Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 17, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Highlights / Catch Notes
Income Tax
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Where a return has been filed by the applicant for advance ruling and notice under section 143(2) was issued, the matter shall be treated to be pending before the Assessing Officer, so that any issue in respect of such return cannot be entertained for advance ruling under section 245R(2) of the Act. - AAR
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Penalty under section 271D - Violation of bar provided by Section 269SS - Receipt of cash in excess of Rs. 20,000/- - there was no reasonable cause inasmuch as the story set up by the assessee to arrange the money in hurry to save the honour of the family was not proved, the assessee would not get the benefit of Section 273B of the Act - HC
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Transfer of case - Section 127 (4) - Requirement for reissue of notice for reassessment u/s 147 - it cannot be said that the assessee was either absconding from proceedings or was not available so as to form any opinion that service of notice was not possible. - HC
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Assessee had claimed depreciation on carats @ 100%, however, AO allowed @ 50% - Depreciation on carats as claimed by the assessee is allowed - AT
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Application of percentage completion method for computation of profit real-estate business – a ratio of the basic cost (total) to the other (total) costs (for the entire project) be worked out, which percentage would then be applied for each year, including the current year, in proportion to the other cost for that year. - AT
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Penalty proceedings u/s 271(1)(c) - Accepting or rejecting the assessee's claim is based on appreciation of those evidences, forming part of the assessee's explanation, and for which reference is made to a series of decisions by the apex court, as follows - AT
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Provision for Auditor's remuneration - Disallowance u/s 40(a)(ia) - the stand of the assessee that the concerned payees were not identifiable at the time of making the provision is required to be verified keeping in view that the auditors generally are appointed in the relevant financial year itself. - AT
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Once expenditure was of revenue nature and was incurred for expanding existing line of business it could have been allowed under Section 37 of the Act. - No doubt, assessee's claim was only for one-third of total outgo. - However, for this reason alone, a disallowance could not have been made - AT
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Indexed costs of acquisition - family arrangement - sibling of the assessee relinquished their rights. - the indexed cost of acquisition of such capital asset has to be computed with reference to the year in which the previous owner first held the asset. - AT
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Exemption u/s 54F - Sale consideration - purchase of five flats - assessee was eligible for claiming exemption under section 54F of the Act on the five flats received by her in lieu of the land she had parted with. - AT
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Accrual of interest on NPA - Scheduled Bank - Once the loans had become NPAs and the assessee had opted to account for the interest on such NPAs only on recovery of the same, the law recognizes such treatment of interest on NPAs as valid in view of the provisions of section 43D of the Act - AT
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Penalty u/s 271(1)(c) - Penalty in dispute has been imposed is purely on estimation basis and the Assessing Officer has not brought any material on record to establish any mala fide intention of the assessee to evade tax - no penalty - AT
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Jurisdiction of High Court - reassessment - High Court quashed reassessment proceedings u/s 148 - Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the re-assessment orders passed and the consequential demand notices issued thereon - SC
Customs
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Scope of Judicial Review – Review of the decision of the Settlement Commission - There is limited scope of judicial review - Despite such narrow confines of judicial review of the decision of the Settlement Commission, it is undeniable that the jurisdiction under Article 226 of the Constitution is not totally ousted - HC
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Reduced penalty - appellant has allowed others to use his CHA licence - penal proceedings being quasi-criminal in nature, taking into consideration the civil punishment the appellant had already undergone, penalty reduced from 20 lakhs to 5 lakhs - AT
FEMA
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Property Liable to Attachment - proceeds of crime - The burden of proving that proceeds of crime were untainted property was applicable not only to prosecution and trial of a person charged of committing an offence u/s 3 but to proceedings for attachment and confiscation - HC
Indian Laws
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Dishonor of Cheque u/s 138 N.I. Act - the provisions of Section 427 of the Cr.P.C. do not permit a direction for the concurrent running of the substantive sentences with sentences awarded in default of payment of fine/compensation - SC
Service Tax
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Manpower Supply Services u/s 65 (105) (k) - processing of coffee beans to make instant coffee and thereafter packing the same - stay grated partly - AT
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‘Commission Agent’ u/s 65 (105) (zzb) or ‘Business Auxiliary Services’ u/s 65(19)(v) – prima facie there was no scope for a different understanding - the contention to look at the legislative history and read too many words into the legislation to give a different meaning could not be accepted - AT
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Notification No. 09/2009-ST casts an obligation on AC or DC for condoning the delay if the refund claim is not filed within the period of six months - the notification itself was issued in March, 2009 thus a liberal approach for condonation of delay was required - AT
Central Excise
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Classification of goods under tariff heading no. 30.03 (medicament) - Moisturex - Care or cure - Having regard to the pharmaceutical constituents present in the cream ‘Moisturex’ and its use for the cure of certain skin diseases, have been classified as medicament liable to be classified under the Heading 30.03 (medicament) - SC
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Rule 6(3)(b) of Cenvat credit Rules – Since goods Jao bhusi and the malt culm are cleared at nil rate of duty and appellant is not maintaining separate accounts for dutiable goods as well as for exempted goods - Rule 6(3) are squarely applicable - AT
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Cenvat credit on sil covers / sil sheet - sil covers / sil sheet are used to cover their final product ‘malt’ for the purpose of protecting it from the rain and moisture - Cenvat Credit not allowed - AT
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Rule 6(3) of Cenvat Credit Rules, 2004 - the reversal of credit by the appellant on the entire service tax taken along with interest thereon both in respect of dutiable goods as well as exempted goods amounts to non-availing of credit and, therefore, the provisions of Rule 6(3)(i) are not attracted and the confirmation of demand by the adjudicating authority directing the appellant to pay an amount at the rate of 5%/10% of the value of the exempted goods is not sustainable in law. - AT
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Transfer of manufactured product to another unit - Captive Consumption – Rule 8 of Valuation @ 110%/115% of cost of production - the concept of revenue neutrality is not novel to a manufacturer where the goods are modvatable. - short payment of duty by under valuation of wire rods is equally a conscious and positive act of suppression of facts on the part of the appellant - AT
VAT
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Nature of Goods - Whether the Methanol and Methyl Alcohol are two names of the same commodity or they are different goods - Methanol and Methyl Alcohol in the Text Book on the subject of Chemistry Dictionaries - the Methanol and Methyl Alcohol are two names of the same commodity - HC
Case Laws:
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Income Tax
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2013 (8) TMI 496
Penalty to be levied u/s 271(1)(c) of the Income Tax – Mens rea is not present – Held that:- Making an incorrect claim does not tantamount to furnishing inaccurate particulars and that to attract penalty, the details supplied in the return ‘must not be accurate, not exact or correct, not according to the truth or erroneous’ - Facts reveal that details supplied by the assessee did not fall in any of these categories – Delete the penalties u/s 271(1)(c) – Decided in favor of Assessee.
