TMI Tax Updates - e-Newsletter
July 24, 2013

Case Laws in this Newsletter:

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

Articles

1. Penalty u/s 271(1)(C) of Income Tax Act, 1961

   By: Surender Gupta

2. Service to self - Is unjust enrichment applicable?-SERVICE TAX

   By: RENGARAJ R.K

3. Skill development projects under section 35CCD- an analysis of related provisions- a case of very late notification of Rules for guidelines, applications, notifications etc.

   By: DEVKUMAR KOTHARI

News

1. Auction for Sale (Re-Issue) of 1.44% Inflation Indexed Government Stock 2023

2. Repayment of 12.40% Government Stock 2013 due on August 20, 2013

3. Mission Director for DBT to be in Ministry of Finance, L.P.G. direct benefits cross Rs. 100 crores in 7 weeks

4. India, Belarus Sign Protocol to Boost Trade Ties India Looks for Long-Term Contract for Potash Supply

5. RBI Reference Rate for US $ and Euro

6. TRAI issues the Telecommunications Mobile Number Portability (Fifth Amendment) Regulations, 2013 for corporate mobile numbers

7. TRAI releases Consultation Paper on “Valuation and Reserve Price of Spectrum”

Notifications

Income Tax

1. F. No. DE-20136/Notification/DIT(IT) - dated 18-7-2013 - IT

Notification – I for Departmental Examinations – 2013 for (i) Income Tax Officers, (ii) Income Tax Inspectors and (iii) Ministerial Staff-regarding

Circulars / Instructions / Orders

VAT - Delhi

1. VAT AUDIT/HQ/2013-14/2920-2927 - dated 24-7-2013

Dropping from audit proceedings

Income Tax

2. F. No. 225/117/2013/ITA.II - dated 23-7-2013

Order under Section 119 of the Income-tax Act, 1961

FEMA

3. 17 - dated 23-7-2013

Risk Management and Inter-Bank Dealings – Reporting of Unhedged Foreign Currency Exposures of Corporates

Central Excise

4. 972/06/2013.CX - dated 24-7-2013

Applicable excise duty on Sedan cars like Maruti SX4, Honda Civic, Toyota Corolla Altis under notification No. 12/2013-CE dated 1st March, 2013 - regarding

Highlights / Catch Notes

Income Tax

• Section 80I Deduction: Ownership Not Required, Focus on Profit Source from Industrial Undertaking, Says High Court.

  Case-Laws - HC : Deduction u/s 80I - Service charge - Ownership is not necessary - The only thing that has to be seen is whether the source of the profit or gains is an industrial undertaking - HC
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• High Court Upholds ITAT Decision Granting Section 80M Deduction for Dividends from Unit Trust of India.

  Case-Laws - HC : Deduction u/s 80M - Dividend received from UTI - CIT(A) rejected deduction u/s 80M as dividend distribution was related to earlier years - Tribunal granted deduction - order of ITAT sustained - HC
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• Tax Penalty Under Sec 271(1)(c) Not Justified by Mere Agreement to Addition Without Evidence of Income Concealment.

  Case-Laws - HC : Penalty u/s 271(1)(c) - merely because the assessee agreed for addition and accordingly assessment order was passed on the basis of this addition and when the assessee has paid the tax and the interest thereon in the absence of any material on record to show the concealment of income - it cannot be inferred that the said addition is on account of concealment - HC
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• High Court Evaluates Classification of Furniture Improvement Expenses in Rented Premises: Capital or Revenue?

  Case-Laws - HC : Nature of expenses – capital or revenue - improvement towards furniture in the renting premises - tenancy rights - claim of 1/5 of the expenditure every year- Tribunal was erred in not allowing the amount paid by the appellant as revenue expenditure - HC
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• Taxpayer Non-Appeal Doesn't Imply Income Concealment or False Info u/s 271(1)(c) Penalty.

  Case-Laws - AT : Penalty levied under Section 271(1)(c) – merely because the assessee did not file the appeal against the assessment order, it cannot be presumed that there was any concealment of income or furnishing of wrong particular - AT
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• Internal Fund Transfers Don't End Liability u/s 41(1) of Income Tax Act; Partners Remain Personally Liable.

  Case-Laws - AT : Cessation of liability u/s. 41(1) of the I.T. Act - The transfer of amount from one account to another which ultimately remained with the firm is not a cessation of liability - The existing partners were personally liable to the old partners as well as to the creditors - AT
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• Notice u/s 148 Quashed for Lack of Justification by Assessing Officer in Reopened Assessment Proceedings.

  Case-Laws - AT : Reassessment - On the basis of the details of Civil Suit, the AO reopened the assessment proceedings - AO failed to bring any discussion on record as to how he had reason to believe before issuing notice u/s.148 - Notice quashed - AT
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Customs

• Settlement Commission Directed to Impose Interest per Rule 8, Not Section 28AB, for Concessional Duty Imports.

  Case-Laws - HC : Imposition of interest – Settlement Commission directed to pay interest under Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - Interest is chargeable because of the provisions of Rule 8 and not because of Section 28AB - HC
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Corporate Law

• Supreme Court: Unlisted Public Company Share Transfers Must Comply with Securities Contracts (Regulation) Act Provisions.

  Case-Laws - SC : Regulating provisions for unlisted shares - Whether the shares of a public company which is an unlisted company on being transferred would attract the provisions of SCR Act - Held yes - SC
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Service Tax

• CENVAT Credit Allowed for Repair Services on Rented Property, Proportionate to Rented Space.

  Case-Laws - AT : CENVAT credit - input services or repair and maintenance - Assessee provided immovable property on rent - part of premises was rented out - proportionate credit allowed - AT
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Central Excise

• Revenue Authority Needs Concrete Evidence, Not Just Theoretical Waste Calculations, for Alleged Clandestine Goods Removal.

