TMI Tax Updates - e-Newsletter
July 5, 2014

Case Laws in this Newsletter:

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

Articles

1. SURRENDER OF SERVICE TAX REGISTRATION

   By: Dr. Sanjiv Agarwal

News

1. A valid Email ID and Mobile Number to be Registered/Updated on the E-Filing Website of the Income Tax Department

2. Shri H. R. Khan re-appointed as RBI Deputy Governor for Two years

3. RBI Reference Rate for US $ and Euro

4. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

Circulars / Instructions / Orders

Income Tax

1. F. No. 279/Misc/M-20/2011-ITJ - dated 1-7-2014

Standard Operating Procedure on filing of Appeals/ Special Leave Petitions (SLPs) by the Income tax Department in the Supreme Court and related matters: instructions regarding- Revised Proforma B to Instruction No 4/2011 dated 09.03.2011- reg.

FEMA

2. 01 - dated 3-7-2014

Financial Commitment (FC) by Indian Party under Overseas Direct Investments (ODI) – Restoration of Limit

Highlights / Catch Notes

Income Tax

• Transaction Not Deemed Dividend u/s 2(22)(e), High Court Distinguishes Supreme Court Precedents.

  Case-Laws - HC : Deemed dividend u/s 2(22)(e) - circuitous transaction – Loan or advance - transaction essentially carried out is not falling u/s 2(22)(e) - two decisions of SC relied upon by the revenue distinguished - HC
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• High Court Rules No Penalty for Cash Loan Exceeding Limit u/s 269SS of Income Tax Act.

  Case-Laws - HC : Violation of section 269SS – Cash accepted exceeding the limit – The identity of those persons has also been well established - assessee also had given satisfactory reason for taking such loan - no penalty - HC
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• Assessee Ineligible for Deductions u/ss 80HH and 80I Due to Lack of Positive Income After Depreciation.

  Case-Laws - HC : After allowing depreciation, unabsorbed loss and unabsorbed depreciation, there was no positive income - the assessee was not entitled to any deduction u/s 80HH & 80I of the Act - HC
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• Capital Gains Tax: Importance of Physical Verification to Determine Agricultural vs. Non-Agricultural Land Classification.

  Case-Laws - AT : Levy of capital gains – Sale of land - agricultural land or Non-agricultural land – physical verification of the land will clinch the issue without any doubt, so that not only on legal principles but also factually also assessee’s contentions can be proved or disproved - AT
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• Exemption Approved: Taxpayer Claims Section 54F for Funds Advanced to Spouse, Holds 50% Property Ownership.

  Case-Laws - AT : Claim of exemption u/s 54F – amount advanced to his wife towards purchase of the property - assessee has 50% ownership over the property - exemption allowed - AT
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• Assessing Officer Directed to Remove Additions for Share Application Money and Unsecured Loans with Verified Sources.

  Case-Laws - AT : Confirmation of additions on account of share application money - Unsecured loan – there have proper sources for the amounts invested in the company –the AO is directed to set aside the additions - AT
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• Bank Officials Deny Client Info, Hindering Section 69A Investigation; AO Urged to Directly Inquire with Banks.

  Case-Laws - AT : Unexplained money u/s 69A - ssessee has clearly stated that the bank officials have refused to divulge the information about the clients - AO should have carried out the enquiry from the banks - AT
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Customs

• Duty Recovery from Agent Allowed Under Customs Act, 1962, Even Without Penalty on Appellant.

  Case-Laws - AT : Recovery of duty from the agent - merely because no penalty was imposed on the Appellant, it cannot be a ground for non-recovery of dues from the Appellant, if provided so under the provisions of the Customs Act, 1962 - AT
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• Refund Granted After Proving Excess Duty Didn't Affect Production Costs; Claimant Overcame Unjust Enrichment Barrier.

  Case-Laws - AT : Denial of Refund claim - excess duty paid at the time of import by them did not form part of the cost of production and they have passed the bar of unjust enrichment - refund allowed - AT
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Service Tax

• Court Rules Conference Hall Rental Not Taxable Under Convention Center or Mandap Keeper Services Classification.

  Case-Laws - AT : Classification - Convention center service or Mandap Keeper Service - appellant rented out a Conference Hall (Banquet Hall) for meetings/conferences/assembly - demand set aside - AT
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• Does Buying and Selling Compressed Natural Gas Qualify as Business Auxiliary Service? Tax Implications Examined.

  Case-Laws - AT : Business Auxiliary service or not - Buy and sell of Compressed Natural Gas (CNG) - mere mention in the agreement the trade margin as commission on which VAT/ST has been paid would not evidence the fact of rendering service is application in the present case. - AT
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• Appellants Admit Error in Refund Claim, Citing Wrong Notification; Case Remanded for Further Review Under Notification 18/2009-ST.

  Case-Laws - AT : Denial of refind claim - appellants are admitting their mistake by stating that the correct notification should have been notfn. no. 18/2009-ST - matter remanded back - AT
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• Service Tax on Hire Purchase: Installment Payments Are Obligations, Not Service Continuation, Affecting Tax Rate Calculation.

  Case-Laws - AT : Rate of service tax - Hire purchase - the installment payments are only obligations of the hirer - the contention that appellant continues to provide service during the payment of installments is not correct - AT
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Central Excise

• Refund Granted After Provisional Assessment; Limitation Period Inapplicable, Subject to Unjust Enrichment Rule.

  Case-Laws - AT : Refund - differential duty was paid on finalization of provisional assessee - later the issue was decided in favor of assessee - period of limitation not applicable - but refund to be allowed subjected to principle of unjust enrichment - AT
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• Deposited Amount Without Show Cause Notice Not Considered Duty; Section 11B of Central Excise Act 1944 Inapplicable for Refunds.

  Case-Laws - AT : Refund of amount deposited during investigation when no SCN was issued - the amount cannot be considered as duty and the provisions of Section 11B of the Central Excise Act 1944 cannot be applied. - AT
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• Insufficient Evidence Found for Charges on Unauthorized Goods Removal and Excess Waste in Bottle Manufacturing.

  Case-Laws - AT : Clandestine removal of goods - excess generation of waste on manufacture of bottles - charges of clandestine removal cannot be upheld on the basis of assumptions and presumptions - AT
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• Vinyl Graphics and Stickers Classified Under Chapter 49 as Printing Products, Not Signboard Parts in Chapter 94.

  Case-Laws - AT : Classification - Chapter 49 or 94 - vinyl cut graphics, vinyl self-adhesive stickers and translates - cannot be considered as parts of signboards - these are products of printing industry - AT
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• Refund Approved for Excess Duty Paid on MRP-Based Goods Due to Clerical Error; No Unjust Enrichment Found.

  Case-Laws - AT : Unjust enrichment - MRP based goods - claim of refund on the ground that, excess duty was paid due to clerical mistake - appellant had not charged anything extra over and above MRP printed on the medicaments cleared by them - refund allowed - AT
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• Department's Awareness Irrelevant for Extended Duty Demand Period in CENVAT Credit Dispute; Prima Facie Against Assessee.

