Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 20, 2014
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Nature of franchise fees paid - capital or revenue expenditure - Right to use the trademark, domino’s name and logo – Exclusive license – Held as revenue expenditure - AT
Corporate Law
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Infringement of trademark - Section 35 of the Act permits anyone to do his business in his own name in a bona fide manner - SC
Service Tax
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The nature of process involved is cutting, drilling, pressing, welding etc., as per the drawings of conversion of steel plates into partially finished and fully finished boiler components is prima facie manufacturing activity not taxable under service tax - AT
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Broadcasting service - allotment of airtime and uplink income - prima facie the activity was taxable - AT
Central Excise
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Waiver of pre-deposit - extension of operation of the stay order - The delay in disposal of this appeal is not therefore attributable to the assessee. no extension of stay could be granted by the CESTAT - AT
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CENVAT Credit - Recipient of the inputs is expected to know his immediate supplier and there is no further requirement to find out as to from where his supplier has procured the inputs - AT
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Imposition of personal penalty - Shortage in stock - t present two appellants were aware of the clandestine activities of the company in which case penalties imposed upon them is called for - penalty confirmed - AT
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Interest on the delayed payment of duty - interest on differential duty due to finalization of provisional assessment - prima facie interest is payable - AT
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Refund - discount given to their customers on the sale of vehicles on account of clearance of old stocks/prompt payment - if discount is given by way of credit note, the bar of unjust enrichment is not applicable - AT
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Invocation of longer period of limitation against the appellants on the ground that they got the assessments finalised from the Central excise authorities by mis-representing the facts cannot be appreciated - AT
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CENVAT Credit - Since it is the claim of the appellant that these returned goods were reprocessed and cleared, the assumption that in the absence of a proper accountal of returned goods, the claim of reprocessing cannot be accepted - AT
Case Laws:
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Income Tax
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2014 (8) TMI 527
Tax effect below prescribed limit - monetary limit for filing an appeal - Eligibility for deduction u/s 10(10C) – Held that:- CIT(A) had rightly analysed various judgements rendered vis-a-vis scheme of the Bank and condition mentioned in Rule 2BA and held that assessee is eligible for deduction u/s 10(10C) - all the requirements of Rule 2BA are satisfied - both circulars are not binding to the Tribunal – the tax effect involved in the appeal filed by the Revenue is less than ₹ 3 lacs, and therefore, the appeal is not maintainable - the appeal should not be entertained – Decided against Revenue.
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2014 (8) TMI 526
Commission paid on export sales – TDS not deducted u/s 195 – Non-existence of written agreement - Held that:- The Tribunal in Harrison Garments Division Vs. JCIT [2014 (5) TMI 544 - ITAT MUMBAI] has held that mere existence of an agreement cannot decide the allowability of commission payment, it is the presence of surrounding circumstances and the basic facts that decide the issue in conclusive manner - Similarly non existence of written agreement cannot be sole base for disallowance of commission payment if other evidences prove the fact of incurring for such expenditure wholly and exclusively- proof/existence of a written agreement between the assessee and the commission agent is not a requirement for allowing the expenditure of the commission payment made by the assessee. Genuineness of payment – Held that:- The payment has been received by the party on Mexican orders - the perusal of the P/L account suggests that the export sale during the year is increased and the loss is reduced - the assessee has secured the order for export to Mexico without visiting the Mexico - The facts clearly evidence that the assessee has paid the commission to M/s. Bombay Industries for the effort made by it to secure the export order to Mexico as demonstrated by the assessee. On the issue of non-deduction TDS on the payment, as per the CBDT circular No.23 dated 23.7.1969 and circular No.786 dated 7.2.2000, the assessee is not required to deduct the tax at source u/s 195 with regard to payment of commission to foreign agent - the CBDT withdrawing the circular No.23 of 1969 and circular No.786 of 2000 will be operative only from 22nd October, 2009 and not prior to that date - the reasoning of the CIT(A) for making the disallowance is not sustainable – the disallowance made by the CIT(A) is liable to be set aside - Decided in favour of Assessee. Addition u/s 41(1) – Held that:- The assessee has filed statement showing list of sundry creditors return back in M/s. India Fashion Ltd. in A.Y. 2006-07 and break up of assessee’s creditor return back in that year - the document has never been asked for by the AO or the CIT(A), assessee has placed it as additional evidences to substantiate the claim of the assessee – thus, the matter is to be remitted back to the AO for fresh assessment – Decided in favour of Assessee. Free samples given to customers – Held that:- The assessee during the assessment proceeding has given the details of the freebies of 790 samples and the breakup of freebies on trading item to the AO - assessee has made sales to the parties to whom freebies are given - the AO is not justified in doubting the genuineness of freebies given by the assessee by concluding that the freebies are sold for a price – there was no justification on the part of the CIT(A) to confirm the addition made by the AO – Decided in favour of Assessee. Expenses on exempted income u/s 14A – Held that:- The assessee has earned an exempt income and the assessee has not offered any disallowance in respect of earning the exempt income - the assessee would have incurred certain administrative expenses for earning the exempt income - disallowance of 3% of the common expenses seems to be on the excessive side – Relying upon CIT vs. Ms. Godrej Agrovet Ltd. [2014 (8) TMI 457 - BOMBAY HIGH COURT] - percentage of the exempt income can constitute a reasonable estimate for making disallowance in the years earlier to the AY 2008-09 – the matter is remitted back to the AO for restriction of disallowance only to the extent of 5% of the total exempt income – Decided in favour of Assessee.
