Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 11, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Notifications
Highlights / Catch Notes
Income Tax
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Non-issuance of notice u/s 143(2) – scrutiny assessment - the AO has failed to issue requisite notice u/s 143(2) of the Act and this defect is not rectifiable u/s 292BB of the Act - AT
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Exemption u/s 10(23)– if the annual gross receipt of the educational institution is considered separately, the same is below ₹ 1 crore in each year, therefore, it is entitled for exemption u/s 10(23)(iiiad) - AT
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Penalty u/s 271(1)(c) - If the assessee has made a complete disclosure in the income tax return and offered the surrendered amount for the purposes of tax, there is no concealment or non-disclosure of particulars of income - AT
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Income from sale of shares – Income treated as business income OR STCG – the assessee decides to take delivery of shares purchased by her only at the end of the day depending upon the price movement of those shares - held as business income - AT
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Since the additional evidence of the assessee pertaining to the application for registration u/s 12A of the Act is admitted, it would be appropriate that the issue of registration u/s 12A of the Act requires fresh adjudication at the level of CIT - AT
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Sale of agricultural land – Amount not effected in bank a/c - there was no reason in not giving credit to the amount, just because the transaction has not routed through the bank account - AT
Customs
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Demand of 1% loading of Extra Duty Deposit (EDD) on bills of entry - Petitioner will have to furnish a Bond in favour of the Respondents at the time of clearance to secure the difference - HC
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Classification of goods - raw jute - what they had imported, were raw jute of cutting grade and correctly classifiable under sub-heading 53031010 of CTA, 1975 - AT
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100% EOU - If an order is passed on only cancellation of LOP, the moment the cancelled LOP gets reviewed and extended, naturally the obvious step when an appeal is filed is to set aside the order which is passed purely on the ground that LOP has been cancelled - AT
Service Tax
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Delay in payment of duty from CENVAT Credit account - It was contended that there were sufficient balance in the Cenvat account of the applicant, therefore, no interest is demandable in the present proceedings - prima facie case is against the assessee - AT
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Since 2004 a dispute was going on between the Revenue and the respondent as to whether the activity of providing place, seating arrangement to the finance institutions falls under the category of Business Auxiliary Service - extended period of limitation not applicable - AT
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Condonation of delay - delay of 382 days - delay in filing of appeal before Commissioner (A) - appellant being a lady entrepreneur who started her business as self-employment and sought a sympathetic treatment - application rejected - AT
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CENVAT Credit - input service - Tax paid on re-insurance service - credit denied on the ground that reinsurance takes place after the insurance business is effected - credit allowed - AT
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Availing cevnat credit while availing benefit of abatement - As now the appellant has reversed the credit of service tax paid on the common inputs services with interest, therefore the matter remanded back - AT
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Valuation - Mandap Keeper service - Non inclusion of room rent in assessable value - estimation of room rent - decided against the assessee - AT
Central Excise
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Default of payment of duty in terms of Rule 8 in the month of October, 2008 - in the case of default of payment of duty on due date, the manufacturer has to clear the goods on consignment basis by making duty from PLA - stay granted partly - AT
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Levy of penalty under Rule 25 cannot be imposed upon the main appellant for goods not manufactured by him - however penalty on director under Rule 26 confirmed - AT
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Classification of goods - metal foil / aluminium foil - Product manufactured by the appellant is more appropriately classifiable under CETH 4811 as asceptic packaging paper - AT
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CENVAT Credit - ground for disallowing the Cenvat credit of duty paid on the raw material sent by the Appellant to job workers is that the processes carried out by the Appellant do not amount to manufacture - prima facie case is in favor of assessee - AT
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Classification of goods is per exemption notifiation - Toilet paper - what is covered under Serial No. 55 is only cleansing or facial tissues falling under CETH 48182000 and not toilet paper which is classifiable under 48181000 - AT
Case Laws:
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Income Tax
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2014 (8) TMI 279
Non-issuance of notice u/s 143(2) for the purpose of reassessment u/s 147 – validation u/s 292BB - Held that:- Any legal ground even if it was not raised before any authorities can be raised for the first time in case no further investigation of facts is required – relying upon NTPC Vs. CIT [1996 (12) TMI 7 - SUPREME Court] - the Tribunal has jurisdiction to examine the question of law which arises from facts as found by the Income tax authority and has bearing on the tax liability of the assessee, the additional grounds taken by the assessee are to be admitted - Without issuance of notice, no further proceedings can be pursued and completed by the AO - the AO has failed to issue requisite notice u/s 143(2) of the Act and this defect is not rectifiable u/s 292BB of the Act - the plea that the AO was not intimated about the vacation of the stay order and dismissal of the writ petition is of no avail – Decided in favour of Assessee.
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2014 (8) TMI 278
Claim of exemption u/s 10(23)(iiiab) and (iiiad) – Educational institution whose income is less than Rupees one crore - Whether the each educational institution has to be taken as independent units or the trust has to be taken as a unit for assessment - Held that:- Following the decision in Jat Education Society Versus Dy. CIT [2011 (3) TMI 569 - ITAT DELHI] - for the purpose of section 10(23)(iiab) and (iiiad), the annual gross receipt of each educational institution run by the assessee has to be taken separately and it cannot be clubbed together in the hands of the trust for examining the fulfillment of condition of receipt of less than the prescribed limit of the annual gross receipt - if the annual gross receipt of the educational institution is considered separately, the same is below ₹ 1 crore in each year, therefore, it is entitled for exemption u/s 10(23)(iiiad) of the Act - The matter is remitted back to the AO for fresh adjudication - the details of the aids said to have been received from the government and the annual receipts are not available - It is made clear that any opinion in respect of exemption u/s 10(23C) is not expressed, and the AO shall consider it independently and decide – Decided in favour of Assessee.
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2014 (8) TMI 277
Payment made to non-resident for technical services u/s 40(a)(ia)- Liability to deduction TDS – Held that:- CIT(A) observed that irrespective of the fact that whether the assessee has claimed as deduction or not disallowance has to be made since tax was not deducted - Both the authorities have not examined whether the amount paid to the non-resident was deducted while computing the income chargeable to tax or not - even though the assessee claims that the payment to non-residents was not claimed as expenditure while computing taxable income, it was not examined by any of the authorities - thus, the matter is remitted back to the AO for re-examination – Decided in favour of Assessee.
