreal transaction - Decided in favour of assessee.

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• 2013 (7) TMI 542
  Validity of statement made during survey u/s 133A - Whether the Tribunal erred in confirming and not appreciating the facts the order of Respondent solely on the basis of statement made during the survey under section 133A which has no evidentiary value - Held that:- explanation of the assessee was found to be completely not acceptable - Assessing Officer as well as higher authorities have given cogent reasons for rejecting such theory - assessees explanation that such amount was being carried for being deposited and that same was withdrawn from the account of a sister concern few days back - When cash was admittedly found in possession of the employee of the assessee, it cannot be stated that additions were made on the basis of bare statement recorded under section 133A - If assessee was to pay any sum he could have paid the same through cheque as both the parties were having their bank accounts and there was no need to withdraw any sum in cash and then deposit the same to the account - assessee has failed to give any cogent evidence in support of his contention that a sum of money robbed was actually out of money withdrawn from the bank – appeal decided against assesse.

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• 2013 (7) TMI 541
  Classification of Income - Business income or income from other sources - whether the income earned from activity of sale of shops commenced by the assessee during the year is to be considered as business income or income from other sources.– Held that:- The income should be treated as a business income - assessee being a cooperative society, had, after appropriate permission from the District Registrar of Cooperatives, developed two plots of land by demolishing the office and godown and constructed shops and such shops were sol - this was purely commercial activity and was aimed at reducing the assessees losses - Proper resolution was also passed by the cooperative society before undertaking such an activity – the purpose of construction of the commercial complex and the sale of shops was done with the sole intention of engaging itself into a commercial activity and the construction and sale of shops was only with a view to earn profit to increase the revenue – further assessee owned the land also - the income is in the nature of business income – appeal decided against the revenue.

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• 2013 (7) TMI 540
  Nature of income - Income from house property or business income - Assessee engaged in provide infrastructure; including electrical installations, lifts etc. - Assessee receive guaranteed monthly amount - A.O. held it as income from house property and made addition - CIT(A) and Tribunal deleted addition holding that appellant had obtained registration under labour law and other applicable factory laws - Held that:- assessee did not supply solely the house property with or without furnishings. It supplied various requirements of the joint venture business; such as, infrastructure, machinery, security systems, canteen and house-keeping. The assessee also undertook the responsibility of operation and maintenance of such services and also to provide skilled work force for processing the diamonds - It, therefore, cannot be stated that the assessee was not in the business through joint venture of processing of the diamonds. Merely because such agreement envisaged assured return to the assessee, in lieu of either profit or loss to be shared from the joint venture, would not take away the fact that the assessee was engaged in the business - The assessee had not rented out property but had allowed its use thereof for the purpose of joint venture business - Following decision of Assistant Commissioner of Income-Tax Versus Saptarshi Services Ltd. [2003 (2) TMI 415 - GUJARAT High Court] - Decided against Revenue.

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• 2013 (7) TMI 539
  Block assessment - Purchase at inflated price - Suppression of tax - Tribunal deleted additions holding that there was no suppression - Held that:- On the basis of the seized material for a certain period, during the part of the block period, certain additions were made by the Assessing Officer - Such materials admittedly related to a brief period of three months, thereafter, for the entire block period to extrapolate the same basis of modus operandi, that too without any basis or material from the seized documents was simply not permissible - In absence of any documents found during search to even link the assessees activities for the entire period, to project by way of extrapolation the facts found during the brief period of about four months would not be permissible - Decided against Revenue. Excess stock - Tribunal deleted addition holding that stock was properly accounted - Held that:- Assessee has received the goods on approval basis and the same was lying in the stock at the time of search - When two authorities concurrently found that the stock was duly explained - no substantial question of law arise - Decided against Revenue.