  Case-Laws - AT : Clandestine Removal of goods - Revenue cannot build its case based upon the theoretical percentage calculation of waste generated, without production of any evidence to reflect upon the above allegation - AT
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Case Laws:

• Income Tax

• 2013 (7) TMI 632
  Deduction u/s 80I - Service charge - Tribunal held that service charges were not profits and gains derived by the assessee from its industrial manufacturing activities therefore not deductable - Held that:- A plain reading of Section 80-I(1) and 80-I(2) would indicate that the ownership by the assessee of an industrial undertaking from which the assessee derives profits and gains is not a stipulated condition - The only thing that has to be seen is whether the source of the profit or gains is an industrial undertaking - The service charges are directly linked to the quantum of heavy water produced by Kribhco by operating and maintaining the Heavy Water Plant - Decided in favour of Assessee.

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• 2013 (7) TMI 625
  Deduction u/s 80M - Dividend received from UTI - CIT(A) rejected deduction u/s 80M as dividend distribution was related to earlier years - Tribunal granted deduction - Held that:- Section 80M(1) for the purpose of interpretation can be segregated into two parts or postulates two requirements. The first requirement is that gross income of a domestic company in the previous year should include income by way of dividend from another domestic company. The said condition it is accepted is satisfied as the respondent-assessee had received dividend from another domestic company - The second part of Section 80M(1) states that in the year in which the dividend was received, the assessee company would be allowed a deduction of an amount equal to and not exceeding the amount of dividend distributed on or before the due date - Dividend was paid to the shareholders of the assessee before due date - second part of Section 80(1) of the Act, does not specifically postulate or prescribes the requirement that dividend distributed must match or relate to the assessment year itself - Payment of dividend in several cases may spill over and distribution can and does take in the subsequent year - Following decision of The Commissioner of Income-tax Versus M/s. Saumya Finance & Leasing Co. (P) Ltd. [2008 (1) TMI 13 - BOMBAY HIGH COURT] - Decided against Revenue.

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• 2013 (7) TMI 624
  Income from other sources - Income from voluntary reserve - Whether income earned by the assessee from voluntary reserve is its income from business or profession and not the income which is to be assessed under the head income from other sources - 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 Vs. M/s District Co-operative Bank Ltd [2013 (7) TMI 560 - ALLAHABAD HIGH COURT] - Decided against the revenue.

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• 2013 (7) TMI 623
  Cost of acquisition - Tribunal upheld the cost of acquisition quoted by assessee - Held that:- Assessee had filed certificate from Nagar Palika and also report from Land Revenue Inspector stating that all Khatta numbers of the said property lie within municipal limits - assessee also filed copies of revenue records, which revealed that the property is not part of Harijan basti as reported by ITI in his earlier report - If for the sake of presumption it is considered that the land is situated near to Harijan Basti, it cannot be said that the land will not have the value as fixed in the circle rate in as much as the Central Government and the State Government have announced several programmes to uplift the Harijans to provide affordable houses to them - The State Government has charged stamp duty of the land from Vijay Cinema upto Kisan Degree College at the rate of Rs.250/- per sq. yard. The adoption of rate at Rs.150/- per sq. yard was thus reasonable. - Therefore, no substantial question of law arises - Decided against Revenue.

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• 2013 (7) TMI 622
  Disallowance u/s 40(a)(ia) - TDS not deducted by assessee - ship management work - Tribunal deleted disallowance - Held that:- Provision of Section 40(a)(ia) was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head 'Income from Business and Profession' in case the assessee does not deduct TDS on such expenses - The default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible - TDS deducted from the salaries of the employees paid by M/s Mercator Lines Ltd., and the circumstances in which such salaries were paid by M/s Mercator Lines Ltd., for assessee, were sufficiently explained - For disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year - Decided against Revenue.

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• 2013 (7) TMI 621
  Genuineness of the Trust - Assessment of trust - Tribunal held that as per the terms of the trust deed, 'would be spouse' and 'would be children' would also become beneficiaries of trust therefore declined to declare Assessee as trust - Held that:- Without giving a finding on the genuineness of the Trust, the relief claimed in the Tax Case Appeal could not be granted to the assessee - Following decision of Commissioner of Income Tax, Coimbatore Versus M/s. P. Sekar Trust and M/s. Peegee Trust [2009 (4) TMI 38 - MADRAS HIGH COURT] and Commissioner Of Income-Tax Versus M. K. Chandrakanth [1996 (4) TMI 66 - MADRAS High Court], matter remanded back.