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2013 (8) TMI 487
Bar provided in section 245R(2) of the Income Tax Act for filing application before Advance Rulings – Held that:- As per decision in the case of Sepco III Electric Power Construction Corporation, In re (No.1). [2011 (8) TMI 213 - AUTHORITY FOR ADVANCE RULINGS], where a return has been filed by the applicant for advance ruling and notice under section 143(2) was issued, the matter shall be treated to be pending before the Assessing Officer, so that any issue in respect of such return cannot be entertained for advance ruling under section 245R(2) of the Act. When notice u/s.143(2) is issued, all the informations available in the return and claims thereon are subject to adjudication by the Assessing Officer and several issues emerge for adjudication by the Assessing Officer - With issue of notice u/s.143 (2) of the Act, particulars of income, claims of the assessee in the return are pending for adjudication before the Assessing Officer - Question raised in the application for advance ruling is pending adjudication before the assessing authority and the bar created under the proviso to section 245R (2) clearly operates. Therefore, these applications are not admitted for adjudication and stand rejected - Decided against the Assessee.
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2013 (8) TMI 486
Penalty under section 271D of the Income Tax Act – Violation of bar provided by Section 269SS of the Act, which provides all transactions above Rs.20,000/- to be made through banking channels – Held that:- There is no evidence to show that there is urgent requirement of the fund for purpose of repaying to the bank - There is no deadline set by the Bank for repayment of the loan amount - Assessee had taken loans from four individuals in cash of Rs. 2 lacs each in violating Section 269SS of the Act - Section 273-B, in an exception to Section 269-SS, and provides that no penalty is imposable on the person or assessee as the case may be for any failure referred to in the said provisions (including Section 269-SS), if he proves that there was reasonable cause for the said failure – Held that:- The assessee, could not satisfactorily give explanation for the alleged hurry in which he had to arrange the money to be deposited in bank for release of the property - The findings, whether there was any reasonable cause for non-compliance of Section 269SS are findings of fact. The Tribunal is the last forum for recording such findings - All the Income Tax authorities including the Tribunal have concurrently held that there was no reasonable cause inasmuch as the story set up by the assessee to arrange the money in hurry to save the honour of the family was not proved, the assessee would not get the benefit of Section 273B of the Act – Decided against the Assessee.
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2013 (8) TMI 485
Transfer of case - Section 127 (4) - Requirement for reissue of notice for reassessment u/s 147 - Held that:- There was no search and seizure operation nor any coordinate investigation was required as there was no group of companies nor any incriminating material was seized at any place or places. It was during the course of assessment made by ACIT, NOIDA, who had assumed jurisdiction on the ground that he alone could have assessed the assesee as they had their office and business place in NOIDA, the order under Section 127 (2) was obtained by making efforts. According to A.O. the assessee was seeking repeated adjournments. In the circumstances, it cannot be said that the assessee was either absconding from proceedings or was not available so as to form any opinion that service of notice was not possible. The assessee had filed objections, which was directed to be decided by the High court - Reasons given by CIT (A) in deciding the objections were not sufficient as the transfer of jurisdiction was made on the request of A.O. to which objections were filed and were not decided by the A.O - Mandatory for the A.O. to decide objections and that the exercise of discretion on the objections would in any case not validate the notice under Section 147/148 of the Income Tax Act – Decided against the Revenue.
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2013 (8) TMI 484
Rate of allowance of interest expenditure – Held that:- Assessing Officer himself made the disallowance @ 12% in the succeeding year i.e. 2007-08. It was claimed that the facts for the year under consideration were similar with the facts involved in the assessment year 2007-08. The learned CIT(A) also pointed out that in another comparable case having similar facts, the Assessing Officer himself disallowed the proportionate interest @ 12% - Allowance of interest expenditure @ 12%. Allowance of expenditure in relation to insurance charge and registration fee of vehicle – Held that:- A.O. disallowed all the expenses incurred by the assessee on account of insurance and registration charges for the assets acquired first time during the year under consideration – A.O. ignored this vital fact that insurance charges were to be paid year after year annually so those were revenue in nature. In the instant case, it is not the case of the Assessing Officer that those expenses were not incurred for the business purposes, therefore, the Learned CIT(A) was fully justified in deleting the disallowance to the extent of Rs. 5,55,033/-, which related to the annual insurance expenses – Revenue appeal rejected – Decided against the Revenue. Valuation of closing stock - The facts related to this issue in brief are that the Assessing Officer noticed that the assessee had shown closing stock of Rs. 2,15,95,145/- in the trading account of IMFL/Beer - The permit fees, which was payable on per bulk liter basis had not been included in the valuation of closing stock – Held that:- Assessing Officer was not justified in treating the permit fee relating to the transmission of the stock from godown to the shops as a part of the closing stock. Moreover, whatever permit fee was paid by the assessee that was for the sale materialised, therefore it could not have been added while valuing the closing stock, which was to be surrendered/ returned on the next day following the end of the year to the Excise Department/distillery at cost price – Revenue appeal dismissed – Decided against the Revenue. Depreciation on written down value of the carats - Assessee in the revised depreciation chart claimed the depreciation at Rs. 37,000/- on carats, based on the adjustment made on account of excess depreciation claimed in the assessment year 2005-06 - Assessee had claimed depreciation on carats @ 100%, however, it was allowable @ 50% - Held that:- Depreciation on carats as claimed by the assessee is allowed - As the A.O. has already allowed 50% depreciation, there remains the W.D.V. at Rs. 16,74,000/- for the year under consideration. Therefore, the appellant is entitled for depreciation @ 50% on the W.D.V. of carats. The A.O. is directed to allow depreciation on carats as claimed by the appellant.
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2013 (8) TMI 483
Application of percentage completion method for computation of profit real-estate business – Held that:- Clearly, there is no question of any income unless the sale or transfer has taken place, so that the builder-seller retains no effective control of the real estate, i.e., to the degree as usually associated with the ownership, which is thus beneficially transferred. This essential condition for recognizing income being satisfied, the next step would be to determine the extent to which it could be so. We have already explained of the fundamental accounting assumptions of conservatism and prudence, which are to necessarily inform the accounting estimates and statements and, in fact, stand also statutorily recognized per the accounting standards issued by the CBDT u/s. 145 of the Act. Regarding cost plus method and valuation of WIP - Unsold project - Held that:- No income can be anticipated in respect of the part of the project yet to be sold (i.e., as at the relevant year- end), so that it would be, from the stand point of reporting profit on the project, be immaterial if the sale price, as is generally the case, has increased over the period since which the project stands commenced. - if there is a sudden depression in the real estate market. If the Management considers that it cannot hold on to the project, the subsequent sales would have to be necessarily estimated at the going market rate. The same, if lower than the cost as anticipated, would impact the valuation of the WIP. This would depress the overall profit, which though, as evident, has no direct relation with the costs incurred during the year, i.e., the incremental WIP for the year. The assessee has furnished a revised chart (Table C) by eliminating the profit included in the valuation of the closing stock, so that it is valued at cost, which shows the profit on the project at 40.22% of the total cost. In view of the fact that some percentage of the total cost remains to be incurred as at the year-end, which though could be fairly assessed, in our view, adopting the said percentage (of course upon verifying the same to be correct) to the incremental cost for the year would be a fair assessment of the profit arising for the current year. As the assessee has booked the cost of land and utilities in some years, in preference to others, without furnishing any explanation for the same, much less a reasonable one, in our view, the cost of land and utilities, i.e., the basic costs, since incurred, be allotted to each year in proportion to the other costs incurred in that year. That is, a ratio of the basic cost (total) to the other (total) costs (for the entire project) be worked out, which percentage would then be applied for each year, including the current year, in proportion to the other cost for that year. The A.O. is accordingly directed to verify the afore-mentioned ratio of 40.22% as worked out by the assessee, and apply the said percentage - Decided partly in favor of assessee.