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• 2013 (7) TMI 538
  Payment to contractors and sub-contractors - Whether the provisions of section 194C were made applicable for the assessment year 2005-2006 - Held that:- the case of the assessee was not covered under section 194C(1) of the Act since in the present case the payment was made by the assessee to individuals - Till clause (k) was introduced in sub-section (1), the category of individual, HUF or AOP was not included. Such amendment was made with effect from 1st June, 2007 therefore would not apply to the case on hand – this was not a case of relationship between the assessee contractor and the transporters in the capacity of sub-contractors - the nature of relationship between the assessee and the transporter is not a case of sub-contract - none of the responsibilities of the contractor vis-a-vis the execution of the work were fastened on the transporters. Assessee had indemnified ANS Construction against any legal or financial liability if such liability arises in future out of such contract - assessee was solely responsible for execution of the work - No part of such liability was fastened on the transporters - assessee had only availed of the services of such transporters for carrying out the material to the site - to reiterate, for application of section 194C(2) of the Act what was necessary was a relationship between the contractor and sub-contractor and not merely be hiring of an agency by the contractor during the course of execution of the work. In the present case, such vital requirement of relationship of a contractor and sub-contractor between the assessee and the transporters was missing - The Tribunal was perfectly justified in holding that liability to deduct tax at source in this case do not arise – appeal decided against the revenue.

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• 2013 (7) TMI 537
  Reopening of the assessment u/s 147 – whether the reopening of the assessment by the AO valid - Held that:- There exist no reasons to be lacking validity permitting the Assessing Officer to assess the income - So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued - there was sufficient material with the Assessing Officer to form a belief that income chargeable to tax had escaped assessment - Court relied upon the decision of Assistant Commissioner of IncomeTax vs. Rajesh Jhaveri Stock Brokers P.Ltd. (2007 (5) TMI 197 - SUPREME Court) - in an assessment which was previously not taken in scrutiny, the AO found that there were no cash sales in the financial year 2004-05 and that therefore total sales was unexplained - AO also pointed out that the total sum through different entries was deposited in cash in the bank account of the assesse during the said period which is also unexplained - notices for reassessment have been issued in case of a non-scrutiny assessment - appeal decided against assesse

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• 2013 (7) TMI 536
  Reassessment - disclosure of truly and fully all material facts - notice u/s 148 issued after 4 years - TDS u/s 194H - nature of transaction - discount or commission - recording of reasons for reopening of assessment - True and full disclosure – retrospective amendment to section 115JB - Held that:- There was no failure on part of the assessee to disclose true and full material facts. The petitioner's contention that deduction of tax at source as required under law was made, has not been rebutted by the respondent / revenue. - Before the Assessing Officer full details of payment of commission were available. There was no failure on part of the petitioner to disclose true and full material facts. It is true that the petitioner supplied only the details of those agents who received commission in excess of Rs. 50 lakhs. However, to our mind, this was not material. It is not even the case of the Assessing Officer that the requirement of deducting tax at source had any relevance to the payments in excess of Rs. 50 lakhs or below. Regarding reopening due to retrospective amendment u/s 115JB - Held that:- Surely, beyond a period of four years this cannot be a ground for reassessment on assessment. - Such legal proposition requires no authority of law. - Following the decision in Denish Industries Ltd. v. ITO (2004 (7) TMI 72 - GUJARAT High) decided in favour of assesse.

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• Service Tax

• 2013 (7) TMI 556
  Interest on refund - Service liability under protest - service tax under the taxable Construction of Complex Service – sectiion 11BB - Held that:- the order of the Commissioner (Appeals) modified directing the revenue that they shall refund the amount along with interest at the applicable rate The order of the appellate Commissioner directing refund plus applicable interest from the date of remittance thereof by the assessee - payment of refund amount retained by Revenue without the authority of law - u/s 11BB the assessee is entitled for interest on the amount deposited - Section 11BB is applicable on refund of service tax remittances in view of Section 83 that interest is liable to be paid, wherever any refund is due or ordered and remains unpaid for 3 months from the date of receipt of a refund application, under Section 11B(1) – decided against revenue.

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• 2013 (7) TMI 555
  Commercial or industrial construction service – penalty and Interest u/s 77, 78 and 75 - Held that:- The order of the Commissioner (Appeals) is fundamentally misconceived thus quashed - the attribution by the appellate Commissioner of reasons recorded by the adjudicating authority are totally unfounded -the adjudication authority did not conclude or even observe that the service provided by the assessee is not service in relation to commercial building because it was constructed out of funds generated from persons other than the gas tragedy victims as observed by the appellate authority - the transaction in issue falls within the purview of Industrial and Commercial or Construction of Complex Service of buildings u/s 65 (25)(b) – decided in favour of revenue.