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2014 (8) TMI 276
Reopening of assessment – Change of opinion - Income from sale of shares wrongly assessed under income from STCG instead of business income – Held that:- CIT(A) rightly held that the AO has reopened the assessment on the basis of change of opinion - CIT(A) also held that the gain arising on sale of shares is assessable as Short term Capital gain only - the view expressed by CIT(A) is upheld - assessee has furnished all the details relating to share transactions before the AO during the course of original assessment proceedings - AO has completed the assessment u/s 143(3) of the Act by considering those details - Later the AO has passed a rectification order u/s 154 of the Act also - on both the occasions, the AO was very much aware of the fact that the assessee has declared the gains arising on sale of shares under the head Capital gains, that too both the Short term Capital Gains and Long term capital gains - A careful perusal of the reasons recorded for re-opening also shows that the AO has entertained the reasons only from the facts already available on record - CIT(A) was justified in holding that the AO has re-opened the assessment only on the basis of change of opinion and the CIT(A) was justified in quashing the reopening of assessment – Decided against Revenue.
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2014 (8) TMI 275
Penalty u/s 271(1)(c) - Transactions relating to cash loan and purchase of land not accounted - Held that:- Penalty u/s 271(1)(c) should not be levied if there is no difference between the returned income and assessed income - there should not be any difference of opinion in respect of this proposition - The income surrendered during the course of survey has been duly offered in the return of income filed by the assessee - the assessee has accounted for the Cash loan and land value in the books of account by making corresponding credit to the Capital Account, which fact proves that both the items cannot be said to have been omitted to be accounted due to incomplete nature of books of accounts - Relying upon CIT Vs. SAS Pharmaceuticals [2011 (4) TMI 888 - Delhi High Court] - The entry passed by the assessee clearly shows that the assessee has used its unaccounted money only to give cash loans and to purchase the land. The penalty cannot be imposed on surmises, conjectures and possibilities - Section 271(1)(c) of the Act has to be construed strictly - unless it is found that there is actually a concealment or non-disclosure of particulars of income, penalty cannot be imposed - If the assessee has made a complete disclosure in the income tax return and offered the surrendered amount for the purposes of tax, there is no concealment or non-disclosure of particulars of income - the provisions of sec. 271(1)(c) should be interpreted strictly - the assessee cannot be imposed penalty u/s 271(1)(c), since it has already disclosed the surrendered amount as its income in the return of income – the order of the CIT(A) – Decided against Revenue.
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2014 (8) TMI 274
Unaccounted Contract receipts – Held that:- CIT(A) has given a finding that the amount has been credited to the Cartage account - CIT(A) did not consider any fresh material, he has only considered the books of accounts of the assessee - the assessee has claimed credit of the TDS amount deducted from the payment - submissions made by the assessee before AO and also the decision rendered by CIT(A) shows that the assessee has disclosed the amount in the profit and loss account by crediting the “Cartage expenses” account with the amount - When the assessee has duly accounted for the amount in its account and has also brought the same to the Profit and Loss account through the “Cartage Account”, there was no reason to assess it again – the order of the CIT(A) is upheld – Decided against Revenue. Unidentified Sundry creditors – Held that:- The assessee has challenged the presumption entertained by the AO - the view entertained by the AO that they are outstanding for more than one year is wrong - no creditor’s balance was outstanding for more than six months - CIT(A) shows that the AO has also appears to have acted in a hasty manner on this issue - assessee has expressed its difficulty in procuring and furnishing the details that were called for by the AO - These explanations of the assessee requires examination at the end of the AO – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Disallowance out of Telephone, Conveyance, Cartage – Held that:- CIT(A) has held that these disallowances need to be set aside, since he had estimated the net profit by rejecting the books of account of the assessee - the order of CIT(A) is set aside with regard to the rejection of books of account, the issue now requires adjudication - since the issue relating to the Sundry Creditors, the disallowances may also be examined afresh at the end of the AO – thus, the matter is remitted back to the AO – Decided in favour of Revenue.
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2014 (8) TMI 273
Income from sale of shares – Income treated as business income OR STCG – Held that:- CIT(A) has given a categorical finding that the activities carried on by the assessee in respect of share transactions are akin to the business activities - The Statement of Profit/loss arising on sale of shares also shows that the assessee was indulging in short term trading activities during the year - shares allotted under primary issue were also sold within short period from the date of allotment - These kinds of transactions add strength to the view taken by the tax authorities - CIT(A) has pointed out the assessee has earned long term capital gains in 11 transactions and has earned short term capital gain in 255 transactions, which proves the case of the AO that the assessee has been indulging in short term trading activities with the aim of maximising the profit. The fact that the assessee has been indulging in speculative activities also, also support the case of the AO - the speculative transactions have been admitted as business transactions - Another important aspect that was brought out by the tax authorities is about the conduct of the assessee, viz., the assessee decides to take delivery of shares purchased by her only at the end of the day depending upon the price movement of those shares, which means that the decision to hold it as investment is not taken at the time of purchase, which is the crucial factor to determining about the nature of transactions - If the intention had been to hold it as investment, usually, an investor is least bothered about the short term price movements - The conduct of the assessee was brought out by the assessee, strongly militates against the stand taken by the assessee - CIT(A) has also pointed out that the assessee has rotated the funds several time, which is akin to the business activity - CIT(A) was justified in upholding the order of the AO in assessing the gain arising on sale of shares as the business income of the assessee – order of the CIT(A) is upheld – Decided against Assessee.