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2013 (8) TMI 482
Unexplained credit u/s 68 - The addition made to the returned income, for which the penalty stood levied, is u/s.68 – Held that:- Explanation, if any, offered in establishing the genuineness of the credits, is essentially a matter of fact - The only explanation offered by the assessee in the quantum proceedings, which is itself a matter of fact, was that the said credits in fact pertain to an earlier year, and which was found on verification as incorrect on facts, so that the additions stood confirmed – Decided against the Assessee. Issue involved is primarily factual, i.e., whether the assessee has been able to satisfactorily prove the impugned credits as to their representing the assessee's genuine liabilities or not.If and to the extent it has been, its return of income does not bear any concealment or inaccurate furnishing of any particulars of income, so that no penalty u/s.271(1)(c) could be levied. The law placing the onus to prove the credits on the assessee, a failure to do so would invite addition in its respect as unexplained income u/s.68. Further, that the addition has been made under the deeming provision of section 68 is no bar for the levy of penalty. Penalty proceedings u/s 271(1)(c) – Held that:- Assessee has been able to adduce some evidences toward establishing the credits as representing genuine liabilities - Accepting or rejecting the assessee's claim is based on appreciation of those evidences, forming part of the assessee's explanation, and for which reference is made to a series of decisions by the apex court, as follows - In sum, decision in the instant case is based purely on findings of fact; the law in the matter being well settled and trite: CIT v. Atul Mohan Bindal [2009 (8) TMI 44 - SUPREME COURT]; Union of India v. Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] etc. - Penalty deleted. - Decided in favaor of assessee.
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2013 (8) TMI 481
Computation of income from contract receipts - contract completion method - issuance of provisional acceptance certificate - Held that:- fees received for the contract work was being offered by the assessee by following the percentage completion method and the said method consistently following by the assessee was accepted by the Department in the earlier year. As per the said method, 98.54% of the total contract work was shown to be completed by the assessee upto 31-3-2006 and accordingly the corresponding income was offered to tax in the year under consideration. The A.O. as well as the ld. CIT(A), however, took the contract as fully completed up to 31-3-2006 mainly on the basis of provisional acceptance certificate issued by the owners taking a stand that the assessee having become entitled to receive the entire contract fees on the issue of provisional acceptance certificate, income to that extent had accrued to the assessee and the same was taxable in the year under consideration - The said list, is sufficient to show that the work as per the contract was not completed by the assessee up to the date of issuance of provisional acceptance certificate and the assessee was still not relieved of the obligations under the contract as made clear in the certificate itself. The provisional acceptance certificate also made it clear that the same did not constitute final acceptance of the work and as per clause 25.1 of the contract, the assessee was entitled to apply to the owner for its final acceptance certificate upon completion of pending items identified in the provisional acceptance certificate to the satisfaction of the owner. The said final acceptance certificate was issued by the owner only on 26-3-2007 and even the said certificate indicating the effective final date as 8-10-2006 was subject to certain defect and deficiencies as set out in the Appendix –A to the certificate which were required to be rectified by the contractor - Therefore, it is held that contract work was finally completed in the subsequent year and the disclosure made by the assessee of its income by showing 98.54% work completed upto 31-03-2006 and offering the income relating to the balance work in the subsequent year i.e. A.Y. 2007- 08 was in consonance with the method of accounting consistently followed by it to recognize its income from execution of contract work - Decided in favour of assessee. Disallowance of professional fees u/s 40(a)(ia) - Provision for Auditor's remuneration - Held that:- if the auditor’s remuneration and the services availed in transfer pricing matter were related to the year under consideration, the same cannot be disallowed on the ground that the relevant services were rendered after the end of the previous year - Decided in favour of assessee. As regards the applicability of section 40(a)(ia) of the act, assessee has relied on the decision in the case of Pfizer Limited (2012 (11) TMI 164 - ITAT MUMBAI) wherein it was held, following the decision in the case of IDBI vs. ITO (2006 (7) TMI 248 - ITAT BOMBAY-H), that when payee is not identifiable at the time of making provision, no TDS need to be made. - the stand of the assessee that the concerned payees were not identifiable at the time of making the provision is required to be verified keeping in view that the auditors generally are appointed in the relevant financial year itself. - Matter remanded back. Disallowance u/s 40(a)(ia) - Held that:- It is also not the case that assessee has not deducted any amount. Assessee has indeed deducted tax under section 192 and so we are of the opinion that provisions of section 40(a)(ia) also do not apply as the said provision can be invoked only in the event of non deduction of tax but not for lesser deduction of tax - Following decision of DCIT vs. Chandabhoy & Jassobhoy [2011 (7) TMI 956 - ITAT MUMBAI] - Decided in favour of assessee.
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2013 (8) TMI 480
Disallowance of preliminary expenditure - expansion of its existing line of business - CIT confirmed disallowance - Held that:- business which was being set up by the assessee at Trivandrum was only an expansion of its existing line of business. - At both place, assessee was only developing software for educational purposes. Once expenditure was of revenue nature and was incurred for expanding existing line of business, in our view, it could have been allowed under Section 37 of the Act. No doubt, assessee's claim was only for one-third of total outgo. However, for this reason alone, a disallowance could not have been made - Decided in favour of assessee. Gratuity payment of M/s LIC - CIT disallowed the claim of the assessee - Held that:- There is no dispute that premium towards Gratuity Fund was paid by the assessee to LIC and the Gratuity Fund created by LIC by virtue of such payments, was not having the approval of CIT/CCIT under Section 36(1)(v) of the Act. Nevertheless, it is also a fact that assessee had filed an application before CIT for such approval on 12.4.2002. - unless there was strict compliance to Section 40A(7), an assessee could not claim for relief any amount or payment of premium to M/s LIC for any Group Gratuity Scheme - conditions mentioned in Section 36(1)(v) was held to be satisfied since the funds ultimately came back to a Gratuity Fund had the approval of the Commissioner. Here, the fate of the application of the assessee for approval is not known - If the assessee is able to produce the approval for Gratuity scheme, no doubt, it can claim deduction under Section 36(1)(v) of the Act and will not be fettered by constraints placed under Section 40A(7) of the Act - Decided in favour of assessee. Deduction u/s 10B - CIT disallowed deduction - Held that:- if the assessee is able to produce FIRC for whole of the receipts on account of export proceeds, it will be unfair to deny the claim made by it under Section 10B of the Act - Following decision of CIT v. Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] - Decided in favour of assessee. Depreciation on fixed asset - Relevant bills not produced - Held that:- assessee was unable to file any evidence in support of acquisition of fixed assets during previous years relevant to assessment years 2001-02 to 2004-05. Disallowance of claim of depreciation for the impugned assessment year has been done only with respect to the written down value of those assets on which assessee could not produce bills for acquisition in the earlier years - Decided against assessee.
