Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 29, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Current repairs - Capital expenditure vs. Revenue expenditure – Replacement of entire marble floor was done – Allowable expenditure u/s 30 - A new asset of enduring benefit in form of completely new flooring of marble, different and distinct from the earlier flooring, has come into existence – deduction not allowed - HC
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Deduction u/s 37 - Provision for Suraksha Fund - Suraksha Fund created by the order of Office of the Registrar, Co-operative Societies, Rajasthan - diversion by overriding title - deduction allowed - AT
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Deduction u/s 35(2AB) - Weighted deduction - expenditure on R & D facilities - - matter remanded back to the file of the AO to grant weighted deduction u/s 35(2AB). The balance expenditure if any not approved by the DSIR will have to be considered for deduction under section 35(1) or under normal provisions - AT
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Capital gain - transfer u/s 2(47) - taxability in the year in which agreement took place or in the year in which sale deed registered - merely because an agreement to sale has not been registered, which otherwise is in the nature of agreement referred to in section 53A cannot be taken out of ambit of section 2(47)(v) - AT
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Penalty under section 158BFA (2) - Block assessment u/s 158BC - Penalty imposed in the present case is not sustainable because the enhancement of undisclosed income by the Assessing Officer has been made on estimated basis - AT
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Exemption u/s 54 - scope of the term 'a residential house' – construction of 7 flats - AO not correct in restricting the exemption under section 54F of the Act to only one flat by interpreting the words “a residential house“ in a manner which has been held to be an incorrect interpretation - AT
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Unexplained Credit – Addition u/s 68 - Additin where fixed deposits taken during the earlier years - fixed deposits renewed during the year - No addition during the current year - AT
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Unexplained Credit – Addition u/s 68 - Money borrowed through fixed deposit in a scheme under the Company (acceptance of deposit) Rule, 1975 - mere filing of the confirmatory letters will not discharge the onus that lies on the assessee - AT
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Deduction u/s.54 - Joint ownership in property - assessee was owner of 50% - exemption cannot be denied to the assessee on the ground that assessee did not show any income chargeable under the head income from house property - AT
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Comparison - Arm’s length price – Comparability of price with the chosen company - assessee's contention that assessee is in merely functional advisory consultancy service without any risk cannot be accepted - AT
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Royalty income - sale of Microsoft software products to the Indian distributors – MRSC cannot be taxed again on the same income by way of royalty for exploitation of same rights which had been assessed in the hands of Gracemac, otherwise it would result in double taxation - AT
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Revenue or Capital expenditure - expenditure incurred by the assessee in relation to the premises under consideration for complete renovation to suit the requirements of licencee is a capital expenditure and the assessee is entitled to depreciation - AT
Customs
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Mis declaration of Goods – goods arrived by post parcel will not liable for confiscation u/s 111(l) and 111(m) - the penalty imposed u/s 112(a) on the assessee was also unwarranted - AT
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Valuation – Inclusion of cost of erection, commissioning and installation of the three cranes – Cost incurred after import - It cannot be said that the purchase contract had a condition for erection to be undertaken and this was a condition of sale - No addition - AT
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Undervaluation - Revenue was of the view that both Di-Octyl Phthalate (DOP) and Di-2-Ethyl Hexyle Phthalate (DEHP) were the same compounds and they started importing the goods adopting a new name with the purpose of undervaluing the goods - The evidences produced by Revenue can at best create a doubt but cannot prove a case of undervaluation - AT
Corporate Law
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Mistake in the scheme - Once the applicant had asserted its right to the North Mill on the basis of the order sanctioning the scheme as drawn up, and failed - it was no longer open to it to claim that the order was erroneously drawn up in the North Mill not being included in the schedule thereto - A mistake of court in an order that operates in rem may be corrected at the instance of any person demonstrating to be prejudiced thereby - HC
Service Tax
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On-line Information Retrieval Service - Taxable services u/s 65(105)(zh) – reverse charge - if access was provided only to their own data such services will not be covered by the entry for On-line Information Retrieval Service. - AT
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Commercial Training or Coaching – Assesse was engaged in the activity of video tape production and also providing training in visual effects and animation - prima facie the activity is computer training - stay granted partly - AT
