TMI Tax Updates - e-Newsletter
July 30, 2013

Case Laws in this Newsletter:

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

Articles

1. RECENT DEVELOPMENTS IN GOODS AND SERVICE TAX

   By: Dr. Sanjiv Agarwal

News

1. RBI and The Government on the Same Page and working together to Achieve Stability and Growth; Government Welcomes the RBI Policy Statement : CEA

2. TRAI releases consultation paper on Foreign Direct Investment in Broadcasting Sector

3. RBI Reference Rate for US $ and Euro

4. First Quarter Review of Monetary Policy 2013-14 Statement by Dr. D. Subbarao, Governor, Reserve Bank of India

5. First Quarter Review of Monetary Policy 2013-14 By - Dr. D. Subbarao Governor

6. Frauds in the Banking Sector: Causes, Concerns and Cures (Inaugural address by Dr. K. C. Chakrabarty , Deputy Governor, Reserve Bank of India on July 26, 2013 during the National Conference on Financial Fraud organized by ASSOCHAM at New Delhi)

7. Prime Minister's Council on Trade & Industry

8. Auction for Sale (re-issue) of Government Stocks

Notifications

Central Excise

1. 22/2013 - dated 29-7-2013 - CE

Seeks to exempt central excise duty on the scheduled formulations as defined under the Drugs Price Control Order (DPCO), 2013 and which are subjected to re-printing, re-labeling, re-packing or stickering, in pursuance of the provisions contained in the said Order, in a premises which is not registered under the Central Excise Act, 1944 or the rules made thereunder

Income Tax

2. 56/2013 - dated 29-7-2013 - IT

Notifies rate of interest in respect of rupee denominated bond of an Indian company - section 194LD(2)

Highlights / Catch Notes

Income Tax

• Assessee Avoids Penalty: Voluntary Disclosure u/s 271(1)(c) of Income Tax Act Accepted by Department.

  Case-Laws - AT : Penalty u/s 271(1)(c) - it was admitted by the Department that the information came from the assessee without any suggestion or detection from the Department - no penalty - AT
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• Court Rules No Violation of Tax Provisions in Property Purchase u/ss 10(23C)(iv) and 11 of Income Tax Act.

  Case-Laws - HC : Deduction u/s 10(23C)(iv) and 11 - Property purchased in name of individual - It is not a case of diversion of funds for purchasing the property for the benefit of the director. - HC
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• Interest-Free Loans to Unregistered Societies Don't Qualify as Deposits or Investments u/s 11(5) Income Tax Act.

  Case-Laws - HC : Benefit u/s 11 an 12 - Loan given to society not registered u/s 12AA - Where both the societies have similar objects and are registered under Section 12AA and have approvals under Section 80G, interest free loan cannot be treated as deposit or investment so as to attract Section 11 (5) of the Act - HC
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• Court Rules No Benefit Entitlement u/s 42 for Mineral Oil Prospecting Based on Letters Alone.

  Case-Laws - HC : Benefit u/s 42 - business for prospecting, etc., for mineral oil - no legal right on the basis of the letters accrues/arises - no statement or promise that advantage u/s 42 would be available to the successful bidder was promised or made - HC
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• Court Rules Power Subsidy as Taxable Revenue Receipt, Not Capital Receipt, in Income Computation.

  Case-Laws - HC : Whether the power subsidy received by the assesse is taxable as a revenue receipt in the computation of the income - the amount of power subsidy/rebate is certainly a trading receipt not a capital receipt - HC
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• Court Rejects Petition Against Authority's Exercise u/s 153C for Reassessment of Already Assessed Period.

  Case-Laws - HC : Notice u/s 153C - It is not open for the petitioner to contend before the writ court that the exercise of power, which admittedly exists in the authority, will expose the petitioner to assessment for the same period on which assessing authority has already recorded satisfaction - HC
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• Assessee Ineligible for Tax Exemption u/ss 10(23C)(iiiab) and 11 Due to Extra Charges Beyond Admission Fees.

  Case-Laws - AT : Eligibility for exemption u/s 10(23C) (iiiab) - The assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students - AT
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• Assessing Officer Unfairly Dismisses Affidavits on Sale of Mother's 70-Year-Old Streedhan Ornaments Without Cross-Examination.

  Case-Laws - AT : Sale proceeds of ornaments - It is reiterated that the mother of the assesee was got married about 70 year ago and the ornaments sold were out of her 'Streedhan'. - AO is not justified in rejecting the affidavits of the assessee and of his mother without cross examination and without giving proper and sufficient opportunity in this regard. - AT
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Customs

• Customs Commissioner Error: Petitioner Entitled to Interest on Delayed Refund Due to Incorrect Adjudicatory Order.

  Case-Laws - HC : Interest on delayed refund – it was a mistake on the part of the Commissioner of Customs that he passed an incorrect or illegal adjudicatory order. Pursuant to the mistake committed by him, the writ petitioner was obliged to pay the amount assessed by him on account of redemption fine and penalty - interest allowed - HC
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• Court Declines to Support Litigation Over Show Cause Notice in Coal Classification Dispute.

  Case-Laws - HC : Challenge to the Show Cause Notice - Classification of the imported coal as steam coal or as bituminous coal - the court would not encourage litigation at the stage of show cause notice - HC
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• 'Relevant Date' in Customs Act Section 28(3): Defined by Clearance Order Date or Duty Payment Date.

  Case-Laws - HC : The 'relevant date' is defined in Section 28(3) of the Customs Act as the date on which the proper officer makes an order for the clearance of the goods or in any other case the date of payment of duty or interest. - HC
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Service Tax

• Export of Services Must Follow 2005 Rules; Subjective Interpretations Not Allowed.

  Case-Laws - AT : Export of services are to be determined strictly with reference to provisions of the 2005 Rules and not by any subjective assumption of what constitute export - AT
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• Private placement of unlisted shares classified as Merchant Banking activity under regulatory guidelines.

  Case-Laws - AT : The activity of private placement of shares which have not been listed in any recognized stock exchange - The activity comes under the category of Merchant Banking activity - AT
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• Executor's Duties Exempt from Service Tax: No Service Tax on Property Tax, Water, and Electricity Payments for Flat Owners.