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2013 (8) TMI 479
TDS u/s 194H - commission paid to the directors - Disallowance for remuneration/commission - Held that:- no tax was deducted at source from remuneration/commission paid to the director - No valid material showed on record to derive from judgment for CIT(A) - No distinguishable facts could also be pointed out - No Infirmity in order of CIT(A) - Following decision of Jahangir Biri Factory (P) Ltd vs D.C.I.T. [2009 (3) TMI 215 - ITAT CALCUTTA-C] - Decided in favour of Assessee.
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2013 (8) TMI 478
Indexed costs of acquisition - family arrangement - sibling of the assessee relinquished their rights. - CIT(A) held year 1981-82 as base year for A.Y. 2006-07 as against F.Y. 2003-04 determined by the Assessing Officer. - Held that:- The Ld. DR could not place on record any contradictory material in support of his contention that the indexation should be with reference to the financial year in which property devolved on assessee by virtue of family arrangement - No reason to interfere with the order passed by the CIT(A) - the indexed cost of acquisition of such capital asset has to be computed with reference to the year in which the previous owner first held the asset. - Following decision of DCIT vs Manjula Shah [2009 (10) TMI 646 - ITAT MUMBAI] - Decided in favour of Assessee.
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2013 (8) TMI 477
Exemption u/s 54F - Sale consideration - purchase of five flats - claim of deduction as one house property - Held that:- None of the authorities below has doubted the eligibility of the assessee for claiming an exemption under section 54F of the Act. Their only qualm is that assessee had preferred such claim for all the five flats whereas according to them, such exemption could only be founded to a single flat - A residential house in the context could not be construed as a singular - It is not necessary that all residential units should have a single door number allotted to it - However, this alone was not the reason why assessee was held to be eligible for claiming of exemption under section 54F of the Act - Following decision of CIT v. Smt. K.G. Rukminiamma [2010 (8) TMI 482 - Karnataka High Court] and Dr. Smt. P.K. Vasanthi Rangarajan v. CIT [2012 (7) TMI 563 - MADRAS HIGH COURT] - assessee was eligible for claiming exemption under section 54F of the Act on the five flats received by her in lieu of the land she had parted with. - Decided in favour of assessee.
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2013 (8) TMI 476
Interest on outstanding loans - Accrual of interest on NPA - Scheduled Bank - Special provisions u/s 43D - Held that:- loans were advanced since 1999 and they had become NPAs against which suits for recovery were filed by the assessee in various Courts. In view of the assessee having neither received the loans or part thereof nor any interest therefrom, no interest was provided in the books of account as the recovery of the loans itself had become difficult. Admittedly, the assessee was following mercantile system of accounting under which income is to be recognized when the same accrues irrespective of the fact whether the same is received or not. However, in respect of the interest due on NPAs special provisions are provided under section 43D of the Act, which is non obstante clause and in case of NPAs i.e. the debts recovery of which had become bad, interest is to be provided on this recovery, i.e. the year in which it is actually received by the institution or the bank or other body or when it is charged to the Profit & Loss Account whichever is earlier. The provisions of section 43D of the Act override other provisions of the Act and said provisions are applicable in the case of assessee, being Scheduled Bank. Once the loans had become NPAs and the assessee had opted to account for the interest on such NPAs only on recovery of the same, the law recognizes such treatment of interest on NPAs as valid in view of the provisions of section 43D of the Act - No addition - Decided against Revenue.
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2013 (8) TMI 475
Penalty u/s 271(1)(c) - mala fide intention - onus on the assessee to prove the genuineness of credits and justify the expenses claimed in profit and loss - Held that:- After perusing the assessment order in which the Assessing Officer has made all additions, disallowances, treating the cash credits/foreign receipts as well as the assessee's declared agricultural income merely on estimate and guess work basis without bringing on record any positive and concrete evidence to be applied against the assessee - Assessing Officer has not quoted any comparable case in this line of business, which has shown better gross profit than that shown by the assessee in the present assessment year. As stated above, the assessee has filed statement of trading account, profit and loss account, balance-sheet and audit report in Form 3CD duly signed by the authorised person. As regards the cash credits which the assessee has shown in his return, one can establish its genuineness by furnishing necessary documentary evidence but due to lack of communication by his chartered accountant the assessee could not furnish the same. As regards the foreign gift in dispute which the assessee has received from his real brother who is residing in the USA and made the gift to the assessee out of love and affection through banking channel, for that the assessee has produced all necessary evidence in the assessment proceedings. As regards to the agricultural income declared by the assessee on estimation basis, which has been converted into the income of the assessee from other sources without appreciating the Revenue's record furnished before the Assessing Officer being ancestral land as per Jamabandi available with the assessment record. Penalty in dispute has been imposed is purely on estimation basis and the Assessing Officer has not brought any material on record to establish any mala fide intention of the assessee to evade tax in the return filed by the assessee - Following decision of CIT v. Metal Products of India [1984 (1) TMI 36 - PUNJAB AND HARYANA High Court] and Harigopal Singh v. CIT [2002 (8) TMI 65 - PUNJAB AND HARYANA High Court] - Decided against Revenue.
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2013 (8) TMI 459
Documents against show cause notice - Remission back of matter - Held that:- documents, which the appellants have now filed before this Court are of some relevance and those documents should be looked into by the High Court before it comes to a conclusion whether the appeal requires to be allowed or to be rejected - Order of High Court set aside for fresh adjudication - Decided in favour of assessee.
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2013 (8) TMI 458
Jurisdiction of High Court - reassessment - Writ petition filed against order passed u/s 148 - High Court quashed reassessment proceedings - Held that:- Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and not a mere formality with no substantial relief - If an appeal is from “Caesar to Caesar’s wife” the existence of alternative remedy would be a mirage and an exercise in futility. In the instant case, neither has the assessee-writ petitioner described the available alternate remedy under the Act as ineffectual and non-efficacious while invoking the writ jurisdiction of the High Court nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of instant case. Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the re-assessment orders passed and the consequential demand notices issued thereon - Decided in favour of Revenue.
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Customs
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2013 (8) TMI 473
Provisional Assessment - Held that:- The assesse was directed to deposit 20% of the provisional assessment duty in cash or by way of demand draft as the case may be - For remaining amount of duty assesse shall furnish a bond along with bank guarantee. Conditions for allowing provisional assessment - Following the Judgement of Mohammed Fariz and Co. Vs. Commissioner of Customs [2011 (3) TMI 1338 - KERALA HIGH COURT ] - Where the proper officer on account of any of the grounds specified in section 18(1) of the Customs Act, 1962 was not able to make a final assessment of the duty on the imported goods or the export goods, as the case may be, he shall make an estimate of the duty that is most likely to be levied hereinafter referred to as the provisional duty - If the importer or the exporter, as the case may be, executes a bond in an amount equal to the difference between the duty that may be finally assessed and the provisional duty and deposits with the proper officer such sum not exceeding twenty per cent of the provisional duty, as the proper officer may direct, the proper officer may assess the duty on the goods provisionally at an amount equal to the provisional duty. Surety or security of the bond — The proper officer may require that the bond to be executed under these regulations may be with such surety or security, or both, as he deems fit - assesse shall further execute a bond that penalty was also imposed upon the assesse in respect of undervaluing the goods.