  Case-Laws - AT : CENVAT credit - Trading activity - Duty demand - Knowledge/awareness of the department is not a relevant factor for invoking extended period of time - prima facie case is against the assessee - AT
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VAT

• High Court Rules Land Costs Deductible from Works Contracts for VAT and Sales Tax on Construction Projects.

  Case-Laws - HC : Valuation - works contract - construction of complex / flats - Deduction of land cost - land cost allowed to be deducted - HC
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• Higher Court Rules Tribunal Wrong to Reduce Minimum Penalty Imposed by Joint Commissioner u/s 53(12.

  Case-Laws - HC : Imposition of penalty under Section 53(12) - Tribunal has committed a serious error in modifying the order of the Joint Commissioner of Commercial Taxes, which had imposed only the minimum penalty payable under the provision and in reducing the same - HC
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Case Laws:

• Income Tax

• 2014 (7) TMI 141
  Deemed dividend u/s 2(22)(e) - circuitous transaction – Loan or advance - Held that:- The Tribunal was of the view that the transaction was a circuitous transaction and the money which initially belongs to M/s. Swati Energy and Projects Pvt. Ltd. was returned to the same company on the very same day through M/s. Power Service Corporation - this is not a loan or advance so as to attract section 2(22)(e) - The Tribunal may have addressed itself to the status of Mr. Manish Dedhia and the financial position of M/s. Power Service Corporation possibly to take care of the argument of the revenue that these were entities closely connected and possibly the money was routed through them although there was no genuine business transaction - In taking care of that argument, the status and financial position of all the entities, their annual income has been referred by the Tribunal - the transaction essentially carried out is not falling u/s 2(22)(e) - the Tribunal cannot be said to be perverse or vitiated by any error of law apparent on the face of the record. Decision of Apex Court in Smt.Tarulata Shyam and Others [1977 (4) TMI 3 - SUPREME Court] and L. Alagusundaram Chettiar [1996 (10) TMI 73 - SUPREME Court] distinguished wherein it was held that, The assesssee could not escape the rigour of the law merely because the transaction has been routed by the assessee in a different way - Decided against Revenue.

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• 2014 (7) TMI 140
  Reopening of assessment u/s 148 of the Act – full and true disclose of all material facts – Held that:- The reasons as recorded, when read as a whole do not indicate even remotely any failure on the part of the assessee to disclose fully and truly any material facts necessary for assessment - The only reason recorded by the AO for re-opening is the subsequent decisions of Tribunal and Courts - There is no whisper of any facts indicating that the assessee had not having disclosed any fact which led to a reasonable belief that income chargeable to tax has escaped assessment - the reasons as recorded for issuing the notice dated 10th January 2005 do not satisfy the jurisdiction requirement in case of notice issued beyond a period of four years from the end of the relevant Assessment Year i.e. 1998-99 – the notice does not satisfy the jurisdictional requirement of reasonable belief that income chargeable to tax has escaped assessment on account of the assessee failure to disclose truly and fully material facts necessary for assessment. Relying upon DIL Ltd. v/s. Assistant Commissioner of Income Tax and Others [2012 (2) TMI 85 - BOMBAY HIGH COURT] - In view of the retrospective amendment of law by Parliament, the AO may have reason to believe that income has escaped assessment - But that in itself is not sufficient for reopening an assessment beyond the period of four years - Beyond the period of four years when an assessment is sought to be reopened, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment - re-opening of an assessment beyond a period of four years from the end of the Assessment Year in the absence of any failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment would not give jurisdiction to issue notice under Section 148 of the Act – Decided in favour of Assessee.

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• 2014 (7) TMI 139
  Accrual of interest on Non-Performing Assets – Held that:- The assessee had credited only an amount as interest on loans - AO was of the view that the interest accrued on the entire loans should have been shown as income - The details as to how the interest income on accrual basis should have been disclosed are referred to by the Tribunal - The Tribunal held that the income was not realized - the assessee follows the mercantile system of accounting - the loan advanced by the assessee which was in NBFC had become nonperforming asset - Commissioner of Income tax Versus Vasisth Chay Vyapar Ltd. & others [2010 (11) TMI 88 - Delhi High Court] - once there is no dispute that the interest considered as accrued was a non-performing asset as per Reserve Bank of India guidelines, then, the income from this interest did not accrue to the assessee – the income was not and cannot be assessed on accrual basis - once the view taken by the Tribunal was possible the income has not been realized by the assessee, the addition was rightly deleted – Decided against Revenue.

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• 2014 (7) TMI 138
  Violation of principles of natural justice - No notice served – Held that:- Before passing the final order of assessment, a notice dated 10.06.2013 was issued to the assessee, but it was not served - Rather, it was served on 22.07.2013, along with the final order dated 30.06.2013 - Therefore, the petitioner has no occasion to submit their objections to the notice dated 10.06.2013 - both the notice dated 10.06.2013 and the final order dated 30.06.2013 have been served on 22.07.2013 thereby the order dated 30.06.2013 is vitiated and is violative of the principles of natural justice - Decided in favour of assessee.

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• 2014 (7) TMI 137
  Penalty u/s 271D of the Act – Exception to section 269SS of the Act – Cash accepted exceeding the limit – Genuineness of loan/ deposit transaction – Held that:- A sum of Rs. 42.75 lakhs has been taken by way of loan by the respondent from ten different persons - this was by way of loan in cash exceeding rupees twenty thousands and the same therefore contravenes the provision of Section 269SS of the Act - reasonable cause had been sufficiently made out and when the very transactions were never doubted by the Revenue authorities, the breach is to be treated as a mere technical or venial breach - the requirement of Section 273B is for the assessee to prove that there was a reasonable cause for its having failed to abide by the provisions of Section 269SS - not only the substantiating evidence like 7/12 Extracts were produced, but, also additionally, transactions were reflected in the accounts of assessee and the advancement of loan to the assessee had been reflected in the books of account of those persons from whom the loan had been received - The identity of those persons has also been well established - assessee also had given satisfactory reason for taking such loan - His bona fide belief that such transactions would not attract provision of Section 269SS on the ground that they were agriculturists and lived in remote villages also was one of the grounds which has weighed with both the authorities. No error has been committed by both the authorities in deleting the penalty – Relying upon Hindustan Steel Limited Versus State Of Orissa [1969 (8) TMI 31 - SUPREME Court] - an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or act in conscious disregard to its obligation - Penalty will not also be imposed merely because it is lawful to do so - Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute – Thus, the order of the Tribunal is upheld – Decided against Revenue.

