TMI Tax Updates - e-Newsletter
July 24, 2012

Case Laws in this Newsletter:

Income Tax Corporate Laws Service Tax Central Excise

Articles

1. EXEMPTION TO LEGAL SERVICES

   By: Dr. Sanjiv Agarwal

News

1. Eminent Persons Advisory Group Meeting held in CCI. Corporate Affairs Minister releases the first news letter of CCI.

Notifications

Customs

1. 64/2012 - dated 23-7-2012 - Cus (NT)

Seeks to amend Notification No. 83/2004 – Customs (NT) - Jurisdiction of Customs officers .

2. 63/2012 - dated 23-7-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of the Additional /Joint Commissioner of Customs (Import), Air Cargo Complex, Sahar Mumbai; and the Additional/Joint Commissioner of Customs, Custom House, Opp. Ild High Court, Navrangpura, Ahmedabad.

3. 62/2012 - dated 23-7-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of the Joint /Additional Commissioner of Customs, Inland Container Depot, Tughlakabad, New Delhi, the Assistant / Deputy Commissioner of Customs, ICD, Patparganj, New Delhi; and the Assistant / Deputy Commissioner of Customs, ICD, Sabarmati,.

Highlights / Catch Notes

Income Tax

• Eligibility for Section 54F Tax Exemption Depends on Taxpayer's Status and Property Holding at Transfer Time.

  Case-Laws - HC : Denial of claim of exemption u/s 54F - A reading of Section 54F clearly points out that the holding of the residential house as on the date of transfer has relevance to the status of the assessee as an individual or HUF. - HC
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• Appellate Tribunal errs by extending interim order of stay in pending appeal beyond 365-day statutory limit.

  Case-Laws - HC : Appellate Tribunal has committed a positive error in consciously extending the interim order of stay granted in the pending appeal beyond the period of 365 days - HC
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• Court Rules Royalty Payments Cannot Be Reduced After Arm's Length Price Justification, Despite Customer Non-Payment Issues.

  Case-Laws - HC : Disallowance made of royalty paid by the assessee to CAMI USA for distribution of software products in India - Once it is accepted that the ALP of the royalty is justified, there can be no reduction in the value thereof on account of the assessee's customers failing to pay the assessee for the product purchased by them from the assessee. - HC
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• Court Rules Third-Party Claims Insufficient for Seized Jewellery, Silver, and Cash Ownership Proof in Search Case.

  Case-Laws - HC : Jewellery, silver utensils and cash amounting were seized during search - assessee submitted that the articles belong to third party - Mere declaration by third parties may not be sufficient - HC
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• Exemption Allowed u/s 54F Despite Late Filing; Investment Made Before Filing Date Qualifies for Tax Benefit.

  Case-Laws - AT : Exemption u/s 54F - belated filing of return - investment after due date but before actual date of filing of return - exemption allowed - AT
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• Real estate activities don't qualify as civil contracts u/s 44AD; bank deposits related to them are excluded.

  Case-Laws - AT : Addition u/s 69 - computation of income u/s 44AD - activity of real estate is not in the nature of civil contract and therefore, provisions of sec 44AD are not applicable so far as the deposits in the bank account - AT
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• High Court Invalidates Second Notice Issued After Limitation Period u/s 143(2) of Income Tax Act.

  Case-Laws - HC : Notice under section 143(2) of the Act - Subsequent attempt to serve another notice under section 143(2) long after the expiry of the limitation period - not valid - HC
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• Payments to State Electricity Boards Exempt from TDS Deduction u/s 194C for Infrastructure Projects.

  Case-Laws - AT : TDS u/s. 194C - payments made to State Electricity Boards/State Government Corporations for necessary infrastructure – assessee was not liable to deduct TDS - AT
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• Tax Assessment Invalid Without Notice u/s 143(2) of Income Tax Act: Protecting Taxpayer Rights.

  Case-Laws - HC : Assessment - non-issuance/service of notice under section 143(2) of the Act – very foundation of the jurisdiction of the Assessing Officer is on the issuance of the notice under section 143(2) - HC
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• Tribunal Criticized for Upholding Income Attribution to Assessee Based on Suspicions, Contrary to Evidence.