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2014 (8) TMI 525
Inclusion of duty drawback in export sale – Deduction u/s 10B – Held that:- Section 10B was introduced by the Finance Act, 1988 w.e.f 1.4.1989 - As stated in Circular No. 528 dated 16.12.1988, tax holiday u/s 10A was not available to 100% EOU and thus, undertakings were eligible only for deduction u/s 80HHC out of their export profit - section 10B was inserted to ensure that income of 100% EOU shall be exempted from tax for a period of 5 consecutive AYs - Duty drawback is an incentive - the assessee is allowed to realize and repatriate full value of export proceeds within a period of 12 months from the date of export - the assessee received a sum of ₹ 14,31,796/- out of ₹ 31,84,755/- within one year from the date of exports, thus, the deduction relating to the amount of ₹ 14,31,796/- cannot be disallowed - The amount of Duty drawback either is to be included in both total turnover as well as export turnover or to be excluded from both - If the figures of export turnover and total turnover are analyze the deduction u/s 10B would come to ₹ 1,18,56,646 – thus, there was no infirmity in the conclusion drawn by the CIT(A) – Decided against Revenue.
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2014 (8) TMI 524
Deduction u/s 80IC on export incentive - Manufacture of carpets – AO was of the view that the sum included the amount as duty drawback towards export incentives – Held that:- It has been decided in assessee’s own case for the earlier assessment year, it has been held in the judgment of Sharda Exports Versus Joint Commissioner of Income-tax [2013 (10) TMI 513 - ITAT DELHI] wherein it was held that, the decision of Hon’ble Supreme Court is subsequent to the amendment, hence, the decision cannot be distinguished - Following the decision in Liberty India vs. CIT [2009 (8) TMI 63 - SUPREME COURT] - DEPB receipts are not derived from an industrial undertaking rather their genesis is from the beneficiary scheme formulated under Central Excise Act etc. - They are the ancillary profit - the AO is directed to allow the deduction u/s 80IC of the Act as per law excluded on the DEPB receipts. CIT(A) has clearly observed that the assessee had received ₹ 7,29,34,000/- and the balance sum was shown as outstanding and the assessee was maintaining accounts on mercantile basis - assessee himself has included the amount in the net profit and claimed deduction u/s 80IC - the entire amount had to be considered and has rightly been considered by CIT(A) – Decided against Assessee.
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2014 (8) TMI 523
Nature of franchise fees paid - capital or revenue expenditure - Right to use the trademark, domino’s name and logo – Exclusive license – Held that:- The assessee rightly contended that the matter has been decided in assessee’s own case for the earlier assessment year – Following the decision in DCIT, Circle 4(1), New Delhi Versus Jubilant Foodworks Pvt. Ltd. [2014 (8) TMI 458 - ITAT DELHI] - the assessee had acquired only access to the technical information and there was no transfer of ownership with respect to the process and the know-how under the agreement in favour of the assessee - the payment could only be categorized as one made on revenue account – Decided against Revenue. Reduction of taxable income – Double taxation of same income – Held that:- CIT(A) has primarily denied the assessee’s claim because the assessee had not filed revised return of income - Mere non filing of revised return cannot override the substantial right of assessee against double taxation - pitted against the technical and substantial justice the substantial justice is to prevail and not the technicality – Relying upon Jute Corporation of India Limited Versus Commissioner of Income-Tax And Another [1990 (9) TMI 6 - SUPREME Court] – the matter is liable to remit back t the AO for verification of assessee’s claim regarding the whole amount having been taxed between AYs 2001-02 to 2005-06 as per the chart – Decided in favour of Assessee.
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2014 (8) TMI 522
Ex-parte order passed by CIT(A) – Additional evidences filed before CIT(A) - Held that:- The proceedings before the AO as well as before the CIT(A) were completed ex parte and assessee could not get due opportunity of hearing during these proceedings before the authorities below - the AO completed reassessment proceedings u/s 144 of the Act ex parte and assessee submitted additional evidence before the CIT(A) under Rule 46A of the Income Tax Rules, 1962 which was also not considered as the appeal was also dismissed ex parte - the CIT(A) has dismissed ten grounds of appeal by passing a very short and cryptic order without assigning any reason for adjudication on all issues placed before him by the assessee - when a quasi-judicial authority deals with a lis, it is obligatory on its part to ascribe cogent and justified reasons as the same is the heart and soul of the matter and the same also facilitates appreciation when the order is called in question before the superior forum. CIT(A) has not passed a speaking and well-reasoned order on various issues/grounds raised by the assessee - it would be just and proper to set aside the order of CIT(A) as well as ex parte assessment order passed by the AO concerned - the assessee also filed additional evidence before CIT(A) which was not considered while passing order – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (8) TMI 521
Admission of additional evidence under Rule 46A – Income from sale of Jewellery treated as income from other sources – Held that:- On verification of bank statement of the assessee and her mother, the CIT(A) reached to a conclusion that the facts are clear from the statement itself as the transaction happened on the very same date - the assessee has also produced confirmation from the same parties to whom jewellery was sold - the transactions entered were held to be genuine - CIT(A) also pointed out that the AO should have taken help of local ITO/Inspector to strengthen his action but the AO failed to do so - the addition made by the AO was not found to be sustainable revenue could not point out any fact emerging out of order that any additional evidence was admitted and considered by the CIT(A) in contravention of Rule 46A of the Income Tax Rules, 1962 without affording due opportunity to rebut the same and examining and verifying the same for the AO – Decided against Revenue.