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• 2014 (7) TMI 136
  Profits and gains u/s 80HH and 80IA of the Act – Eligible industrial undertaking – Reduction of depreciation u/s 32(1), unabsorbed depreciation u/s 32(2) and unabsorbed loss u/s 72 of the Act – Held that:- For claiming deduction under any provision of Chapter VIA, of which Section 80HH & 80I are also part, then it has to be after allowance of all deductions such as depreciation, unabsorbed depreciation & unabsorbed losses and therefore, in order to compute the profit and loss of income from an industrial undertaking, to which Section 80HH & 80I applies, the provisions of Part D of Chapter IV has to be taken into consideration and it is only after computing the income in accordance with the provisions contained in the Chapter that income from such industrial undertaking, included in the gross total income of an assessee, could be found out - deduction can only be calculated with reference to the profit and loss account of the assessee and after deductions on account of depreciation or additional depreciation unabsorbed depreciation, unabsorbed losses etc. and only if such income is positive would be eligible for deduction under Section 80HH & 80I of the IT Act. The gross total income of the assessee has to be worked out after deducting the aforesaid deductions only to arrive at the net income and in case, after deducting all these statutory deductions, some income remains, then obviously the assessee would be entitled to deduction under Section 80HH & 80I of the IT Act - when there is no taxable income, then no deduction under Chapter VIA could be allowed - after allowing depreciation, unabsorbed loss and unabsorbed depreciation, there was no positive income - the assessee was not entitled to any deduction u/s 80HH & 80I of the Act – Decided against Assessee.

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• 2014 (7) TMI 135
  Validity of notice u/s 148 of the Act – Proceedings u/s 127 of the Act - Held that:- The proceedings were initiated on 06.04.2004, which were subsequently dropped on 18.10.2005 - on 03.04.2006, the proceedings u/s 147/148 of the Act were initiated but, a proposal for transfer of jurisdiction from Chennai to Suratgarh was made only on 24.07.2007, which ultimately materialized on 21.08.2007 - nothing of error or illegality in the observations of the CIT(A), as approved by the ITAT, that the ITO at Suratgrarh got the jurisdiction over the respondent-assessee only on 21.08.2007 and prior to that, he was not having the jurisdiction over the assessee, particularly when the assessee was filing the returns of income with ITO-VII(2), Chennai - the proposal for transfer of jurisdiction over the respondent-assessee, from Chennai to Suratgarh, materialized only on 21.08.2007, the proceedings initiated by the ITO, Suratgarh prior to this date by issuance of notice u/s 148 on 03.04.2006 cannot be considered authorized and competent. The facts regarding place of business or residence of the assessee, as sought to be referred carry little relevance in the indisputable fact situation that the assessee was indeed filing his returns at Chennai and the date/period when the proceedings were sought to be adopted by the ITO at Suratgarh, the jurisdiction for assessment in relation to the respondent-assessee was being exercised at Chennai – there was no cogent reason to entertain the appeal so as to interfere with the orders passed by the CIT (A) and ITAT – Decided against Revenue.

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• 2014 (7) TMI 134
  Imposition of penalty u/s 271(1)(c) of the Act – Royalty and rent paid u/s 40(a)(ia) of the Act – Held that:- The Assessee has paid a sum to Court Receiver as per direction of the High Court for calling bids from the partners for the purpose of fixing royalty and the higher bidder would be appointed agent of Receiver who shall carry on the business of Blood Bank which was being carried on by erstwhile partnership firm - penalty and quantum proceedings are separate and distinct - the provisions of section 194J were not applicable to an individual assessee in respect of payment of royalty - Royalty has been defined in Explanation 2 to section 9(10)(vi) of the Act - mere disallowance of any claim will not make the case fit for levy of penalty – Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee - merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s 271(1)(c) - as the matter has already been restored with respect to disallowance of rent made in quantum proceedings, the penalty imposed by AO has no legs to stand – Decided in favour of Assessee.

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• 2014 (7) TMI 133
  Levy of capital gains – Cost of acquisition - Sale of land - agricultural land or Non-agricultural land – Held that:- Assessee has sold agricultural land which is away from the municipal limits on which there is no doubt and further fact that assessee’s land was acquired by the State Government as agricultural land and based on the pahani patrikas and the report of the MRO as well as Horticulture Officer evidencing that these survey numbers are having agricultural operations - evidence indicates that assessee is indeed cultivating the land and the land in question is agricultural land - Sale of agricultural land does not result in capital gains tax as agricultural land is not a capital asset under the definition of ‘capital asset’ in the Income Tax Act - the AO did not give any opportunity while inspecting the land nor he has given any opportunity to examine the MRO certificates obtained by him - assessee should be given one more opportunity to support his contentions - Assessee is also willing to take the A.O. to the land to show that the land in question is still agricultural land - physical verification of the land will clinch the issue without any doubt, so that not only on legal principles but also factually also assessee’s contentions can be proved or disproved – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (7) TMI 132
  Recall of order – Rectification of order – Held that:- There is defect the form of appeal filed by the assessee, inasmuch as it has been signed by the Voice President (Finance) and not by the Managing Director of the assessee company, who alone is competent to sign the same - Reason for this was stated to be that the Managing Director was out of country at the relevant point of time - even though the said defect has been rectified, date on the Form 36 was allowed to remain the same as in the earlier Form No.36 - Since on the date on which earlier Form No.36 was signed, assessee’s Managing Director was stated to have been out of country, observing that on that very date the Managing Director could not have signed the revised Form No.36, the Tribunal dismissed the appeal of the assessee as defective - there is no mistake apparent from the record in the order of the Tribunal, the dismissal of the appeal was for a procedural and technical defect in the Form of Appeal/Revised Form of Appeal, viz. Form No.36, filed by the assessee, in the interests of justice and taking a lenient view of the matter - the earlier order of the Tribunal dated 11.2.2014 is recalled, duly taking on record the Revised Form of Appeal – Decided in favour of Assessee.

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• 2014 (7) TMI 131
  Determination of total income - income taxable in the hands of firm or partners - Held that:- The investment has been made by the partners jointly prior to the formation of the partnership firm – the view taken by the CIT(A) is upheld that any addition on account of investment should only be considered in the assessment of the partners and not in the assessment of the partnership firm - revenue was not able to brought any material for the determination of the point – also in Commissioner of Income-Tax Versus Smt. PK Noorjahan [1997 (1) TMI 6 - SUPREME Court] it has been held that no addition of the magnitude is involved – thus, the order of the CIT(A) is upheld – Decided against Revenue. Difference in the cost of construction – Held that:- CIT(A) was of the view that the buyer of the property, Shri Girish Kumar, has confirmed the fact of Rs. 30-lakhs having been spent by him after taking possession of three floors of the building - this part of the investment cannot be taken as that of the assessee - If this amount is reduced from the value of cost of construction estimated by the Departmental Valuation Officer of Rs. 1.50 crores, the value remaining of Rs. 1,20,00,000 does not leave much of a margin above the cost of construction of Rs. 1,14,05, 509 disclosed by the assessee itself - the difference is less than 5%, the addition made by the AO is unjustified – revenue has not brought on record any evidence to indicate that the assessee has incurred any expenditure over and above what has been recorded in the books – the order of the CIT(A) is upheld that the additions made by the AO cannot be sustained – Decided against Revenue. Addition of capital introduced – Source not explained properly - Held that:- CIT(A) rightly deleted the addition made by the AO observing that the partners have invested the amounts from out of the existing assets as on 31.3.2007 and out of the income derived by them during the year - the investments were also properly recorded in the books of account of the partners and were also shown in the balance sheets filed by them along with the returns of income before the AO - In the absence of anything to the contrary brought on record by the Revenue to disprove the above findings of the CIT(A), there was no justification for the addition made by the AO – Decided against Revenue.