  Case-Laws - HC : AO added income belonged to assessee’s wife treated as income in the hands of the assessee - ITAT uphold the view of AO - Tribunal has indulged in suspicions, conjectures and surmises and acted contrary to the evidence which position is judicially unsustainable - HC
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Service Tax

• Estoppel Doctrine Applied: Commissioner Classifies Services as 'Management or Business Consultant' in Service Tax Case.

  Case-Laws - AT : Whether the doctrine of estoppel can be invoked in service tax - Commissioner has, invoking the doctrine of estoppel, held that the appellants have treated themselves as rendering the services of 'management or business consultant' - AT
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Central Excise

• Chartered Accountant's Valuation Certificate Must Be Duly Considered; Presumed Thorough Review Conducted Before Issuance.

  Case-Laws - AT : Valuation of final products – Professional's certificate cannot be summarily dismissed, as the said professional, in this case, Chartered Accountant must have gone through the accounts and entire records produced before him. - AT
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Case Laws:

• Income Tax

• 2012 (7) TMI 563
  Denial of claim of exemption u/s 54F - as possession of the property under consideration by the appellant to the developer for development of the property under the development agreement and therefore transfer for the purpose of assessment of capital gains took place - Held that:- as joint owners of the property, the assessee and her husband had shown 50% share with reference to the clinic and the residential portion in their respective returns. Thus, it is clear that as on the date of the transfer, the assessee did not own a residential house in her name only, the income from which was chargeable under the head "income from house property", to bring into operation, the proviso to Section 54F - A reading of Section 54F clearly points out that the holding of the residential house as on the date of transfer has relevance to the status of the assessee as an individual or HUF. On the admitted fact that the assessee herein, as an individual, does not own any property in the status of an individual as on the date of transfer, we have no hesitation in accepting the case of the assessee, thereby allowing the appeal - in favour of assessee.

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• 2012 (7) TMI 562
  Power of Tribunal to extend the stay beyond a period of 365 days - Revenue contested it to be order contrary to Section 254 - Held that:- Considering the provisions of Section 254(2A) the first proviso provides that the said Appellate Tribunal may, on merit, pass an order of stay in any proceedings relating to an appeal were period of stay cannot exceed 180 days from the date of such order and the said Appellate Tribunal shall dispose of the appeal within the specified period of stay - The second proviso to further extend the period of stay originally allowed. However the aggregate of period originally allowed and the period so extended should not exceed 365 days. The Appellate Tribunal is required to dispose of the appeal within the extended period - The third proviso provides that if such appeal is not decided within the period allowed originally or the period extende the order of stay shall stand vacated after the expiry of such period or periods. Appellate Tribunal has committed a positive error in consciously extending the interim order of stay granted in the pending appeal beyond the period of 365 days ignoring the language of Section as the language of the legislature being quite clear about the outer time limit stipulated for the duration of the operation of stay - in favour of revenue.

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• 2012 (7) TMI 561
  Denial to grant approval u/s 10(23C)(vi) - petitioner is a society registered under the Societies Registration Act - Held that:- As the petitioner has been approved in the past for the purposes of Section 10(23C)(vi) and it has also been approved for the purposes of Section 80G and hitherto no fault has been found in the manner in which the books of accounts have been maintained and expenses and payments have been made. The registration under Section 12A continues to remain in force - the suspicious approach of the respondent towards the evidence adduced by the petitioner without noticing the crucial facts such as payment by cheques etc., it seems to us that the respondent was not justified in law in readily inferring that the petitioner manipulated and fabricated its books of accounts and vouchers and also debited personal, bogus and exaggerated expense - in favour of assessee.

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• 2012 (7) TMI 560
  Disallowance made of royalty paid by the assessee to CAMI USA for distribution of software products in India - whether the royalty should be allowed to be written off to the extent of the unpaid invoices during the year itself - ITAT deleted the disallowance - Held that:- Merely because the respondent had paid the royalty even in respect of the products sold by it to the clients, who had not paid for the same, it would make no difference to the determination of the Arm's Length Price of the transaction - Once it is accepted that the ALP of the royalty is justified, there can be no reduction in the value thereof on account of the assessee's customers failing to pay the assessee for the product purchased by them from the assessee. Transactions between the respondent and CAMI are unrelated to the transactions between the respondent and its clients i.e. purchasers of the products from the respondent. CAMI was not concerned with the respondent's inability to recover the consideration from its clients. It is not suggested that the transactions in this case either between the respondent and CAMI or the respondent and its clients are colourable - in favour of assessee.