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Selling of software service / granting a license to use the software - It is not in dispute that a new entry specifically covering the impugned services from 16/05/2008 came into force when the entry for taxing 'information technology service' was introduced in Finance Act, 1994. - stay granted - AT
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Double taxation - services have been provided by two persons jointly - one partner has discharge the service tax - demand of service tax from another partners also - Demanding service tax on the taxable value on which service tax had already been paid under the same service would definitely lead to double taxation - stay granted - AT
Central Excise
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Classification of goods - Strong merit in the contention of the appellant that a small percentage of gum in sugar confectionary may not be sufficient to consider the product as gum, though not examining the merits of the issue. - demand set aside as time barred - AT
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MODVAT credit - supplier of inputs had not discharged full duty liability for the period covered by the invoices - The proviso postulates and requires “reasonable care” and not verification from the department whether the duty stands paid by the manufacturer-seller - credit allowed - SC
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Refund - when the duty was paid through Cenvat credit account, the unit was functioning and by the time the matter was decided by the Tribunal partly in the favour of the respondent, which resulted in refund and the refund was sanctioned - the unit had closed down and even the registration certificate had been surrendered - refund allowed in cash - AT
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Valuation - Job work - It was apparent that the firms had cleared the goods in relation to the body fabricating and mounting on the chassis which were supplied to the said firms free of cost by the manufacturer of chassis - the activity for the purpose of valuation would squarely fall under Rule 10A and not under Rule 6 - AT
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CENVAT credit on invoices issued by a registered depot of the manufacturer of inputs - The case of the revenue was that there was no evidence of the amounts of duty shown in the depot invoices having been paid by the manufacturer - Credit allowed. - AT
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Liability to Pay Interest - Excess Credit - Reversal of Credit - Whether the assesse was liable to pay interest in terms of Rule 14 of the CENVAT Credit Rules, 2004 - Held yes - AT
VAT
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Validity of Search and Seizure - Cancellation of liquor licence - The appellate authority was fully empowered to go into the merits of the validity of the search and to pass appropriate orders but the appellate authority had taken a too technical approach in setting aside the order of cancellation of license - HC
Case Laws:
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Income Tax
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2013 (8) TMI 767
Addition on account of abandonment of interest on interest free loan given to sister concern – Addition made u/s 4(1)(c) of the Gift Tax Act - Assessee has taken the advances/loans on the interest @ 18%. Equal interest was charged from some of the sister concerns. But no interest was charged from a few selected sister concerns. For this discrimination, neither any reason was given by the assessee nor the authorities below including the Tribunal have examined this aspect. Undoubtedly, the assessees are the financial concerns and their main object is to earn interest, then, why the interest was not earned from a few selected sister concerns – Held that :- The matter need to be examined on the basis of judgment in the case of Kamla Ganpati v Controller of State Duty, [2001 (2) TMI 132 - SUPREME Court] as well as in the case of M. Janardan vs. Joint CIT, [2005 (1) TMI 14 - SUPREME Court] . Examination to be done by the Hon’ble Tribunal to establish the bonafied action on the part of the assessee – Impugned order/judgment set aside and restored back the matter to the Tribunal to pass a fresh orders in the light of above discussions as per law.
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2013 (8) TMI 766
Current repairs - Capital expenditure vs. Revenue expenditure – Replacement of entire marble floor was done – Allowable expenditure u/s 30 of the Income Tax Act - Held that:- Applying the tests of “current repairs” and capital expenditure to the present case the expenditure in question was a capital expenditure and even otherwise cannot be classified as “current repairs”. The earlier flooring was removed and completely replaced by marble flooring in an area of 9000 sq. ft. consisting of basement, ground floor, first and second floor. The effect thereof was that an entirely new flooring came into existence. It was not mere “repair” or “current repair”, as is understood in commercial sense or in terms of the tests specified above. The said expenditure was not necessary for maintaining or preserving the building but was done with the view to make distinct improvement and upgrade the appearance and ambience. The expenditure incurred would have entailed specific benefits and a new advantage. The word “repair” involves “renewal” of existing or replacement of a part or a supporting part and not complete replacement or reconstruction. Reliance had been placed upon the decision in the case Commissioner of Income Tax vs. Modi Industries Ltd. [2010 (9) TMI 162 - DELHI HIGH COURT] apart from various other decisions – In the instant case, the assessee has in fact averred that enduring benefit has accrued to him as it would help in long term since the foreign clients visit his factory/ office. A new asset of enduring benefit in form of completely new flooring of marble, different and distinct from the earlier flooring, has come into existence – Decided against the Assessee.