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2014 (8) TMI 272
Rejection for registration u/s 12AA – Charitable purpose u/s 2(15) – Education imparted by Trust – Admission of additional evidence under Rule 29 of Rules - Held that:- The facts which lead to the conclusion of CIT were based on the agreement between the assessee trust and Lancaster University - CIT could have asked the assessee trust to explain the details of identity cards and procedure of appointment of academic, administrative and support staff and also the source and mode of payment of their salary and perquisites but the CIT without asking any explanation in this regard drew a conclusion that the assessee trust is merely facilitating Lancaster University in the business of education in India and that too for a fee - important evidence and relevant material was not considered by the CIT while rejecting the application of the assessee for registration u/s 12 of the Act - Since there was no query from the CIT, Faridabad, the relevant evidence and documents could not be produced and considered at the level of CIT during the original proceedings - the additional evidence and documents submitted by the assessee are relevant for adjudication of the assessee for registration u/s 12A of the Act - additional evidence submitted by the assessee deserves to be admitted and we admit the same by allowing application of the assessee filed under Rule 29 of the IT(AT) Rules, 1963 – Decided in favour of Assessee. Since the additional evidence of the assessee pertaining to the application for registration u/s 12A of the Act is admitted, it would be appropriate that the issue of registration u/s 12A of the Act requires fresh adjudication at the level of CIT, Faridabad – the issue of registration u/s 80G of the Act being consequential rejection of the application of the assessee is also restored to the file for fresh adjudication with a direction to CIT that the application of assessee filed in Form No. 10G shall be reconsidered in the light of conclusion drawn for grant of registration u/s 12A of the Act - thus, the matter is remitted back to the CIT for fresh consideration – Decided in favour of Assessee.
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2014 (8) TMI 271
Enhancement of income – No reasonableness of purchase consideration – Held that:- CIT(A) has not only upheld the disallowance of depreciation but he has held that the entire payment sum was to be disallowed u/s 40A(2) - CIT(A) has referred that Shri Binoy Jacob was main promoter of TPPL i.e. one company in which he holds 74% shares - in the assessee company which bought the ongoing business for TPPL Shri Binoy Jacob holds 50% share - Other investor M/s. Saipen Italy had acquired 50% share at a premium of 45,840 per share of ₹ 10 /- each - But Shri Binoy Jacob did not have to pay a single rupee as premium on acquisition of 50% equity - CIT(A) found that there is no plausible explanation as to why Saipen should pay such high premium for acquision of a startup company - CIT(A) has held that entire sum liable to be disallowed and he enhanced the assessment to that extent. Whether a payment made by the assessee which has neither been claimed as an expenditure or a loss can be disallowed and subject to taxation – Held that:- Assessee’s counsel has fairly admitted that the valuation report was obtained post slump sale agreement in order to determine / record the values of various tangible and intangible assets acquired by the assesee - If there are defects in the valuation report, it cannot lead to conclusion that the whole agreement between the assesee and the other parties is bogus - tax planning through legitimate means is perfectly justified - it has never been the arguments of the revenue that the money paid by Saipen Italy was not paid or was of Mr. Binoy Jacob or was of TPPL own money routed through this manner - the conclusion by the authorities that the whole scheme was a colourable device cannot be sustained and is liable to be set aside. Depreciation of payment of intangibles – Held that:- CIT(A) has found that valuation report was prepared by a Chartered Accountant who was also appearing on behalf of the assessee in the appellate proceedings - numerous defects have been reported in the valuation report - the valuer has mentioned that in preparing the valuation report the valuer has relied upon and assumed without independent verification , the accuracy and completeness of all information provided by the company - the information provided there has not been verified by the valuer - the valuer is a Chartered Accountant and he made his valuation only by taking into account the economic data and the ratio of turnover and profits - there is lack of credibility on the valuation assigned by the valuer towards technical knowhow, valuation of business and price for non-compete clause - the main stay of the TPPL was consultancy and execution of FPSO projects though its skilled employee who were very much a part of assessee company - It has further been noted by the CIT(A) that the assessee has never engaged in any R & D activity - credible materials have not been brought out by the valuation report on which a specific valuation can be attributed to the intangible assets – the authorities are justified in holding that assesee is not entitled to depreciation on the valuation of technical knowhow, valuation of business and non-compete fee mentioned - Relying upon CIT vs. Smith Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - good will is an asset under Explanation 3 (b) to section 32(1) of the I.T. Act. Whether the valuation of good will by the assesee at ₹ 40.58 crore is appropriate or not – Held that:- The valuation report submitted by the assesee does not deal with valuation of good will - no material has been brought on record which can aid into the computation of good will in this regard - revenue has submitted that the sum of ₹ 40.58 crore towards good-will was arrived at between the assessee and the TPPL before the agreement - there are proper and generally accepted methods of valuation of good-will and there was no method or procedure applied for valuation of good will has been brought on record – the matter is remitted back to the AO for adjudication. Application of section 170 and Explanation 3 of section 43(1) – Held that:- The whole scheme in the case cannot be termed as sham transaction - while dealing with enhancement on account of disallowance of depreciation by invoking 5th proviso to section 32(1), CIT(A) has observed that there is no need to give separate opportunity for the enhancement - AO has not considered these aspects – thus, the matter is remitted back to the AO for fresh consideration. Enhancement on account of rent for use of assets – Held that:- In the agreement the lease rent of ₹ 30 per sq. ft. p.m. was specified - The facilities in this regard included provision for air conditioning facilities through AC plant and also power back up facilities through DG sets - CIT(A) has found the sum paid is excessive and he had substituted the same with this figure of ₹ 6 sq. ft. – there was no basis whatsoever for arriving at this figure of ₹ 6 per sq. ft. has been specified - even if the payment made is considered to be excessive and it cannot be substituted by any guess work or otherwise – thus, the matter is remitted back to the AO for fresh consideration – Decided partly in favour of assessee.