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• 2012 (7) TMI 559
  Block assessment Order u/s 158BC r.w.s. 143(3) - jewellery, silver utensils and cash amounting were seized during search - assessee submitted that the articles belong to third party & are covered under the Voluntary Disclosure of Income Scheme, 1997 - Held that:- Mere declaration by third parties may not be sufficient unless the assessee also establishes as to how the items in question reached the assessee from third parties and consequentially found in his possession at the time of search - entire issue was restored to the file of the AO but the petitioner, instead of attending the hearing before the AO and producing the necessary evidence in support of his claim, filed the present petition in the Court - as the adjudication proceedings consequent to the order of the ITAT are pending before the AO it is desirable that assessee should attend the personal hearing as and when the matter is fixed for hearing by the AO - in favour of revenue.

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• 2012 (7) TMI 558
  Challenging notice of reopening u/s 148 beyond a period of four years - according to AO the claim for deduction of license fees paid by the petitioner assessee was required to be dealt with in the manner provided in section 35ABB - Held that:- AO has placed no reliance on any new material at his command to form a belief that income chargeable to tax has escaped assessment. Further during the original assessment framed after scrutiny, the claim of deduction for license fees paid by the petitioner came up for consideration - It may be that some of the queries did not directly relate to such claim and the limitation of deduction as provided in Section 35ABB. However, entire issue was at large before the AO - it cannot be stated that there was any failure or omission on part of the petitioner to disclose truly and fully any material facts necessary for assessment. As in addition to lodging the claim for deduction in the original return filed giving full details and particulars and accounting policies followed the petitioner further elaborated its claim for deduction to the query issued by the AO during such correspondence and if the AO was of the opinion that such expenditure had to be spread over as provided in Section 35ABB nothing prevented AO from doing so in the original assessment that he framed. Full facts with respect to such claim were on record before him as it was not for the assessee to lead the Assessing Officer to any particular legal inference - impugned notice is not sustainable - in favour of assessee.

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• 2012 (7) TMI 557
  Violation of provisions of Section 40A(3)- Tribunal allowed payment of cash amounting to Rs.3,80,083 by the assessee to the supplier's bank account - Held that:- Unless there are exceptional and unavoidable circumstances, the payment made in excess of Rs.10,000/- by cash would not escape the rigour of Section 40A(3) - the mere circumstance that the amount had been remitted to the account of the payee, would not be a good ground to accept the case of the assessee that Section 40A(3)will not applied - the deposit of the amount to the bank does not make the case any shade better than a cash payment for the purpose of condoning the conduct of the assessee - Order of Tribunal is set aside - against assessee.

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• 2012 (7) TMI 556
  Income escaping assessment - period of limitation u/s 149 - Revenue stated that Section 149 lays down since the income escaped assessment in the present case is more than Rs.1,00,000/- the un-amended provision of Section 149, the limitation would be seven years - Held that:- Considering interpretation given to Sections 147 to 149 when there is full, complete and true disclosure of all material facts, the limitation is only four years from the end of the assessment year concerned and when there is non disclosure of facts the limitation is four years in case the income escaping assessment is less than Rs.1,00,000/- and in case there is non-disclosure of facts and the income escaping assessment is more than Rs.1,00,000/- the limitation is six years - in favour of assessee.

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• 2012 (7) TMI 555
  Disallowance of claim u/s 54F - that appellant did not deposit the sale consideration, on sale of shares, in capital gains account scheme before due date for furnishing return - Held that:- Appellant not having filed his return of income for AY 2008-09 within the time allowed u/s 139(1), is eligible to do so till 31-3-2009 which is the extended time u/s Sec.139(4) and accordingly he filed it on 9-1-2009 - the amount utilized by the assessee for purchase of new residential house before 9.1.2009 qualifies for consideration with reference to which deduction u/s 54F(1) is to be computed. Thus, the CIT(A) was not justified in holding that only the amount which was utilized by the assessee before 31.3.2008 only qualifies for deduction - in favour of assessee.

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• 2012 (7) TMI 554
  Substantial question of law - Block assessment - Undisclosed income - unexplained cash - Block period u/s 158BC/143(3)by AO - Held that:- Tribunal were fully justified in coming to this conclusion by rightly placing reliance or the decision of the Bombay High Court CIT vs Shamlal Balram [2000 (2) TMI 37 - BOMBAY HIGH COURT] that the question proposed is not a substantial question of law.