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2014 (8) TMI 520
Assessment order u/s 153A - Absence of any incriminating material belonging to assessee – Held that:- The return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment - addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search – Relying upon Kusum Gupta Versus DCIT, Central Circle-15 New Delhi [2013 (11) TMI 665 - ITAT DELHI] CIT(Appeals) was not justified in upholding the validity of the proceedings initiated under sec. 153A of the Act and the assessment framed under sec. 153A read with section 143(3) in furtherance thereto - the initiation of proceedings under sec. 153A of the Act and framing of assessment under sec. 153A read with sec. 143(3) in furtherance thereto in absence of any incriminating material found during the course of search were not valid – Decided in favour of Assessee. Unexplained cash credits u/s 68 – Held that:- CIT(A) has rightly come to the conclusion that there is no actual credit in the books of the assessee on account of M/s. Jayna Closure, Proprietor Rakesh Kumar as stated by the AO whereas the same was accounting adjustment passed in the accounts of S.H. Ltd. and that since the identity of S.H. Ltd., the source of payment is also not in dispute as well as the transaction entered into by the assessee with S.H. Ltd. are also not in dispute – the order of the CIT(A) in deleting the addition made by the AO u/s 68 is justified - Revenue has also not been able to rebut the finding of the CIT(A) that the amount of ₹ 19,17,500 was outstanding in the AY 2001-02 also, which was a carried forward balance in the current year from the last many years - CIT(A) has rightly deleted the addition made by the AO. Creditworthiness and genuineness of transaction – Held that:- CIT(A) has rightly come to the conclusion that the creditor was in existence and the assessee had filed sufficient evidence to support its contention regarding the creditworthiness and genuineness of the transaction as the payments have been received through banking channel and the bank statement filed also supports the case of the assessee – CIT(A) was justified in deleting the addition of ₹ 2,87,10,000 made by the AO u/s 68 – Decided against Revenue.
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2014 (8) TMI 519
Admission of additional evidence – assessment u/s 153C - Unexplained credit - Held that:- CIT(A) has dealt with the issue in detail and after discussing the case of the assessee for admission of the additional evidence has allowed the application of the assessee - there was sufficient reason for the admission of the additional evidence by the CIT(A) as the AO had issued show-cause notice in respect of the issue of share capital for the first time on 14.12.2011 and has given just two days to the assessee to give detailed submissions/evidence to prove the genuineness of the transaction, creditworthiness and identity of the shareholder who had given ₹ 4.03 crores - the time of two days given to the assessee was not sufficient and the documents filed before the CIT(A) were in the nature of supporting evidence - CIT(A) has rightly allowed the required admission of additional evidence by the assessee before him after affording opportunity to the AO - there is no any violation of Rule 46A of the Income-tax Rules, 1962 – Decided against Revenue. Unexplained credit – Share capital issued – Identity and creditworthiness of shareholders – Held that:- CIT(A) was rightly of the view that in respect of all the six shareholders, the assessee has been able to furnish on record substantial evidences to establish the identity, creditworthiness of the shareholders and genuineness of the transactions – CIT(A) rightly relied upon CIT vs. Orissa Corporation [1986 (3) TMI 3 - SUPREME Court] - the assessee has provided evidence in the form of PAN, ROC details, copy of ITR filed and copy of confirmation, explained source of sources also and even in the post search inquiries, the shareholders have confirmed the investment before the ADIT – thus, CIT(A) has passed a comprehensive and reasoned order on the issue after examining evidence relating to each of the share applicant companies to arrive at a conclusion that the assessee was able to establish the identity, creditworthiness and genuineness of the transaction – Decided against Revenue.
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2014 (8) TMI 518
Penalty u/s 271(1)(c) – disallowance of expenditure - Under-valuation of work in progress - Excess claim of deduction u/s 80IC - Held that:- The CIT(A) has deleted penalty because the assessee has claimed expenditure and the claim was not accepted or was not acceptable to the revenue, that too by itself, would not attract penalty u/s 271(1)( c) of the Act – Relying upon CIT vs Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] – the order of the CIT(A) for setting aside the penalty on account of part disallowance pertaining to claim of software expenses of the assessee is upheld – Decided against Revenue. Under-valuation of work in progress – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that AO has not brought on record any material to show that the, assessee has furnished any Inaccurate particulars of income but on the contrary on the basis of estimation the AO has worked out the value of work-in-progress at a figure different from what is stated by the assessee which by no stretch of imagination can be equated with concealment of income so as to attract penal provisions – it cannot be said that there was conscious malafide act of the assessee for concealment of particulars of income so as to attract the penalty u/s 271(1)( c) of the Act – Decided against Revenue. Excess claim of deduction u/s 80IC – Held that:- Merely because of part disallowance on account of re-computation of deduction u/s 80IC of the Act, it cannot be said that the assessee concealed or furnished wrong particulars of its income which attracts penalty u/s 271(1)(c) of the Act because part disallowance of claim of assessee cannot be said to be a conscious and mala fide act of concealment or furnishing of inaccurate particulars of its income because the disallowance made by the AO on deduction claimed by the assessee u/s 80IC of the Act was finally made on the direction of the Tribunal to the AO to recompute the deduction of the assessee after furnishing and examining relevant facts and material – Decided against Revenue.