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2014 (8) TMI 270
Receipt of loans from various persons – Creditworthiness of persons not established – Held that:- Smt. P. Vinodha is mother-in-law of the assessee who filed an affidavit and submitted that she has funds out of retirement, death-cum-retirement benefit of her husband plus income from agricultural land of about ac.6.32 gts - Assessee being son-in-law, she advanced interest free loan and confirmed the amounts - Assessee being a shareholder in the property also, it were accepted by the CIT(A) as a source –the order of the CIT(A) is upheld – Decided against Revenue. Sale of agricultural land – Amount not effected in bank a/c – Held that:- Just because it was not affected to the bank account, it does not mean that assessee did not have a source of funds - CIT(A) has noted that assessee has sold ac.2.12 gts situated at Maheswaram Mandal - copy of the pattadar passbook as noted by the revenue authorities were also filed – there was no reason in not giving credit to the amount, just because the transaction has not routed through the bank account - AO has verified the cash deposits and bank account and the assessee also explained to AO the source of deposit out of sale proceeds received in cash – Decided against Revenue. Advance receipt on sale of land – No evidence adduced – Held that:- There was no reason not to give credit to the amount - Assessee has shown the amount in the Balance Sheet prepared as advance received and furnished necessary evidence in the form of an agreement of sale before the CIT(A) with necessary Annexures vide E & F which was also sent to the AO in the remand - If AO chose to ignore and gives report to the CIT(A) that all the information was available with the AO at the time of assessment, the CIT(A) cannot be faulted for entertaining the evidence and giving a finding - the assessee has submitted necessary evidences in support of contention that it has received advance by virtue of the agreement of sale entered with a company, there was no reason to differ from the finding of CIT(A) – Decided against Revenue.
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Customs
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2014 (8) TMI 290
Demand of 1% loading of Extra Duty Deposit (EDD) on bills of entry - Held that:- There is a SVB order passed by the Deputy Commissioner of Customs, New Delhi dated 23rd June 2014. In view of the said order, at least prima facie, Respondent Nos.4 and 5 were not justified in loading 1% EDD on the imports made by the Petitioner. In any event and even if we were to hold that the SVB order dated 23rd June 2014 was not a fresh order and there was no renewal of the earlier SVB order dated 21st February 2011, even then, by virtue of the Circular dated 23rd February 2001, and particularly clause 9 thereof, in the facts of the present case, Respondent Nos.4 and 5 were not justified in loading 1% EDD on the imports made by the Petitioner. The said clause categorically states that where the provisional assessment is being resorted to, the investigation and finalization of the assessment must be completed within four months from the date of reply and if no decision is taken within the said period, the extra duty deposit will be discontinued. Even if we assume that the order passed by the Deputy Commissioner, SVB, New Delhi dated 23rd June 2014 does not amount to a fresh SVB order and neither does it renew an earlier SVB order dated 21st February 2011, by virtue of the said circular, no EDD could have been loaded on the imports made by the Petitioner. However, in view of the fact that the Appeal before the CESTAT, Delhi is pending, we do not think it would be a fit case to entitle the Petitioner to clear their imports without in any way securing 1% EDD that is being loaded on their imports. - Petitioner will have to furnish a Bond in favour of the Respondents at the time of clearance to secure the difference between the duty demanded and the Quantum of Extra Duty Deposit. - Decided in favour of assessee.
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2014 (8) TMI 282
Classification of goods - whether the imported goods described as ‘raw jute (BWCB/BTCA)’ in the respective Bills of entry are classifiable under chapter subheading 530310.10 or under chapter subheading 530390.10 of the Customs Tariff Act, 1975 and consequently eligible to the benefit of Notification 21/02-Cus dated 01.03.2002 read with SAPTA Notification no. 105/99 Cus dated 08.10.2005 - Held that:- Sub-heading 53.03 of CTA,1975 broadly enumerates the items, that is, jute and other textile based fibers in raw stage or processed ones; also the waste generated. To explain the said heading, the Explanatory Notes under the HSN are also designed accordingly, mentioning the items that are covered under the said heading. Under the 1st category, of the quoted explanation different types of raw fibers are considered, under category II the processed goods are covered and under category III, waste materials of the fibers have been included. The meaning of ‘cuttings’ appears under category I and it is referred in the contest while explaining different types of raw fibers that are covered under the said sub-heading. It is explained to mean the butt-ends of the fibers which are cut off and marketed separately - it is clear that the raw ‘jute cuttings’ are of different grades and are available in the market. It supports the contention of the Appellant that what they have imported are raw jute cuttings of different grades. No contrary evidence has been produced by the Revenue to establish that what the Appellant had imported, were not raw jute of cutting grades, but processed ‘jute cuttings’. Under the re-structured eight digit new tariff entry, the raw jute of cutting grades are not classifiable under CSH 53039010, as the ‘jute cuttings’ mentioned in the said entry does not refer to raw jute of cutting grade. On the other hand, in view of the items covered under the broad heading 53.03, along with the explanation of inclusion of various items covered under the said heading as mentioned in the HSN, undoubtedly, the inference goes in favour of the assessee that what they had imported, were raw jute of cutting grade and correctly classifiable under sub-heading 53031010 of CTA, 1975. Goods imported by the Appellant, be considered as raw jute of cutting grade, therefore the benefit of the said Notification automatically flows as it continued to be applicable to raw jute only and we do not see any necessity to delve into this aspect as it would be a mere academic exercise - Decided in favour of assessee.
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2014 (8) TMI 281
100% EOU - subsequent development after the passage of order in original - LOP was extended and permission for Customs Private bonded warehouse was extended - capital goods obtained duty free - Clandestine clearance of goods into the DTA and failure to intimate commencement of manufacturing goods - Violation of the conditions of Notifications No. 13/81-cus and 123/81-CE - Held that:- there is a new development in the sense that the LOP has been extended up to 06.04.2014. If the Tribunal was convinced that the entire order was a result of cancellation of LOP, the moment the LOP was extended, normal course would have been to set aside the order and direct the department to take up the issue as and when LOP expires. If an order is passed on only cancellation of LOP, the moment the cancelled LOP gets reviewed and extended, naturally the obvious step when an appeal is filed is to set aside the order which is passed purely on the ground that LOP has been cancelled. - matter remanded back for fresh decision.