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• 2013 (7) TMI 554
  Nature of service – Market Research Agency Service u/s 65(69) - whether the activities fall under Market Research Agency Service as defined u/s 65(69) – Held that:- Activities of the assessee weremore in nature of promotion of sale of the goods and do not fall under the category of Market Research Agency Service - as per agreement assessee entitled to commission for the performance of their obligation of the aggregate amount of sale and the rate of commission may be increased or decreased for specific products after mutual agreement – they were working merely as a commission Agent and their activities fall under Business Auxiliary Service – decided in favour of assessee.

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• 2013 (7) TMI 553
  Denial of Refund - Refund of service tax paid under Terminal Handling Charges, Inland Haulage Charges, B.L. Charges, Rail Freight and Agency Charges – Held that:- Refund of service tax paid and Charges admissible - invoices clearly show amount against THC as well as B.L.C and the service tax had been paid on these charges - the container number and Shipping bill number was also mentioned on the invoices in the name of assessee - sufficient to prove that the consignment in question was exported - Court relied upon Durhan Spintex & Holding Pvt. Ltd. Vs. Commissioner of Service Tax, Ahmedabad (2012 (8) TMI 288 - CESTAT, AHMEDABAD) - what is required to be seen was whether service tax was paid for required service under admissible category or not. Refund of service tax paid on Rail Freight and Inland Haulage Charges – Held that:- Assessee would be eligible for the refund of the service tax paid by them under the Notification No. 17/2009-ST – court relied upon Trident Ltd. Vs. CCE Chandigarh(2013 (4) TMI 201 - CESTAT, NEW DELHI) - invoices issued by the various Rail operators clearly shows the container number and name of the assessee – decided in favour of assessee.

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• 2013 (7) TMI 552
  Refund of CENVAT credit – assessee provided the services of Information Technology Software Services - there was no proof that two refund applications were submitted by the assessee with the Department – Held that:- The forwarding letter does not mention anything about the other two refund claims - there was no evidence of submission of the refund claim - lower authority had rightly rejected the claim for the quarter July 2009 to September 2009 as the credit of tax paid in March 2010 will not be available for refund and July 2009 to September 2009 – decided against assessee.

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• Central Excise

• 2013 (7) TMI 535
  Clandestine removal – Demand of an amount of Rs. 1,85,10,861/- is based on the note books and pen-drive recovered from the premises of M/s. Sunrise Enterprises, Mehsana(third party), who was a dealer of M/s. Sakeen Alloys Pvt. Limited, Mehsana(appellant) – Held that:- In a clandestine removal case - Facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later - But there has to be positive evidences like purchase of excess raw materials, shortage/ excess of raw materials/ finished goods found in the stock/ factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. From annexures of the SCN, observed that there were huge cash transactions to the tune of Rs. 11.23 Crores - When such large number of transactions involving huge amounts being undertaken in clandestine removal activities, it is very likely that some cash would have been seized - There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/ finished goods were found either short or in excess in the factory premises of the appellant or at any other place - As per the Panchnama drawn at the factory premises, shown that there was no excess/ shortage of the raw materials or finished goods found - The documentary evidences collected from the business premises of M/s. Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities being undertaken by the appellant. However, such a suspicion or doubt, to be strengthened by positive evidences which seem to be lacking in the case. Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, quantification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s. Sakeen Alloys Pvt. Limited under proper invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various customers by accepting payment in cash. In such a situation, the quantification undertaken by the investigation becomes doubtful and incorrect. For this purpose cross-examination of the person Incharge looking after the records of M/s. Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observations, the demand of duty of Rs. 1,85,10,861/- is not sustainable and is required to be set-aside – Decided in favor of Assessee. Clandestine removal - Demand of Rs. 8,25,277/- is based on the parallel invoices recovered as sealed envelopes from the business premises of transporter M/s. Khodiyar Transport Services, Mehsana – Held that:- positive evidence in the form of parallel invoices issued by the appellant are available and the same have been confirmed by the proprietor of transporter M/s. Khodiyar Transport and the same have been affirmed by independent witness other than the manufacturer of the goods. Therefore, the duty demand of Rs. 8,25,277/- pertaining to clandestine removal of goods on parallel invoices is upheld and the appellants are liable to penal action under the provisions of the Central Excise Act and Central Excise Rules. – Decided against the Assessee.