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Corporate Laws
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2014 (8) TMI 528
Infringement of trademark - Appellants restrained from doing their business in the concerned name - Interim order u/s 35F - Held that:- interlocutory order passed by the Court below is not just and proper in view of the provisions of Section 35 of the Act - Section 35 of the Act permits anyone to do his business in his own name in a bona fide manner. In the instant case, it is not in dispute that the defendants are doing their business in their own name and their bona fides have not been disputed. It is also not in dispute that the plaintiff and defendants are related to each other and practically all the family members are in the business of jewellery - looking at the provisions of Section 35 of the Act, there is no prima facie case in favour of the plaintiff and therefore, the defendants could not have been restrained from doing their busines. We, therefore, quash and set aside the impugned order granting interim relief in favour of the plaintiff - decided in favour of Applicant.
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Service Tax
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2014 (8) TMI 555
Business Auxiliary Service - Job Worker - The nature of process involved is cutting, drilling, pressing, welding etc., as per the drawings of conversion of steel plates into partially finished and fully finished boiler components - Revenue contends it does not amount to manufacture - Held that:- It is reported that the raw materials such as MS Plates, MS Pipes and MS Roads were supplied to the applicant by their customers along with Purchase Order, Delivery Challans and drawings and processes were undertaken by the applicant as per the drawing supplied by their customers and the resultant job worked materials were cleared under Delivery Challans and invoices under the name as specified in the Purchase Orders - applicant undertook the job work on behalf of their client M/s. BHEL There is no dispute that the job work materials used in relation or in relation to the manufacturer of the components of boiler. Prima facie , we find that the present case is covered by Exemption Notification No.8/2005-ST, dated 01.03.2005 and also supported by the decision of the Tribunal in the case of M/s. Munish Forge Pvt. Ltd. (2014 (6) TMI 492 - CESTAT NEW DELHI). The case law M/s. Tansi Engineering Works (1996 (8) TMI 256 - CEGAT, MADRAS) is related to the circumstances of the present case. In view of the above discussion, we waive pre-deposit of tax along with interest and penalty till disposal of the appeal and recovery stayed thereof - Stay granted.
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2014 (8) TMI 554
Broadcasting service - allotment of airtime and uplink income - Earlier assessee filed application for cancellation of registration but later obtained registration for Business Support Service - Held that:- Applicant got the permission to up-link their own TV channels. It is noted that P&L Account for the year ending 31.3.2005 showed fees for allotment of airtime and up-linking charges separately. Thus it is clear that applicant had been collecting fees for allotment of air time. So, prima facie, we are unable to accept the contention of learned advocate that they were not rendering any service of broadcasting. It is seen from the impugned order that in the P&L Account for the year ended 31.3.2006 in the Schedule X relating to administration and other expenses, the expenses in respect of cassettes, tapes and carriage fees were shown separately. The contention of the learned advocate is that they have collected up-linking charges from the other two parties as per the agreement would be examine at the time of appeal hearing. We have also considered that audit party during their visit in 2010 detected collection of broadcasting charges after examining the records. - Partial stay granted.
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2014 (8) TMI 553
Waiver of pre deposit - Renting of Immovable Property - Held that:- according to the applicant, prima facie, there is a dispute of levy of tax on market fees, bus fees etc under the category of "Renting of immovable property". However, there is no dispute regarding liability of tax of about ₹ 65 lakhs as per the submission of Ld. Advocate. In view of that, respectfully following the decision of Hon'ble Supreme Court as mentioned above, the applicant is directed to make a predeposit of ₹ 65,00,000/- - stay granted partly.
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2014 (8) TMI 552
Waiver of pre-deposit - Rent a cab service - appellant has made available their buses to the APSRTC - Held that:- The appellant has made available their buses to the APSRTC under agreement wherein the APSRTC would ply the buses on predetermined routes covered by stage carriage permits held by the owner, with a time schedule fixed by the APSRTC, and the bus owner would provide the services of drivers to the Corporation and would be paid by the corporation, hire charges per km. On these and allied facts, a prima facie view taken in the cited Stay Order to the effect that the activity of the bus owners could not be classified as rent-a-cab service. Based on this view, waiver and stay were granted in those cases, The same view has to be taken in this case also. - stay granted - Matter remanded back.