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• 2012 (7) TMI 553
  Reopening of assessment u/s.147 of the Income Tax Act - grievance of the assessee is that the AO did not supply copies of the reasons recorded even when specifically was asked for from the A.O – Held that:- Before issue of notice under the section the AO shall record his reasons for doing so. Since the AO did not provide the assessee - reopening was bad in law, hence quashed. Addition made by rejecting of books of accounts - AO directed to estimate gross profit @ 22% by adopting the average Gross Profit of last six years as against 30% estimated by the Assessing Officer – Held that:- AO relied upon a part of a transaction for the preceding year while rejecting the other - This is not permissible in law - Without pointing out any error in the P&L a/c and the audited report, the powers of best judgment assessment could not be invoked. The principles of best judgment assessment do not appear to have been followed by the AO - in the absence of any specific adverse material on record, the AO was not justified in applying an adhoc gross profit rate which was rightly reduced by ld.CIT(A) – addition deleted Addition made by rejecting of books of accounts – Held that:- AO is directed to delete GP addition because he has not pointed out single defect in the books of account in the year under consideration - AO has neither bothered to issue a show cause notice before rejecting the accounts of the appellant firm. Application of GP rate at 30% on receipts has been made by the AO without bringing any material on record to justify it, without even caring to mention that he is applying 30% rate as against 20.89% GP rate shown by the assessee

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• 2012 (7) TMI 552
  Disallowance of salary – Held that:- Smt. Belwal (director) was an educated lady and after she left the assessee, she got employment at a hefty amount so therefore her working abilities cannot be doubted. Moreover, in the preceding year also, she was paid salary by assessee and no disallowance was made. Deduction of TDS on payment made to her also goes in favour of the assessee as far as genuineness of the expenses is concerned - person who receives salary as a Director cannot be expected to be involved in day today activities. His or her involvement remains at the level of making strategic decisions only and therefore the contention of the Assessing Officer that assessee could not provide proof of any services rendered by her is not correct in view of her role as an art director – addition deleted - decided in favour of assessee. Addition was made u/s 41(1) of the Act by treating the old outstanding amounts as deemed income u/s 41(1) of the Act - assessee had claimed during assessment proceedings that these were un-secured loans which were taken by the assessee 15-20 years back and they have been repaid now by crediting the account of Shri Mahesh Belwal and by debiting the respective account of the lenders – Held that:- Provision of section 41(1) are not attracted as these are attracted only if the liability ceased to exist by way of remission or cessation thereof - assessee has written back this amount and a corresponding credit of an equivalent amount has been given to Mr. Mahesh Belwal and therefore no benefit can be said to have arisen to the assessee In respect of Rs.3,29,748 - assessee has not written back and liability has not ceased to exist – only stand taken by the Assessing Officer that the amount is outstanding for long and hence need to be written back - Held that:- Assessing Officer directed to delete the addition - appeal filed by the assessee is allowed.

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• 2012 (7) TMI 551
  Revision u/s 263 - Interest on enhanced land compensation - assessee has not offered the same to tax by giving a note in the return of income that the same shall be offered for tax, if and when the matter is fianlised by the Highest Court in favour of the assessee – Held that:- Assessing Officer had mentioned that interest amount has not been brought on tax on the ground that the same would be taxable, when the case is finalized - order cannot be treated as erroneous or prejudicial to the interests of the revenue. In this view of the matter, it cannot be said that Assessing Officer has passed an order in undue haste, without proper application of mind and without conducting due and proper enquiry Regarding interest on late furnishing of return - section 234A(3) mandates levy of interest for late furnishing of the return, in response to section 148 of the Act - Assessing Officer has not charged this interest, the order is erroneous and prejudicial to the interests of revenue to this extent - Assessee is partly allowed.