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• 2014 (7) TMI 130
  Claim of exemption u/s 54F – amount advanced to his wife towards purchase of the property - assessee has 50% ownership over the property - Held that:- The AO does not dispute the fact that assessee’s wife has purchased the property in her name by utilizing the amounts advanced by the assessee - the assessee’s investment in the property cannot be disputed - the assessee has shown the amount advanced to his wife towards purchase of the property in the cash flow statement - If the AO had any doubt with regard to the fact, he should have conducted necessary enquiry to find out whether the assessee has actually made the advance of Rs. 40 lakh to his wife - the finding of the AO appears to be contradictory – there was no infirmity in the order of the CIT (A) in directing the AO to allow deduction u/s 54F of the Act - the CIT (A) has power coterminous with that of the AO - When the evidence produced is glaring and speaks for itself, it will serve no purpose in getting it verified again by the AO – thus, the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (7) TMI 129
  Condonation of delay for filing an appeal before CIT(A) - illness of MD - Delay and defect in memos – Penalty u/s 271 - Held that:- The assessee has not only explained the cause of delay but has also submitted evidence to substantiate the claim - The evidence on record show that the MD was keeping ill intermittently - It is not necessary that only when a person is immobile or bedridden he would not be able to attend to his day to day activities - Even when a person is afflicted with illness quite intermittently, it not only takes a toll on him physically but also mentally - It so much preoccupies his mind that, it is quite possible that many other acts or duties, which he could otherwise have attended to if not ill, escapes his attention. Relying upon Collector of Land Acquisition V/s. Mst. Katiji and others [1987 (2) TMI 61 - SUPREME Court] - when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay - there is sufficient cause for condoning delay - CIT(A) was not justified in dismissing the appeals on the ground without pointing out the defect and allowing opportunity to the assessee to rectify it – thus, the order of the CIT(A) is set aside with a direction to decide the appeal on merit after condoning delay – Decided in favour of Assessee. Imposition of penalty u/s 271(1)(c) of the Act – Held that:- At this stage it will be premature to impose penalty u/s 271(1)(c) of the Act, when assessee’s appeals against assessment orders are still pending - It may be recalled that CIT(A) dismissed in limine appeals preferred by the assessee against the assessment orders - Though, technically penalty proceeding u/s 271(1)(c) of the Act can be invoked during pendency of quantum appeal, but to avoid multiplicity of proceeding and unnecessary harassment to the assessee it is always advisable to wait for the decision of the appellate authorities on quantum additions – the order of the CIT(A) is set aside and the matter is remitted back to the AO – Decided in favour of Assessee.

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• 2014 (7) TMI 128
  Confirmation of additions on account of share application money - Unsecured loan – Held that:- The unsecured loan provided by the Director Mr. Rajiv Chilakalapudi was to the tune of Rs. 3 lakhs out of which, outstanding amount was Rs. 2,61,550/-, which was added by the A.O. as unexplained income of the assessee - as far as the unsecured loan was concerned, the source of Rs. 3 lakhs advanced by Mr. Rajiv Chilakalapudi stands explained by way of personal loan obtained from Citi Bank - addition of Rs. 2,61,550/- cannot be sustained on the facts – the explanation given for various withdrawals by Mr. Rajiv Chilakalapudi’s bank account was confused with the loan account of the company both by AO and CIT(A) - to the extent of addition of unsecured loan, it cannot be sustained on facts. Both Mr. B.P. Jain and Mr. Rajiv Chilakalapudi has explained the sources and are very much assessees on record - In case, the credit worthiness is doubted and source of funds are doubted, the proper course would have been to initiate proceedings in their individual hands as the persons are identified and they have confirmed the amounts which are invested in the company - on the basis of the confirmation and necessary evidence placed on record and also after perusing the remand report by the AO - there have proper sources for the amounts invested in the company –the AO is directed to set aside the additions – Decided in favour of Assessee.

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• 2014 (7) TMI 127
  Transfer pricing adjustments - Selection of comparables - Extra ordinary event - Exensys Software Solutions Ltd. – Bodhtree consulting Ltd, Four Soft Ltd, Infosys,., Sankhya Infotech Ltd., Thirdware Solutions Ltd, Tata Elexi (seg) - – Held that:- The decision in Intoto Software India (P.) Ltd. Versus Assistant Commissioner of Income-tax, Circle -2(1), Hyderabad [2013 (10) TMI 599 - ITAT HYDERABAD] followed - there is an extra-ordinary event which resulted in high operating margin of that company – thus, the AO is directed to exclude this company from the list of comparables. Inclusion of cpmparables – Birla Technologies Ltd. - VJIL Consulting Limited - The assessee is requesting for inclusion of the above companies on the reason that TPO erred in not selecting these companies of extraneous reasons stating that Birla Technologies Limited was incurring persistent losses - inclusion or exclusion of these companies would require further examination of contentions by TPO – thus, the matter is to be remitted back to the AO/TPO for consideration as to whether to include or exclude the above two comparables selected by assessee – Decided in favour of Assessee. Working capital adjustment and risk adjustment – Held that:- With reference to quantification of risk adjustment, assessee arrived at the same at 4.63% based on difference in the average prime lending rate and the average bank rate – it cannot be accepted that the difference in prime lending rate and bank rate has to be considered as risk adjustment, TPO should examine the risk profile of the assessee and other comparables and arrive at appropriate risk adjustment if it can be quantified on any reasonable basis - on negative working capital adjustment as well as risk adjustment, the issue is restored to the TPO, as selection of comparables were also restored to the file of the TPO - TPO should examine the aspects and arrive at revised ALP, after giving due opportunity to the assessee – Decided in favour of Assessee.