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2014 (8) TMI 280
NEPZ Unit - Contravention of conditions of LOP dated 22.09.1995 - Import of goods at concessional rate of duty for manufacture of excisable goods - Cannulae and Needles were imported duty free by the appellant availing exemption granted under Notification No. 53/97-CUS dated 03.06.97 for use in the manufacture of Disposable syringes with or without needles - Number of of needles were claimed to be waste and scrap - Invocation of extended period of limitation - Held that:- When the assessee had shown wastage and scrap of the imported material meant for use in the manufacture of syringes with or without needle, unless the waste and scrap aspect is reconciled for the period November, 96 to April, 2003 it is difficult to reach to any conclusion prematurely about the export or no export of 2,35,54,000 pieces of cannulae. Unless cannulae is properly accounted for it is difficult to hold the manufactured quantity of specific goods were exported. Therefore, it is required to be ensured that the claim of waste and scrap as that is in appeal No. C/580/2008 should not grant undue advantage to the plea of export in the present appeal - Matter remanded back - Decided in favour of Revenue.
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Service Tax
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2014 (8) TMI 304
Levy of Interest - Delay in payment of duty from CENVAT Credit account - It was contended that there were sufficient balance in the Cenvat account of the applicant, therefore, no interest is demandable in the present proceedings - Bar of limitation - Held that:- So far as applicability of limitations of one year is concerned, the judgment passed by Delhi High Court will have relevance and it, prima facie, conveys that the demand of interest has also to be issued within one year. However, it is seen from the Annexure to the show cause notice dt. 18.04.2013 that the demand period is from October 2007 to March 2012 and the periodical duty paying returns in service tax matter are also required to be filed on half yearly basis. In view of the demand previsions the entire period is not beyond one year. Appellant has not made out a prima facie case for complete waiver of the confirmed demands as on merits once there is a delay in payment of duties the interest is required to be paid on the period of delay - stay granted partly.
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2014 (8) TMI 303
Consulting Engineer service - import of services - reverse charge - Held that:- in absence of the specific provisions in the Finance Act, 1994 during the period prior to 18.4.2006, for recovery of the service tax, from the service recipient in India, in case of the services provided by a service provider abroad, no service tax could be recovered from the service recipient. In view of this, the impugned order is not sustainable - Following decision of Indian National Ship Owners Association Ltd. [2008 (12) TMI 41 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2014 (8) TMI 302
Business Auxiliary Service - Bar of limitation - Held that:- Since 2004 a dispute was going on between the Revenue and the respondent as to whether the activity of providing place, seating arrangement to the finance institutions falls under the category of Business Auxiliary Service - As the classification of service tax is in dispute therefore the extended period of limitation is not invokable in this case. As in this case service tax for the period from July 2003 to September 2006 has been demanded by the department vide a show-cause notice dated 03.06.2008 by invoking extended period of limitation, the said show-cause notice is not sustainable being time barred. Therefore, no infirmity with the impugned order and the same is upheld - Decided against Revenue.
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2014 (8) TMI 301
Waiver of pre deposit - Held that:- Bank accounted ₹ 6,79,292 towards the State tax. The matter was brought to the notice and the office of Accountant General directed the State Bank of India to transfer the above amount from the State account to the service tax account - As the substantial amount has already been paid by the applicant, therefore the pre-deposit of the remaining dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.
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2014 (8) TMI 300
Disallowance of CENVAT Credit - penalty imposed under Rule 15(3) - Held that:- It is observed from the ground of appeal filed by the appellant that no reasons have been given as to how Cenvat Credit is admissible to them and as to why the order passed by the First Appellate Authority is not acceptable. So far, imposition of penalties upon the appellant is concerned, the issue of chargeability of interest was under litigation and has been settled only by an order passed by Hon'ble Supreme Court in the case of UOI vs. Ind-Swift Laboratories Ltd. The entire Cenvat Credit taken by the appellant already stands reversed. In the facts and circumstances of the case, no penalty is attracted against the appellant under the Finance Act 1994. Penalties imposed upon the appellant are, therefore, set aside and appeal to that extent only is required to be allowed - Decided partly in favour of assessee.
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2014 (8) TMI 299
Condonation of delay - delay of 382 days - delay in filing of appeal before Commissioner (A) - appellant being a lady entrepreneur who started her business as self-employment and sought a sympathetic treatment - Held that:- the appellant has pleaded that Commissioner (A) could have condoned the delay by invoking the provisions of Limitation Act, 1963 which provides that appeal can be filed within three years from the date of cause of action. The Hon'ble Supreme Court considered this issue in the case of Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT OF INDIA] and has held that when the statute provides a period for filing an appeal and also a period which can be condoned, if an appeal is filed beyond such period, such delay cannot be condoned. - appeal rejected - Decided against the assessee.
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2014 (8) TMI 298
CENVAT Credit - input service - Tax paid on re-insurance service - credit denied on the ground that reinsurance takes place after the insurance business is effected - Held that:- Since reinsurance is a statutory obligation and the reinsurance is coterminous with the insurance policy, stand taken by the Revenue that the transfer of a portion of the risk to the reinsurer which is all the reinsurance means has to be considered as having a nexus with the output service namely provision of insurance to the customers - percentage of insurance to be reinsured is directly connected to the premium collected from the persons who are insured with insurer and it is basically transfer of a portion of the risk and therefore it can be definitely said that the reinsurer is providing the service to the insurance company when he accepts to reinsure a portion of the insurance undertaken by the insurer. Therefore, impugned order cannot be sustained on merits. - Decided in favour of assessee.
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2014 (8) TMI 297
Availing cevnat credit while availing benefit of abatement - Denial of benefit of Notification No. 1/2006-ST dated 1.3.2006 - Held that:- As per the condition of the Notification, the benefit of the Notification is not available in case where cenvat credit of duty paid on input services is availed. In view of this, the impugned order is rightly passed - As now the appellant has reversed the credit of service tax paid on the common inputs services with interest, therefore the matter is to be re-examined by the adjudicating authority afresh - Decided in favour of assessee.