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• 2012 (7) TMI 550
  Penalty u/s 271(1)(c) of the I.T. Act - penalties on additional income offered in the respective returns filed by the assessee in response to notice u/s 153A of the Act – Held that:- Penalty u/s 271(1)(c) is not imposable where there is neither concealment of income nor furnishing of inaccurate particulars of income in return filed u/s 153A of the Act - concealment of income is to be determined with reference to the return of income to be filed in response to notice u/s 153A of the Act. Once returned income filed u/s 153A is accepted by the assessing officer it can neither be a case of concealment of income nor furnishing of inaccurate of particulars of such income - appeals of the assessee get accepted

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• 2012 (7) TMI 549
  Addition u/s 69 of the IT Act on account of bank deposits - Assessing Officer noticed that the assessee had deposited cash of Rs. 23,89,500/- in the Saving Bank Account - Commissioner of Income Tax(Appeals) treated the amount deposited in the bank as undisclosed business deposits and thereby directed the Assessing Officer to determine the profit of the assessee @ 10% of the deposits – Held that:- Assessee by producing the material has demonstrated that these receipts in the bank account of the assessee are relating to its activity of real estate and for the purpose of purchasing the plot and then again returned the amount to the parties - activity of real estate is not in the nature of civil contract and therefore, provisions of sec 44AD are not applicable so far as the deposits in the bank account - receipt in the bank account are in relation to the business activity of the assessee - CIT(A) is just and proper in estimating the profit of the said activity at 10% of the deposits pertaining to the year under consideration

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• 2012 (7) TMI 548
  Addition made on protective basis in the hands of the assessee – Held that:- CIT(A) has not in corporated full facts in his order. Neither any finding have been given on merit nor the issue that how second notice u/s 148 is valid been examined whereas assessee has objected that no addition can be made on protective basis in proceeding initiated u/s 148 - matter sent back to the file of CIT - appeals of the Revenue are allowed for statistical purpose.

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• 2012 (7) TMI 547
  Exemption under section 80P(2) (a) (i) of the Income Tax Act - interest received from the members of the society – Held that:- Tribunal was required to examine the memorandum of association, the articles of association, the return of income filed with the Department, the status of business indicated in such returns, etc - parties not brought on record copy of Memorandum of Association and Articles of Association of the assessee-society nor produced copy of returns as filed by the assessee nor the relevant audit reports - issue requires verification of records and therefore, the issue should be restored to the file of the Assessing Officer for proper verification - matter remanded back to the file of the Assessing Officer - appeal of revenue is allowed for statistical purposes.

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• 2012 (7) TMI 546
  Whether the Tribunal was justified in holding that the assessments were invalid for the reason that search warrant issued in Form 45 was invalid - search is carried out strictly by following the procedure contained under Rule 112 and by issuing warrant by giving the names of each and every assessee separately - when notice after search was issued, each and every assessee without any objection filed return and contested the assessment on merit - In the first appeal stage also they had no contention that block assessments were invalid for want of separate warrants in the case of each and every assessee. However, at the second appeal stage the assessees raised the contention that warrants were defective - Since the Tribunal has followed their order in allowing assessee's claim which stands now reversed - orders of the Tribunal set aside and appeals restored back to the Tribunal for decision on merits.

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• 2012 (7) TMI 545
  Notice under section 143(2) of the Act - Held that:- Notice under the said section must be served on the assessee within the time stipulated in the proviso. In case the notice was not served within the said time limit the assessment order passed would be null and void - No attempt was made to serve the respondent-assessee at the correct address which was available with the Department - Subsequent attempt to serve another notice under section 143(2) long after the expiry of the limitation period – In favor of assessee

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• 2012 (7) TMI 544
  TDS u/s. 194C - payments made to State Electricity Boards/State Government Corporations for necessary infrastructure – Held that:- Assessee not awarded any works contract to the SEBs - complete exercise in the case has been carried out for the purpose of sanction of load for Railway traction sub-station to be operated on Ambala-Moradabad section - Merely because the infrastructure has been provided as per the application moved by the assessee in line with the requirement of the assessee does not establish the case of the Department that the same tantamounts to works - cost of the infrastructure has been borne by the assessee as there were no existing sub-station of the distribution licensee in the said area - no oral or written agreement between the assessee and the distribution licensee for the said purpose except the application made by the assessee, the estimate thereof by the distribution licensee and the payment of the estimated charges - no merit in the observations of the CIT(A) in this regard that the abovesaid represents a contract between the parties - assessee was not liable to deduct TDS out of the amounts paid to the distribution licensee for providing the infrastructure for providing electricity to the Railway traction sub-station of the assessee - AO directed to delete the demand raised under s. 201(1) and interest charged under s. 201(lA) of the Act.