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2013 (8) TMI 765
‘Reasons to believe’ for re-opening of assessment u/s 147 of the Income Tax Act – Notice issued u/s 148 of the Income tax act – Held that:- Relying upon the judgment in the case of Assistant Commissioner of Income-tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd. [ 2007 (5) TMI 197 - SUPREME Court ]; Commissioner of Income-Tax Vs. Kelvinator of India Ltd., [2010 (1) TMI 11 – SUPREME COURT OF INDIA] , it is held that the language of Section 147 of the Act stipulates that there should be reasons coupled with the belief and both the conditions have to be satisfied. Law requires that there should be rational connection between the reason and the belief that income chargeable to tax had escaped assessment. Reasons to believe as recorded in the present case are vague, unreasonable, incomplete and irrational. No rational or reasonable person can form or decipher from the reasons that income had escaped assessment - Petitioner is entitled to succeed - Impugned order dated 23rd August, 2007 issued under Section 148 read with Section 147 of the Act for the assessment year 2002-03 is hereby set aside – Decided in favor of Assessee.
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2013 (8) TMI 764
Reopening of assessment - Deduction claimed u/s 80IB - CIT held proceeding u/s 147 as valid - Held that:- Assessing Officer having nowhere alleged that income chargeable to tax for the relevant Assessment Year has escaped assessment on account of failure or omission on the part of the assessee to disclose truly and fully all material facts necessary for assessment, the impugned notice u/s 148 issued after expiry of period of four years from the end of the relevant Assessment Year is liable to be quashed - assessee furnished all the details relating to its claim for deduction u/s 80IB of the Act and the Assessing Officer thoroughly examined the claim while framing the assessment u/s 143(3) and on being satisfied the claim was allowed. Therefore, in the present case, reopening of the assessment by issuing notice u/s 148 of the Act is definitely a change of opinion which is not maintainable and therefore, the reassessment framed by the Assessing Officer u/s 147 of by issuing notice u/s 148 of the Act after completing the assessment u/s 143(3) of the Act is not valid - Following decision of Commissioner of Income-tax Versus Steel Tubes of India Ltd. [2010 (1) TMI 406 - MADHYA PRADESH HIGH COURT] - Decided against Revenue.
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2013 (8) TMI 763
Deduction u/s 37 - Provision for Suraksha Fund - Suraksha Fund created by the order of Office of the Registrar, Co-operative Societies, Rajasthan - diversion by overriding title - Held that:- Any contribution made by the assessee to a fund which directly connected or related to carrying on assesee's business or which results in benefit to the assesee's business has to be regarded as deduction allowable u/s 37 of the Act. The decision of Hon'ble Apex Court in the case of Associated Power Co. Ltd. vs CIT (1995 (11) TMI 5 - SUPREME Court) is not applicable. - Decided in favour of assessee. Deduction u/s 37 - Premium paid to LIC leave encashment group scheme - CIT upheld disallowance - Held that:- Leave encashment is not a statutory liability and even in the case of provision being made the deduction was allowed as business expenditure, when the liability was not actually incurred in the previous year. It was not a provision which was disowned but an actual liability towards premium paid on insurance policy and the liability was allowable as a deduction u/s 37 being an expenditure incurred for the purpose of business - The CIT proceeded on a totally wrong premise in finding the claim to be only u/s 43B(f) and then disallowing it. The order of AO allowing deduction to assessee in the case of premium paid towards the valid insurance policy, ensuring the satisfaction of liability for leave encashment by the insurer cannot be held to be erroneous and was not liable to be revised u/s 263 for the reason of being prejudicial to the revenue - Following decision of CIT vs. Hindustan Latex Ltd. [2012 (6) TMI 713 - KERALA HIGH COURT] - Decided in favour of assessee.
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2013 (8) TMI 762
Deduction u/s 35(2AB) - Weighted deduction - expenditure on R & D facilities - whether CIT(A) erred in restricting disallowance of the expenditure on R&D to 50% from 150% made by the AO. - The assessee contended that the Assessing Officer disallowed the claim u/s 35(2AB) without correspondingly allowing the revenue expenditure which was added to the computation of income, which tantamounts to double addition - Held that:- matter remanded back to the file of the AO to grant weighted deduction u/s 35(2AB). The balance expenditure if any not approved by the DSIR will have to be considered for deduction under section 35(1) or under normal provisions of the Act. The expenditure has been incurred by the R & D facility of the assessee approved by the Government of India. Merely because part of the expenditure incurred by the approved R & D facilities is not considered for weighted deduction under Section 35(2AB) would not render that expenditure is not towards R & D or not for the purposes of the business. Allowability of such expenditure u/s 35(1) or under other appropriate provisions of the Act will have to be considered. - Decided against Revenue.