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2014 (8) TMI 296
Valuation - Mandap Keeper service - Non inclusion of room rent in assessable value - estimation of room rent - Held that:- Room rent is not to be taken as consideration towards Mandap Keeper service. No evidence is produced by the appellants regarding quantum of room rent. The appellants are charging consolidated amount for Banquets Hall and Conference Hall. If a Conference Hall or Banquets Hall is booked by service receiver, how many rooms he has taken on rent is not on record. Whether the rooms were given complimentary or the appellants were separately charging for rooms is also not on record. In previous order, appellants produced certain evidence by way of certificate by the Chartered Accountant. In this case, there is no such evidence produced by the appellants - Decided against assessee.
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Central Excise
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2014 (8) TMI 292
Waiver of pre deposit - Default of payment of duty in terms of Rule 8 in the month of October, 2008 - subsequent clearances were effected on payment of duty partly through Cenvat credit and partly through PLA - short paid duty for the month of October, 2008 was ultimately made good in December, 2009 - Imposition of interest and penalty - Difference of opinion - Majority order - Held that:- The provision of Rule 8(3A) of Rules were before the Hon’ble Madras High Court in the case of Unirols Airtex (2013 (12) TMI 1398 - MADRAS HIGH COURT) and before the Hon’ble High Court in the case of Harish Industries (2013 (6) TMI 83 - GUJARAT HIGH COURT). While interpreting this provision, the Hon’ble High Court, held that in the case of default of payment of duty on due date, the manufacturer has to clear the goods on consignment basis by making duty from PLA. In view of the above, decision of the Hon’ble High, the prima facie, the applicants had not made out a strong case for waiver of pre-deposit of duty. In respect of the pre-deposit of penalty which is imposed under Section 11AC, the Hon’ble Gujarat High Court in the case of C.C.E. & Customs vs. Saurashtra Cement Ltd. reported in [2010 (9) TMI 422 - GUJARAT HIGH COURT] held that in such case, the penalty is imposable under Rule 27 of the Central Excise Rules, 2002 which is restricted upto ₹ 5,000/-. In view of the majority order, the appellant is directed to make pre-deposit of ₹ 20,07,725/- (Rupees twenty lakh seven thousand seven hundred twentyfive only) along with deposit of penalty of ₹ 5,000/- (Rupees five thousand only) as a condition of hearing of their appeal - stay granted partly.
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2014 (8) TMI 291
Order of settlement commission - appellant contested the demand u/s 11D as per parallel invoices issued for obtaining finance - commission remanded back the matter - Held that:- Considering the provisions of law, more particularly section 32E and 32F of the Act, the Settlement Commission is justified in not accepting the suggestion made by the learned advocate appearing on behalf of the petitioner that the case may be settled only in respect of first two issues where duty demand has been accepted by the petitioner and the third issue relating to section 11D may be referred to the adjudicating for deciding as per law. However, the learned Settlement Commission has erred in rejecting the application by observing that the demand of duty amounting to ₹ 35,13,847/- under section 11D of the Act has not been accepted by the petitioner. Settlement Commission has materially erred in not exercising the jurisdiction and passing order under section 32F(5) of the Act with respect to demand of duty amounting to ₹ 35,13,847/- under section 11D of the Act, which was disputed by the petitioner. - matter remanded back to commission - Decided in favour of assessee.
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2014 (8) TMI 289
Clandestine removal of goods - Levy of penalty under Rule 25 on the appellant - Levy of penalty on the director of company under Rule 26 - of the Central Excise Rules, 2002 - Held that:- M/s. Rajvi Petrochem Pvt. Ltd., Surat clandestinely cleared and sold the goods to the main appellant without any documentation, is not doubted. This fact has not been denied by the main appellant. In this regard, it is relevant to glance through the provisions contained in Rule 25 of the Central Excise Rules, 2002 - From the language of the above Rule 25(1) of the Central Excise Rules, 2002, it is apparent that the same is applicable to a producer, manufacturer, registered person of a warehouse or a registered dealer who contravenes any of the provisions of these rules when intent to evade payment of duty. In the present case, the main appellant has not contravened any provisions of the Central Excise Rules, 2002 with intent to evade payment of duty. POY purchased by the main appellant were not the goods manufactured by the main appellant much less with any intent to evade payment of central excise duty. As the main appellant is not the manufacturer of the goods, therefore, it is held that penalty under Rule 25 of the Central Excise Rules, 2002 cannot be imposed upon the main appellant for goods not manufactured by him and penalty imposed under Section 25 of the Central Excise Rules, 2002 is accordingly set aside. - Decided in favor of assessee. Penalty on director - Held that:- Shri Pankesh S. Patel, Director of the main appellant is representing the unit registered with the central excise department and was aware that the goods (POY) purchased by them were without any invoice and without payment of central excise duty. Being representative of a registered unit, he has to be aware of the central excise procedures and law. It cannot be said that he was not aware that the goods purchased by them were not liable to confiscation under the Central Excise Act, 1944 and the Central Excise Rules, 2002. - He has been rightly visited with penalty under the Rule 26 of the Central Excise Rules, 2002 - penalty reduced to ₹ 50,000/- - Decided against the appellant.
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2014 (8) TMI 288
Classification of goods - metal foil / aluminium foil - Classification under under CETH 4811 9092 or under CETH 7607 2090 - Exemption under Notification 4/2006-CE dated 01/03/2006 - Held that:- From the manufacturing process given, it can be seen that the aluminium foil is not backed with any material. On the other hand, it is covered on both sides by plastic material and is laminated on one side of the paperboard. Thus, it is the aluminium foil which forms the backing and not the other way. Further, as per the test report, paper accounts for 80% of the material and aluminium, barely 5%. After the introduction of a specific entry for asceptic packaging paper, the scope of CEETH 4811 has undergone a change and paper or paperboard backed by a metallic foil merits classification under Chapter 48 which was not the position earlier. The HSN explanatory notes also underwent a change to incorporate within the scope of CETH 4811 such paper. A reading of the revised HSN Explanatory Notes clearly shows that paper and paperboards covered on both faces with thin transparent sheets of plastics with or without a lining of metal foil (on the fact which will form the inside of packaging) are also classified under CETH 4811. Thus the change in the scope of tariff entry needs to be given effect to. - Product manufactured by the appellant is more appropriately classifiable under CETH 4811 as asceptic packaging paper. - Decided against Revenue.