  Case-Laws - AT : Appellant was obliged to discharge property tax, water and electricity tariff etc. on behalf of the flat owners and the appellant has undertaken these activity in the capacity of an executor - No service tax - AT
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Central Excise

• Head Office Permitted Cenvat Credit Despite Lack of Input Service Distributor Registration; No Dispute on Service Eligibility.

  Case-Laws - AT : Head office not registered as Input Service Distributor – Invoices issued by Service Provider in the name of Head Office registered in Delhi – There is no dispute about the eligibility of the Service covered under the invoices for Cenvat Credit. - Credit allowed - AT
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• Court Rulings Favor Assessee: Longer Limitation Period Not Allowed Due to No Suppression or Misstatement Found.

  Case-Laws - AT : If the expert bodies, judicial as well as quasi judicial, have interpreted the law in favour of the assessee, the assessee cannot be held guilty of any suppression or mis-statement etc., longer period of limitation is not allowed - AT
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VAT

• Court Orders Release of Goods Seized in Interstate Transit; No Need to Detain Until Adjudication Ends.

  Case-Laws - HC : Interception of the vehicle and the goods seized in the course of transit from outside the State - the goods need not be detained till the adjudication proceedings are over. - revenue directed to release the goods detained by them - HC
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Case Laws:

• Income Tax

• 2013 (7) TMI 825
  Penalty u/s 271(1)(c) - Bogus purchase - CIT(A) has confirmed the addition to the extent of 25% of the total alleged bogus purchases by the assessee - Held that:- assessee has furnished quantitative details of material purchased and material sold - addition of 12.5% of the alleged bogus purchase will meet the ends of justice - Following decision of VIJAY PROTEINS LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX. [2002 (2) TMI 349 - ITAT RAJKOT] - Decided partly in favor of assessee.

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• 2013 (7) TMI 824
  Penalty u/s 271(1)(c) - Confirmation not filed - CIT reduced penalty - Held that:- Assessee had furnished stock register to show the day-to-day purchase and sale of goods - addition made by the AO and reduced by the appellate authorities was on estimation basis - Following decision of M/s.Rolex Tin Works Vs. ITO [2013 (7) TMI 825 - ITAT AHMEDABAD] - Decided in favour of assessee.

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• 2013 (7) TMI 823
  Penalty u/s 271(1)(c) - Long term capital gain - Sale of ancestral property - CIT upheld penalty - Held that:- Explanation offered by the assessee, would go to show that the assessee discharged the burden placed upon it. Thus, in as much as on merits, the assessee had already declared the correct income before detection by the department by filing an application u/s273A of the act - it was admitted by the Department that the information came from the assessee without any suggestion or detection from the Department and notice under s. 148 of the Act was issued long after the settlement petition to the CIT. This would show that no enquiry was made with reference to the declaration filed u/s 273A of the Act by the assessee and no question was asked by the ITO as to the basis he is going to adopt for distributing the total income declared in the computation of income filed before CIT - Following decision of Balvantrai S Contractor v. ITO[2010 (11) TMI 855 - ITAT AHMEDABAD] - Decided in favor of assessee.

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• 2013 (7) TMI 814
  Disallowance of interest - Diversion of interest bearing funds to sister concern company - Tribunal deleted disallowance - Held that:- share of sister concerns of the assessee were held in the name of partners and not in the name of the assessee firm, because the shares cannot be registered in the name of the firm. No portion of interest debited in profit and loss account relates to investment in shares and entire payment of interest was for business purposes. The Assessing Officer has not brought out any evidence to show that borrowed money was used by the assessee in share business - Following decision of CIT vs. Prem Heavy Engineering Works P. Ltd. [2005 (4) TMI 32 - ALLAHABAD High Court] - Decided against Revenue.

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• 2013 (7) TMI 813
  Method of computing profit rate - A.O. used comparable method of accounting - CIT upheld the method of accounting but reduced the amount of addition - Tribunal deleted disallowance - Held that:- The CIT(A) has given cogent reason for not endorsing the approach of the AO in making assessment with reference to the case of another assessee after finding it to be not a directly comparable case and hence, not a safe guide more particularly, when assessee's past history was available and there was no material difference in the facts pertaining to the relevant assessment year and the past history year. The CIT(A), even while accepting past history as the relevant basis for assessment, proceeded to retain a part of the addition without cogent and sufficient reason therefor. The Tribunal, therefore, while endorsing the basis adopted by the CIT(A), has found no reason to sustain any addition and hence, deleted the addition altogether - Tribunal cannot be faulted in accepting the profit rate as declared by the assessee while not approving the rate as applied by the AO -Following decision of Commissioner of Income Tax Vs. Sadrudeen Hussaion [2001 (7) TMI 11 - RAJASTHAN High Court] and Ram Prakash v. CIT [1983 (9) TMI 262 - ALLAHABAD HIGH COUR] - Decided against Revenue.

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• 2013 (7) TMI 812
  Deduction u/s 10(23C)(iv) and 11 - Property purchased in name of individual - Tribunal granted deduction as assessee runs school - Held that:- The sole objection raised by the Assessing Officer for denying the exemption to the assessee was that the property was purchased in the name of Smt. Bharti madhok, director of the assessee society. The assessee is a society which cannot represent itself before the Registrar for the purpose of registration of the sale deed. Somebody has to represent the assessee society in the sale deed for getting it registered. The director of the assessee society is a competent person to represent the assessee society for getting the sale deed registered - It is not a case of diversion of funds for purchasing the property for the benefit of the director. It is not in dispute that the land and building is used for the purpose of the assessee society for educational purposes. In the assessment year 2003-04 the Additional Commissioner of Income tax issued directions to the Assessing Officer on the same set of facts and directed to grant exemption to the assessee. It was also held that the vehicles are purchased for the benefit of the assessee society. Even the CBSE has granted recognition and approval to the assessee society to run the educational school in the same property. Exemptions under Section 10 (23c) (vi) of the Act can be claimed by the assessee without applying for registration under Section 12A of the Act, as it is not required to fulfill the conditions mentioned under Section 11 of the Act in claiming exemption under Section 10 (23c) (vi) of the Act, as explained by this Court in Commissioner of Income Tax and another vs. M/s Jeevan Deep Charitable Trust [2012 (12) TMI 818 - ALLAHABAD HIGH COURT] Decided against Revenue.