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2013 (8) TMI 761
Revision u/s 263 - erroneous and prejudice to revenue order – Held that:- As held in the case of Malabar Industries Co. Ltd., Vs. CIT [2000 (2) TMI 10 - SUPREME Court], the Commissioner can exercise revision jurisdictional u/s 263 if he is satisfied that the order of the assessing officer sought to be revised is (i)erroneous; and also (ii) prejudicial to the interests of the revenue – Assessing officer should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him - The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. Arbitrariness in decision- making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer - While making an assessment, the ITO has a varied role to play. He is the investigator, prosecutor as well as adjudicator. As an adjudicator he is an arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In the present case, there is no description what enquiry he has caused to come to the conclusion that the assessee is entitled for deduction u/s. 80IC of the Act - Regarding allowability of deduction u/s. 80IC of the Act from Assessing Officer's order. The assessee produced copy of letter dated November 6, 2006 addressed to the Assessing Officer and one more letter dated 15.12.2008. There is one more letter regarding claim of the assessee u/s. 80IC of the Act. It has to be noted that these letters do not bear any acknowledgement from the Assessing Officer or from the Inward section of the Department - In these circumstances, we are of the opinion that the CIT is justified in exercising his powers u/s. 263 of the Act. Manufacture of water purifiers - Assembly - Deduction u/s 80IC of the Income Tax Act, 1961 - The case of the assessee is that the assessee is engaged in the manufacturing activity and hence, the assessee is entitled for deduction u/s 80IC of the Act. The case of the DR is that the assessee is not engaged in the manufacture and it is only engaged in the work of assembling of various parts of purifier and joining them so as to make water purifier an there is no value addition to this product – Held that:- In the case under consideration, the assessee company does the assembling work to prepare water filter cum purifiers. It purchases various components like, 'chassis, body, top cover, back cover, pumps, PCB, wire harness, some hardware and plastic components from different vendors from all over India, assembles these components to get a finished product - A new distinct article which is called 'water purifier' came into existence having commercial market and the original commodity no longer remained and the new product has recognized as distinct commodity - Assessee is engaged in the manufacture of water purifiers and therefore entitled for deduction u/s 80IC.
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2013 (8) TMI 760
Land to be agricultural land or not Non cultivation Held that:- the land in question was acquired in the year 1959. Even the Village Administrative Officer had certified the same to be agricultural but not cultivated for more than two years as in the year 2007. Hence, it is held that once a parcel of land is agricultural, the mere fact that it is lying uncultivated for a short span of time would not change its nature in the absence of any other material contrary to the same. Therefore, no merit in the argument raised by the Revenue Decided against the Revenue. Date of agreement to sale land Date of execution of the agreement Held that:- On 20.4.2007, the assessee had executed unregistered agreement with the vendee delivering possession of the property in question. Even in the agreement dated 20.8.2007, the parties reiterated that possession had already been exchanged on 20.4.2007 Relying upon the judgment in the case of Bakthavatsalam Gowtham [2013 (8) TMI 759 - ITAT CHENNAI], it has been held that as per sec.2(47)(v) of the Act, mere parting of possession of an immovable property under sec.53A of the Act in case of unregistered agreement amounts to a valid transfer - Merely because an agreement to sale has not been registered, which otherwise is in the nature of agreement referred to in section 53A cannot be taken out of ambit of section 2(47)(v) of the Act when parting of the possession of immovable property has taken place. Distance of land from the municipal limit for deciding the land to be agricultural land Method to be adopted - Method of straight line on horizontal plane or as per crow's flight - Contention of the Revenue that the land fell within the notified area as the distance was within 4.5 KMs by following crow fly method - Assessee s specific contention was that actual road distance between municipality and the land transferred was 5.1 kms ie. more than the notified area limit of 5 KMs Held that:- The reckoning of urbanization as a factor for prescribing the distance is of significant which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane - Once the statutory guidance of taking into account the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal plane or as per crow's flight because any measurement by crow's flight is bound to ignore the urbanization which has taken place Reliance has been placed upon the judgment in the case of Radhasoawami Satsang v. CIT(1992) [1991 (11) TMI 2 - SUPREME Court] Decided against the Revenue.