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2013 (8) TMI 472
Scope of Judicial Review – Review of the decision of the Settlement Commission - power to grant immunity from prosecution - held that:- There is limited scope of judicial review - Despite such narrow confines of judicial review of the decision of the Settlement Commission, it is undeniable that the jurisdiction under Article 226 of the Constitution is not totally ousted. - it was undeniable that the jurisdiction under Article 226 of the Constitution was not totally ousted - In a given situation if the Settlement Commission had taken into consideration irrelevant facts and such consideration had gone into its decision-making process resulting into grave injustice and prejudice to the party then within the narrow confines of the judicial review, interference would still be open. Opportunity to Produce Materials - The Settlement Commission gave full opportunity to both sides to produce materials on record - The Tribunal upon completion of the hearing noted that this was not the first case where the company was involved in the breach of the provisions of the Customs Act - On earlier occasion, the company was visited with a penalty imposed by the Settlement Commission for irregularity in imports - There was no irregularity in the Commission’s order in imposing penalties on the company and the two Directors - the provisions of Chapter XIVA nowhere provided that the Commission cannot increase the penalty from what was originally imposed when a party might file an application for settlement - the Commission had a special power to waive prosecution under certain circumstances - the Commission while exercising such powers, granted total immunity from prosecution to the company as well as to the two Directors - With the narrow scope of judicial review available in a writ petition - there was no reason to interfere. The Commission took into consideration irrelevant and extraneous materials - The conclusion of the Commission that assesses were habitual offenders was not based on any material on record - the decision of the Commission in this respect was required to be reconsidered - the court was not concerned with the ultimate decision but the decision-making process - the process was vitiated on account of irrelevant considerations having weighed with the Commission – Order of the Commission partly allowed - Proceedings were remanded to the Settlement Commission for fresh consideration.
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2013 (8) TMI 471
Fraudulent declaration of the description and under valuation of the goods – assessee imported containers which were found to be vegetable oil instead of declared description of vegetable fatty acid – Held that:- Assessee fabricated import documents were presented so as to manage the import of goods undervalued and mis-declared them to evade customs duty - He suppressed the correct transaction value and description fraudulently - Goods liable to be confiscation u/s 111 (d) and (m) – there was willful fraudulent intention to evade customs duty – differential duty was demanded – penalty was imposed – assessee failed to establish the description of the declaration that established undervaluation by nature of the goods - appeal decided ex- parte – decided against the assessee.
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2013 (8) TMI 470
Classification of Goods - Import of ‘Inula racemosa’ and ‘Chinese Ginseng’ - Goods imported by the assessee were found to be mis-declared by description – Revenue proceeded to ascertain the value - Revenue confiscated the goods granting an option to redeem the goods on payment of redemption fine - Held that:- Test report of goods did not reveal in favour appellant there was no necessity to interfere with the adjudication finding as to the nature of goods – duty was also confirmed. Quantum of redemption fine and penalty payable – Held that:- Imposition of fine may not be improper in the fitness of the circumstances of the case and reducing penalty to 50% of the duty element would be justified - imposition of huge fine shall cause undue hardship to the appellant and the penalty to the extent of duty element shall also be harsh - appeal decided partly in favour of assessee.
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2013 (8) TMI 469
Reduced penalty - appellant has allowed others to use his CHA licence and committed offence under Customs Act, 1962. - Held that:- record does not reveal that the appellant had hatched conspiracy against Revenue - penalty of the magnitude of Rs. 20 lakhs may be disproportionate to the act of letting out of CHA licence not permitted by law – quantum of penalty of Rs. 5 lakhs shall be reasonable - overall assessment of the facts depicted and finding that the appellant was not an abettor to the offence committed - penalty aspect should not be dealt leniently – penal proceedings being quasi-criminal in nature, taking into consideration the civil punishment the appellant had already undergone penalty reduced from 20 lakhs to 5 lakhs - Appeal was allowed partly
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Corporate Laws
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2013 (8) TMI 468
Infringement of Registered Trade Mark - Whether the Defendants had infringed the registered trade mark AMLOBET of the Plaintiff by using the mark - Held that:- The Defendants had indeed infringed registered trademark AMLOBET of the Plaintiff by using the mark AMLOVATE/AMLOVATE-A - there was phonetic similarity when both marks were pronounced – There was also a structural similarity in the marks - The two marks have to be compared as a whole - The two drugs are prescribed for treating the same symptom viz., high blood pressure – that makes even stricter the test of deceptive similarity leading to confusion in the mind of an average customer - A comparison of the two marks AMLOBET and AMLOVATE as a whole lends support to the Plaintiff’s case that there was an overall structural and phonetic similarity between the marks when examined from the point of view of a man of average intelligence and imperfect recollection - It was likely that one drug could be confused for the other [Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd. 2001 (3) TMI 928 - SUPREME COURT OF INDIA ]. Passing off of Goods - Whether the Defendants were passing off their goods as those of the Plaintiff by using the mark - Held that:- The use by the Defendants of the mark AMLOVATE/AMLOVATE-A amounts to passing off the product of the Defendants as that of the Plaintiff - The adoption by Defendants of a phonetically and structurally similar mark more than a decade after the Plaintiff began marketing its product under the mark was dishonest - Section 65B (4) provided for an alternative method of proving an electronic record by producing the certificate of a person in whose custody the computer device in which the document was stored in an electric form remained. Territorial Jurisdiction - Whether the Court had territorial jurisdiction to try the present suit – Held that:- The Court negatives the plea of the Defendants that the Plaintiff was not carrying on business within the territorial jurisdiction of the Court - it had been operating its office at Delhi both for sales as well as liasioning purposes - The Delhi office personnel were employed for obtaining necessary approvals from the various regulatory authorities based in Delhi without which it cannot carry on its business. Damages - Permanent Injunction - Whether the Plaintiff was entitled to damages and if so to, what amount and from whom - the issue was answered against the Plaintiff - the Plaintiff would be entitled to the costs of these proceedings – The right of the Plaintiff to institute proceedings on that basis to recover the loss of profits was reserved - Rs.30,000 which will be paid by the Defendants to the Plaintiff - injunction Granted to the petitioner.