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2014 (8) TMI 551
Penalties under Sections 75A, 76, 77 & 78 - Revenue contends that penalty should have been imposed under Section 75A and Section 76 of the Finance Act, 1994 and penalty should not have been reduced equal to service tax under Section 78 - Erection, Commissioning and Installation service - Held that:- Appellant claimed the benefit of SSI exemption which was allowed in the impugned order and it is because of this reason that the amount of service tax came down to ₹ 27,568/-. It is also found that after this impugned order was passed, respondent has not appealed - Respondent obviously is a small scale service provider and has not even filed an appeal against the order confirming the demand and imposition of penalty under Sections 77 & 78 in the impugned order. Under these circumstances, having regard to the facts of the case and also the records, I consider that there is no need for separate penalty under Section 76 in this case in addition to the penalties imposed under Sections 77 & 78 of Finance Act, 1994. Even though Commissioner (Appeals) has not given reasons, I find that a small scale unit need not have to be inflicted with penalties under all these sections. Further I also consider that having regard to the fact that the appellant is a small scale person and in view of the fact that for a period of four years the total demand for service tax comes to ₹ 27,568/- it can be said that provisions of Section 80 can be applied in this case. On this ground also penalties are required to be set aside - Decided against Revenue.
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2014 (8) TMI 550
Waiver of pre deposit - Denial of CENVAT Credit - credit availed on the basis of the advice notes issued by their Corporate Head Office located in Delhi, along with the invoices of service provider - Head Office was not registered under ISD - Held that:- There is no dispute about the input service received by the appellant and admissibility of the credit. The only objection raised by the Revenue is procedural and too technical. The denial of the credit on the ground of Head Office not being registered with the Service Tax Department should not be adopted as one of the reasons for denial of the credit. We also find that a strong prima facie case in favour the appellant. - Stay granted.
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2014 (8) TMI 549
Abatement claimed by him under Notification No. 19/2003 - Erection, Commissioning & Installation Services - Held that:- benefit of Notification No. 19/2003-S.T. talks about abatement of 67% if there is a sale of the materials and the words used are ‘sold’. On perusal of the records, we find that there is nothing on record to show that there was sale of material by the appellant to the service receiver. It is also on record that the appellant’s main job was erection of piping work. In the service recipient factory premises pipes were provided by the service receiver. Appellant is unable to make out a prima facie case for the complete waiver of the amount of service tax confirmed by the adjudicating authority under the Head Erection, Commissioning & Installation Services by availing benefit of Notification No. 19/2003-S.T. In view of this, we are of the view that the appellant should be put to some conditions for hearing and disposing the appeal - Conditional stay granted.
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2014 (8) TMI 548
Waiver of penalty where service tax has been deposited before issuance of SCN - assessee exceeded small scale exemption limit - Held that:- Section 73(3) not only covers the cases of payment of service tax on an assessee’s own ascertainment but also on the basis of tax ascertained by the Central Excise officers before service of the notice - the amount of Service Tax of ₹ 68,424/- paid prior to issue of the SCN can be held to have been paid under Section 73(3) of the Act. There is no provision in the said Section not to cover cases where returns may not have been filed. As such, equal penalty imposed in respect of the said amount of ₹ 68,424/- is set aside. As far as the amount of ₹ 34,212/- paid after the issue of the SCN, the penalty is imposable as this has been paid after the issue of SCN. The provisions of Section 80 will also not apply to a case, such as this, where the appellants have taken registration - Penalty reduced - Decided partly in favour of assessee.
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2014 (8) TMI 547
Waiver of pre deposit - Outdoor catering service - Mid day meal to government schools - non profit making charitable trust - Held that:- Vide Notification No. 47/2010-S.T., dated 3-9-2010, the activities of providing mid-day meal by NGO have been held to be exempted from the taxable service on outdoor catering. Similarly vide ad-hoc exemption Notification No. 2/2/2011 issued from F.No. 137/94/2010-CX.4 by Ministry of Finance, it has been held that mid-day meal provided by non government organization registered under any Central Act or State Act, under Centrally assisted Mid-Day Meal Scheme, from the whole of service tax leviable thereon under Section 66 of the Finance Act, during the period 10-9-2004 to 2-9-2010 - Stay granted.
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2014 (8) TMI 546
Waiver of pre deposit - Coercive steps for payment of dues - Revenue contends that assessee are providing services of business support services to their own offices situated outside SEZ unit - Held that:- appellant/assessee deposited entire amount of service tax liability and interest thereof, and are challenging to liability to service tax. Since the entire amount of service tax liability and the interest thereof stands deposited with the Revenue Authorities, we allow the applications for waiving the condition of pre-deposit of the balance amounts involved and stay the recovery thereof till the disposal of appeals - Stay granted.
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2014 (8) TMI 545
Penalty u/s 78 - Suppression of facts - Malafide intention to cause evasion of duty - Held that:- original authority did not impose any penalty - but the revisionary authority imposed penalty under Section 78 on the ground that the party not only disclosed information but also not submitted anything in its defence despite repeated opportunities. The said authority discarding the finding of the adjudicating authority made under Section 80 of the Finance Act, 1994 and proceeded to penalize the appellant under Sections 76 and 78 on the ground of willful contravention of law. Adjudicating authority in Para 4.10 has observed that the appellant, a public sector, has not followed any questionable modus operandi to cause evasion. To revert the finding of the Adjudicating Authority the appellate authority did not make any independent inquiry since no material borne by record could be brought by him to establish his finding and conclusion - Decided in favour of assessee.