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2013 (8) TMI 759
Capital gain - transfer u/s 2(47) - taxability in the year in which agreement took place or in the year in which sale deed registered - Held that:- merely because an agreement to sale has not been registered, which otherwise is in the nature of agreement referred to in section 53A cannot be taken out of ambit of section 2(47)(v) of the Act when parting of the possession of immovable property has taken place - The sale deed in respect of above transaction was registered in financial year 2006-07 relevant to the year under consideration and on which stamp duty was charged on the value of Rs. 23,50,85,500/-. The assessee offered capital gains in respect of the above transaction in assessment year 2004-05 which was duly assessed by the Assessing Officer u/s 143(3) in the assessment of the assessment year 2004-05 - Therefore, property in question has already been treated as transfer by the assessee in assessment year 2004-05 and therefore, in respect of that transfer, capital gains cannot be assessed in the assessment of assessment year 2007-08 - Decided against Revenue.
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2013 (8) TMI 758
Penalty under section 158BFA (2) - Block assessment u/s 158BC - Determination of Undisclosed income – Held that:- Pre-condition for the imposition of penalty under Section 158 BFA (2) is that there must be a determination of the undisclosed income by the Assessing Officer under clause (c) of Section 158 BC of the said Act. If this is not satisfied, then there would be no question of imposing any penalty. In the scheme of block assessments, it is settled position of law that the income for the block period has to be determined on the basis of the seized material found during the course of search. The seized material is to be supplied to the assessee and it is supposed to compute true undisclosed income from the seized material - The ultimate income which is to be assessed as an income for the block period is the reduced amount than what has been computed by Assessing officer - Facts suggest that there was no attempt of concealment or furnishing inaccurate particulars, it is difference of the opinion about the income assessable from the material - There was no deliberate attempt at the end of assessee in computing wrong income from the seized material. Penalty imposed in the present case is not sustainable because the enhancement of undisclosed income by the Assessing Officer has been made on estimated basis and we are unable to see any reason or material which proves beyond the shadow of doubt that there was actual income in the hands of assessee and further that the income was not disclosed in the return filed u/s 158BC of the Act. - Decision in ACIT vs Shanti Kumar Chhabra [2007 (10) TMI 334 - ITAT JAIPUR-A] followed - No penalty - decided in favor of assessee.
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2013 (8) TMI 757
Exemption u/s 54 - scope of the term 'a residential house' – construction of 7 flats - building development agreement in respect of existing dwelling house - Held that:- Relying upon the judgment in the case of CIT vs. Smt. K.G. Rukmini Amma[ 2010 (8) TMI 482 - Karnataka High Court ]following its earlier decision in case of CIT vs. D.Anand Basappa [2008 (10) TMI 99 - KARNATAKA HIGH COURT], in which it have been held that the expression "a residential house" as appears in section 54 of the Act, cannot be interpreted in a manner to suggest that the exemption would be restricted to a single residential unit – In the present case, considering the totality of the facts and circumstances in the light of consistent view of different High Courts including the jurisdictional High Court, lower authorities were not correct in restricting the exemption under section 54F of the Act to only one flat by interpreting the words "a residential house" in a manner which has been held to be an incorrect interpretation The assessee is entitled for exemption under section 54F of the Act in respect of all the seven flats - Assessing Officer, therefore directed to compute capital gain, if any, after allowing exemption under section 54F of the Act in respect of all the seven flats which were received by the assessee under the development agreement. In view of our aforesaid finding, the other issue as to whether the long term capital asset transferred by the assessee under development agreement was simply a land as held by the department or a residential house along with land as claimed by the assessee so as to entitle it for exemption under section 54 of the Act has become inconsequential and therefore, not required to be adjudicated upon – Decided in favor of Assessee.
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2013 (8) TMI 756
Unexplained credit u/s 68 of the Income Tax Act – credit worthiness of lender - genuineness of transaction - onus to prove - Held that:- In the present case, the assessee did not able to establish the cash credits mentioned above as genuine credits. The assessee's stand from the beginning and also before us is that the cash credits are genuine. The assessee never took specific stand that these unexplained cash credits are referable to the income from disclosed sources - In order to delete this addition, the assessee is bound to explain the source of credit, genuineness of the transaction and the capacity of the lender to advance the same. As the assessee failed to explained these criteria – confirmation of order of Commissioner(A) has been done – Reliance is placed upon the CIT v. Maduri Rajaiahgari Kistaiah [1975 (12) TMI 8 - ANDHRA PRADESH High Court] -and in the case of CIT v. Devi Prasad Viswanath Prasad [1968 (8) TMI 5 - SUPREME Court] wherein held that on rejection of books of account, business income estimated, addition towards unexplained cash credit separately valued – Decided against the Assessee. Whether Intangible addition in the past would take care of the unexplained credit in the present – Held that:- When the alternate plea that tangible additions in the past could take care of cash credits of current year is not taken at the earlier stage and no materials are placed on record to substantiate the same, rejection of such plea would be justified – Reliance is placed upon the judgment of R. Dalmia (Decd.) Versus Commissioner of Income Tax.[2001 (8) TMI 26 - DELHI High Court] – Decided against the Assessee.