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PMLA
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2013 (8) TMI 474
Property Liable to Attachment - proceeds of crime - Prevention of Money Laundering Act, 2002 - Petitioners contended that the property in ownership, control or possession of a person not charged of having committed a scheduled offence would not constitute proceeds of crime - Held that:- Property owned or in possession of a person, other than a person charged of having committed a scheduled offence was equally liable to attachment and confiscation proceedings under Chapter – III and Section 2(1) (u) which defines the expression “Proceeds of Crime”, was not invalid. Interpretation of Provisions of Section 5 - The Bombay High Court in the Judgement had interpreted the provisions of Section 5 (1) of the Act even prior to incorporation of the Second proviso by the Second Amendment Act, 2009) as enabling initiation of proceedings for attachment and confiscation of property in possession of a person not accused/charged of an offence u/s 3 as well - The Second Amendment Act in so far as it has incorporated the second proviso to Section 5(1), it was contended on behalf of the respondents was by way of clarification and emphasis as to the true import and trajectory of Section 5(1) – Held that:- that the provisions of the second proviso to Section 5 were applicable to property acquired even prior to the coming into force of this provision (vide the second amendment Act with effect from 06032009); and even so was not invalid for retrospective penalization. Validity of Section 23 - Held that:- The presumption enjoined in cases of interconnected transactions enjoined by Section 23 was valid - The challenge to Section 23 was projected on the ground that the presumption enjoined by this provision in respect of interconnected transactions was unduly restrictive of the right to property; was a disproportionate burden, not commensurate with legitimate Governmental interests in targeting proceeds of crime involved in money laundering, for eventual confiscation. Validity of Section 8 – Held that:- Provisions of Section 8 were not invalid for vagueness, incoherence as to the onus and standard of proof, ambiguity as regards criteria for determination of the nexus between a property targeted for attachment/confirmation and the offence of money laundering or for exclusion of mens rea/knowledge of criminality in the acquisition of such property, Section 8(4), which enjoins deprivation of possession of immovable property pursuant to an order confirming the provisional attachment and before conviction of the accused for an offence of money laundering was valid. Constitutionality of Section 24 – Held that:- Section 24 shifts the burden of proving that proceeds of crime are untainted property onto person(s) accused of having committed the offence u/s 3 - This provision was challenged as arbitrary; was contended to be applicable only to the trial of an offence u/s 3 and not the proceedings for attachment and confiscation of property under Chapter III and alternatively as not applicable to proceedings for attachment and confiscation of property of a person not accused of an offence u/s 3. Burden to Prove - Held that:- On its textual and grammatical construction, the provision shifts the burden of proving that proceeds of crime were untainted property on person(s) accused of having committed the offence u/s 3 – The burden of proving that proceeds of crime were untainted property was applicable not only to prosecution and trial of a person charged of committing an offence u/s 3 but to proceedings for attachment and confiscation – in Chapter III of the Act as well; but only to a person accused of having committed an offence u/s 3 - The burden enjoined by Section 24 does not inhere on a person not accused of an offence u/S 3 - The presumption under Section 23 however applies in interconnected transactions, both to a person accused of an offence under Section 3 and a person not so accused.
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Service Tax
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2013 (8) TMI 494
Manpower Supply Services u/s 65 (105) (k) - Duty Demand – Interest and Penalty - Assesse was performing certain tasks in the factory mainly for processing of coffee beans to make instant coffee and thereafter packing the same - Revenue was of the view that the assesse was providing Manpower Supply Services – Held that:- The character of the activity was actually manufacturing activity or supply of manpower, the difference can be a very thin depending on what exactly was the responsibility of the assesse - notice does not expressly invoke provisions of 73A and in a passing manner for the purpose of invoking the extended period - it was stated that tax was collected but not paid - The contract clauses as also the manner in which it was operationalized were to be examined in detailed for deciding the issue - A worksheet showing the number of manpower employed by itself may not be sufficient to determine the nature of the responsibilities of either parties and nature of service – 5lakhs were ordered to be paid as pre-deposit – upon such waiver rest of the duty to be waived till the final disposal – Decided partly in favor of assesse.
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2013 (8) TMI 493
Service Tax liability – Interest and Penalty – Waiver of Pre-deposit - the application for waiver of central excise duty and directed deposit as a condition for hearing the appeal u/s 35 F – Held that:- Assesse shall deposit the amount as directed by the order - The pre-deposit was not be made before the Commissioner (Appeals) by the assesse on account of pleaded financial stringency- This Tribunal accordingly directed pre-deposit before the Commissioner (Appeals) and remitted the matter for disposal of the appeal de – novo - Super Tyres Ltd. vs. UOI [2005 (1) TMI 119 - HIGH COURT OF DELHI] – the Miscellaneous Application was devoid of merits and rejected – Decided against assesse
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2013 (8) TMI 492
‘Commission Agent’ u/s 65 (105) (zzb) or ‘Business Auxiliary Services’ u/s 65(19)(v) – Duty Dmand – Interest and Penalty – Waiver of pre-deposit - Revenue was of the view that the service rendered by the assesse was classifiable under Business Auxiliary Service u/s 65 (19) (v) - Held that:- Assesse was providing service of effluent treatment and such service was classifiable as Business Auxiliary Service - The contention of the revenue that the activity undertaken by the assesse was covered by the expression used in section 65 (19) (v) was tenable – prima facie there was no scope for a different understanding - the contention to look at the legislative history and read too many words into the legislation to give a different meaning could not be accepted - after considering the financial difficulties submitted, to strike a balance of convenience of the interest of both the parties – assesse was directed to make a pre-deposit of 25lakhs – upon such submission rest of the duty to be waived till the final disposal – Decided partly in favor of assesse.
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2013 (8) TMI 491
Condonation of delay – The issue is rejection of refund claim files by the appellant on the ground that the said refund claim was not filed within a period of six months of the payment to service provider – Held that:- The action of the AC without giving an opportunity to the appellant to explain the delay in rejecting the refund claim on the ground of delay cannot be sustained - - Notification No. 09/2009-ST casts an obligation on AC or DC for condoning the delay if the refund claim is not filed within the period of six months - the notification itself was issued in March, 2009 thus a liberal approach for condonation of delay was required - relying upon Woco Motherson Advanced Rubber Technologies Ltd. Versus CCE (2012 (6) TMI 244 - CESTAT, AHMEDABAD) – condonation allowed. Production of invoices - the appellant have admittedly produced invoices and have got proof of payment –matter remanded back – appeal decided in the favour of assessee.
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2013 (8) TMI 490
Erection, Commissioning and Installation Services – appellant contended that the majority of the activity undertaken by them relates to laying of cables on the roadside is not taxable as per Circular No. 123/05/2010-TRU dated 24.05.2010 – Held that:- The procedure adopted by the lower appellate authority is not permissible under law - Any order directing the party to pay any amount should be in writing and has to be tendered as per the provisions of Section 37 CE Act, - The lower appellate authority has not passed any interim stay order, but directed the appellant to make a pre-deposit at the time of personal hearing - matter remanded back. Service tax on installation charges – appellant admitted that they might be liable to pay Service Tax on installation services - However, they were under bona fide belief that they are not liable to pay Service Tax on these activities – Held that:- Appellant has accepted the partial duty liability under the category of Erection, Commissioning and Installation Services on account of installation of lights, transformer etc. – complete waiver of duty cannot be granted. Stay application – After submitting the amount ordered by the court stay to be allowed – appeal decided in the favour of the assessee with conditions.
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2013 (8) TMI 489
Business auxiliary services or Management, maintenance or repair service – surface grinding of worn out cylinders - Held that:- Applicant submission that their service should be classified as "Management, maintenance or repair service has been given credence – further pleaded that the entire nature of work is surface grinding of worn out cylinders in order to recondition/repair of worn-out cylinders –submission of the learned counsel on applicability of tax on merit would be looked into at the time hearing. Pre- deposit of duty - the applicant has not made out a prima facie case for waiver of pre-deposit of the entire amount - applicant is directed to pre-deposit one fourth amount of duty – on such submission the remaining amount would be waived and stay allowed – application decided with conditions in the favour of the assessee.