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• 2013 (7) TMI 620
  Concealment of income imposition of penalty - Whether the Tribunal was correct in holding that there was no concealment of income and there was no cessation of liability but it was on assesses agreement additions have been made and therefore no penalty is attracted despite there being no evidence to substantiate such a conclusion and consequently recorded a perverse finding Held that:- The conduct of the assessee cannot be construed as malafide - the Tribunal was justified in setting aside the orders passed by the Appellate Authority as well as the Assessing Authority - In so far as the imposition of penalty is concerned it is not in accordance with law - No fault could be found with the Tribunal for deleting the penalty - merely because the assessee agreed for addition and accordingly assessment order was passed on the basis of this addition and when the assessee has paid the tax and the interest thereon in the absence of any material on record to show the concealment of income - it cannot be inferred that the said addition is on account of concealment - the assessee has offered the explanation - The said explanation is not found to be false - On the contrary it is held to be bonafide - the entry found in the rough cash book could have been reflected in the accounts for the said financial year in which the survey took place as the last date for closing the account was still not over - the assessee agreed to pay tax and did not challenge the assessment order decided in favor of assesse. Validity of notice u/s 271(1)(c) - Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal and the proceedings initiated by the Assessing Authority was legal and valid Held that:- The Tribunal was justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law thus justified in interfering with the order passed by the Appellate Authority as well as the Assessing Authority and in setting aside the same - Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271 - Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision decided in favour of assessee. Penalty proceedings - Whether the Tribunal was justified in holding that the basis for initiation of the penalty proceedings is the satisfaction of the Appellate Authority in coming to a conclusion based totally on a different ground other than the ground on which the Assessing Authority had passed the assessment order and the proceedings initiated by the Assessing Authority was legal and valid Held that:- the subject matter of the penalty proceedings is the order of the Appellate Authority and not the order passed by the Assessing Authority the penalty proceedings are initiated by the Assessing Authority initially on the basis of his assessment order - the Appellate Authority deleted the additions made under Section 69 of the Act by the Assessing Authority - he sustained additions under new grounds under valuation of the closing stock - the finding recorded by the Appellate Authority - the Assessing Authority in the penalty proceedings took note of the Appellate order and suitably amended the penalty proceedings and proceeded further in the matter and then imposed penalty decided in favour of assesse. When the two fact finding authorities have concurrently held that the explanation offered by the assessee is not false, though the assessee has failed to conclusively prove the explanation offered, does a case is made out for interference Held that:- The explanation offered by the assessee is not false and it is a bonafide one though the assessee has failed to conclusively prove the explanation offered there was no justification to interfere with the well considered order passed by the Tribunal decided in favour of assesse.

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• 2013 (7) TMI 619
  Nature of expenses – capital or revenue - improvement towards furniture in the renting premises - tenancy rights - claim of 1/5 of the expenditure every year - Whether the expenses incurred by the assesse would be treated as capital expenditure or revenue expenditure and would be eligible for deduction or not – Held that:- The expenditure incurred by the assessee canot be treated as capital expenditure and is of revenue in nature – the assesse would also be eligible for getting deductions towards the tenancy rights - the Tribunal was not justified in ignoring the submissions of the appellant while upholding the orders of the lower authorities and the order of the Tribunal was perverse and unsustainable - Court relied upon the judgement of CIT v/s ASSOCIATED CEMENT Cos. LTD. (1988 (5) TMI 2 - SUPREME Court) - the payment made by the appellant to the vendor which resulted in the acquisition of no asset or right would still be treated as revenue expenditure - Tribunal was erred in not allowing the amount paid by the appellant as revenue expenditure in the A.Y. 1997-98 - the Tribunal was not right in disallowing 1/15th of the payment for the relevant year as originally claimed by the appellant – appeal decided in favour of assesse.

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• 2013 (7) TMI 618
  Validity of notice u/s 148 – The averments has not been dealt though two affidavits have been filed - this would further led credence to the assessee’s grievance that reopening notice has been issued at the behest of the audit party - apart from the assessee's averment court intrigued by the fact that though precisely on the four issues the AO called upon the assessee's explanation through a letter - in the subsequent notice for reopening which the AO issued was the only ground taken as reason to reopen the assessment which was outside of the issues on which the explanation of the assessee was called for - this would further demonstrate that the AO at that point of time was not inclined to reopen the assessment - notice lacks validity – court quashed the notice – appeal decided in favour of assessee.

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• 2013 (7) TMI 617
  Validity of notice for re-opening of assessment u/s 148 - Held that:- The Assessing Officer's belief that income chargeable to tax during the year under consideration had escaped assessment, lacks validity - In the previous year relevant to the A.Y. 2004-05 nothing had happened which would permit the Department to collect tax on such receipt - because the petitioner changed the nature of treatment for accounting purpose to such subsidy amount received in the year 1995 would not permit the Revenue to examine the taxability of such receipt in the A.Y. 2004-05 – court quashed the notice of the department - appeal decided in favour of assessee.

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• 2013 (7) TMI 616
  Penalty levied under Section 271(1)(c) – Disallowance of deduction under Section 80IA on the ground that the assessee did not engage more than ten workers – Held that:- Workers employed by sister concern to carry out the job work contractually assigned to them should be considered as the workers employed because they were involved only for the purpose of manufacturing for and on behalf of the assessee company - Decision of Hon'ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. –[ 2010 (3) TMI 80 - SUPREME COURT ] would be squarely applicable, wherein it was observed that, merely because the assessee did not file the appeal against the assessment order, it cannot be presumed that there was any concealment of income or furnishing of wrong particular - Even on merits, the assessee had a good case and had he filed the appeal against the original assessment order, the assessee's claim would have been allowed. As per the judgment in the case of CIT Vs. Delhi Press Patra Prakashan Ltd. - [2013 (6) TMI 70 - DELHI HIGH COURT], wherein it was considered that the employees of the sister concern who were engaged for executing the business of the assessee company was considered as the employees who were engaged for the purpose of manufacturing so as to entitle the assessee to claim the deduction under Section 80I - In the instant case, deduction under Section 80IA was bona fide and merely because the Assessing Officer did not accept the same and had taken a different view, it would not amount to either concealment of income or furnishing of inaccurate particulars - cancelled the penalty levied under Section 271(1)(c) – Decided against the Revenue.