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• 2012 (7) TMI 543
  Assessment - non-issuance/service of notice under section 143(2) of the Act – Held that:- Notice under section 143(2) of the Act was admittedly not issued in this case. The assessing authority thus did not have jurisdiction to proceed further and make assessment - very foundation of the jurisdiction of the Assessing Officer is on the issuance of the notice under section 143(2) - income-tax appeal is dismissed.

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• 2012 (7) TMI 542
  Capital gains - denial of the deemed exemption under s. 10(38) of the Act - Assessee had purchased the shares outside stock exchange directly from the broker in physical form - he was not having D-mat account - alleged that purchase contract notes are not genuine and that the shares were not purchased by the assessee - Held that:- Before the AO copies of the share certificates held by assessee in physical form were provided which contained complete relevant details - merely because there was substantial delay in transferring the shares into D-mat account from the date of purchase and the transactions not routed through Stock Exchange, the AO was not justified in doubting the declared date of purchase of the shares ignoring the evidences - AO directed to allow the claimed exemption under s. 10(38) of the Act on the long-term capital gain shown by the assessee on those shares – In favor of assessee

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• 2012 (7) TMI 541
  Revenue or capital Expenditure - purchase of tin plates for advertisement and publicity – Held that:- These tin plates were not of a life which can provide benefit of enduring nature - in the past and subsequent years, such expenditure has been treated as revenue in nature and without any cogent reason, the revenue should not have disturbed the same - no fault in the order of the CIT (A) in granting the relief. Reassessment proceedings – Held that:- Assessing Officer while finalizing the initial assessment has not applied his mind - No discussion has been made about this particular expenditure in the assessment order - reply of the assessee to the query is also silent on the issue, thus it is clear from the records that the assessment order was passed without any application of mind and such non-application of mind is clear from the order of the assessment itself - no fault in the order of CIT (A) in upholding the reopening of the assessment proceedings

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• 2012 (7) TMI 540
  Penalty u/s 271(1)(c) of the Income tax Act - assessee company, it accepted its mistake and filed a revised computation of income – Held that:- Imposition of penalty on withdrawal of claim by way of revised computation assumes a character of technical default. In respect of bad debt also assessee filed all the primary particulars in this behalf and was under bona fide belief that the amounts having become irrevocable same were allowable as bad debts on write off - penalty should not be imposed only because it is lawful to do so and that the penalty should not be imposed for technical and venial defaults - assessee having furnished all primary facts along with the return of income and the mistake being technical or venial in nature, assessee is not liable to be visited with penalty u/s 271(1)(c) - penalty deleted - revenue’s appeal is dismissed.

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• 2012 (7) TMI 539
  Addition on account of unaccounted income - Assessing Officer took into consideration the documents forwarded to him by the CBI and on that basis added certain incomes as unaccounted income – income belonged to assessee’s wife treated as income in the hands of the assessee - contention of the appellant that the assets for which wealth-tax already stood paid by his wife, Smt. Asha Bhatnagar, could not be the subject-matter of the additions – Held that:- statement on oath of Smt. Asha Bhatnagar has been repelled cursorily although she had in detail explained the circumstances under which she had made her savings ; her earning earned by tuition ; amounts received by her in terms of the will of her father-in-law enabling her to purchase the aforenoted properties as noted in group II in her own name - Tribunal has indulged in suspicions, conjectures and surmises and acted contrary to the evidence which position is judicially unsustainable - order set aside – In favor of assessee

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• Corporate Laws

• 2012 (7) TMI 534
  Misuse of the machinery provided under the SICA - continuous and systematic abuse of process resorted to by respondent with the sole motive of delaying and defeating the rights of its creditors - Held that:- It was felt that the existing institutional arrangements and procedures for revival and rehabilitation of potentially viable insolvent industrial company were both inadequate and time consuming and a comprehensive law was needed - Section 22 (1) provides that in case the inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration by BIFR or any appeal under Section 25 is pending then certain proceedings against the industrial company are to be suspended or presumed to be suspended and if it is intended by the concerned party that the proceedings are to be continued against the sick industrial company then prior consent or approval of BIFR should be taken. Once the enquiry under Section 16 is treated to be pending, the provisions of Section 22 are attracted and the company court cannot proceed further the matter. In present case it appears to be one where prima facie the provisions of Section 22 of the SICA are taken undue advantage of. Therefore, at least in those cases where the reference was rejected in previous years on merits by the BIFR, guidelines can be issued to ensure that fresh references in subsequent years should not be mechanically entertained - direction that BIFR should formulate necessary Practice Directions as where the references were rejected previously, the BIFR can pass appropriate directions refusing to extend the benefit of Section 22 of the SICA.