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Central Excise
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2013 (8) TMI 467
Classification of goods under tariff heading no. 30.03 (medicament) - ‘Moisturex’ - ‘Care or cure’, is the clue for the resolution of the lis arising in these cases. If the product by name ‘Moisturex’ is held to be a medicament for cure, the decision goes in favour of the assessee and if the product is held to be one for care of the skin, the decision benefits the Central Excise – Held that:- ‘Moisturex’ cream is prescribed by the dermatologist for treating the dry skin conditions and that the same is also available in chemist or pharmaceutical shops in the market. The cream is not primarily intended for protection of skin. The ingredients in the cream, the pharmaceutical substances do show that it is used for prophylactic and therapeutic purposes - Heading 33.04 dealing with beauty or make-up preparations and preparations for the care of the skin has specifically excluded medicaments - Having regard to the pharmaceutical constituents present in the cream ‘Moisturex’ and its use for the cure of certain skin diseases, have been classified as medicament liable to be classified under the Heading 30.03 (medicament) – Reliance is placed upon the judgment in the case of Alpine Industries vs. Collector of Central Excise, New Delhi [2003 (1) TMI 103 - SUPREME COURT OF INDIA] – Decided in favor of Assessee.
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2013 (8) TMI 466
Rule 6(3)(b) of Cenvat credit Rules – No separate accounts maintained for dutiable as well as exempted goods - Appellant is engaged in the manufacture of barley malt – Records revealed the manufacture of malt culms and jao bhusi (cattle feed) - Appellant’s contention is that jao bhusi and malt culms are not their product but only a waste – Held that:- Fact that these goods i.e. malt culms and jao bhusi are regularly being sold by them at the nil rate of duty. Since goods Jao bhusi and the malt culm are cleared at nil rate of duty and appellant is not maintaining separate accounts for dutiable goods as well as for exempted goods - Rule 6(3) are squarely applicable – Decided against the Assessee.
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2013 (8) TMI 465
Cenvat credit on sil covers / sil sheet - sil covers / sil sheet are used to cover their final product ‘malt’ for the purpose of protecting it from the rain and moisture – Held that:- Sil cover/ Sil sheets are used to cover the final product to protect it from rain / rainy water and the moisture. These are used after final product Barley malt is manufactured – Cenvat Credit not allowed – Decided against the Assessee.
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2013 (8) TMI 464
Demand under Rule 6(3) - Cenvat credit availed - Held that:- bagasse emerges in course of crushing of the sugarcane - neither the show cause notice nor the impugned order in appeal mentions as to which common Cenvat credit availed inputs have been used in manufacture of sugar and, molasses (dutiable final product) and bagasse (exempted final product). Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any inputs-chemicals etc. having been used at that stage - Following decision of BAJAJ HINDUSTAN LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-I [2013 (4) TMI 180 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2013 (8) TMI 463
Rule 6(3) of Cenvat Credit Rules, 2004 - Appellant did not maintain separate accounts for the input services used in or in relation to the manufacture of product dutiable as well as exempted products - Two options were available to them, i.e., either to pay 5%/10% of value of the exempted goods or pay an amount equal to the credit attributable to the input services used in or in relation to manufacture of exempted goods subject to the provisions of Sub-rule (3A) – When mistake was pointed to the appellant of taking full credit of the input services, he reversed not only the credit taken on input services used in the manufacture of exempted goods but also the credit taken on input services used in the manufacture of dutiable goods. In other words, the appellant reversed the entire credit taken along with interest thereon – Held that:- Rule 6(3) (i) will not have any application, when a credit is taken wrongly and the same is reversed along with interest as it tantamount to non-taking of the credit, relying upon the judgments in the case Hello Minerals Water (P) Ltd [2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD], wherein it is held that “reversal of Modvat credit amount to non-taking of credit on the input and even if such reversal was done after the clearance of the goods the said action amounts to non-availment of credit - In view of this decision along with various other decisions s.a. in the case of Chandrapur Magnet Wires (P) Ltd.[ 1995 (12) TMI 72 - SUPREME COURT OF INDIA], the reversal of credit by the appellant on the entire service tax taken along with interest thereon both in respect of dutiable goods as well as exempted goods amounts to non-availing of credit and, therefore, the provisions of Rule 6(3)(i) are not attracted and the confirmation of demand by the adjudicating authority directing the appellant to pay an amount at the rate of 5%/10% of the value of the exempted goods is not sustainable in law. Consequently, the imposition of penalties on the appellant and appellant firm and its manager are also not sustainable in law and accordingly, they are set aside – Decided in favor of Assessee. Penalty under Rule 15(3) of Cenvat Credit Rules, 2004 – Held that:- Appellant has initially availed credit and only on pointing out by the department they have reversed the credit and, therefore the appellant is liable to penalty under Rule 15(3) of the Cenvat Credit Rules 2004 for contravention of the provisions of Cenvat Credit Rules. The maximum penalty imposable under he said Rule is ₹ 2000/- and accordingly the appellant is liable to pay penalty of ₹ 2000/-.
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2013 (8) TMI 462
Stay Application - Pre-deposit of amount - In respect of four traders - Appellant-RUL not submitted any assessment order of Sales-tax/VAT Authority of respective State. Moreover, report sent by Joint Excise and Taxation Commissioner does not incorporate the names of M/s Goverdhan Sales Agency and M/s S.S. Traders as their registered assesses. Similarly, registration of M/s New General Company was cancelled in 1995 by the said Authority. In respect of M/s V.K. Trading company, applicant did not show any evidence in respect of their contention about existence of said firm- appellant-RUL does not have a prima facie case in respect of these four traders – Held that:- Pre-deposit of Rs. 15 lakhs within six weeks. Decided against the Assessee.
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2013 (8) TMI 461
Transfer of manufactured product to another unit - Captive Consumption – Rule 8 of Valuation @ 110%/115% of cost of production - Appellants manufactured wire rods and stock transferred the same to their Borivali unit on payment of duty. - On scrutiny of records by the department, it was observed that the appellants while computing the cost of production of wire rods only took into consideration the cost of production of the billets instead of 115% /110% of the cost of production of the billets, which resulted in short payment of duty – There is short payment of duty inasmuch as the assessable value of wire rods should be 115%/110% of the cost of production of billets – Held that:- As per the case of Nirlon Ltd. vs. CCE [2004 (10) TMI 363 - CESTAT, MUMBAI], the concept of revenue neutrality is not novel to a manufacturer where the goods are modvatable. Thus the Goregaon factory is aware that whatever duty is discharged while clearing the goods to Tarapur unit the latter will be in a position to take such duty as Modvat credit. Despite that if an unit chooses to suppress certain facts and thereby short pays duty, the consequences of such action would befall him. As per the Larger Bench in Jay Yuhshin Ltd. v. CCE, New Delhi [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI] - Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods – In case two assessees albeit belonging to the same group - We are not aware as to what financial considerations the Goregoan unit had in mind when it chose to deliberately understate the value of the goods manufactured and cleared by it to the Tarapur unit nor are we expected to go into such calculations. Revenue neutrality is a concept known to both the units. The allegation of evasion does not get mitigated by the fact that one unit is entitled to take Modvat credit of duty paid by the other – Held that:- The appellants recognize the cost as 115%/110% of the cost of production which is nothing but a conscious and positive act on the part of the appellant. Similarly, short payment of duty by under valuation of wire rods is equally a conscious and positive act of suppression of facts on the part of the appellant - Raising a hypothetical question and taking shelter of revenue neutrality does not come to the appellant's rescue – Decided against the Assessee.