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2014 (8) TMI 544
Waiver of pre deposit - denial of the benefit of Notification No. 1/2006-S.T., dated 1-3-2006 - abatement to the extent of 75% for payment of Service Tax on the GTA services received by the assessee - Non production of certificate from transporters - Held that:- The fact that transporters were not registered with the Service Tax department, should have been sufficient as evidence to show that they are neither availing the Cenvat credit nor the benefit of exemption Notification No. 12/2003. In any case, the appellants have subsequently procured such certificates from the transporters and have produced the same before Commissioner (Appeals) who has ignored the same simply. We find that in view of the subsequent certificates produced by the appellants, the fact of non-availment of Cenvat credit and the benefit of notification stands established. As a consequence, the appellant becomes entitled for the benefit of Notification No. 1/2006-S.T. As such, demand of tax confirmed and penalty imposed upon them cannot be upheld - Decided in favour of assessee.
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2014 (8) TMI 543
Activity of field verification of the credibility of borrowers - Scientific and technical consultancy - Held that:- Authority proceeded to treat the appellant as provider of scientific and technical consultancy service without testing the activity carried out by the appellant to determine whether covered by the class of service under which Revenue proposed to bring the appellant. We therefore looked into show cause notice. Show cause notice is also premeditated one to raise demand against the appellant without exhibiting the activity carried out by the appellant. This clearly shows that adjudication was made in vacuum and suffers from legal infirmity of violation of natural justice without any foundation in the show cause notice - Decided in favour of assessee.
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2014 (8) TMI 542
Business Auxiliary services - services of issue of marriage certificate, death certificate, etc., to the public on behalf of the Government of Punjab - Held that:- This entry covers “providing of service on behalf of the client”. In this case, the services is provided on behalf of the Punjab Government. However, the Punjab Government is not paying anything to them. The consideration received by the appellant is from the public and the service provided to public who is the clients cannot be, prima facie covered by the said entry. Therefore, prima facie, we are of the opinion that there is no case for maintaining the demand against the appellant and therefore, we grant waiver of pre-deposit of dues arising from the impugned order and collection of such dues is also stayed - Stay granted.
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Central Excise
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2014 (8) TMI 556
Waiver of pre-deposit - extension of operation of the stay order - Held that:- Delhi High Courts considered the position resulting from introduction of the third proviso to Section 35C(2A) of the Central Excise Act, 1944 and ruled that as the relevant provision signals the clear legislative prescription that if the appeal is not disposed of under the first proviso of the Section or within the period or periods extended under the second proviso, which shall not in any case exceed 365 days, the stay order, after expiry of that period shall stand vacated - present appeal is of the year 2008. Several older appeals preferred under the provisions of Central Excise Act, 1944 including of the year of 2005 are pending disposal. The delay in disposal of this appeal is not therefore attributable to the assessee. no extension of stay could be granted by the CESTAT in the light of the provisions of Section 35C(2A) of the Central Excise Act, 1944, even if the delay in disposal of an appeal, beyond the sunset period prescribed, is not attributable to an appellant - Extension of stay denied.
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2014 (8) TMI 539
CENVAT Credit - issue of invoice without supply of material - procurement of goods from second stage dealer - genuineness of dealer - Penalty - Held that:- The statement of the authorized representative of Khemka reveals that with the loss of business in the year 2002, they entered into an arrangement with the first stage dealer for issuing invoices without the supply of goods so as to reflect some sale purchase books on accounts - Rule 7(2) of Cenvat credit rule requires the recipient of the inputs to know the identity of the supplier of the goods, was second stage dealer, the rule stand satisfied by the manufacturer with proprietor of second stage dealer having deposed that they had in fact supplied to the manufacturer, payment for which were made by them in cheque - Recipient of the inputs is expected to know his immediate supplier and there is no further requirement to find out as to from where his supplier has procured the inputs - Penalties set aside - Following decision of M/s SUPER TRADING COMPANY & OTHERS Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-IV [2013 (10) TMI 491 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2014 (8) TMI 538
Imposition of personal penalty - Shortage in stock - Clandestine removal of goods - Held that:- There is no debar for imposition of separate penalties on the Directors, subject to the prejudice finding of their role in the clandestine activities of the company. In the present case when incriminating documents were recovered and seized under the cover of panchnama Shri Gajjadhar Jhanwar in his statement agreed with the same and also appended his signature in the panchnama. When the said facts were put to the other Director, Shri Narayan Prasad Jhanwar, he also agreed with the contents of the panchnama and clarified that the quantity stand cleared without issuing the invoices. These facts sufficiently clarify that present two appellants were aware of the clandestine activities of the company in which case penalties imposed upon them is called for. As such, I find no justification for setting aside the penalties upon the present appellants - Decided against the appellants.