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• Service Tax

• 2012 (7) TMI 568
  Scope of input service - Rule 2(l) cenvat credit rules, 2004 - contention by AO that services allowed are having no nexus with the manufacturing activity - assessee contention that definition of input service is an inclusive definition and services used even in relation to setting up, modernization, renovation or repairs of a factory etc. are included in the ambit of "input service" - Held that:- Considering the case of CCE, MUMBAI-V Versus GTC INDUSTRIES LTD.[2008 (9) TMI 56 (Tri)] Commissioner has failed to discuss individually how each of the services claimed by the respondent-assesses as input services in the light of inclusive part of the definition has been accepted by him - every input service availed by the manufacturer cannot be treated as eligible for input credit without looking into the nexus - the matter is remanded to the Commissioner (Appeals) to record his finding in respect of each of the disputed services have been treated as falling under input service in terms of Rule 2(1) of the CENVAT Credit Rules

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• 2012 (7) TMI 566
  Cargo handling service - service tax demand and penalty of identical amount u/s 78, 75A, 76 and 77 - Held that:- After examining the activity undertaken by the appellant as reflected in the agreement the prime work for which the contract was awarded to the appellant for crushing, screening and sieving of the dolomite in the mining area. The movement of the end-product from site of one activity to the site of second activity for further work upon the same is within the mining area. As such, it can be safely concluded that the said activity, being within mining area cannot be held to be covered by the definition of cargo handling service. The activity of loading of finally processed dolomites at Dadhapara Railway sidings for transportation of the same to Bhilai would get covered by the definition of "cargo handling service" as it is not the case of unloading from where transportation has already been completed but a case of loading, for further transportation of the same. The issue involved is of legal interpretation of the definition of the various services and being a complicated issue, the assessee cannot be saddled with any suppression or misstatement or mala fide intention so as to invoke longer period of limitation - direction to re-quantify the demand of the service tax only on consideration received for movement for loading of dolomite for further movement within normal period of limitation - as no mala fide on the part of the appellant, imposition of penalty upon them is not justified - partly allowed in favour of assessee.

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• 2012 (7) TMI 565
  Whether the activities relate to field of Management or Engineering - ERP implementation – Held that:- ERP software has been prepared obviously taking inputs from various domain experts such as inventory control, production engineering, finance, labour management, marketing etc. However, the software is predominantly a product evolved by engineers - It cannot be said that everybody who is concerned with ERP implementation should be a Management consultant as such consultant can be from any other discipline as well - Activities clearly are in the field of engineering and not in the field of management. Whether the service falls under Management Consultant - Appellants are claiming that their activities are only in relation to ERP implementation – Held that:- appellants are actually implementing applications software like SAP, Oracle, people soft. They are also into upgradation of application software from existing release level to higher version. They are also specifically into running of electronic data processing centre, business of data processing, word processing etc. - Same appears to be limited only to the field of Engineering and the services would fall under the category of consulting engineers only. Whether the doctrine of estoppel can be invoked - Commissioner has, invoking the doctrine of estoppel, held that the appellants have treated themselves as rendering the services of 'management or business consultant' - Appellants have availed the benefit of Notification No. 16/2004 ST - demand stands confirmed only on the ground that the activities of the appellants can be considered to be in the field of management to bring them under the category of "management consultant"/"management/business consultant". This is held to be not sustainable - Commissioner has chosen to treat as if there were no exports at all and demanded service tax on the entire turnover and there is no justification for demanding service tax on the export of services - denial of credit amounting to 2.33 crores during the period October 2005 to March 2008 was on the ground of non-production of the necessary documents. This is being contested by the appellants stating that they have produced the necessary documents to department - Regarding the taxability of services which is in favour of the assessee - Order of the Commissioner is set aside and the appeal allowed