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• 2013 (7) TMI 534
  SSI Exemption - Determination of turnover - manufacturing of D. G. Sets - inclusion of Installation and testing charges - whether Installation and commissioning is a different activity and shall not form part of assessable value – Held that:- Appellant is a manufacturer of D. G. Sets. A D.G. Set which were cleared without entering it in RG-1 Register - D. G. Set was sold to Sri Ajay Kumar Jain Barabanki without issuing any Central Excise invoice and without payment of Central Excise duty. Further, two D. G. Sets were cleared to La Martenies Boy's Inter College, Lucknow; and Bank of India, Barabanki respectively. But the said sales were willfully suppressed. The installation and testing charges are not shown separately by the appellant in the tenders, while they have paid duty on the invoices after deducting the same from the price which is not as per provisions of the Central Excise law. No bifurcation was mentioned as per section 4 of the Central Excise Act, 1944 – Decided against the Assessee.

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• 2013 (7) TMI 533
  Requirement of pre-deposit – Held that:- As per the decision in the case of Scan Computer Consultancy v. Union of India[2006 (2) TMI 189 - HIGH COURT OF GUJARAT AT AHMEDABAD] wherein it is held that mere default in making deposit as directed, the appellant does not stand to gain anything and only delays his right to have his case adjudicated. Nor does such a delay in making pre-deposit cause any prejudice to the revenue, in absence of any stay operating in favour of the petitioner. Condition of pre-deposit cannot be used by the appellate authority for the purposes of denying an appellant the right of adjudication which is otherwise statutorily granted – In the instant case, Tribunal should hear the Tax Appeals on merits, on further condition that the appellants shall deposit further sum of Rs. 5 lakhs - Decided in favor of Assesse.

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• 2013 (7) TMI 532
  Cenvat Credit, when the input supplier has reduced the value of the goods – Input supplier was required to pay less duty and, as such, the input recipient that is the appellant, would be entitled to less Cenvat credit – Held that:- As per Board Circular No. 877/15/2008-CX dated 17/11/2008, Since, the discount in such cases are given in respect of the value of inputs and not in respect of the duty paid by the supplier, the effect of reduction of value of inputs may be that the duty required to be paid on the inputs was less than what has been actually paid by the inputs manufacturer. However, the fact remains that the inputs manufacturer had paid the higher duty - Rule 3 of Cenvat Credit Rules, 2004 allows credit of duty paid by the inputs manufacturer and not duty payable by the said manufacturer. The entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise - If the lower authorities, even after the clarifications issued by the Board, keep on the deciding the matters contrary to the said clarifications, it lowers the public faith in the fair and just trial/adjudication by the departmental officers – Decided in favor of Assessee.

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• 2013 (7) TMI 531
  Extended period of limitation - Cenvat Credit - Show cause notice stand raised on 27/2/2010 for the period December 2006 to November 2007 – Held that:- There were decisions in favour of the assessee laying down that such use of various iron and steel items was admissible cenvatable inputs. The matter was subsequently declared against the assessee by the Larger Bench decision of the Tribunal in the case of Vandana Global Ltd. vs. CCE, Raipur reported in[2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - The Hon’ble Supreme Court in number of cases s.a. Continental Foundation Jt. Venture vs. CCE, Chandigarh reported in 2007 [2007 (8) TMI 11 - SUPREME COURT OF INDIA ], Jaiprakash Industries Ltd. vs. CCE, Chandigarh reported in [2002 (11) TMI 92 - SUPREME COURT OF INDIA] has held that where there are decisions in favour of the assessee during the relevant period or there are contrary decisions or the matters are referred subsequently to the Larger Bench, no allegation of suppression can be attributed to the assessee - Longer period is not available to the Revenue for raising and confirming the demands – The Show- cause Notice issued to the appellant is time-barred - Decided in favor of Assessee.

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• 2013 (7) TMI 530
  Imposition of Penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 - Rule provides for imposition of penalty in cases where the assessee takes wrong Cenvat credit which shall be not exceeding the duty on the excisable goods in respect of which any contravention has been committed or Rs. 2,000/rupees, whichever is greater – Held that:- No malafide on the part of the assessee, who has immediately reversed the excess credit – Penalty reduced to Rs. 25,000/-, but for reduction in the quantum of appeal, the appeal is otherwise rejected.