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2014 (8) TMI 537
Interest on the delayed payment of duty - interest on differential duty due to finalization of provisional assessment - Held that:- Decision of the Division Bench of the Tribunal in the case of Tata Motors Ltd. (2011 (3) TMI 531 - CESTAT, MUMBAI), following the decision of the Hon'ble Bombay High Court allowed the appeal filed by the assessee. But, the Tribunal in the applicant's own case BHEL (2011 (6) TMI 396 - CESTAT, DELHI) had taken a view against the applicant. The contention of the learned counsel that, in their own case, differential duty was paid after assessment is not clear on a plain reading of the said decision. It is noted that in the present case, the demand of interest involved is in respect of raising supplementary invoice for price revision, which is akin to the decision of the Hon'ble Supreme Court in the case of SKF India (2009 (7) TMI 6 - SUPREME COURT). The submission of the learned Advocate that the decision of SKF India Ltd. (supra) would not apply in the case of provisional assessment, would be examined at the time of appeal hearing at length. applicant failed to make out a prima facie for waiver of predeposit of entire amount of interest - stay granted partly.
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2014 (8) TMI 536
Extended period of limitation - claiming duty exemption on furnace oil - Non fulfillment of conditions of Notification No.1/95-CE - Held that:- As per the amended provisions, for claiming duty exemption on furnace oil, two conditions were required to be satisfied i.e., Furnace Oil is required for the boilers used in the textile mill and the procurement of such Furnace Oil duty free should be approved by the jurisdictional Commissioner of Customs on the recommendations of the Development Commissioner. In the facts of the case before us, there is no dispute that no approval from the Commissioner of Customs was obtained nor any recommendations were given by the Development Commissioner. Therefore, the respondent was clearly ineligible for the benefit of Notification No.1/95-CE. The appellant had also filed D-3 intimation for the procurement of the goods which was required to be verified by the department. Therefore, at the time of verification of the goods obtained duty free, the Bond officer should have examined whether the goods have been moved in accordance with law, which the Bond Officer has failed to do. Therefore, for the failure of the Bond Officer, who verified the receipt of the goods, the department cannot invoke extended period of time. Therefore, the finding of the lower appellate authority that the department had knowledge of the entire transactions and yet they failed to issue show-cause notice within the normal period of time and consequently the demand become time barred cannot be faulted. - Decided partly in favour of Revenue.
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2014 (8) TMI 535
Denial of refund claim - Unjust enrichment - discount given to their customers on the sale of vehicles on account of clearance of old stocks/prompt payment - appellant issued invoices of the gross amount and thereafter issued credit note on the discount applicable against each clearance - discount amount was having the components of duty paid by the appellant - refund claims were allowed but transferred to the Consumer Welfare Fund holding that the appellant has failed to pass the bar of unjust enrichment - Held that:- discount given by the appellant to their dealers regarding clearance of old stocks/prompt payment were in the knowledge of the dealers before the clearance of the vehicle, is not in dispute. The appellant was having a system that he invoices are to be raised on the pre-discounted assessable value of the vehicle and if any discount is entitled to the dealer that will be passed on to the dealers by way of credit notes. In that situation, the claim of the appellant is that duty component in the discount has not been passed on the dealers as the amount of discount has been credited in the account of dealers. where the entitlement discount has already known to the buyers, in that case, if discount is given by way of credit note, the bar of unjust enrichment is not applicable - Following decision of ADDISON & CO. Versus COMMISSIONER OF C. EX., MADRAS [2000 (11) TMI 146 - HIGH COURT OF JUDICATURE AT MADRAS] - Decided in favour of assessee.
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2014 (8) TMI 534
Shortage in stock - Clandestine removal of goods - Held that:- alleged shortages were detected by the officers at the time of visit to the appellants factory on 21.11.08. Immediately on the next date, the appellants addressed a letter dated 22.11.08 to their jurisdictional Asstt. Commissioner denying that there was any shortages and submitted that entire goods were imported by them and were having specific mark of identification traceable batch number and specifications. The same can neither be procured from the indigenous market nor can be sold in the local market inasmuch as the same are not being used by any other manufacturer in India. They have more than 300 items of various inputs and the entire stock taking was done without actually indicating the stock position. The appellants also contended in the said letter that after the officers left, they re-examined their stock and found the same to be in order. The entire case of the Revenue is based upon the shortages admitted at the time of visit of the officers. Though the appellant immediately reconciled their stock position by writing letters to their jurisdictional Central Excise authorities and requested them for reverification, no further action was taken by the department. In any case and in any view of the matter, apart from the shortages, there is no other evidence on record to show that the appellants have cleared their raw materials without payment of duty. mere shortages by itself cannot lead to inevitable conclusion of clandestine removal, even though the assessee might have accepted to discharge their duty liability in respect of said shortages - no justification for upholding the finding of clandestine removal against the appellant and consequent confirmation of demand of duty or imposition of penalty upon both the appellants - Decided in favour of assessee.