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• 2013 (7) TMI 811
  Benefit u/s 11 an 12 - Loan given to society not registered u/s 12AA and it was less than 15% of the income over expenditure - A.O. held there was violation of Section 13(1)(d) - Tribunal denied to grant deduction u/s 11 and 12 - Held that:- Excess of income over expenditure in the relevant year was less than 15% of the gross receipts. The loan was not given in the period relevant to assessment year - Amount was given by way of loan to a society, which was later on registered under Section 12A with the same objects and purpose as that of the assessee - Loan is neither investment nor deposit - The case of deposit is something more than a mere loan of money. It depends on the facts of the each case whether the transaction is clothed with the character of deposit of money - Where both the societies have similar objects and are registered under Section 12AA and have approvals under Section 80G, interest free loan cannot be treated as deposit or investment so as to attract Section 11 (5) of the Act - Following decision of Director of Income-Tax (Exemption) v. Acme Educational Society[2010 (7) TMI 159 - DELHI HIGH COURT] and Mansa Ram & Sons v. Janki Dass Om Prakash & Ors.[1984 (4) TMI 251 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.

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• 2013 (7) TMI 810
  Rejection of account book - Difference in closing and opening stock - IT authorities rejected books of accounts on basis of reduced profit rate - Tribunal upheld rejection of books - Held that:- Appellant is not maintaining accounts for providing different types of raw material to the weavers of different price range - Assessee could not explain as to why the rate of purchase varied and the correlation between the consumption and production - The Income Tax Authorities have not rejected the books of accounts only on the ground of reduced profit rate - Sufficient reason other than reduced profit rate has been given - Decided against Assessee.

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• 2013 (7) TMI 809
  Benefit u/s 42 - business for prospecting, etc., for mineral oil - Whether the benefit u/s 42 was envisaged in the notice inviting tender and in the production sharing contracts but due oversight or mistake the same was not included and mentioned in the written contract and if so the effect thereof - Held that:- It is not possible to accept the contention of the petitioner that the benefit u/s 42 was inadvertently missed out or due to an oversight not included in the written contract - Court examined the original records and found that under the terms and conditions, as well as in the notes, no benefit u/s 42 was envisaged or was required to be granted -the statement of the learned Additional Solicitor General that the three letters mentioned above were factually incorrect - thus no legal right on the basis of the letters accrues/arises - no statement or promise that advantage u/s 42 would be available to the successful bidder was promised or made – petition decided against assessee.

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• 2013 (7) TMI 808
  Whether the Tribunal was justified in differing with the view taken by the first appellate authority and holding that the penalty was leviable under section 271(1)(c) – Power to impose penalty under section 271 of the Act depends upon the satisfaction of the ITO in the course of the pro-ceedings - It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the con-ditions specified in clauses (a), (b) and (c) before the proceedings are concluded – In the absence of a clear finding as to the concealment of income or deliberately furnishing inaccurate particulars, the initiation of penalty proceedings will be without jurisdiction – the law is correctly laid down in CIT V/s. Ram Commercial Enterprises Ltd. (1998 (10) TMI 13 - DELHI High Court) . Validity of proceddings u/s 271 - Held that:- The initiation of the proceedings under sec-tion 271(1)(c) against the assessee for the A.Y. 1982-83 and 1983-84 are not valid in law and the CIT (Appeals) had rightly set aside the same and that the IAT erred in law in sustaining the penalties and reversing the order of the CIT (Appeals) –AO should record in the assessment order his satisfaction that the assessee had either concealed the income or furnished inaccurate particulars of income in his return before imposing penalty - Court noticed that in the assessment orders passed by the AO for the A.Y 1982-83 and for the A.Y. 1983-84 no such satisfaction is recorded - decided in favour of assessee.

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• 2013 (7) TMI 807
  Classification of subsidy - Whether the power subsidy received by the assesse is taxable as a revenue receipt in the computation of the income - Held that:- the amount of power subsidy/rebate is certainly a trading receipt not a capital receipt – subsidy is given on actual power consumption and is nothing to do with the investment subsidy given for establishment of industries or expanding industries in the backward areas - Court relied upon Sahney Steel and Press Works Ltd. v. CIT (1997 (9) TMI 3 - SUPREME Court) - incentives are production incentives in the sense that the company will be entitled to these incentives only after it goes into production - the scheme was not to make any payment directly or indirectly for setting up of the industries - subsidies were granted year after year only after setting up of the new industry and commencement of production – appeal decided in favour of revenue.

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• 2013 (7) TMI 806
  Allowability on interest on borrowed funds - Whether the Tribunal was right in confirming the order passed by the CIT (Appeals) deleting the disallowance made by the AO on the ground that the assessee had given interest free loans to associate concerns out of interest bearing funds - Held that:- Once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case - No businessman can be compelled to maximize its profit – court relied upon the judgement of CIT v. Dalmia Cement (B.) Ltd 2001 (9) TMI 48 - DELHI High Court) - the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) on interest-free loan - the test in such a case is really whether this was done as a measure of commercial expediency – appeal decided against revenue.

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• 2013 (7) TMI 805
  Notice u/s 153C - Whether the assessing authority receiving satisfaction note has already examined account books and has not found anything adverse against the assessee and further seized goods have already been released in favour of the assessee he is required to issue notice u/s 153C to file returns for six years – Held that:- If there is power to do something under the Act, the action taken in the fiscal matters cannot be set aside in exercise of the writ jurisdiction on the ground that such power is to be exercised needlessly without any purpose - The exercise of power in such case can only be challenged - if the power is being exercised with ulterior motive and mala fide intentions - It is not open for the petitioner to contend before the writ court that the exercise of power will expose the assessee to assessment for the same period on which assessing authority has already recorded satisfaction - If there is power to do something under the Act - the action taken in the fiscal matters cannot be set aside in exercise of the writ jurisdiction on the ground that such power is to be exercised needlessly without any purpose - The exercise of power in such case can only be challenged, if the power is being exercised with ulterior motive and mala fide intentions. It is not open for the petitioner to contend before the writ court that the exercise of power, which admittedly exists in the authority, will expose the petitioner to assessment for the same period on which assessing authority has already recorded satisfaction – petition decided against assessee.