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• 2013 (7) TMI 615
  TDS u/s 195 - Business connection – Disallowance u/s 40(a)(i) of the Act - The export commission is paid to the non-resident who rendered the services outside India for the purpose of procuring the order and pursuing the payment from the foreign buyer. Since no services were rendered in India, the income of the foreign agent to whom the commission was paid did not accrue or arise in India, therefore, the assessee was not liable to deduct tax at source. Consequently, the disallowance under Section 40(a)(i) is not called for – Held that:- In the instant case, facts found by the Assessing Officer did not make out a case of business connection as stipulated in section 9(1)(i) – Relying upon the decision of Hon'ble Jurisdictional High Court in the case of AMD Metplast P.Ltd. Vs. DCIT - [2011 (12) TMI 320 - Delhi High Court ], wherein the observation made was,” A was the managing director and in terms of the board resolution was entitled to receive commission for services rendered to the company. It was a term of employment on the basis of which he had rendered service. Accordingly, he was entitled to the amount. Commission was treated as a part and parcel of salary and tax had been deducted at source. A was liable to pay tax on both the salary component and the commission. The payment of dividend was made in terms of the Companies Act, 1956. The dividend had to be paid to all shareholders equally. This position could not be disputed by the Revenue. Dividend was a return on investment and not salary or part thereof." Assessee has paid commission in addition to salary to two of its directors having shareholding of 2.56% - Payment of commission to above two directors is duly supported by the Board's resolution. Both the directors are working full time for the assessee company and the commission paid to them has been considered as salary in their hands and offered for taxation - The payment of commission in the earlier three years i.e. AY 2005-06, 2006-07 & 2007- 08 has been allowed by the Revenue. Moreover, in the subsequent years also, no disallowance out of commission has been made. That the payment of dividend has been made in terms of the Companies Act, 1956 to the shareholders as per their shareholding. On all these facts, the decision of Hon'ble Jurisdictional High Court in the case of AMD Metplast P.Ltd. (supra) would be squarely applicable – Decided in favor of Assessee

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• 2013 (7) TMI 614
  Deduction under Section 80IB of the Income Tax Act, 1961 - The assessee firm has five units. Out of five units, two units are existing in exempted zones and three are existing in taxable zones - Assessee has debited the entire interest in the books of taxable units - Partners in the Assessee’s firm have interest free capitals of Rs. 82.12 crores as on 31.3.2009 and the investments in Tax free units is Rs. 63.67 crores - Held that:- Following the principle of consistency in deleting the addition made by the Assessing Officer. No change in facts from the earlier years have been brought on record – As per the decision in the case of DCIT vs. Delhi Press Samachar Patra [2006 (3) TMI 218 - ITAT DELHI-E] , apportionment of expenses between different units without any investigation and collection any material is arbitrary. - No disallowance in this regard has been made in the past and as such even in view of rule of consistency, the disallowance made is not tenable – Decided against the Revenue Interest received on FDR - Unclaimed creditors written back - Insurance claim – Held that:- Interest was received on FDR purchased for bank guarantee and as such the income is derived from industrial undertaking relying upon the decision in the case of Orchid Chemicals Sundry creditors were outstanding for business transaction. Hence, it cannot be said that income in this regard was not derived from the industrial undertaking relying upon the decision of C.I.T. vs. Abdul Rehman Industries [2006 (12) TMI 114 - MADRAS High Court] ; If the insurance is claimed in the realm of revenue transaction, it will be allowed as deduction. However, if the same is on capital field, the same cannot be sold out – The issue is remitted to the Assessing Officer – Decided against the Revenue.

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• 2013 (7) TMI 613
  Cessation of liability u/s. 41(1) of the I.T. Act - Assessee is a partnership firm of family member of a Hindu Undivided Family and there were changes in the constitution of the partnership firm when few partner retired from the firm - Owing to some disputes amongst the family members of various branches of the group, the settlement of the accounts of the retiring partners could not be made and the same remained outstanding in the balance sheet year after year. However, in order to present the rosy pictures about the financial health of the partnership firm, during the year under consideration the brought forward outstanding balances of the old partners were transferred to the existing partners' account in order to show the sufficiency of the capital invested by the existing partners so that the loan facility from the banks etc., could be availed - The transfer of amount from the account of old partners and loan account to the existing partners account amounts to cessation of liability – Held that:- By no stretch of imagination, it can be said that there has been cessation of liability as held in the case of C.I.T. vs. Auto Kashyap India Pvt. Ltd. [2010 (4) TMI 53 - DELHI HIGH COURT] - The transfer of amount from one account to another which ultimately remained with the firm is not a cessation of liability - The existing partners were personally liable to the old partners as well as to the creditors – Decided against the Revenue.

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• 2013 (7) TMI 612
  Cessation of liability u/s. 41(1) of the I.T. Act - Assessee is a partnership firm of family member of a Hindu Undivided Family and there were changes in the constitution of the partnership firm when few partner retired from the firm - Owing to some disputes amongst the family members of various branches of the group, the settlement of the accounts of the retiring partners could not be made and the same remained outstanding in the balance sheet year after year. However, in order to present the rosy pictures about the financial health of the partnership firm, during the year under consideration the brought forward outstanding balances of the old partners were transferred to the existing partners' account in order to show the sufficiency of the capital invested by the existing partners so that the loan facility from the banks etc., could be availed - The transfer of amount from the account of old partners and loan account to the existing partners account amounts to cessation of liability. Held that:- By no stretch of imagination, it can be said that there has been cessation of liability as held in the case of C.I.T. vs. Auto Kashyap India Pvt. Ltd. [2010 (4) TMI 53 - DELHI HIGH COURT] - The transfer of amount from one account to another which ultimately remained with the firm is not a cessation of liability - The existing partners were personally liable to the old partners as well as to the creditors – Decided against the Revenue.