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2014 (8) TMI 533
Extended period of limitation - Valuation of goods - Job work - delay in finalization of provisional assessment - adjudicating authority has held that such finalisation was got done by the appellants with the ulterior motive of evasion of central excise duty - Held that:- We really fail to understand the above reasoning of the adjudicating authority. - The finalisation of the provisional assessments has to be done by the Central Excise authorities and not by the appellants. It is also a fact that the Central Excise authorities having jurisdiction over the appellants' factory were keeping the assessments provisional in as much as the assessments at the end of M/s. GSK were provisional. They were aware of the said fact as also of the fact that the assessable value at the appellants' end has to be based upon the value of the raw-materials manufactured by M/s. GSK and supplied by them. As such, the entire facts were in the knowledge of the Revenue. As soon as the provisional assessments at the end of M/s. GSK were finalised, the Central Excise authorities having jurisdiction over the appellants' factory also finalised their assessments. As such, finalisation has to be held as having been done by the Central Excise officers after verifying all the facts at the appellants' end as also at the end of M/s. GSK. The said finalised assessments never stands appealed against by the Revenue and as such have attained finality. In this scenario, invocation of longer period of limitation against the appellants on the ground that they got the assessments finalised from the Central excise authorities by mis-representing the facts cannot be appreciated. - Demand barred by limitation - Decided in favour of assessee.
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2014 (8) TMI 532
CENVAT Credit - Credit availed on return of goods sold as rejected - Non maintenance of separate records of goods returned - Credit not reversed for goods returned - Held that:- Rule 16 provides for availment of CENVAT credit in respect of goods received after returned by the customers. This would mean that the principles applicable for inputs would be applicable in respect of the returned goods also. As far as inputs are concerned, the assessee is required to show that inputs have been received, accounted for, utilized in the manufacture to avail the credit. Therefore it was the bounden duty of the appellant to maintain proper accounts of the inputs in this case also. Since it is the claim of the appellant that these returned goods were reprocessed and cleared, the assumption that in the absence of a proper accountal of returned goods, the claim of reprocessing cannot be accepted prima facie cannot be faulted with. Therefore we consider that appellant has not made out a prima facie at all - stay granted partly.
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2014 (8) TMI 531
Restoration of the Appeal - Non delivery of order - Held that:- letters/communications had been issued from time to time by the Registry on the address mentioned in the EA-3 Appeal Form and the same were not returned, as undelivered, by the postal authorities. From the record of the Dispatch Register produced by the Registry, it is crystal clear that the notices/orders were communicated in accordance with the provisions of Section 37C of the Central Excise Act, 1944 - not on a single occasion, communication of notices of hearing/order sent to the Applicant, had ever been returned as unserved. On the contrary, even seven Appeals filed by the Applicant subsequently before this Tribunal the same address has been shown as the address for communication - Decided against assessee.
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2014 (8) TMI 530
Modification of stay order - distribution of a substantial portion of the credit to the applicant using the percentage of overhead expenses in the total expenses as a template - violation of Rule 7(b) of the Rules, 2004 - Conditional stay order granted by Tribunal - Held that:- certificate issued by the Chartered Accountant after passing of the stay order cannot be accepted in the modification application as the same was not placed at any point of time, before the lower authorities. It would be reconsideration of an interlocutory order on merits which is not permissible under the law. In view of that, we do not find any merit in the application filed by the applicant. However, considering the facts and circumstances of the case, we extend the period of compliance for further 8 weeks - Decided in favour of assessee.
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2014 (8) TMI 529
Search and Seizure of goods - Discrepancy in RG-1 Register - clandestine manufacture and clearance of fabrics - Held that:- Dyeing Master Shri Harbans Lal during the course of adjudication, accepted that the entries made in the diaries belonged to him and were relating to his business transactions. Commissioner (Appeals) also took into consideration the retraction made by the appellant by way of sending telegram. He also took into consideration that appellants have no capacity to manufacture such a huge quantity of poly fabrics - entries made in the private note book read with statement cannot be held to be evidence so as to conclude against the assessee - Following decision of M/s. K. Rajagopal Vs. Commissioner of Central Excise, Madurai [2002 (1) TMI 151 - CEGAT, CHENNAI] - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (8) TMI 541
Discrepancy in stock - Whether the learned Tribunal is right in upholding demand of tax and penalty on the premise that the appellants had sold out the goods without recording the same in books of accounts - Held that:- Entire issue is based on appreciation of materials on records. One conclusion by the Tribunal, the final fact finding authority, and what was not seriously disputed by the assessee was that there was excess stock worth ₹ 8.82 lakhs in the books of accounts. On that basis, the authorities as well as the Tribunal confirmed the demand of the tax. We see no question of law arising. The counsel, however, submitted that the stock in the books of accounts and that found during the visit match, except for its valuation. The same was, therefore, only due to error. However, admittedly, the value added tax would be paid on the valuation of the goods cleared. When there was variation of valuation for the purpose of payment of value added tax as compared to the physical stock even at the time of the visit by the authorities, the liability to pay the differential tax cannot be avoided - Decided against assessee.
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2014 (8) TMI 540
Issue of writ of certiorari - Call for records - Validity of show cause notice - Held that:- It is also very clearly stated in the said notice that the petitioner will be given a personal hearing on the above said proposal on 23.05.2014. But the petitioner without appearing before the authority has approached this Court. As rightly pointed out by the learned Additional Government Pleader appearing on behalf of the respondents, the petitioner can very well approach the authority with relevant files to prove the payment of tax - petitioner has chosen to challenge only the proposal notice issued, this Court is of the view that the writ petition is premature in nature. However, the petitioner is given liberty to file their objections to the impugned show cause notice, if any, within fifteen days' from today and appear before the authority on the same day - Decided partly in favour of assessee.
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