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• 2013 (7) TMI 804
  Jurisdiction power u/s 263 by CIT(A) - as per CIT AO had completed the assessment without examining/referring some transactions to the Transfer Pricing Officer to determine whether these investments were made at arm's length - Held that:- The amount representing 2118.84 is towards investment in share capital of the subsidiaries outside India as the transactions are not in the nature of transactions referred to section 92-B and the transfer pricing provisions are not applicable as there is no income. Accordingly, the order passed by the CIT u/s 263 set aside and that of the AO is restored and the grounds raised by the assessee in this regard are allowed.

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• 2013 (7) TMI 803
  Eligibility for exemption u/s 10(23C) (iiiab) - assessee is a society registered under Societies Registration Act - as per assessee the exemption is available being an educational institution which is solely and substantially financed by the Government - CIT(A) allowed the claim - Held that:- The issue is covered by the decision of Vasavi Academy of Education Hyderabad [2010 (2) TMI 970 - ITAT HYDERABAD] wherein remit was remitted back to the file of AO with a direction to reconsider the entire issue in the light of judgement of M/s Islamic Academy of Education & Another Vs. State of Karnataka and Another (2003 (8) TMI 469 - SUPREME COURT) and T.M.A. Pai Foundation and Others Vs. State of Karnataka and Others (2002 (10) TMI 739 - SUPREME COURT) to find out whether the assessee has received any money over and above the fees prescribed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity of hearing to the assessee . The assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students. Thus set aside the issue to the file of the AO for a fresh decision in accordance with law, after affording a reasonable opportunity of being heard to the assessee. Revenue is partly allowed for statistical purposes.

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• 2013 (7) TMI 802
  Unexplained cash deposits - income from undisclosed sources - CIT(A) deleted the addition - accumulated savings out of Agriclutural Income - assessee’s submission that his 87 years old mother earned and accumulated Rs.10,81,840/- in cash from the agricultural productions from piece of 3.5 bighas of land - Held that:- AO's observation is not fair and judicious as on one hand he himself is admitting that the papers of the ownership of the agricultural land has been submitted and on the other hand raising doubt about earning of agricultural income from the same. Moreover A.O. has erred in ignoring the material on record that the savings of the mother of the assessee out of the agricultural income was not from the agricultural income in the year under consideration but are the accumulated savings out of agricultural income over the number of years. He also erred in holding that an old lady of 87 years of age earning and accumulating 20 Lacs in cash appears to be an impossible proposition as first of all the accumulated savings out of agricultural income was stated to be approximately Rs.10,81.4401 and not 20 lacs as mentioned by AO. Secondly it is again reiterated that this was the accumulated savings over the number of years and not the savings out of agricultural income in the year under consideration. AO is not justified in holding that on 3.5 bighas of land one can not even dream to' meet both the ends leave aside earning and saving as it is submitted that the land at the above said place is a fertile land and give various crops three times in a year. AO has failed to give any cogent reason why both ends can not be met with 3.5 bighas of land. In favour of assessee. Regarding proceeds out of sale proceeds of ornaments - Held that:- It is reiterated that the mother of the assesee was got married about 70 year ago and the ornaments sold were out of her 'Streedhan'. It is submitted that there cannot be any purchase bill for acquisition of such 'Streedhan' of an old hindu lady of 87 years of age and who got married about 70 years ago and belong to a respectable family.The observation of the AO that the evidence are flimsy and non verifiable in nature is, thus, not correct in the facts and circumstances of the case. AO is not justified in rejecting the affidavits of the assessee and of his mother without cross examination and without giving proper and sufficient opportunity in this regard. Thus CIT (A) has directly arrived to a finding that it would be fair and reasonable to Rs.2,00,000/- to the return of income of the assessee as income from other sources but we are unable to see any basis of this segregation and part confirmation of the addition made by AO. Thus it will be appropriate that the issue of cash deposit of Rs.19,55,000/- to the saving bank account of the assessee deserve fresh adjudication by the AO in the light of provisions of u/s 68.

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• 2013 (7) TMI 801
  Income derived from sale of shares - capital gain v/s income from business or profession - Held that:- As can be seen from the submission made by the assessee in earlier years i.e., till assessment year 2005-06, the assessee's income has been accepted as capital gain, further the assessee being an investor has not borrowed any fund to make investment in shares but has used his own funds. There is also no intra-day transaction. If these facts are correct and the assessee has used his own funds and carried on the activities as investor and is consistently showing the income under the head capital gain and the department was also accepting this position upto assessment year 2005-06 then the ratio laid down by the Hon'ble jurisdictional High Court in case of M/s Spectra Shares and Scrips V/s. CIT (TMI ID= 234348 2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT) would apply. CIT(A), though, in his order has mentioned specific instances of shares being held for a very short period while coming to his conclusion that the assessee is not an investor but is engaged in a trading activity. However, he has not properly examined the facts whether the assessee has used his own funds and not borrowed funds in the investment in shares, the department has been accepting the income from shares as capital gain upto assessment year 2005-06, there is no intra-day transactions. These facts definitely will have a bearing in coming to a conclusion as to whether the income from shares should be assessed as income from business or capital gain. Since neither the AO nor the CIT(A) have examined all these aspects, the entire issue of activity in shares is in the nature of investment or trading requires to be considered again considering ratio laid down in PVS Raju V/s. CIT ( 2011 (7) TMI 818 - Andhra Pradesh High Court) and M/s Spectra Shares and Scrips (supra) - appeal of assessee is allowed for statistical purposes.