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• 2013 (7) TMI 611
  Reassessment - Issue of Notice u/s 148 of I.T.Act, 1961 - Assessee had lodged an insurance claim for the loss of its equipment due to the barge, which was carrying the equipment, had capsized - The assessee, lodged the claim for USD 103 million, whereas, the insurance company made a payment of INR Rs. 15 million, towards the repairs on equipment namely GT2. The assessee company, therefore, filed a Civil Suit in the Civil Court at Secunderabad, against the insurance company for the recovery of its claim on the loss of its equipment - On the basis of the details of this Civil Suit, the AO reopened the assessment proceedings in the instant year, as the AO was under the belief, that the Offshore Contract for USD 103 million was signed between Lanco Kondapalli Power Projects Ltd and Hanjung. Held that:- Appellant did not declare itself as the owner of the goods but rather declared as EPC contractor for the Kondapalli Power Project and that KPCL is the owner of the project - While issuing notice u/s.148, AO has recorded reasons u/s.147. He has only mentioned that there is a contract for supply of equipment worth US$ 103 million. He has however failed to establish even prima-fade as to how income arising out of this Offshore Equipment Supply Contract is taxable in the hands of appellant. He has mentioned about appellant having filed a recovery suit for the insurance claim. The AO has not reached to any prima-facie conclusion that there is an escapement of income in respect of the supply of equipment as per the Offshore Equipment Supply Contract - AO did not have any reason to believe for issue notice u/s.148 – Appellant failed to bring any discussion on record as to how he had reason to believe before issuing notice u/s.148. There is no discussion on the material leading to the issue of notice. There is no mention of any error of judgment in the regular assessment passed - Decided against the Revenue. In regard to profit from sale of equipment – Held that:- The ground become infructuous in view of decision, holding the assessment proceedings to be bad in law u/s 148 – Decided against the Revenue.

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• Customs

• 2013 (7) TMI 609
  Imposition of interest – Settlement Commission directed to pay interest under Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 (1996 Rules, for short) - assessee contended that no interest can be levied for violation of post importation condition and the liability to duty has no relation to Section 28AB - Held that:- The duty which was actually leviable but for the exemption along with interest at the rate fixed by notification issued u/s 28AB Pre-conditions or the conditions mentioned in Section 28AB do not get incorporated in Rule 8 - Rule 8 applies by its own force and on its own strength. Reference to Section 28AB in Rule 8 is only for the purpose of rate of interest. The rate of interest payable under Rule 8 was/is the rate of interest fixed by the notification issued under Section 28AB. It is to or for this limited extent, reference is made to the notification issued under Section 28AB - Rule 8 does not incorporate Section 28AB - Rule 8 also does not make the pre-conditions mentioned in Section 28AB part and parcel of the said Rule - Levy of interest for short levy of duty is prescribed by Rule 8 itself - Interest is chargeable because of the provisions of Rule 8 and not because of Section 28AB – petition decided against assessee

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• 2013 (7) TMI 608
  Appeal against conviction - appellants were convicted for the offences punishable u/s 21, 23 & 29 of the Narcotic Drugs & Psychotropic Substances Act, 1985 and sentenced to rigorous imprisonment and fine – Held that:- The appellants should be sentenced to the same sentence as was imposed - appellant and her sister were convicted for the offences punishable u/s 21 & 23 and sentenced to undergo rigorous imprisonment for a period of ten and half years and to pay a fine on both counts - the appellants herein had been convicted for the offence punishable u/s 21, 23 & 29 - but in respect of much larger quantity of heroin – Appellants had brought heroin to India for sale - such sale necessarily required to be carried out with the assistance of an Indian National and such support system was provided by appellant – the recovery of contraband is not necessary for an offence punishable u/s 29 – court mentioned the judgement of Pavunny Vs. Assistant Collector (1997 (2) TMI 97 - SUPREME COURT OF INDIA)for explaining as to what evidences required to prove a guilt - Section 29 contemplates that whoever abets or is a party to a criminal conspiracy to commit an offence punishable under Chapter IV - then notwithstanding anything contained in Section 116 of the IPC such person shall be punishable with the punishment provided for the offence – decided against appellant.

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• 2013 (7) TMI 607
  Duty Drawback - assessee manufacture & export of Industrial Boilers & Vapour Absorption Chillers of various Models and Capacities for Industrial use on turnkey basis - the products were huge in size these were shipped in various lots considering the convenience of transportation, requirement on site & part shipments – duty drawback application was made - Held that:- the assessee was entitled for getting brand rate of Drawback fixed under Rule 7(1) of Drawback Rules, 1995 subject to compliance of revenue safeguards as stated - plain reading of said circular makes it clear that brand rate of drawback would also be admissible for the goods exported in CKD/SKD/ unassembled condition even if the All Industry Rate of Drawback is also there subject to certain revenue safeguards stated in the circular - no reason to deny when C.B.E. & C. Circular allows the same – court relied upon Cummins (India) Ltd. v. CC, Pune (2012 (6) TMI 432 - CESTAT, Mumbai). purpose of drawback - Purpose of drawback was to relieve the burden of taxes on the export goods and to make our exports competitive in the international market - If this policy objective is to be achieved, then the Department has to interpret and implement the rules in a meaningful way so that the exporter gets the maximum benefit eligible as prescribed under the law - Adjudicating authority should have considered the claim made by assessee under Rule 7 if they had satisfied the eligibility – M/s. Suksha International v. UOI (1989 (1) TMI 316 - SUPREME COURT) - interpretations of unduly restricting substantial export benefit which otherwise is due as per policy of government should be avoided – revision decided in favour of assessee.