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• 2014 (7) TMI 126
  Low gross profit, un-vouched expenses, unexplained expenses and valuation of stock – Held that:- The AO has not specifically rejected the books of accounts or made any adverse comments - there is a finding by the AO that the vouchers produced by the assessee in support of the expenditure claimed are mostly self-made vouchers - The CIT (A) has restricted the disallowance to 10 lakh by observing that the AO has rejected the books of accounts and the expenditure claimed by the assessee are not supported by bills and vouchers - considering the claim of the assessee that all the expenditures are supported by genuine bills and vouchers and books of accounts have been correctly maintained which can be proved by the assessee, the matter is required to be remitted back to the AO for verification – Decided in favour of Assessee. Addition u/s 40A(3) of the Act – Held that:- The AO has clubbed together payments made on 8th Aril, 2008 and 9th April, 2008 to treat it as single payment of Rs. 20,500 so as to bring it within the purview of section 40A(3) - When other instances of clubbing of payments made on successive days are also filed from the ledger extracts - the AO cannot club together payments made on two different dates as one payment so as to bring within the purview of section 40A(3) of the Act - the claim of the assessee is required to be verified which has not been properly done either by the AO or by the CIT (A) – thus, the matter is to be remitted back to the AO for examination – Decided in favour of Assessee. Restriction of deduction u/s 80G of the Act – Held that:- The receipt is in the name of two persons i.e., the assessee and one Sri Kedia - the contention of the assessee is that the cheque for Rs. 1 lakh was entirely paid by the assessee from his bank account - reference to the order passed u/s 80G, a copy of which reveals that the institution to which donation was paid has been registered u/s 80G of the Act - if the assessee as claimed by him, has issued a cheque from his bank account for Rs. 1 lakh, only because the receipt is in the name of the assessee and another person, the claim of deduction u/s 80G cannot be restricted to 50,000/- in place of Rs. 1 lakh – thus, the matter is liable to be remitted back to the AO for verification – Decided in favour of Assessee.

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• 2014 (7) TMI 125
  Capital recovery on leased assets – Held that:- As it has already been decided in earlier assessment year, even after deduction of finance income, the full value of the cost of assets is fully recovered in lease period of 30 years and it is a case of Finance Lease as per the guidelines issued by ICAI - the AO should verify the charts and if the condition is satisfied, all the transactions should also be accepted as finance lease transactions – thus, the matter is remitted back to the AO –Decided in favour of Revenue. Bond issue expenses – Held that:- The expenditure would qualify only for amortization u/s 35D of the Act - the expenditure was a permissible deduction and accordingly deleted the addition made by the AO – thus, bond issue expenses will be allowable as deduction as revenue expenditure – Decided against Revenue. Prior paid expenses – Held that:- If the AO is of the view that the expenses are pertaining to the prior period, it is required to be considered for the prior and allowed in that year - If it is found that the expenses are allowable in this year on the basis of crystallization of liability, it may be considered in the year – the assessee is directed to place necessary evidence in support of claim of expenses – the AO is directed to determine the allowability of the expenses - the matter is remitted back to the AO.

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• 2014 (7) TMI 124
  Gain from sale of shares – Capital gain or business income - Whether the gain arising from sale of shares is capital gain or business income – Held that:- A person can be investor as well as trader in shares at the same time - Whether the assessee is an investor or a trader in shares is a question of fact to be decided on the facts and circumstances of each case - shares of blue chip companies have been purchased by the assessee on the same day at different rates at different times - The assessee herself has admitted the fact that she traded in shares of listed companies and in some of the cases the sale and purchase of shares have taken place on the same day - she had no intention to keep the shares to earn dividend or capital appreciation - All these facts clearly show that the assessee has been dealing in shares to earn quick profits. The assessee may have been earning income from salary but this does not defy the fact that the sizeable income of the assessee is from trading of shares - The scale of activity is substantial - The period of holding being very short shows the intention of the assessee on quick profits - The transactions were continuous and regular in a systematic manner - the dividend income of the assessee vis-à- vis her investment in shares is too meager - the assessee has not taken any ground to specifically assail the findings of the AO in holding that the nature of business of the assessee is trading in shares. Once the assessee has not taken any steps to rectify the wrong observation, it is deemed that the same is correct - in the Audit Report (in Form 3CD) the nature of business stated is trading in shares - Even though the shares were shown in the balance sheet as investments and not as stock-in-trade - the shares held by the assessee for longer period may be treated as investment and the profit to be treated as long term capital gain - the magnitude, frequency and volume of transactions gives flavour of business income and the same is considered to be income from business – Decided partly in favour of Revenue.

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• 2014 (7) TMI 123
  Addition of low household expenses – Held that:- The assessee was a minor in the relevant financial year and he became major only on 28-3-2003. He was staying with his mother, who was managing the house by preparing tiffin and homemade food for the various persons - There is no further material or information on record that the assessee in the relevant financial year has incurred any expenditure which has not been disclosed – there was no reason for estimating any kind of household withdrawals specifically, on the facts stated that sums was shown by his mother and himself for the household expenses – thus, there was no reason to sustain any kind of addition on account of low household withdrawals as confirmed by the CIT(A) – Decided in favour of Assessee. Unexplained money u/s 69A of the Act – Held that:- The assessee made a specific request that enquiry can be done from the respective bank u/s 131 or 133(6) so as to look into the factum of ownership of the bank accounts - the authorities should have made an enquiry when the assessee has categorically denied the ownership of the bank account – u/s 292C onus is upon the assessee to prove that any asset or books of accounts etc. found from the possession of the assessee, the presumption is raised against the assessee - the assessee has clearly stated that the bank officials have refused to divulge the information about the clients - the AO should have carried out the enquiry from the banks – thus, the matter is to be remitted back to the AO for ascertainment of whether the accounts belongs to the assessee or not – Decided in favour of Assessee.

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• 2014 (7) TMI 122
  Book adjustments u/s 115JB of the Act - MAT - Provision for leave encashment – Held that:- The decision in Bharat Earth Movers Versus Commissioner of Income-Tax [2000 (8) TMI 4 - SUPREME Court] followed - meeting the liability incurred by the company under the leave encashment scheme proportionate with entitlement earned by employees of the company inclusive of officers and the staff subject to ceiling of accumulation as applicable on the relevant date is entitled to deduction out of the gross receipt for the accounting year during which the provision is made for the liability - the liability is not a contingent liability - the provision made for leave encashment cannot be considered to be a contingent liability - there is no question of any addition – thus, the addition is liable to be set aside – Decided in favour of Assessee.

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• Customs

• 2014 (7) TMI 144
  Recovery of duty from the agent - appellant (agent) contended that, there was no evidence of his involvement in the post-import violation by the importer - contravention of the conditions of the Customs Notification No.80/95-Cus. dated 31.03.1995 and 31/97-Cus. dated 01.04.97 - revenue contended that, according to Section 147 of the Customs Act, 1962, duty can be recovered from the agent. - Held that:- We are of the opinion that merely because no penalty was imposed on the Appellant, it cannot be a ground for non-recovery of dues from the Appellant, if provided so under the provisions of the Customs Act, 1962 - any duty not levied or short-levied can be recovered from the agent where the Assistant Commissioner/Deputy Commissioner is of the opinion that the same cannot be recovered from the importer. As such, we do not find any merit into the Appeal and the same is dismissed. However, we find from the records of the case that the Assistant Commissioner/Deputy Commissioner of Customs has not arrived at a conclusion that duty was not recoverable from the importer before recovery of the same from the Appellant. Accordingly, we make it clear that the concerned Assistant Commissioner/Deputy Commissioner of Customs should arrive at the conclusion that the said duty was not recoverable from the importer before initiating the recovery proceedings against the Appellant - Decided against assessee.