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• 2013 (7) TMI 800
  Unaccounted cash deposit in the bank account - Held that:- The assessee has sufficiently discharged the onus of proving the said deposits in to the bank account. The pattern of deposits and withdrawals made in the bank account which are reproduced by the AO assessment order does not establish the fact that the deposits made of a total amount of Rs.5 lakh on 25-8-2008, 26-8-2008 and on 8-9- 2008 are out of the withdrawals of Rs.4,91,000/- made on 27-5- 2008. Similarly, the assessee's explanation with regard to the deposits of Rs.1 lakh and Rs.4 lakh respectively on 29-1-2009 and on 18-3-2009 are acceptable in view of the fact the AO has not disputed the fact of borrowals of Rs.5 lakhs made from Mr. Rajeev Aurangabadkar on 12-12-2008. Similarly, assessee's explanation with regard to total deposits of Rs.1,44,500/- on different dates as mentioned in CIT (A)'s order also cannot be rejected considering the nexus between the deposits and the income and also the fact that the assessee had shown income of Rs.2,61,250/- and agricultural income of Rs.72,630/- which has not been disputed by the AO. Thus no infirmity in the order of the CIT (A) in deleting the additions made by the AO as the assessee has satisfactorily explained the source of such deposits. Assessment of income - AO contested against CIT (A)'s direction to determine the net profit at the rate of 5% of the purchases and stock put for sale during the year - Held that:- As decided in Income tax Officer-Ward-2, Hyderabad Versus Amaravathi Wine Shop, Hyderabad [2012 (8) TMI 706 - ITAT, HYDERABAD] income of the assessee in this particular line of business of liquor has to be estimated at 5% on purchase of stock put for sale. Since the impugned order of the CIT (A) is in consonance with the consistent view taken by the co-ordinate bench of this Tribunal in similar matter appeal filed by the department is dismissed.

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• Customs

• 2013 (7) TMI 799
  Interest on delayed refund – whether the assessee shall be entitled to interest on delayed refund - Revenue contended that there was no question of payment of any interest in case of refund of fine or penalty because the same is not provided for in the statute – The Customs Act being a fiscal statute, equity has no manner of application – court rejected all the contentions of the assessee - Held that:-the assessee would be entitled to the interest on refund being delayed by the department - It is true that there is no equity in the matter of taxation but that principle is applicable against the Revenue and not against the assessee - on equitable consideration tax cannot be realized - it was a mistake on the part of the Commissioner of Customs that he passed an incorrect or illegal adjudicatory order. Pursuant to the mistake committed by him, the writ petitioner was obliged to pay the amount assessed by him on account of redemption fine and penalty - once the doctrine of restitution is attracted, the interest is often as normal relief given in restitution – decided against revenue.

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• 2013 (7) TMI 798
  Challenge to the Show Cause Notice - Classification of the imported coal as steam coal or as bituminous coal - Held that:- The assessee ought not to have filed a writ petition before the High Court questioning, the correctness or otherwise of the orders passed by the Tribunal - The Excise Law is a complete code in order to seek redress in excise matters and hence may not be appropriate for the writ court to entertain a petition under Article 226 of the Constitution. The challenge of the petitioner being at the stage where mere show-cause notice has been issued by the department - at this stage no interference was called for - the court would not encourage litigation at the stage of show cause notice - the noticee had sufficient opportunity to meet with all the allegations and produce such material on record as may be required –court relied upon Special Director and anr. vs. Mohd. Ghulam Ghouse and anr. (2004 (1) TMI 378 - SUPREME COURT OF INDIA ). The statute provides for detailed mechanism for adjudication of disputes between the department and the importer – court would not like to short-circuit such proceedings and plunge straightaway into examining such questions in a writ jurisdiction at the first instance – Union of India vs. Guwahati Carbon Ltd. (2012 (11) TMI 885 - SUPREME COURT OF INDIA) - the assessee had a remedy in the form of a right of appeal under the statute - that remedy must be exhausted first – petition decided against assessee.

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• 2013 (7) TMI 797
  Extended period of limitation - relevant date - Whether the Appellate Tribunal was right in holding that the demand notice dated 1.12.2000 was time barred - the said notice was in time in pursuance of the provisions of Sections 28 and 153 of the Customs Act, 1962 and Sections 8, 9 and 27 of the General Clauses Act - Held that:- The six months period of limitation has to be calculated from the relevant date. - The 'relevant date' is defined in Section 28(3) of the Customs Act as the date on which the proper officer makes an order for the clearance of the goods or in any other case the date of payment of duty or interest. Given the fact that the payment of duty on the above bill of entry was on 1.6.2000 and going by Section 28 of the Customs Act, the six months time for the purpose of invoking jurisdiction under Section 28 has to be counted from the date of payment of duty i.e. on 1.6.2000. - Tribunal has rightly come to the conclusion that the proceedings initiated by the adjudicating authority was time barred. When the Revenue had accepted the two other bills of entry we fail to understand the logic in challenging the order of the Tribunal in respect of one bill of entry which was the subject matter in one of the appeals before the Tribunal – court relied AMBALI KARTHIKEYAN v. COLLECTOR OF CUSTOMS AND CENTRAL EXCISE (1970 (10) TMI 29 - HIGH COURT OF KERALA) wherein it was decided that the notice was served within time limit - similar contention taken in respect of other two bills of entry were not under challenge before the Court – appeal decided against the revenue.