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• 2012 (7) TMI 564
  Eligibility for exemption under Notification No. 12/2003-ST, dated 20.6.2003 – reimbursement expenses - Held that:- As the respondent was not merely acting as a Commission Agent but was also doing business promotion activity, the reimbursements of expenses of the staff employed by the respondents were being given is clearly not covered by the definition of commission agent in Notification No.12/2003-ST. So this issue is answered in favour of the Revenue. Taxability of the consideration received as reimbursable expenses – Held that:- Without employing manpower the respondents could not have provided the service in question. The case laws on "reimbursable expenses" developed around expenses incurred by Clearing and Forwarding agents for godown rented out for keeping the goods of the principal and freight paid for forwarding the goods. These essentially do not form part of the value of the services of C&F agents. Now such decisions are being further interpreted to argue that any amount like wages of the personnel employed by the service provider, the telephone expenses incurred by the service provider, office rent of the service provider etc. will not form part of the value if billed as reimbursable expenses. This matter has been examined by a Larger Bench of the Tribunal in the case of Sri Bhagavathy Traders v. CCE [2011 (8) TMI 430 - CESTAT, BANGALORE] the ratio laid down in that decision would apply and service tax has to be paid on value inclusive of such amounts even if billed as reimbursements. In the matter of Misc. expenses like Registration fees for label or brand, the expenses is not for providing the service being provided by the respondents. So if there is any proof of such expenses incurred by the respondent and reimbursed by SBL, such reimbursed amount will not form part of gross value of services. Similar is the case of transportation expenses paid by respondents on behalf of the SBL. The respondents are not in the business of organising or doing transportation. Transportation is not part of business promotion activity. So actual transportation cost reimbursed will not form part of value of service rendered by the respondents. Invoking section 80 – Held that:- A person giving his own interpretation of notification and then arguing that he was under the bona fide belief cannot get the protection of such section 80 - as the adjudicating authority did not give the option of paying 25% of the duty demanded within 30 days of the order for discharge of the liability imposed as penalty the matter is remanded to the adjudicating authority for calculation of penalty payable based on rulings given above - there is no need to impose penalties under Section 76 when penalty is imposed under Section 78.

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• 2012 (7) TMI 538
  Permissibility of collection of service tax from the service receiver in case of foreign based service providers before 18.04.2006 - Held that:- It is only after enactment of Section 66-A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. In such cases, the Indian recipient of the taxable services is deemed to be a service provider. Before enactment of Section 66-A there was no such provision in the Act and therefore, the Respondents had no authority to levy service tax on the members of the Petitioners-association - Respondents are restrained from levying service tax from the members of the Petitioners-association for the period from 1-3-2002 till 17-4-2006 - in favour of assessee.

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• Central Excise

• 2012 (7) TMI 537
  Stay Petition - Waiver of pre-deposit - classification of the product - Jelly Confectionary - classification of the product is under Chapter 17 only and correctly demanded the duty and interest - classification confirmed by the lower authorities upheld and uphold the demand of penalty and interest Penalty under Rule 25 of Central Excise Rules, 2002, in our view, the penalty of 25% of the amount of duty liability confirmed by the lower authorities is enough to meet the ends of justice - appeal allowed as regards setting aside the balance amount of penalty

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• 2012 (7) TMI 536
  Classification of the product - product TETMOSOL Soap is assessable under Section 4A of the Central Excise Act, 1944 or not – Held that:- Product covered under the provisions of Section 4A of Central Excise Act, 1944 Penalty – Held that:- Demand for subsequent period and when the show cause notice was issued, the issue for the earlier period had not attained finality. The issue attains finality after the order was issued only. The Tribunal passed the order on 13.5.2005, whereas the show cause notice related to the year 2003. Therefore, it cannot be said that there was any suppression of facts or willful mis-declaration, fraud or collusion etc – Penalty set aside

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• 2012 (7) TMI 535
  Valuation of final products – alleged that the appellant has under valued the goods i.e. by understating raw material s cost and by doing so, they have not discharged the correct duty liability – appellant produced Chartered Accountant s certificate – lower authority recording that the said Chartered Accountant s certificate is for the finished goods without having any cost data and showing details of raw materials price and other expenses etc – Held that:- Professional s certificate cannot be summarily dismissed, as the said professional, in this case, Chartered Accountant must have gone through the accounts and entire records produced before him. If the lower authorities had any reason to disbelief the said certificate, they should have called for an explanation from the appellant and who could have given the explanation from the Chartered Accountant himself - approach of the first appellate authority inconsistent with the law - order set aside and matter remanded back to the adjudicating authority to reconsider the issue afresh - Appeal is allowed by way of remand.

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