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2014 (8) TMI 287
CENVAT Credit - input services - running canteen - recovery of service tax portion from the employees - Held that:- At the out-set, it is required to be noted that it has been found that the appellant was recovering the amount from the beneficiaries/ its own employees while running the canteen. Therefore, as such, the appellant was not entitled to Cenvat Credit which was claimed by them on the amount of ₹ 13,27,415/-. Therefore, under the circumstances, when the show-cause notice was issued to reverse the same and accordingly after giving opportunity to the appellant and when it was found that, in fact, an amount of ₹ 13,27,415/- was recovered by the contractor and the same was recovered by the appellant from its employees/beneficiaries, the appellant was not entitled to the Cenvat Credit of the same, no error has been committed in confirming the show-cause notice and making the demand of ₹ 1,59,353/-towards the Cenvat Credit wrongly availed by the appellant. We see no reason to interfere with the impugned judgment and order passed by the learned Tribunal - Decided against assessee.
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2014 (8) TMI 286
Wrong availment of MODVAT Credit - It was alleged that except one grade i.e. Relene E-41003 all other grades of plastic granules could not be used in the manufacture of HDPE Pipes, conforming to the specification as ordered by the Department of Telecommunication - Adjudicating Authority dropped the proceedings initiated - Held that:- Appellants are manufacturers of HDPE Pipes and the same are supplied to DOT against various contracts. The Revenue's case is that in the manufacture of the said HDPE Pipes, the Respondent used inputs, i.e. HDPE granules/plastic granules of various grades, on which they had availed modvat credit. Taking note of a Certificate issued by the Central Institute of Plastics Engineering and Technology, Bhubaneswar, that such HDPE Pipes cannot be manufactured from the HDPE/Plastic granules, as such, other than from Relene-E-41003 grade, the modvat credit was held to be inadmissible on HDPE granules other than Relene E-41003. On the other hand, it is the case of the Respondent that they have been using HDPE granules Relene E-41003 after blending with other grades of HDPE/Plastic granules in the manufacture of HDPE pipes supplied to DOT - Appellants are blending/mixing Relene E-41003 and other grades of HDPE granules in the manufacture of HDPE Pipes, which are ultimately supplied to DOT - Department itself has acknowledged that the Appellants are blending/mixing Relene E-41003 and other grades of HDPE granules in the manufacture of HDPE Pipes, which are ultimately supplied to DOT - Decided against Revenue.
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2014 (8) TMI 285
Waiver of pre deposit - CENVAT Credit - Notification No. 214/86 - Appellant took credit of duty paid on the raw material i.e. MS Rounds, MS Tubes, Pipes, MS Bars/Rods and sent them to the job workers for carrying out the process of cutting, straightening, threading, forging and trimming for manufacture of threading rods, Ledger Blade and Jack Nuts etc. - ground for disallowing the Cenvat credit of duty paid on the raw material sent by the Appellant to job workers is that the processes carried out by the Appellant do not amount to manufacture - Held that:- assessee was paying duty on the final product cleared by them. The show cause notice or the Order- in-Original doesn't question the applicability of exemption notification no. 214/86-CE in respect of the job workers. If the contention of the adjudicating authority that the Appellant themselves did not carry out any processes amounting to manufacture (and hence no Cenvat credit can be allowed to them on the raw material) then the Appellant would not be liable to pay duty either. Nowhere this notification stipulates that the principal manufacturer must carry out some operations amounting to manufacture. It is also a fact that the job worker works on behalf of the principal manufacturer. It is also not disputed that the final product emerged as a result of subjecting the raw material to processes amounting to manufacturer and the appellant paid duty on the final product. Thus prima facie, there is nothing which would make the impugned Cenvat Credit inadmissible to the Appellant - prima facie the Appellant has a strong case and balance of convenience also clearly lies is its favour - Stay granted.
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2014 (8) TMI 284
Classification of goods is per exemption notifiation - Toilet paper - Classification under CETH 48181000 - Sr. No. 55 of Notification No. 49/2008-CE (NT) dated 24/12/2008 - The appellant's contention is that entry at Serial No. 55 of the said Notification covers goods falling under CETH 48182000, which covers handkerchiefs, cleansing or facial tissues and towels. - Revenue contended that, the said entry does not include toilet paper falling under CETH 48181000 and therefore, the appellants are not required to discharge excise duty liability on toilet paper under Section 4A of the Act on the basis of RSP. Held that:- the tariff itself distinguishes between the toilet paper and cleansing or facial tissues. While toilet paper falls under CETH 48181000, cleansing or facial tissues fall under 48182000. Further, the description of goods under serial No. 55 of Notification No. 49/2008 matches exactly with the tariff description of goods falling under CETH 48182000. If the intention of the legislature was to cover toilet paper also under Section 4A, then the toilet paper would have been specifically mentioned in the notification No. 49/2008. Therefore, there is merit in the contention of the appellant that toilet paper is not covered under entry vide serial No. 55 of Notification No. 49/2008. We also observe that wherever the legislature wanted to cover all goods falling under a particular heading, they have stated so in the Notification No. 49/2008. For example, in respect of the goods falling under CETH 3819 vide serial No. 49 of the said notification, “all goods” falling under said heading has been specified in the Notification. This also supports the contention of the appellant that what is covered under Serial No. 55 is only cleansing or facial tissues falling under CETH 48182000 and not toilet paper which is classifiable under 48181000 - Decided in favour of assessee.