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• 2013 (7) TMI 796
  Classification of goods – duty drawback – assessee exported High Voltage switchgear (Circuit breaker SF6) classifying the export goods under Heading 85.37 under claim for drawback - the AC contended that the export goods are not eligible for drawback under SS No. 85.37 but under SS No. 85.35 - Held that:- The Tariff Items in the First Schedule to the Customs Tariff Act, 1975 and description of goods in Drawback Schedule are aligned at four digit level, the said circuit breakers exported are specifically covered under Heading 85.35 of the Drawback Schedule and therefore the same have to be classified under S.S. No. 85.35 of Drawback Schedule - the heading which provides the most specific description shall be preferred to heading providing a more general description - court relied upon Crompton Greaves Ltd. v. CCE (1996 (8) TMI 190 - CEGAT, NEW DELHI ) - Government notes as per Condition 2 of Notification No. 68/2007-Cus. (N.T.), dated 16-7-2007 and Notification No. 103/2007-Cus. (N.T.), dated 29-8-2007, General Rules for interpretation of the First Schedule to the Customs Tariff Act, 1975, shall mutatis mutandis apply for classifying the export goods listed in the said Schedule – revision application decided against assessee

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• Service Tax

• 2013 (7) TMI 820
  Export of Service - Business Auxiliary Services – assessee provided facilitation of importation of goods into India - Held that:- Relying upon the judgement of Paul Merchants Ltd. vs. CCE, [2012 (12) TMI 424 - CESTAT, DELHI (LB)], A service provided by an agent or subagent in India to intended beneficiaries of an overseas company is service provided to a foreign company and not to the recipient of the goods or services provided by the foreign company and that the same must be treated as export of service - Export of services are to be determined strictly with reference to provisions of the 2005 Rules and not by any subjective assumption of what constitute export - On analysis of Rule 3(1)(iii) of the 2005 Rules. - prima facie case is in favor of assessee - stay granted. Regarding reversal of cenvat credit - petitioner /appellant directed to remit Rs. 7 lakhs.

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• 2013 (7) TMI 819
  Demand of service tax – Whether the assessee would come under the category of “stock broking service” – two notices were served to the assessee - Held that:- The order of the department was set aside - no attempt has been made by the Revenue to classify the service and to demand service tax thereon - the principles of natural justice have been clearly violated - primary requirement is to put the appellant to notice under what taxable service category he is liable to service tax - the activity is private placement of shares which have not been listed in any recognized stock exchange - The activity comes under the category of Merchant Banking activity – putting the liability prior to 2001 does not hold ground - the decision in CCE, Chennai Vs. Sundaram Finance Ltd(2007 (1) TMI 495 - CESTAT CHENNAI)also supports the view - classification done by the department of private placement of shares under management consultancy service has no basis - appeal allowed in the favour of the assessee.

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• 2013 (7) TMI 818
  Construction of residential flats - collection and payment of outgoing expenses including any municipal local taxes, property tax, water charges, electric charges, revenue assessment or interest or any mandatory charges - Development and maintenance fees collected - Revenue held that activity undertaken is under category of Management, maintenance and repair services - Held that:- According to Section 5 of Maharashtra Ownership of Flats (Regulation) Act, 1963, appellant was obliged to discharge property tax, water and electricity tariff etc. on behalf of the flat owners and the appellant has undertaken these activity in the capacity of an executor - Therefore, the appellant has not rendered any management, maintenance or repair services - unconditional waiver from pre-deposit of the dues adjudged against the appellant granted - Decided in favour of assessee.

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• 2013 (7) TMI 817
  Condonation of delay - Held that:- The order-in-original was received by the party on 23.07.2010 and an appeal against the same was filed only on 08.08.2011 with a delay far beyond the condonable period of delay prescribed under Section 85 - Section 5 of Limitation Act 1963 was not applicable and that the Commissioner (Appeals) was not empowered – u/s 35 of the Central Excise Act to condone any delay beyond the condonable period of delay (30 days) - Court relied upon Singh Enterprises Vs. Commissioner (2007 (12) TMI 11 - SUPREME COURT OF INDIA). Waiver and stay application - no representation was made by the assessee despite notice nor any request for adjournment – court dismissed the stay application – decided against assessee.

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• 2013 (7) TMI 816
  Rent a cab service – Penalty - whether the assessee would be liable for service tax when providing the services of motor cabs/ maxi cabs - Held that:- The assessee had provided the taxable service defined in Section 65(105)(O) r.w Section 65(91) – assesses contended that they were operating from a remote area and were ignorant of the relevant provisions - The contention is devoid of force - Ignorance of law cannot be considered a reasonable cause for failure to remit the legislatively mandated tax – following the judgement of Secy. Federn of Bus-operators Assn. of T.N. vs. UOI(2001 (4) TMI 7 - HIGH COURT MADRAS ) - wherever a cab is rented by a Rent-a-cab scheme operator to any person a transaction chargeable to service tax occurs and is liable to service tax at the statutorily prescribed rates – appeal decided against assesses.

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• Central Excise

• 2013 (7) TMI 795
  Manufacturing of Yarn - counts - rate of duty - State of things which has been shown to be in existence within a period shorter than that within which such things or states of things usually cease to exist is still in existence – Respondent company is engaged in the business of manufacturing of various counts of cotton yarn falling under heading 52.03 of the Central Excise Tariff Act, 1985 at the relevant point of time. It appears that at the relevant point of time the rate of tax on the yarn manufactured depended on the count/finesse of the yarn. Higher the count higher the duty - Officers of the Central Excise Department inspected the factory premises of the respondent company and recovered two registers and a file - Perusal of the two registers and the files revealed that the assessee was manufacturing higher counts over and above the tolerance limit in respect of the following counts declared to the department and cleared the same without payment of appropriate duty on the higher counts - Held that:- The judgment in the case of Ramalinga Choodambikai Mills Ltd [1974 (9) TMI 54 - HIGH COURT OF MADRAS], appears to be a sound view in law and obviously based on the principle enunciated under Section 114 of the Evidence Act, wherein it was held that If the department on inspection of a manufacturing premises on a particular day detects that goods of a particular specification are being manufactured, the department is entitled in law to presume that (until the manufacturer proves the contra) goods of the same specification are continued to be manufactured. In the instant case the content of the recovered FILE and the statements of the employees of the respondent must be examined to ascertain the fact whether the respondent manufactured during the period covered by the FILE - yarn of a higher count than the declared count. There is no any clear finding on record from any one of the authorities below that the materials gathered by the department would establish that basic fact – Decided against the Revenue.

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• 2013 (7) TMI 794
  Head office not registered as Input Service Distributor – Invoices issued by Service Provider in the name of Head Office registered in Delhi – Branch office is providing Telecommunication Service in the state of Rajasthan – Held that:- There is no dispute about the eligibility of the Service covered under the invoices for Cenvat Credit. There is also no dispute that these services had been used by the Appellant for providing telecommunication service in the state of Rajasthan – Relying upon the ratio of judgment of the Tribunal in case of Durferrit Asea Pvt. Ltd.[ 2010 (4) TMI 259 - CESTAT, BANGALORE] which would be applicable to the facts of the instant case and the Cenvat Credit cannot be denied just because the invoices are in the name of the head office – Decided in favor of Assessee.