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• 2013 (7) TMI 529
  Cenvat credit of service tax paid on various input services like courier services, cargo handling services, CHA services and clearing and forwarding services available to manufacturer – Held that:- As per the decision in the case of Commissioner vs. Adani Pharmachem Pvt. Ltd. reported in (2008 (7) TMI 102 - CESTAT AHMEDABAD], the benefit of Cenvat credit of service tax paid on the CHA services as also the other services availed at the port stands extended to the assessee by observing that in case of export, place of removal gets extended to the load, port - Notification No. 41/2007-ST - There are conditions attached to the Notification and the refund of service tax is available to the exporter subject to the fulfillment of certain conditions. One of the condition is that no Cenvat credit of service tax paid on the specified services stands taken by the exporter. If the exporter avails the benefit of Cenvat credit, he would not be entitled to refund of service tax in terms of the said notification. The notification is in the alternative i.e. the exporter can either choose to avail the credit or to seek refund of the same. The notification cannot be adopted as a support to deny the Cenvat credit claimed by the exporter on the ground that the exporter should have followed the system of refund in terms of the said notification. It is the option of the exporter either to claim refund of service tax, without availing the benefit of the Cenvat credit or to avail the Cenvat credit in terms of Cenvat Credit Rules in which case refund of the service tax would not be available to them – Decided in favor of Assessee.

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• 2013 (7) TMI 528
  Penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944 - Goods manufactured by the appellants in their capacity as a vendors and cleared to another unit for supply to defence are eligible for exemption or not - Held that:- In Sujan Industries vs. CCE, Mumbai: [2007 (8) TMI 531 - CESTAT, MUMBAI], a view had been taken by the Respondents in this case that the goods manufactured by the vendors and cleared to a unit specifying the notification for supply to defence was eligible for the exemption and on this basis Respondents has taken a view that appellant cannot be faulted for taking a view in their favour - On this ground, Penalty was set aside. Held that:- Since the period involved is prior to the date when issue regarding exemption was finally clarified and eligibility was decided and it was held that vendors are not eligible. Therefore, the penalty under Rule 25 read with Section 11AC is not levied – Decided against the Revenue.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 557
  Amount of taxable turnover - whether reduction made under U.P. Act justified or not - Held that:- assessment made by the assessing authority to the best of its judgment ignoring the books of accounts cannot be faulted with and since the first appellate authority had reduced the taxable turnover without assigning any cogent reasons the tribunal has rightly reverse the same - t was not the case of the assessee that he had been maintaining two separate books of accounts one for the U.P. Trade Tax Act and other for the Central Sales Tax Act, therefore, once the accounts books for valid reasons have been rejected for the purpose of levy of tax under the U.P. Trade Tax Act and the said rejection is not disputed it naturally means that the accounts relating to turnover under the Central Sales Tax Act are also not acceptable - assessee is unable to show what further reduction would have been possible in the taxable turnover - no question of law worth consideration arises - Decided in favour of Revenue.

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• Wealth tax

• 2013 (7) TMI 558
  Valuation of land - Assessing Officer made the valuation by increasing the 10% appreciation - CIT deleted same - Held that:- assets being business assets, its value was to be determined as per Rule 14 and not as per Rule 20 of Schedule III - It is only if any condition under Rule 8 is satisfied, that the assessing authority could have referred to and determine the value under Rule 20 - Following decision of M/s Sahara India Savings and Investment Corporation Ltd. Vs. ACIT [2010 (9) TMI 824 - ALLAHABAD HIGH COURT] - Decided against Revenue.