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• 2014 (7) TMI 143
  Denial of Refund claim - Unjust enrichment - excess duty was paid at time of import - Assessee contends that amount has been shown by them in the balance sheet as receivable and they have produced the certificate from the Chartered Accountant to the effect, that the said amount has not formed part of cost of production and is receivable from the department - Revenue contends that appellant has failed to show that the excess duty paid has not formed part of the cost of production - Held that:- appellant has produced a certificate issued by the Chartered Accountant certifying that the excess duty paid by them did not form part of the cost of production. It is further proved by the appellant that the price of the finished goods remain same before and after importation of the impugned goods. It is also found the excess duty paid has been shown as receivable in the balance sheet - excess duty paid by them did not form part of the cost of production and they have passed the bar of unjust enrichment. Therefore, appellants are entitled for refund - Decided in favour of assessee.

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• Corporate Laws

• 2014 (7) TMI 142
  Registration u/s 125 - mortgage and creation of charge - Execution of Form 8 - Held that:- respondent No 1 Company authorised one of its director to execute the documents and sign the necessary forms in respect of mortgage and creation of charge. The director who was authored to sign Form 8 is also stated to have appended his digital signature on the Form 8 creating the charge. Thus, the R1 Company has fulfilled its obligations and has not made any default which requires the Bench's indulgence to direct the R1 Company and any of its officers to make good the default. The director who was authorised by the R1 Company to execute the documents is stated to be a director of another company which is a defaulting company. In the said circumstances, it is for the petitioner company to ventilate its grievances against the R1 Company. Seeking directions from the Bench by invoking jurisdiction as vested under section 614 is my view is completely misplaced. As stated supra the company and its officers who has been authorised to file Form 8 for creation of charge has complied in creation of charge and in filing of Form 8 with ROC. On the other hand, from the pleadings it is seen that the company's inability to file Form 8 is due to MCA online services not accepting the digital signature of the director who has signed the Form 8 due to his default in some other company. In such a situation no directions can be issued against R2 as Section 614 of the Act envisages issue of directions by Company Law Board only against the company and its officers who are in default and not against anyone else. In view of the reasons as stated above the petition has miserably failed both on facts and on law and the petitioner company is not entitled for any reliefs as prayed for - Decided against assessee.

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• Service Tax

• 2014 (7) TMI 160
  Classification - Convention center service or Mandap Keeper Service - appellant rented out a Conference Hall (Banquet Hall) for meetings/conferences/assembly - Held that:- Prima facie, for falling under ambit of ‘convention’ and for classification as a provider of convention service it is not a legislated ingredient that the service (provided by one person to another in relation to holding of a convention not open to the general meeting/assembly public) should be provided only in /upon immovable property including any furniture , fixtures, light fittings and floor coverings therein let out for a consideration for organizing any official, social or business function. Board Circular dated 9.7.2001 clarified that the intention is not to charge service tax twice on the same service; if a service provider is already registered as a mandap keeper and is paying service tax, he is not liable to pay service tax again under the category of convention service. This Circular identifies a subtle distinction between official, social or business function which fall within the scope of mandap keeper and a formal meeting which fall within the scope of convention service. We have not fully comprehended the ‘subtle’ distinction clarified by the Board qua this Circular. Be that as it may. Extended period of limitation - Held that:- Where a person (service provider) is registered as a mandap keeper, the demand of service tax under convention service, particularly by invoking the extended period of limitation is not justified and that having regard to the ambiguity between the scope of the two taxable services, it would be illegitimate to allege suppression of facts or an intention to evade taxes - neither the show cause notice, the primary authority nor the Appellate order had alleged or concluded that renting the appellant’s Banquet Hall to pharmaceutical, insurance and other companies was for holding formal meetings or assembly which is not open to the general public, the specific ingredients for a transaction to fall within the ambit of ‘convention’, defined in Section 65 (32) of the Act - Decided in favour of assessee.

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• 2014 (7) TMI 159
  Business Auxiliary service or not - Buy and sell of Compressed Natural Gas (CNG) - whether the appellant are providing Business Auxiliary Service as per section 65(19) read with section 65(105)(zzb) of the Finance Act, 1994 or not? - Held that:- As per the said provisions, the service provider provides service to his client for marketing or promotion of the goods to third party. In these cases, appellants themselves are buying goods from M/s MGL. Therefore, the question of rendering the service to the client for marketing of the goods does not arise. We further find that MGL is discharging VAT/ST liability while selling the CNG to appellants. Although the RSP is fixed but it does not mean that the profit margin shall be constituted as commission for rendering the service. On examination, it is found that all the transactions shown by the appellants are done on principal to principal basis. Moreover, the appellants are selling these CNG on payment of VAT/ST to the buyers. There is no commission component that have been received by the appellants from M/s MGL. The decision in the case of Bhagyanagar Gas Ltd. (2012 (9) TMI 860 - CESTAT BANGALORE) wherein this Tribunal held that mere mention in the agreement the trade margin as commission on which VAT/ST has been paid would not evidence the fact of rendering service is application in the present case. The contention of the ld. AR that the private parties are paying service tax under the category of Business Auxiliary Service on the same activity, therefore, the appellants are required to pay service tax is not acceptable as in the case of private parties, the invoices on the customers were raised by M/s MGL directly and the private parties are receiving commission and there is no transaction on principal to principal basis. - Decided in favour of assessees.

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• 2014 (7) TMI 158
  Denial of refind claim - Availment of CENVAT Credit - Exemption claim under Notification 18/2009 - Reveresal of CENVAT Credit - On application of refund claim Notification number written wrongly - Held that:- Refund claim was filed under Notification no. 17/2009-ST dated 7.7.2009. The appellants are admitting their mistake by stating that the correct notification should have been notfn. no. 18/2009-ST dated 7.7.2009. I note that before rejecting the refund claim, no show-cause notice was issued to the appellants. Similarly, no personal hearing was also granted so that the appellants could have rectified the mistake. Even before the Commissioner (Appeals) the appellants have stated about the correct notification. However, the Commissioner (Appeals) rejected the appeals on the ground that initially the claim was not under the correct notification. Keeping in view the facts mentioned above, the order of the Commissioner (Appeals) as also the order of the Asstt. Commissioner are set aside and the matter is remanded back to the original authority to examine the claim under Notification no. 18/2009-ST dated 7.7.2009. The original authority will consider the claim as if the claim under Notification no. 18/2009-ST dated 7.7.2009 was filed at the initial stage. If the appellants are eligible for refund under Notification no. 18/2009-ST dtd. 7.7.2009 and satisfy the conditions, the refund will be granted - However, appellants have not claimed the refund under notification, they will not be eligible for any interest for the intervening period - Decided partly in favour of assessee.

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• 2014 (7) TMI 157
  Waiver of pre-deposit of service tax - CENVAT Credit - reversal of credit for providing exempted services - Held that:- decision of the Tribunal in the case of Jost's Engineering Co. Ltd. (2013 (8) TMI 463 - CESTAT MUMBAI) was not available at the time of passing of the adjudicating order. Further, the appellants had reversed whole of the credit availed on common input services. In view of this, the matter requires consideration afresh by the adjudicating authority. The impugned order is set aide and the matter is remanded to the adjudicating authority to decide afresh - Decided in favour of assessee.