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• 2013 (7) TMI 793
  Testing of goods - Test report of the chemical examiner GR-1, Central Excise & Customs Laboratory, Vadodara merit classification as a manufactured tobacco - Appellant did not accept the test report dated 28.3.08 and clarification given by the chemical examiner GR-1 on 22.4.08, and, had specifically requested the lower authorities vide their letter dated 15.05.08 for retest of the samples - Request was not granted by the lower authorities and they denied the retest without assigning any reason – Held that:- As per chapter 11 of CBEC manual, paragraphs from 8.8 to 8.13 of the said chapter submits that the retesting is allowed to an assessee if he does not agree with the results of the first test, subject to a condition that the said retest test is sought within 90 days from the date on which first test was conducted - The department should have done a retest to eliminate any misgivings before taking up the adjudication - Non-granting of retesting of the sample would be gross violation of the principles of natural justice – Decided in favor of Assessee.

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• 2013 (7) TMI 792
  Clandestine Removal - 42.030 M.T. of MS Ingots seized from truck No. UP 2 IN 3681, from place near Varanasi and in respect of which an invoice issued by M/s Panther Ispat Udyog, Bokaro to M/s Manoj Steels had been produced, had been manufactured and cleared by M/s Savitri Ispat (India) Pvt. Ltd., Durgapur – Statement of Mohd. Akram, driver of the said Truck is his spontaneous statement and the person giving the statement being a simple illiterate person could have no reason to give a false statement. I also find that the invoice issued by M/s Panther Ispat Udyog, Bokaro had been produced by the truck driver and on inquiry with Shri Ajay Kumar Garg of M/s Panther Ispat Udyog, Shri Garg also has named M/s Savitri Ispat as the supplier of the goods and had stated that the goods had been cleared without payment of duty. This statement of Shri Ajay Kumar Garg has also not been retracted - Evidence is sufficient to establish the preponderance of probability in support of the obligation that goods, in question, had been manufactured by M/s Savitri Ispat (India) Pvt. Ltd. and had been illicitly cleared by them – Decided against the Assessee. Penalty under Rule 26 of the Central Excise Rules, 2002 - Imposition of penalty on Shri Ramjatan Prasad Singh, Manager of M/s Savitri Ispat India Ltd. – Penalty under said rule on the basis of allegation that he knowingly, dealt with the goods which he knew are liable for confiscation – Held that:- There is no evidence to show that it is Shri Ramjatan Prasad Singh, who was involved in illicit for the clearance of the goods, in question. It is very much possible that some other employee of M/s Savitri Ispat may be involved – Decided in favor of Appellant(Shri Ramjatan Prasad Singh).

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• 2013 (7) TMI 791
  Initiation of proceedings for imposition of penalty - Respondent are a rolling mill operating under compounded levy scheme under Rule 96 ZP - There was delay in discharge of monthly duty liability by the due date which attracted equal amount of penalty in terms of Rule 96 ZP (3) – Held that:- Hon’ble Punjab & Haryana High Court in the case of CCE, Chandigarh vs. Hari Concast (P) Ltd. reported in [ 2009 (4) TMI 170 - PUNJAB AND HARYANA HIGH COURT ] has held in clear terms with regard to the provisions of Rule 96 ZO (3), that though there is no limitation period for initiating penal proceedings for failure of discharge the duty liability by the due date, the penal proceedings must be initiated within a reasonable period and it would be reasonable to adopt a period of five years in this regard and accordingly held that the penal proceedings initiated after five years are not sustainable. Similar view is again adopted by Punjab & Haryana High Court in a different case - There is no contrary judgment of any High Court or Apex Court – Department’s appeal is without any merit – Decided against the Revenue.

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• 2013 (7) TMI 790
  Limitation – Extended period for issuance of Show- Cause Notice – Held that:- Relying upon the decision of Tribunal in the case of Diamond Cements Ltd. vs. CCE Bhopal [ 2012 (6) TMI 73 - CESTAT, NEW DELHI], when during the relevant period, the decision of the Higher appellate forums were in favour of the assessee, no suppression can be alleged against the assessee - If the expert bodies, judicial as well as quasi judicial, have interpreted the law in favour of the assessee, the assessee cannot be held guilty of any suppression or mis-statement etc., longer period of limitation is not allowed – Barred by limitation – Decided in favor of Assessee. Rule 6(2) of CCR, 2004 – Held that:- Sub-rule (2) of Rule 6 of Cenvat Credit Rules does not require separate maintenance of records in respect of fuel, there is no requirement of proportionate reversal of credit when such fuel is ultimately used in the manufacture of exempted products – This proposition is relied upon based upon the decision by Hon’ble Punjab and Haryana High Court in the case of Commissioner of Central Excise, Ludhiana vs. Nestle India [2009 (8) TMI 510 - PUNJAB Decision of Hon’ble Gujarat High Court in the case of CCE vs. Charak Pharma P. Ltd. [2012 (11) TMI 475 - GUJARAT HIGH COURT ]; Larger Bench of the Tribunal in the case of Gujarat Narmada Fertilizers Co. Ltd. reported in [2006 (12) TMI 9 - CESTAT,MUMBAI] – Decided in favor of Assessee.

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• 2013 (7) TMI 789
  Cenvat Credit on various steel items like MS Angles, Channels, Joists, Sheets, Coils, Plates etc - Respondent are manufacturers of sugar and molasses chargeable to Central Excise duty - Items being neither inputs nor covered by the definition of capital goods, are not eligible for Cenvat credit – Held that:- In terms of definition of input as given in Rule 2 (k), the goods used for fabrication of capital goods for use in the factory are eligible for Cenvat credit – Also, in terms of judgment of Hon’ble Rajasthan High Court in the case of Union of India vs. Hindustan Zinc Ltd. reported in [2006 (5) TMI 44 - HIGH COURT RAJASTHAN ], appeal against which has been dismissed by the Apex Court, the steel items used for repair and maintenance of the plant and machinery would be eligible for Cenvat credit – Decided against the Revenue.