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2014 (8) TMI 283
Determination of annual production capacity - induction furnace capacity - Tribunal remanded matter for de novo determination, directing that annual production capacity should be taken into consideration and the copy of the verification report should be supplied - Commissioner again records the fact, of the Asstt. Commissioner having forwarded a report dated 24.8.2005 informing that the appellant paid duty on the basis of the furnace capacity of 3 M.T. during the period 1.9.97 to 31.3.98; but had short paid duty for the subsequent period i.e. April, 1998 to June, 1998 and that some duty is due for the later period - Held that:- The Commissioner fails to record a finding whether the appellant remitted the Excise Duty due on the capacity of 3 M.T. for the relevant period i.e. 1.9.97 to 31.3.98. The Commissioner also fails to record a finding whether the report of the Asstt. Commissioner (as to the appellant having paid correct duty for the relevant period) is accepted. To this extent, the impugned order violates the mandate of this Tribunal's order dated 9.3.2001. In the operative portion of the Order, the Commissioner records that the capacity of furnace is 3 M.T; and the annual production capacity is fixed at 9600 MT. On this aspect the appellant has no grievance. The Commissioner further ordered that the appellant shall pay Duty accordingly including the interest payable, within 10 days of receipt of the order. It is not clear from the impugned order, the analysis therein and in particular the concluding portion, as to whether the direction to pay Duty and interest, is in respect of the period which was the subject matter of remand. In terms of the order of this Tribunal dated 9.3.2001, the relevant period is 1.9.97 to 31.3.98. The subsequent period viz. April, 1998 to June, 1998 was wholly beyond the jurisdiction of the Commissioner to observe, analyse or adjudicate - In the light of the chronology of events adverted to above, it is clear that the Learned Commissioner has passed a clearly erroneous and patently perverse order - Therefore, matter is remanded back - Cost of ₹ 10,000 imposed on revenue - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (8) TMI 295
Recovery of dues - Valuation - non inclusion of the ADD payable under Section 30 of Special Economic Zone Act, 2005 in the sale value of goods - Revenue asked petitioner to pay entire duty and penalty within 3 days - Held that:- Admittedly, the second appeal filed by the petitioner was dismissed by the Tribunal on 24.03.2014 and a copy of the order was served on the petitioner on 30.05.2014. As against the order dated 24.03.2014, the petitioner has got a right of revision and such revision has to be filed within 90 days. However, even before the expiry of the statutory period prescribed for preferring a revision, the respondent has issued the impugned notice calling upon the petitioner to pay the penalty amount, which is sought to be assailed by the petitioner by filing a revision petition. In the decision of this Court rendered in the case of Lakshmi Machine Works Ltd., vs. Deputy Commisisoner reported in (2007 (11) TMI 552 - MADRAS HIGH COURT) it was held that coercive steps shall not be taken for recovery of dues before the expiry of the appeal period and recourse taken by the assessing officer to recover arrears in such a hasty manner, even without giving adequate time to the petitioner to prefer an appeal, is arbitrary - Decided in favour of assessee.
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2014 (8) TMI 294
Liability to pay dues - recovery of dues from the directors - is stated that the revision petitioner is not the Director of the 2nd respondent company and he has not shown as Director in the books of Registrar of Companies - Onus to prove - Held that:- Admittedly, the revision petitioner has not filed any affidavit. Only the alleged brother-in-law of the revision petitioner namely one C.K.Simon alone filed the affidavit. No sufficient reason has been stated in the affidavit, for not filing any affidavit by the revision petitioner and only filed by brother-in-law of the revision petitioner. On the sole ground, the petition filed on behalf of the revision petitioner is not maintainable, as rightly pointed out by the learned counsel appearing for the respondents. Revision petitioner seeking relief of declaration and other reliefs and therefore, the revision petitioner should have examined witnesses to prove his case at first instance. A careful reading of the pleadings in the above said plaint and written statement revealed that the onus is only on the revision petitioner to prove the contentions and hence the revision petitioner should prove the contentions raised in the plaint by adducing reliable oral and documentary evidence. The learned counsel appearing for the revision petitioner submitted that in view of the averments made in the written statement the onus is only on the respondents to prove their case and therefore, the respondents should examine their witnesses first. Further, the learned counsel appearing for the revision petitioner submitted that since the brother-in-law of the revision petitioner well aware of the facts of the case, he has filed the affidavit and there is no illegality in filing the affidavit by brother-in-law, on behalf of the revision petitioner. A careful perusal of the averments made in the plaint and the written statement in the instant case revealed that the defendant had not admitted the material facts stated in the plaint and therefore, the above said facts in the above said decisions are differs and hence, not applicable to the facts of the present case - trial court has correctly discussed both side contentions and finally dismissed the above said petition and therefore, there is no need to interfere with the findings of the trial court and the revision petition is liable to be dismissed - Decided against assessee.
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2014 (8) TMI 293
Bombay Sales Act, 1959 - Section 33D - non production of documents - Whteher in case the communication issued by the AO is construed as being with respect to the assessment orders under both the Acts, the respondents' right to assess would be barred by limitation - Whether in case it is construed as applicable only to the assessment order under the BST Act, the assessees would be faced with an assessment order which it never had an opportunity of challenging - Held that:- subject itself refers to the cancellation of the assessment orders under the BST Act as well as under the CST Act, 1956. The petitioner proceeded on the basis that by the said order, the assessment orders under the BST Act as well as under the CST Act had been cancelled. In view of the applicability of the provisions of the BST Act to the CST Act, in certain respects, it is possible that the petitioner genuinely believed that its applications for setting aside the assessment orders were considered to be applications in respect of the assessment orders under both the Acts and not merely under the BST Act. No application was made in form VII(BB) in respect of the assessment orders passed under the CST Act. The application was only in form N-30AA, which is prescribed in respect of the applications for setting aside the assessment orders under the BST Act. However, a fair reading of the letter dated 10.01.2008 definitely indicates that the assessment orders under both the Acts were cancelled. The net result is that the assessment under the CST Act has not been decided on merits. If the communication dated 10.01.2008 is construed as being with respect to the assessment orders under both the Acts, the respondents' right to assess would be barred by limitation. The prescribed period of limitation is eighteen months. On the other hand, if it is construed as applicable only to the assessment order under the BST Act, the petitioners would be faced with an assessment order which it never had an opportunity of challenging - The ends of justice therefore, would be served by disposing of this writ petition by treating the communication dated 10.01.2008 to be an order cancelling the assessment orders under the CST Act as on the date of this order. The respondents shall therefore, have a further period of eighteen months commencing from the date of this order for carrying out the assessment under the CST Act for both the said periods - Decided partly in favour of assessee.
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