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2013 (8) TMI 755
Unexplained Credit – Addition u/s 68 - Assessee is a Public Limited Company. - Money borrowed through fixed deposit in a scheme under the Company (acceptance of deposit) Rule, 1975. credit worthiness - genuineness of transaction - onus to prove – Held that:- The Hon'ble Calcutta High Court in the case of C. Kant and Company vs. CIT (1980 (6) TMI 21 - CALCUTTA High Court) held that in respect of credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors, the advance money and genuineness of the transactions. Similar view has been taken by the Hon'ble Rajasthan High Court in the case of Kamal Motor vs. CIT 131 Taxman 155 (Raj.). - mere filing of the confirmatory letters will not discharge the onus that lies on the assessee. In the case under consideration, the assessee failed to furnish even confirmation of the depositors for which the CIT(A) has sustained the addition. The Hon'ble Calcutta High Court in the case of CIT vs. Precision Finance Pvt. Ltd. held that mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction as genuine. As per the judgment in the case of CIT vs. United Commercial and Industrial Co. (P) Ltd.[1989 (5) TMI 18 - CALCUTTA High Court], wherein it was held that The primary onus lies on the assessee to prove the nature and source of credits in its accounts. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to advance the money and lastly the genuineness of the transactions. Only when these things are proved by the assessee prima facie and only after the assessee has adduced evidence to establish the aforesaid facts does the onus shift on to the Department. - Decided against the assessee. Additin where fixed deposits taken during the earlier years - fixed deposits renewed during the year - Held that:- In the instant case, fixed deposits which were renewed during the year - In fact these fixed deposits were taken in earlier year, therefore, to that extent addition is not warranted - The assessee has furnished a chart of such 244 depositors amounting to Rs.29,84,000/- which has been placed in the Paper Book – Accepted the contention of the Assessee that section 68 requires that credit must be in the previous year and not of earlier year for the purpose of making addition in the income since renewal of fixed deposits are not credit of this year, therefore, addition cannot be made in the year under consideration - Balance addition of Rs.23,98,000/- (Rs.53,82,000.00 - Rs.29,84,000.00) sustained and confirmed and matter pertaining to addition of Rs.29,84,000/- is being sent back to the file of the A.O – Appeal of the assessee is partly allowed for statistical purpose.
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2013 (8) TMI 754
Deduction u/s.54 - Joint ownership in property - assessee was owner of 50%. - Though the capital gain was computed in the hands of the assessee but exemption under section 54 was not granted in the assessment order passed under section 143(3) of the Act on the ground that assessee is not owner of the house property which was sold and no income has been assessed relating to the said property in the hands of the assessee under the head "house property". Held that:- assessee is owner of the land upon which building was constructed by the funds made available by the husband of the assessee in pursuance to an agreement - If the terms of aforementioned agreement are kept in mind then it cannot be said that assessee was not owner of the building which was sold by her. Upon the basis of aforementioned agreement revenue has assessed the husband of the assessee and has computed long term capital gain on 50% of the sale proceeds and exemption has also been granted under section 54 - AO after verifying the evidences filed by the assessee has accepted the claim of the assessee regarding deductibility of Rs.25.00 lacs, which was paid to the tenant as compensation. This fact itself has established that the property of the assessee was occupied by the tenant. The requirement of section 54 is that the income of the building which is being sold should be chargeable under the head "income from house property". The requirement of section is not that the assessee must earn income from said property. If there was a tenant then the income from the property was chargeable to tax. Therefore, exemption also cannot be denied to the assessee on the ground that assessee did not show any income chargeable under the head income from house property - Decided in favour of assessee.