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CST, VAT & Sales Tax
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2013 (8) TMI 495
Nature of Goods - Whether the Methanol and Methyl Alcohol are two names of the same commodity or they are different goods - Held that:- Both on the basis of physical parameters as well as on the basis of chemical properties of the Methanol and Methyl Alcohol, there cannot be any bona fide issue qua the same being two names of the same commodity - there was no reason for directing any further examination by the Tribunal of the issue - British India Corporation Ltd., Kanpur vs. Commissioner of Sales Tax, U.P 1987 (2) TMI 490 - ALLAHABAD HIGH COURT - The assesse could not refer to any other name of the goods in the open market except for Methanol and Methyl Alcohol. There cannot be any concession on the issue of law by the representative of the department - It was an argument in desperation - Neither any material was on record before the tax authorities nor has otherwise been brought to the notice of the Court, so as to even prima facie establish that Methanol and Methyl Alcohol are known as two different commodities in the open market. Whether the assesse was liable to pay tax on Methanol as an unclassified item at the rate of 7% plus 1% or at the rate of 12% plus 1%, which was the tax applicable to Methyl Alcohol in terms of the Notification No. ST-II-3203/X-1012-1972 – Held that:- The Tribunal had committed a manifest error in treating the Methanol manufactured by the Assessee as distinct from Methyl Alcohol and therefore, committed a further error in treating it to be an unclassified item taxable at the rate of 7% plus 1%. The plea of the assessee that the scientific and technical meanings of the term or expressions need not to be applied in the matter of determination of a tariff or perceptions of products also has no application in the facts of the case. Suffice is to record that in the case in hand not only the meaning, which has been assigned to the commodity, namely, Methanol and Methyl Alcohol in the Text Book on the subject of Chemistry, but also that product in the Dictionaries has been taken into consideration by this Court, for coming to the conclusion that the Methanol and Methyl Alcohol are two names of the same commodity. The assessee could not refer to any other name of the goods in the open market except for Methanol and Methyl Alcohol. - Decided in favor of revenue.
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Indian Laws
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2013 (8) TMI 488
Dishonor of Cheque u/s 138 N.I. Act - Whether the High Court was right in declining the prayer made by the appellant for a direction in terms of Section 427 r.w. Section 482 of the Code of Criminal Procedure for the sentences awarded to the appellant in connection with the cases under Section 138 of the Negotiable Instruments Act filed against him to run concurrently – Held that:- Court affirmed the direction of the High Court for the sentences to run concurrently - The legal position favours exercise of discretion to the benefit of the prisoner in cases where the prosecution was based on a single transaction no matter different complaints in relation thereto may had been filed as is the position in cases involving dishonour of cheques issued by the borrower towards repayment of a loan to the creditor - the cases against the appellant fall in three distinct categories - The transactions forming the basis of the prosecution relate to three different corporate entities who had either entered into loan transactions with the State Financial Corporation or taken some other financial benefit like purchase of a cheque from the appellant that was on presentation dishonoured -The cases that had culminated in the conviction of the appellant and the award of sentences of imprisonment and fine imposed. Power available to the Court under Section 427(1) of the Code stipulated a general rule to be followed except in three situations - It was manifest from Section 427(1) that the Court had the power and the discretion to issue a direction but in the very nature of the power so conferred upon the Court the discretionary power shall had to be exercised along judicial lines and not in a mechanical, wooden or pedantic manner - It was difficult to lay down any strait jacket approach in the matter of exercise of such discretion by the Courts - There was no cut and dried formula for the Court to follow in the matter of issue or refusal of a direction within the contemplation of Section 427(1). Extension of Concession - There was no reason to extend that concession to transactions in which the borrowing company was different no matter the appellant before us is the promoter/Director of the said other companies also - the direction regarding concurrent running of sentence shall be limited to the substantive sentence only - The sentence which the appellant had been directed to undergo in default of payment of fine/compensation shall not be affected by this direction - the provisions of Section 427 of the Cr.P.C. do not permit a direction for the concurrent running of the substantive sentences with sentences awarded in default of payment of fine/compensation – Decided partly in favor of appellant.
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2013 (8) TMI 460
Demand of corruption money - During raid, Respondent was found with money as illegal gratification - High court acquitted Respondent - Held that:- Mere recovery of tainted money is not sufficient to convict the accused when substantive evidence in the case is not reliable, unless there is evidence to prove payment of bribe or to show that the money was taken voluntarily as a bribe. Mere receipt of the amount by the accused is not sufficient to fasten guilt, in the absence of any evidence with regard to demand and acceptance of the amount as illegal gratification. Hence, the burden rests on the accused to displace the statutory presumption raised under Section 20 of the Act 1988, by bringing on record evidence, either direct or circumstantial, to establish with reasonable probability, that the money was accepted by him, other than as a motive or reward as referred to in Section 7 of the Act 1988 - While invoking the provisions of Section 20 of the Act, the court is required to consider the explanation offered by the accused, if any, only on the touchstone of preponderance of probability and not on the touchstone of proof beyond all reasonable doubt. However, before the accused is called upon to explain how the amount in question was found in his possession, the foundational facts must be established by the prosecution. The complainant is an interested and partisan witness concerned with the success of the trap and his evidence must be tested in the same way as that of any other interested witness. Respondent-accused took a plea that he only had the duty to serve the notice on the complainant with regard to the tax evasion done by him and was not the authority for making an assessment order. It was his official duty to serve upon the complainant a notice under Section 148 of the Income Tax Act, 1961. The complainant came to his house and asked the respondent-accused to give him a glass of water as he had to take the medicine. He went inside the kitchen and came back with a glass of water and thereafter shook hands with the complainant and that is why when the hands of the respondent were washed, they turned pink. Reasoning given by the High Court does not deserve to be accepted for the reason that even if the complainant had a criminal background, he can still be forced by the officer of the Income Tax Department to pay illegal gratification for not reopening the assessment of a particular year. The subsequent cases against the respondent-accused for having disproportionate assets cannot be corelated with the incident of trap case. The incident in which the respondent had been arrested for taking illegal gratification has to be examined on its own merit. The courts below have not taken note of the statement made by PW.2 who is an Executive Magistrate and must be treated to be the most reliable and independent person and admittedly, he had been associated with the trap party. It is evident that in case the complainant himself had gone to PW.12 for having a trap on 1.6.1994, the question of receiving a direction from the Deputy Commissioner on 31.5.1994 could not arise. PW.2 is a witness only of recovery and not of accepting the bribe money. This statement alone made it evident that the prosecution has not disclosed the genesis of the case correctly - Decided against Revenue.
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