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• 2014 (7) TMI 156
  Denial of refund claim - Various taxable services - Nexus with input services - Held that:- Commissioner (Appeals) has disallowed the refund of service tax namely Rent-a-cab service, Telephone service, Maintenance charges, Renting of premises, Consultancy, Food Pass, Software, AMC charges, Data Card. Video Conferences, Outsourcing, Housekeeping, Courier, Ancedent charges, Foreign outsourcing, Profession charges, Web conference and vendor charges on the ground that these activities are not relating to business. I find that the Tribunal by [2014 (5) TMI 541 - CESTAT CHENNAI], in the appellant’s own case, dismissed the Revenue’s appeals on the ground that Revenue has not placed any material to prove that the above services were not used in relation to output service. In the said order, the Commissioner (Appeals) discussed the use of the services item-wise elaborately. In the present case, the Commissioner (Appeals) merely mentioned the name of the services and observed that the same cannot be stretched to portray as an activity relating to business. In my considered view, the Commissioner (Appeals) cannot disallow the refund claim of the same service without discussing in detail use of services item-wise. The learned consultant on behalf of the appellant submits that they have mentioned the use of the activities item-wise in their refund claim application. Hence, it is appropriate that the Commissioner (Appeals) should examine the use of the services on each of the items before deciding the case. - Matter remanded back - Decided in favour of assessee.

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• 2014 (7) TMI 155
  Rate of service tax - Hire purchase - Demand on lease agreement entered into before the levy of service tax - Held that:- Banking and Financial Services came under The Service Tax net w.e.f. 16.07.2001. At that time, CBEC issued clarification to the effect that in respect of Hire Purchase Contracts entered prior to 16.07.2001 and installments of which were received after 16.07.2001, there is no Service Tax liability. In our view, the same logic is applicable to the present case also. When the Hire purchase contract is entered, the taxable event occurs. We agree with the appellants that the installment payments are only obligations of the hirer. The finding of the Commissioner(Appeals) that the appellant continues to provide service during the payment of installments is not correct. Therefore, the rate of Service Tax will be the rate prevailing on the date on which the contract is entered into. Consequently, the demand of differential amount applying the higher rate, which came into effect from 14.05.2003, will not be applicable in respect of the contacts entered prior to that date - Following decision of Art Leasing Ltd. vs. CCE [2007 (6) TMI 217 - CESTAT, BANGALORE] - Decided in favour of assessee.

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• Central Excise

• 2014 (7) TMI 152
  Condonation of delay - delay of 73 days - delay was caused due to the Senior Manager had not placed the impugned order before the management - Held that:- order was received by the applicant on 16.10.2012. Shri Ramakrishnan had submitted his resignation before receiving the order i.e. on 22.6.2012. It is noted that Shri Ramakrishnan was relieved from the service on 19.2.2013. The applicant had not taken any initiative to search the file for filing the appeal. On perusal of the impugned order, it is found that Shri Ramakrishnan appeared in personal hearing on 28.8.2012 before the Commissioner (Appeals). It is difficult to accept the averment in COD application that Shri Ramakrishnan submitted his resignation on 22.6.2012 and during this period, he was under some stress, for the reason, after filing resignation, he attended personal hearing before Commissioner (Appeals). It is not a case of misplacement of order, but, it is a clear case of gross negligence and inaction on the part of the applicant. Hence, there is no reason for condoning the delay of filing appeal. Condonation denied.

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• 2014 (7) TMI 151
  Denial of refund claim - differential duty was paid on finalization of provisional assessee - later the issue was decided in favor of assessee - Unjust enrichment - Held that:- In order to get over the situation arising under Mafatlal Industries Ltd., (2011 (8) TMI 880 - CESTAT, MUMBAI) vide notification No. 45/99-C.E. (N.T.), dated 25-6-1999, an amendment was made in sub-rule (5) of Rule 9B by adding a proviso thereto. The effect of the proviso is that even after finalisation of the provisional assessment under Rule 9B(5), if it is found that an assessee is entitled to refund, such refund shall not be made to him except in accordance with the procedure established under sub-section (2) of Section 11B of the Act. Proviso introduced in sub-rule (5) of Rule 9B cannot be said to be retrospective in operation. - However, revenue, contends that on the date on which the proviso was brought into force, i.e. 25-6-1999, the refund claim was still pending with the departmental authorities and, therefore, it had to be adjudicated in accordance with the law as it became enforceable from 25-6-1999. - this contention cannot be accepted. - Merely because the departmental authorities took a long time to process the application for refund, the right of the appellant does not get defeated by the subsequent amendment made in sub-rule (5) of Rule 9B. The matter should be re-examined by the lower authority in respect of the applicability of Doctrine of Unjust Enrichment. - Accordingly, impugned order insofar as the rejection of the refund, as it is hit by Doctrine of Unjust Enrichment, is set aside. - Decided in favour of assessee.

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• 2014 (7) TMI 150
  Denial of refund claim - refund of amount deposited during investigation when no SCN was issued - noticing the fact that, appellant had claimed Drawback as well as Cenvat Credit on the Inputs department asked the assessee to deposit the amount - assessee deposited Rs. 10 lakhs - no further action/activity was initiated against the assessee - Held that:- Adjudicating Authority had rejected the refund claim only on the ground that the refund claim is hit by limitation. - there is nothing on record to indicate that the amount of Rs. 10 lacs paid by the appellant was an amount of duty. If the assessee deposits any amount during investigation, said amount unless on confirmation appropriated, cannot be considered as duty and the provisions of Section 11B of the Central Excise Act 1944 cannot be applied. - Following decision of Jalan Dyeing and Bleaching Mills [2011 (6) TMI 513 - CESTAT, MUMBAI] refund allowed - Decided in favour of assessee.

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• 2014 (7) TMI 149
  Clandestine removal of goods - excess generation of waste on manufacture of bottles - Held that:- Revenue’s entire case is based upon the sole basis of generation of excess plastics scrap at the time of manufacture of plastic bottles. Otherwise, there is virtually no evidence to reflect upon the manufacture of the mineral water bottles or transportation of the same or clearance of the same to identify the buyers. The charges of clandestine removal cannot be upheld on the basis of assumptions and presumptions - Following decision of Acqua Minerals Ltd. Vs. CCE [2004 (7) TMI 562 - CESTAT, NEW DELHI] - Decided in favour of assessee.