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2013 (8) TMI 753
Comparison - Arm’s length price – Comparability of price with the chosen company - whether Assessee is in merely functional advisory consultancy service without any risk to its sister companies – Held that:- Apropos assessee's contention that assessee is in merely functional advisory consultancy service without any risk cannot be accepted as in preceding two years the ITAT [2012 (10) TMI 779 - ITAT, DELHI] has held that it is in marketing services which carry elements of risk and the assessee's services are to be treated as marketing services. Relying upon the decision in the case of MCI Com India (P.) Ltd[2012 (10) TMI 790 - ITAT DELHI], it has been held that companies like EIL, Rites, Wapsos and TCE are engineering companies and provide end to end solutions and therefore they cannot be compared with those assessee who were into providing marketing support services to the parent company. They were held to be functionally not comparable with thee engineering companies - Therefore, they are to be excluded - Matter to go back to the file of AO /TPO who will determine the T.P. adjustments by excluding Vapi and WAPCOS comparables. Rate of depreciation on computers – Assessee charged depreciation @ 60% - Held that:- It is well settled that computers and peripherals are eligible for depreciation @ 60%. Besides assessee's opening WDV cannot be disturbed.
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2013 (8) TMI 752
Royalty income - sale of Microsoft software products to the Indian distributors – selling/licensing of software through independent distributors to the end users under the End User License Agreement (EULA). – MS Corp is the sole owner of intellectual property rights vested in Microsoft software. It has granted exclusive license to manufacture and distribute Microsoft products to one of its wholly owned subsidiaries, M/s Gracemac (now merged with MOL Corporation), which, in turn, granted similar non-exclusive rights to its wholly owned subsidiaries, Microsoft Operations Pte.Ltd., Singapore (MO Singapore) to manufacture Microsoft products in Singapore and distribute such products in Asia (excluding non-English language products in China and Taiwan). The assessee has been appointed as a distributor of Microsoft products in India by MO Singapore. Held that:- MRSC reproduced certain software products and distributed the same through chain of distributors in India. Therefore, the very appointment of distributors by MRSC in India, had business connection in India. But, MRSC cannot be taxed again on the same income by way of royalty for exploitation of same rights which had been assessed in the hands of Gracemac, otherwise it would result in double taxation -Decision in the case of Gracemac Corpn. and Microsoft Corpn. Versus ADIT [2010 (10) TMI 583 - ITAT, DELHI] followed. – Decided in favor of Assessee. Penalty for concealment u/s 271(1)(c) of the Income Tax Act – Held that:- As income has not been held to be assessable in the hands of the assessee, no justification in levy of penalty, therefore, the order of the CIT (A) deleting the penalty is upheld on the ground that as the income itself is not assessable in the hands of the assessee, there is no question of levy of penalty.
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2013 (8) TMI 751
Revenue or Capital expenditure - Expenditure on renovation work - CIT allowed depreciation - Whether the said expenditure incurred by the assessee to renovate the said premises is to be allowed as capital expenditure or as a revenue expenditure - Held that:- On perusal of the agreement entered by the assessee, it is observed from the Clause 3.1 that none of the party is entitled to terminate this agreement during the said lock-in-period of 24 months beginning from 9.2.2007 till 8.2.2009. The above terms and conditions of the agreement itself establishes that the first lease agreement entered into by the assessee with its sister concern, a partnership firm to take the said premises on rent on monthly rent of ₹ 3000/- and thereafter spent the said amount of ₹ 59,65,000/- in the Financial Year relevant to the year under consideration and let out the said premises at monthly rent of ₹ 15,00,000/- appears to be a colourable device - expenditure has been incurred by the assessee for complete renovation of the building to suit the requirement of licensee - Said expenditure cannot be said to be a revenue expenditure but it is a capital expenditure giving enduring benefits to the assessee in the form of regular receipt of monthly rent and interest free refundable security deposits - CIT(A) has rightly held that the said expenditure incurred by the assessee in relation to the premises under consideration for complete renovation to suit the requirements of licencee is a capital expenditure and the assessee is entitled to depreciation - Explanation to section 32(1) of the Act also stipulates that all the expenditures incurred by the assessee in relation to lease premises for renovation or extension or improvement is entitled to depreciation as is shown by the assessee - Decided against Assessee. Disallowance of expenditure incurred on repairs to Air conditioner - Held that:- expenditure has been incurred by the assessee towards cost of new compressor and to replace old damaged one, therefore, no new asset has come into existence. The said expenditure is revenue in nature as expenditure has been incurred to replace the damaged compressors of existing Air- conditioners - Decided in favour of assessee.
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Customs
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2013 (8) TMI 781
Misdeclaration - Recalling of export consignment - The manufacturer Suomotu informed the customs authority about the discrepancy in the exported consignment due some technical problem which otherwise results in mis-declaration of quantity - Revenue viewed that the action of both the appellants viz., manufacturer and exporter was contrary to law – Held that:- No ill design was behind the consignments nor there was wilful suppression to cause prejudice to Revenue - assessee had voluntarily approached the customs authority to call back the consignment for bonafide mistake detected by it before discovery thereof by Customs - to prevent abuse of process of law court ordered that redemption fine to be upheld - Penalty of the appellants were reduced – decided in favour of assessee.