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• Corporate Laws

• 2013 (7) TMI 606
  Regulating provisions for unlisted shares - Whether the shares of a public company which is an unlisted company on being transferred would attract the provisions of SCR Act - Held that:- The transactions were hit by the provisions of the SCR Act and the guidelines - the consideration for transfer of shares were duly paid – shares of public limited company though not listed in the stock exchange come within the definition of securities - the provisions of Regulation Act apply – relied upon East Indian Produce Ltd. v. Naresh Acharya Bhaduri & Ors (1985 (8) TMI 314 - HIGH COURT OF CALCUTTA) - whatever is capable of being bought and sold in a market is marketable – there was no warrant for limiting the expression “marketable securities” only to those securities which are quoted in the stock exchange - the provisions of the Regulation Act would cover unlisted Securities of Public Limited Company - shares of Public Limited Company not listed in the stock-exchange was covered within the ambit of Regulation Act. Nature of Contract - whether the contract in question is a spot delivery contract – Held that:- The contract in question is not a spot delivery contract – formal agreement was executed later on and the delivery also took place at a later date - decided against petitioner.

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• Service Tax

• 2013 (7) TMI 630
  Refund of Service tax – bar of limitation – Held that:- The refund claim had been time barred - the claim had been filed beyond the statutory period of one year as stipulated u/s 11B - Court followed the judgement of collector of Central Excise, Chandigarh Vs. Doaba Co-operative Sugar Mills (1988 (8) TMI 103 - SUPREME COURT OF INDIA) - there was no infirmity in the Order of Commissioner (Appeal) – appeal decided against assessee

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• 2013 (7) TMI 629
  Refund of service tax – output services - assessee were having Central Registration number which shows address of premises on which services pertaining to invoices are taken - there is no dispute that lease agreement of Hitech City is with HCL Delhi and invoice in question are also in name of HCL, Delhi and provider of output services is also HCL Delhi - there was no reason to deny credit and subsequently refund of credit to the assessee. credit of service tax - Canteen Services - Held that:- From the invoice it cannot be concluded that food/meal/snack were consumed within premises – there was not any infirmity in finding of the Commissioner (Appeals) in respect of Canteen Services – as stated in CCE Vs. Ultratech Cement Ltd. (2010 (10) TMI 13 - BOMBAY HIGH COURT) - credit in respect of Canteen Service is not admissible if employees have been charged for canteen services – Appeal partly decided in favour of assessee.

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• 2013 (7) TMI 628
  CENVAT credit - input services - Assessee provided immovable property on rent - order beyond the scope of SCN - part of premises was rented out - Held that:- Assessee were eligible for the Cenvat Credit in respect of service tax paid on Maintenance service in respect of 998 Sq. ft. of the total area - service and maintenance and repair service in respect of rest of the area will not be covered under definition of inputs service as that has not been used in providing the output services. Penalty u/s 76 and 78 –Held that:- amount of penalty imposed under Section 78 would be sustained – penalty cannot be imposed more than the amount of CENVAT credit – appeal decided partly in favour of assessee.

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• 2013 (7) TMI 627
  Chareability of interest and imposition of penalty – whether interest is chargeable from date of taking advances to the date of payment of service tax at the time of issue of invoices u/s 68 C/G can prescribe the manner in which service tax is to be paid - Held that:- interest is chargeable on the advances from 5th of month following the quarter to date of payment Under First proviso to Rule 6 of the Service Tax Rules if assessee is an individual or proprietary firm or partnership firm service tax is to be paid by 5th of the month immediately following the quarter and under Rule 6 of the service tax Rules –it was not done by the assessee. time for paying service tax - whether service tax required to be paid at the time of raising final invoice or on date of taking of advance from the service recipient - Held that:- Service tax is to be paid on the payment received in the quarter by 5th of month immediately following the quarter - there was no doubt that tax was payable on the advances received in quarter by 5th of the month following the quarter. Limitation of time barred - whether the demand was time-barred - Show Cause Notice had been issued u/s 75 - there was no time limit prescribed for demand of the interest in the section - Held that:- There was no reason for invoking extended period after appellant filed revised return –show Cause Notice is hit by time limitation - demand is not sustainable on the limitation - court followed the judgement of CCE Vs. TVS Whirlpool Ltd. (1999 (10) TMI 701 - SUPREME COURT OF INDIA) - there was no case for imposition of penalty – appeal decided in favour of assessee

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• 2013 (7) TMI 626
  Mode of payment of service tax on import of services - Business Auxiliary Services and Consulting Engineering Services – assessee paid service tax through CENVAT account – department contended that the same should be paid in cash – Held that:- The payment of service tax can be made through Cenvat Credit during the relevant period – appeal decided in favour of assessee.

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• Central Excise

• 2013 (7) TMI 610
  Monetary limit for filing an appeal - Total amount involved is less than the prescribed amount in the Circular by the CBDT – Held that:- As per the judgment in the case of Joint Commissioner of Income Tax vs. M/s. Ranka & Ranka as reported in [ 2011 (11) TMI 449 - KARNATAKA HIGH COURT ], Circular issued by the Board in that case even though was subsequent to the date of filing of the appeal would have retrospective effect and if the total amount involved is less than the prescribed amount in the Circular by the CBDT, the appeal is not maintainable – Appeal rejected as not maintainable – Decided against the Revenue.

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• 2013 (7) TMI 604
  Cenvat Credit Reversal - Receipt from insurance company was against damage of capacitor – Held that:- The recovery made from insurance company being related to capital goods attributable to credit of Rs. 1,10,956/-gained by the appellant earlier, to be reversible. Therefore, the duty element of Rs. 1,10,956/- confirmed. Interest shall follow – Decided against the Assessee. Penalty of Rs. 1,10,956/-in terms of Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 – Held that:- No mensrea brought out by show cause notice to invoke Section 11AC in the present case. Intention of evasion being absent there shall not be penalty under Rule 15(2) of Cenvat Credit Rules, 2004 – Decided in favor of Assessee.