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• 2014 (7) TMI 148
  Classification - Chapter 49 or 94 - appellant's claim is that vinyl cut graphics, vinyl self-adhesive stickers and translates are not liable to excise duty since they are products of printing industry - Department has classified these items as parts of illuminated signboards. - Held that:- unless an item is part of illuminated signboard, the same cannot be classified under Chapter 9405 - the products such as translates, vinyl self-adhesive stickers and vinyl graphic cut by the appellants cannot be considered as parts of signboards and from the manufacturing process, it emerges that these are products of printing industry since the processes undertaken are covered by the Chapter Note. - appellant’s claim that these items cannot be classified under CETH 9405 has to be accepted. - Decided in favor of assessee. As regards signages on metal base and illuminated glow signs and other materials - parts of signboards - Held that:- appellants are not disputing the liability and therefore the demand on these items has to be upheld. - Since the appellants have not taken registration and have not paid excise duty, we find that the penalty has been correctly imposed - demand on this account confirmed with interest and penalty - Decided against assessee.

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• 2014 (7) TMI 147
  100% EOU - Benefit of notification No. 23/2003 - Revenue’s contention is that in terms of proviso to Section 5A, under which the said notification has been issued, notification so issued are meant for domestic units unless it is specifically mentioned to be applicable to 100% EOU. - Held that:- there is specific mention in notification for benefit to export oriented unit inasmuch as the exemption is to the goods manufactured in the export oriented undertaking. As such, the department’s only submission for denial of benefit of notification in question is against the very nature of the notification itself - Decided against Revenue.

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• 2014 (7) TMI 146
  Denial of refund claim - Unjust enrichment - MRP based goods - claim of refund on the ground that, excess duty was paid due to clerical mistake while taking assessable value of physician sample - Held that:- appellants are manufacturing and clearing the Pharmaceuticals goods i.e. Medicaments. It is undisputed that the duty liability on such medicaments is based upon the MRP of the said product less abatement, as per the notification. It is also seen undisputed that the appellant had not charged anything extra over and above MRP printed on the medicaments cleared by them, in respect of which they have claimed refund of interest of duty. Whether unjust enrichment will apply when products are sold under MRP. - Held that:- It cannot be held so unless there is evidence on record to show that such products were sold in excess of the MRP printed thereon; in the absence of any such evidence, we are of the view that the order of the Adjudicating Authority in sanctioning the refund is correct and needs to be restored. - Decided in favour of assessee.

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• 2014 (7) TMI 145
  Benefit of small scale exemption Notification Nos. 1/93 and 8/99 - Use of brand name of other person - Held that:- invoices issued by the appellant show the brand name in some cases and do not reflect upon the use of brand name in some cases. If the appellant was using the brand name in respect of all the goods manufactured by them, they would have reflected the same in all the invoices and there was no reason for them to reflect the use of brand name in some of the invoices and to abstain from mentioning the same in other invoices. This fact clearly reflects upon the fact that brand name was only used wherever they are mentioned in the invoices. As such, we agree with the learned advocate that wherever invoices are showing the brand name, the benefit of small scale exemption notification is to be denied only in those cases. As the same requires factual verification and examination, which exercise can be done only at the original stage level, we set aside the impugned order and remand the matter to the original adjudicating authority for doing the said exercise and for requantifying the appellants duty liability. - Decided partly in favour of assessee.

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• 2014 (7) TMI 121
  CENVAT credit - Trading activity - Duty demand - Penalty - Non maintenance of separate accounts for taxable and non taxable activities - Applicable provision - Held that:- Recovery of wrongly availed credit is provided for under Rule 14 of CCR, 2004. If the credit is utilized for payment of excise duty, the applicable provisions are Rule 14 read with Section 11A. if the appellant is mainly a service provider, recovery will be made under the said rule 14 read with section 73 of the Finance Act. In the present case, the appellant is a manufacture of excisable goods and the credit taken on input services has been utilized for payment of duty on excisable goods. Therefore, the correct provision for recovery of wrongly availed credit is Rule 14 of CCR, 2004 read with Section 11A of the Central Excise Act, 1944. Lack of Jurisdiction - Held that:- Wrongly availed credit has to be recovered from the person who has availed the credit and not from the person who has distributed the credit. In the present case, it is the appellant who is a central excise registrant who has availed the credit and therefore, recovery of wrongly availed credit has to be made from the appellant by the jurisdictional excise authorities. Therefore, we do not find any lack of jurisdiction in the present case. Whether CENVAT Credit can be taken in respect of trading prior to 1-4-2011 - appellant is not an output service provider in respect of all the traded goods and no evidence has been placed before us in this regard. In such a situation, the question of taking credit on input service and its utilization thereof cannot be permitted at all prior to 1-4-2011 - Following decision in case of Mercedes Benz [2014 (4) TMI 12 - CESTAT MUMBAI]. Whether extended period of time could have been invoked for recovery of credit wrongly taken - Knowledge/awareness of the department is not a relevant factor for invoking extended period of time. It is not the appellant's case that they had declared to the department the fact of availing credit attributable to the trading activity either in the statutory returns filed or otherwise. The facts on record prove otherwise. The decision of this Tribunal in the case of Tigrania Metal & Steel Industries [2001 (3) TMI 155 - CEGAT, COURT NO. II, NEW DELHI] and of the hon'ble High Court of Gujarat in the Neminath Fabrics case [2010 (4) TMI 631 - GUJARAT HIGH COURT] support this view. In view of the above factual and legal position, invocation of extended period of time cannot be faulted at all - Conditional stay granted.

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• CST, VAT & Sales Tax

• 2014 (7) TMI 154
  Valuation - works contract of construction - Deduction of land cost - Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in giving a finding that deducting the value of land from the total receipt of the builder is impermissible, but only value of the transfer of property in goods has to be considered for the purpose of assessment by adding G.P., as the same is against provisions of law - Held that:- State legislatures lack legislative power to levy tax on the transfer of immovable property under Entry 54 of List II of the Seventh Schedule. However, the States do have competence to levy sales tax on the sale of goods in an agreement of sale of flat which also has a component of a deemed sale of goods. Aspects theory though does not allow the State legislature to entrench upon the Union List and tax services by including the cost of such service in the value of goods but that does not detract the State to tax the sale of goods element involved in the execution of works contract in a composite contract like contract for construction of building and sale of a flat therein. Decision in the case of Larsen & Toubro Ltd. v. State of Karnataka [2013 (9) TMI 853 - SUPREME COURT] followed - developer has paid VAT/Sales Tax on the entire material cost that was used for construction of the building and in the present case, the only question is deduction of land cost. - Revenue, petitioner, if they find it necessary to verify correctness of the statement and if they find it incorrect, they may take appropriate steps against the assessee in accordance with law. - Decided in favour of assessee.

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• 2014 (7) TMI 153
  Imposition of penalty under Section 53(12) - attempt to evasion of tax - Tribunal reduced penalty to nominal amount - Held that:- no discretion is vested in the authority or the Appellate Tribunal to either impose less or reduce the penalty less than double the amount of tax leviable under the provision. Having regard to the language employed in this provision, it is clear that the provision is mandatory in nature and no discretion is vested with the Commercial Tax Officer or the Appellate Tribunal to levy less or reduce penalty under this provision - Tribunal has committed a serious error in modifying the order of the Joint Commissioner of Commercial Taxes, which had imposed only the minimum penalty payable under the provision and in reducing the same - Decided in favour of Revenue.

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