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• 2013 (7) TMI 788
  Cenvat Credit on Welding electrodes used for repair and maintenance of plant and machinery – Held that:- Relying upon the judgment of Hon’ble Chhattisgarh High Court in case of Ambuja Cement Eastern Ltd. [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT ], it has been held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - Hon’ble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in [2010 (4) TMI 424 - KARNATAKA HIGH COURT ] has also held that the goods used for repair & maintenance of plant and machinery are eligible for Cenvat Credit – Decided in favor of Assessee.

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• 2013 (7) TMI 787
  Welding electrodes used for repair and maintenance of plant and machinery, are eligible for Cenvat Credit or not - Held that:- Relying upon the judgment of Hon’ble Chhattisgarh High Court in case of Ambuja Cement Eastern Ltd. [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT ], it has been held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - Hon’ble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in [2010 (4) TMI 424 - KARNATAKA HIGH COURT ] has also held that the goods used for repair & maintenance of plant and machinery are eligible for Cenvat Credit – Decided in favor of Assessee.

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• 2013 (7) TMI 786
  Welding electrodes used for repair and maintenance of plant and machinery, are eligible for Cenvat Credit or not - Held that:- Relying upon the judgment of Hon’ble Chhattisgarh High Court in case of Ambuja Cement Eastern Ltd. [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT ], it has been held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - Hon’ble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in [2010 (4) TMI 424 - KARNATAKA HIGH COURT ] has also held that the goods used for repair & maintenance of plant and machinery are eligible for Cenvat Credit – Also, Apex Court in case of Grasim Industries Ltd. reported in [2011 (10) TMI 2 - SUPREME COURT OF INDIA] has held that repair & maintenance of machinery is not manufacture and therefore steal scrap, arising in course of the said activity is not excisable, this judgment does not help the Department, as for determining the eligibility for Cenvat Credit of an item used in an activity, what is relevant is as to whether without that activity in which the item, in question, is used, manufacturing operation are commercially feasible, and it is not relevant as to whether that activity by itself amounts manufacturer. In the case of Sree Rayalaseema Hi-Strength Hypo Ltd. reported in [2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT] decided by Hon’ble Andhra Pradesh High Court, the point as to whether without regular repair & maintenance of the plant and machinery by using welding electrodes, manufacturing operations, were commercially feasible, had not been considered – Decided in favor of Assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 822
  Interception of the vehicle and the goods in the course of transit from outside the State - Respondent seized goods in default of necessary documents - Held that:- Course pursued by the respondent cannot be said as arbitrary or illegal, more so, when the only document which accompanied the transport was the 'Invoice' and not even 'Form 16' - However, the goods need not be detained till the adjudication proceedings are over. Accordingly, the respondent is directed to release the goods detained by them as per Ext. P3 forthwith, on condition that, the petitioner furnishes 'Bank Guarantee' for the amount or sufficient security by way of immovable property to the satisfaction of the department.

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• 2013 (7) TMI 821
  Violation of principal of natural justice - Opportunity of personal hearing not given - Held that:- it is an undisputed fact that the petitioner had sought for such an opportunity for explanation in response to pre-assessment notice, which admittedly, has not been granted - Impugned order passed by the respondent is not in conformity with the statutory requirement and the binding judicial precedent of Suzion Infrastructure Services v. Commercial Tax Officer (WC), Ernakulam [2010 (6) TMI 677 - Kerala High Court] - Decided in favour of Assessee.

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• Indian Laws

• 2013 (7) TMI 815
  Refund of licence fee along with interest for the period of cancellation of licence of Hotel-Bar Licence - The Licencing Authority considered the representation of the residents and without affording any opportunity of being heard to the petitioner, cancelled the aforesaid licence granted to the petitioner on 22.6.2003 - Section 31 of the C.G. Excise Act, 1915 shows that the power given to the Licencing Authority for cancellation of the licence to be exercised on certain conditions which are enumerated in Clauses (a) to (g) of sub-section (1) of section 31of the C.G. Excise Act, 1915. If any of the above conditions mentioned in sub-section (1) of Section 31 appears to be there, the Licencing Authority entitled to cancel the licence of the concerned licencee after giving due opportunity of hearing to him/her and if a licence is cancelled on the above breach, then only, under sub-section (3) of Section 31, the holder of a licence, permit or pass shall not be entitled to any compensation for its cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof - The Licencing Authority has taken a view that the cancellation of the licence was not u/S 31 (1), therefore, the petitioner was not entitled to any refund as per sub-section (3) of Section 31. Section 32 of the Act, 1915 – The section provides power to the Licencing Authority to withdraw licences. It provides that whenever the authority which granted any licence under this Act considers that such licence should be withdrawn for any cause other than those specified in Sec.31, it shall remit a sum equal to the amount of the fees payable in respect thereof for fifteen days, and may withdraw the licence either- (a) on the expiration of fifteen days’ notice in writing of its intention so to do, or (b) forthwith without notice. Sub-Section (3) of Section 32 further provides that when a licence is withdrawn under sub-section (1), any fee paid in advance or deposit made by the licencee in respect thereof shall be refunded to him, after deducting the amount (if any) due to the Government. Held that:- The petitioner had deposited Rs.2,50,000/- as the licence fee for the period commencing from 30.4.2003 to 31.3.2004 - She was entitled to refund of the licence fee for the period of closure i.e. from 22.6.2003 to 31.8.2003 as would be determined on the basis of the total fee of Rs.2,50,000/- for the above period - Argument relating to refund of fee of one month, i.e. for the period in between 1.4.2003 to 29.4.2003, is concerned, the petitioner cannot make a claim for the same, because, for grant of the licence to the petitioner, she had paid the licence fee only on 26.4.2003. Thus, the grant itself became due in her favour on 26.4.2003 or immediately thereafter and not prior to it – Thus, refund allowed along with simple interest at the rate of 6% per annum from 31.8.2003 till realization – Decided in favor of Assessee.

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