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• 2013 (7) TMI 603
  Price inclusive of excise duty – Held that:- Facts of this case is more similar to the facts of the case of CCE Vs. Maruti Udyog Ltd.[ 2002 (2) TMI 101 - Supreme Court] decided by Hon’ble Apex Court - Impugned invoices should be treated as cum-duty price and taxable value arrived at accordingly. Quantum of Penalty under Section 11 AC of Central Excise Act, 1944 – Held that:- Relying upon the Apex court decision in the case of UOI Vs. Dharamendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] that if there is finding that penalty under section 11AC is to be imposed in any case, then such penalty should be equal to the amount of duty evaded – Therefore, Penalty imposed by the Commissioner (Appeal) under 11AC be increased to Rs. Rs.27,976/- 25% of penalty under section 11AC if paid within 30 days of receipt of the order – Held that:- Option to pay 25% of duty confirmed as penalty along with other dues within 30 days of the communication of the adjudication order for final closure of the matter was not brought to the notice of the respondent by adjudicating authority – Therefore, the option to pay 25% within 30 days from the date of this order is given now.

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• 2013 (7) TMI 600
  Clandestine removal - Appellant is engaged in the manufacture of PCC Poles - Difference of 283 pieces of PCC poles in the invoice issued by the appellant and the number of poles cleared as per stock register – Held that:- If the appellant s was having any malafide intention to clear the goods without payment of duty they would not have first entered the goods in the stock register and then would not have shown the clearance of the same – This is a case of wrong reflecting of the goods and clerical mistake - Revenue has not been able to adduce any other evidence on record to indicate that said difference in number of poles stand cleared by them clandestinely – Appeal allowed – Decided in favor of Assessee.

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• 2013 (7) TMI 599
  Cenvat Credit on CHA Services - Appellant availed the said CHA Services – Appellant contended that the exported goods are on FOB basis and it is the appellant who remained the owner of the goods till the port area – Revenue contends that expenses after the removal of the goods to port, cannot be considered to be eligible cenvatable input services – Held that:- Relying upon the decision in the case of Commissioner of Central Excise, Rajkot Adani Pharmachem Pvt. Ltd. [2008 (7) TMI 102 - CESTAT AHMEDABAD], it is held that where goods are sold on FOB basis and Service tax paid for CHA Services, all the services availed till the port area would be considered as input services for the purposes of eligible credit – Appeal allowed – Decided in favor of Assessee.

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• 2013 (7) TMI 598
  Limitation – Extended period – Held that:- Before availing the credit, the appellant has addressed letter dated 15.12.2006 to their jurisdiction Deputy Commissioner intimating their intention to avail credit on the inputs used in the manufacture of their capital goods. The credit so availed is also reflected in the statutory record maintained by them as also in the reports so filed by them – Also, relying upon the decision of Hon'ble Supreme Court decision in the case of Mentha & Allied Products Ltd. Vs. CCE, Meerut [2004 (5) TMI 74 - SUPREME COURT OF INDIA], confirmation of demand is barred by limitation – Decided in favor of Assessee.

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• 2013 (7) TMI 597
  Manufacture – Activity gave rise to distinct product – Held that:- By an apparent look, the raw material suggests that without undertaking processing thereof no finished goods can be produced since finished goods exhibits altogether a different look quite distinct from raw material which is visible to naked eye - Difficult to agree with the appellant that there was no manufacture done - Activity carried out by the appellant amounts to manufacture which gave rise to the finished goods which was liable to excise duty – Decided against the Assessee. Penalty – Held that:- For the difficulty of interpretation of law and technicality of examination involved, penalty imposed is waived – Decided in favor of Assesse.

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• 2013 (7) TMI 596
  Pre-deposit of the entire demanded amount – Held that:- Revenue recorded statement of Managing Director Shri Baleshwar Nath of the appellant. Shri Anil Anil Kumar Chaudhary, owner of the above vehicle brought out inextricable link between clandestine removal of cigarettes made by the Appellant and movement of the same by the offending vehicle while resulted in seizure at Varanasi Excise Department - Shri Anil Kumar Chaudhary, vehicle owner brought Shri Adesh Kumar Srivastava, proprietor of M/s. S.A.S. Tobacco Pvt. Trading Co. to the route of investigation who was buyer of the clandestinely removed goods and a vital link of evidence was brought out by him - Evidence came from of driver of the offending vehicle remaining un-rebutted by any of the persons above - Finding interest of Revenue was prejudiced, pre-deposit of entire demand which included duty element as well as penalty was ordered. Stay Order - Direction issued to make deposit of entire demand during pendency of appeal within stipulated time. But only duty element was deposited – Held that:- Appellant failed to comply with the stay order, for which its appeal is dismissed by this order – Decided against the Assessee.