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• Indian Laws

• 2013 (7) TMI 551
  Damages for detention - whether the appellant was entitled for any damage for having detained for around two months u/s 3(2) of the Tamil Nadu Act - Held that:- respondents have failed to bring on record the evidence to show that the appellant was engaged or was making preparations for engaging in any of his activities as a 'Goonda' which may affect or are likely to affect adversely the maintenance of public order - there was nothing on record to suggest that the appellant by himself or as a member of or leader of a gang habitually committed or attempted to commit or abetted the commission of offence - there was no sufficient cause for detention of the appellant- there was nothing on the record to suggest that the appellant while in service took part in pro-police association activities or formed any association - there was nothing on the record to suggest that he formed another association after retirement - the respondents had failed to bring on record any evidence to suggest that the appellant incited the police personnel of Tamil Nadu to form an association to fight their rights against the Government - the respondents had also failed to bring on record that the appellant toured to various Districts and incited serving police personnel over forming an association in a manner prejudicial to the maintenance of the public order. Personal liberty - Personal liberty is of the widest amplitude covering variety of rights - Its deprivation shall be only as per procedure prescribed in the Code and the Evidence Act conformable to the mandate of the Supreme Law, the Constitution - the investigator must be alive to the mandate of Constitution and is not empowered to trample upon the personal liberty of a person when he had acted by malafides – as decided in State of Bihar and another vs. P.P. Sharma, IAS(1991 (4) TMI 365 - SUPREME COURT). Intention to form Association - whether the intention of the appellant was to form Association of Police force amounts to causing disaffection towards the Government established by law to attract Section 3 of Police (Incitement to Disaffection) Act, 1922 – Held that:- Respondent grossly abused legal power to punish the appellant to destroy his reputation in a manner non-oriented by law by detaining him under the Tamil Nadu Act 14 of 1982 in lodging a Criminal Case No.11/98 under Section 3 of the Police (Incitement to Disaffection) Act, 1992 and under Section 505(1)(b) of the IPC based on the wrong statements which were fully unwarranted - Nothing had been brought to the notice of the Court to prove that the appellant with intent to cause fear or alarm to the public or to any section of the public or to induce to commit an offence against the S/G or against the public tranquility issued the press statement - for attracting the penalty under Section 3 for causing disaffection - it needs to be proved that the person concerned intentionally caused or attempted to cause or done any act which is likely to be disaffection towards the Government established by law in this country among the members of the Police force or induces or attempts to induce or does any act which he knows likely to induce any member of the Police force to withhold his service or committed breach of discipline.

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• 2013 (7) TMI 550
  Forfeiture of Property - detention under the provisions of COFEPOSA, 1974 - Unexplained investment - Tainted money - Petitioner's husband detained under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 - More than 50% value of construction cost unexplained - Construction cost of property determined at current rate by valuation officer - Held that:- It is seen that the petitioner's mother had gifted the property by way of registered gift deed. As such, the landed property which is nil encumbered property cannot be considered as bought through illegally acquired funds derived from her husband's income. Therefore, the landed property could not be forfeited, as the subsequent matter of the present dispute is only regarding the superstructure. Therefore, the forfeiture of land, which had been gifted to the petitioner by her mother through a gift deed cannot come under the purview of the "Act". The property had not been purchased by her and the petitioner had only succeeded it through her mother. The Income Tax Returns particulars furnished showed taxes paid on legal source of income and no case has been made out by the respondents to show that the Income Tax Authorities collect income tax for illegally earned money also and hence, this point is not sustainable under law. The writ petitioner has failed to give detailed explanation regarding a portion of amount which had been utilized for the construction of the said building. It is imperative that the petitioner should give explanation regarding the source of income for the construction of the building, but she has failed to do so. The second respondent, being the competent authority is equally liable to give an explanation regarding the charge of "illegal money" received by the petitioner from her husband, by way of documentary evidence, but the second respondent has failed to establish their case that the writ petitioner had acquired illegal tainted money from her husband. Therefore, the impugned order of the competent authority has not been supported through documentary evidence. Therefore, the original impugned order passed by the second respondent /competent authority is not maintainable. As such, the subsequent order passed by the first respondent is also not sustainable under law. This Court is of the further view that the second respondent had initiated the show cause proceedings in the year 1976. After the final order of the second respondent, the writ petitioner filed an appeal before the first respondent. So, the matter is pending on the file of both the respondents for about 20 years, which is an inordinate delay for deciding the issue regarding forfeiture of property. This delay has caused injustice to the petitioner. The petitioner has been enjoying the interim order passed in W.M.P.No.819 of 1998, dated 21.02.1998. As such, she is enjoying the said property for a period of more than 14 years without any interference. Under the circumstances, the property cannot be forfeited after such a long period since the other expenses for maintenance of building has also been incurred by the petitioner including further investments. The interim order shows that there is a prima facie case on the side of the petitioner. - Decided in favour of petitioner.

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