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• 2013 (7) TMI 595
  Clandestine Removal of goods - Case based upon an assumption that wastage arisen during the course of manufacture of POY should not be more than specified percentage - Wastage arisen during the course of manufacture of POY should not be more than 7% and Appellants recorded the wastage of around 16% - Cleared POY in the garb of extra wastage shown by them – Held that:- Not even any iota of evidence produced by the Revenue to confirm the allegation. Entire case is based upon assumption and presumption and neither any documentary evidence has been seized by the Revenue nor any customer has agreed to have received POY under the garb of waste - The process adopted by one manufacturer for manufacture of POY as also the technology, the kind of machines used and the age of machine used would be relevant factors to decide the quantum of generation of waste. Excess waste may arise out of number of facts as detailed by the expert which stand un-rebutted by the Revenue. Such higher production can be on account of deviation in production parameters, fault of operators of machines, due to use of sub-standard raw materials, technology inefficiency or the power supply cut therein or may be attributed to inferior quality of fiber etc - Revenue cannot build its case based upon the theoretical percentage calculation of waste generated, without production of any evidence to reflect upon the above allegation- Decided in favor of Assessee. Adjudicating authority confirmed the demand of duty of Rs.6,27,997/against the manufacturing unit in respect of 5 invoices which stand procured by the Revenue along with intelligence report – Held that:- Invoices not recovered from the appellant’s factory. As such, the onus to show that appellant cleared the goods under the cover of said invoices lies very heavily on the Revenue. The Commissioner while confirming the demand has taken into account the statement of Shri R C Saxena. However, it is the appellant’s case that as Shri Saxena was relieved from his service on account of financial mishandling and he fabricated these documents and produced the same to the Revenue so as to take revenge from the appellant. However, subsequently he filed an affidavit specifically stating that these invoices were fabricated by him - Apart from these invoices, there is virtually no evidence on record to show that the appellant has cleared the goods under the cover of such invoices - Accordingly the confirmation of demand to the extent of Rs.6,27,997/and penalty imposed on unit and imposition of penalty is set aside – Decided in favor of Assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 631
  Assessment of turnover of star rated hotel - Tribunal held assessment based on star rating would be applicable from subsequent year - Held that:- first order of the Tribunal rejecting application was passed on 20.5.2002, however, subsequent thereto, the assessee admittedly received orders from the Tourism Department on 13.8.2002 changing the date of classification issued originally in its order dated 29.11.1999. Thus, amended classification granting star status from 13.10.99 for a period of three years came into existence long after the order of the Tribunal; thus this letter cannot be stated as a fact which was there already at the time when the Tribunal passed the order on 20.5.2002, which, the assessee could not place it before the Tribunal for its consideration - Following decisions of STATE OF KERALA AND ANOTHER v. P.K.SYED AKBAR SAHIB [1988 (1) TMI 37 - SUPREME Court], TEXMACO LTD AND ANOTHER v. STATE OF A.P. AND ANOTHER [1998 (8) TMI 528 - SUPREME COURT OF INDIA] and BRITISH PHYSICAL LAB INDIA LTD v. STATE OF KARNATAKA AND ANOTHER [1998 (9) TMI 546 - SUPREME COURT OF INDIA] - Decided in favour of Revenue.

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• Indian Laws

• 2013 (7) TMI 605
  Recovery - Liability for pay order - Whether Defendant proved that the pay order was issued by Plaintiffs on behalf of CMF – Held that:- the plaintiff had proved that it had bought the securities through the broker - It is the specific case of defendant that the broker informed it that the plaintiff has made payment - defendant had not been able to prove that payment was made by the plaintiff - the natural corollary thereof was that the payment was made by the plaintiff to defendant to purchase the bonds - it had delivered the bonds to the plaintiff - the payment had been made with a clear understanding and arrangement that the bonds would be delivered by Canbank Mutual Fund to the plaintiff on account of the money having been paid by the plaintiff to said defendant.

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• 2013 (7) TMI 602
  Sale of contry liquor - Circular asking for affixing of hologram is supported by any statutory provision - The Appellant could not sell country liquor unless the bottles had holograms affixed upon them. It is a compulsory exaction of money and amounts to tax - Article 265 of the Constitution prohibits any taxation without there being any law. No tax or fee can be imposed without being supported by any statutory provision. There is no statutory provision for issuing the Circular. It is violative of article 265 of the Constitution – Held that:- The affixation of holograms is merely a regulatory measure. This decision was taken by the State Government and direction in the form of the Circular was issued by the Commissioner to stop smuggling and evasion of excise duty under rule 4(12) of the Rules framed under the power conferred on the State Government under section 62 of the Chhattisgarh Excise Act, 1915. It is supported by a statutory provision – Decided against the Assessee. Damages, Return/Refund of price cannot be claimed - Circular was issued by the Commissioner on 23.05.2001 during continuance of the 2000-Tender. After issuance of the Circular, ten months period was still left. The Appellant continued during this period without raising any objection; it never claimed relief on this account: it was only after completion of this 2000-Tender and expiry of six months of the 2002-Tender that the Appellant started objecting to the price of the holograms – Held that:- There cannot be estoppel and acquiescence against constitutional and statutory provisions - The claim of the Petitioner cannot be denied on the ground of estopple – However, Circular is supported by a statutory provision and has statutory force – Therefore, no refund/return can be claimed – Decided against the Assessee.

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• 2013 (7) TMI 601
  Liquor license - Rule 62 under Section 85 of the Act as well as Rule 9 of the 2003 Rules - A foreign liquor ‘ON’ shop licence - Objections raised by the local people, which included number of Councillors of the local municipality - It does not appear that the Collector had conducted any enquiry to find out the creditworthiness of the complaint(s) – Held that:- Among other things, enquiry must be directed to ascertain the veracity of the allegations levelled by the petitioner in this writ petition regarding vested interests of a group of people, who are standing in the way of a licence being granted in his favour. Copies of the report of enquiry shall be made available to the petitioner as well as the respondent no. 6 (who appears to be the primary objector to grant of licence in favour of the petitioner) as well as the Councillor of the ward in which the site proposed is located. No other Councillor of the local municipality shall be entitled to participate in the proceedings, unless he is a resident of that ward and objects to grant of licence as a resident and not on the authority of the office he holds. A Councillor, even though not resident of the concerned ward, may be allowed to participate in the proceedings if he satisfies the Collector of his right to object - Report of enquiry is furnished and an appropriate reasoned decision shall be taken on the petitioner’s application keeping in mind the relevant factors including location of other nearby liquor shops and the likelihood of loss of State revenue, should the petitioner be unable to offer any alternative site.

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