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2013 (8) TMI 780
Mis-declaration of the value as well as quantity - revenue pleaded that undue relief was granted by Commissioner (Appeals) to the assessee basing on a FAX Message of the exporter stating that due to typing error the weight of citrine exported was typed wrongly – Held that:- The discrepancy in quantity and inadvertent error been brought to notice of Customs at the time of clearance were not bonafide - fabricated document was used in defence subsequent to adjudication - Innocence before Commissioner (Appeals) was pleaded falsely - plea of respondent accepted was totally baseless and detrimental to interest of justice - FAX message on record cannot be considered as credible to appreciate innocence of respondent – decided in favour of revenue.
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2013 (8) TMI 779
Mis declaration of Goods – confiscation of goods u/s 111(m) – custom duty – penalty u/s 112(a) - Department was of the view that the the silver jewellery which was imported was having Americcan standard high priced stone and not low cost stones – they issued notice for Confiscation of goods u/s 111(m) and custom duty was imposed – penalty u/s 112(a) were imposed – Held that:- following the judgment of Commissioner of Customs vs. M. Vasi (2002 (11) TMI 135 - CEGAT, MUMBAI) held that, goods arrived by post parcel will not liable for confiscation u/s 111(l) and 111(m) - the penalty imposed u/s 112(a) on the assessee was also unwarranted – order set aside – decided partly against revenue
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2013 (8) TMI 778
Confiscation of imported goods – redemption fine and penalty were imposed - It was an admitted fact that assesses had obtained NOC from Assistant Drug Controller – Held that:- Revenue’s stand of contravention of Customs law cannot be upheld - confiscation of the goods would not be justified in terms of Circular No. 16/6-DC - Cumulative reading of Boards instructions and the instructions issued by Drugs Controller General of India makes it very clear that if importer obtains NOC for import of the drugs through Ports other than specified ports, the importation cannot be held to be illegal - It was also an undisputed fact that representative sample of Vitamin C (ascorbic acid) were sent to Assistant Drug Controller and were found to be as per declaration - It was thereafter that Assistant Drug Controller issued NOC for release of the goods – order was set aside – decided in favor of assesse.
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2013 (8) TMI 777
Valuation – inclusion of inspection charges - inclusion of cost of erection, commissioning and installation of the three cranes - Held that:- he words that ICAN shall provide, shows that inspection was a condition of the sale and not optional to ICAN. Even though payment has been made separately, the fact remains that it was an obligation of the seller to provide the certificate. - inspection charges have to be included in the assessable value since it was ICAN’s responsibility and expense was incurred on behalf of the ICAN by GPPL since it was obligatory for ICAN to provide the certificate. Any expense incurred on behalf of the seller by the buyer and obligatory as per the contract and incurred prior to import is includable in the assessable value. – Decided in favor of revenue. Inclusion of cost of erection, commissioning and installation of the three cranes – Cost incurred after import - Held that:- It cannot be said that the purchase contract had a condition for erection to be undertaken and this was a condition of sale - Commissioner had wrongly interpreted the provisions of Rule 4 to reject the transaction value on the ground that importation of cranes in the dis-assembled form means restriction in terms of clause (e) of said Rule 4 (2) of the Customs Valuation Rules – assesse shall be entitled to refund of all payments made including an annual interest payable on the same. The purchase contract also included a warranty and provides that warranty shall survive the expiration and / or sooner determination of the contract - It also provides that the warranty shall be the sole remedy for the goods - the case was decided on the basis of Valuation Rules and the terms of the contract, which invariably were not comparable – according to clause -1 assesse was required to do necessary drawing, design engineering and modification work and thereafter only send the cranes in disassembled form - By the time the disassembled cranes were received in India, full drawing, design and engineering details and documentation required was available – Decided in favor of assesse.
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2013 (8) TMI 776
Duty under protest - Refund claim – unjust enrichment – Held that:- Assesse had not been able to show that there was no unjust enrichment - the finding was a finding of fact based on evidence which does not call for any interference would show that they did not really went to analyze the evidences and the statutory requirements - it was not clear as to how the CA concerned or the proprietor did not think of showing this amount either as a disputed amount or as a receivable – relying on CC, Chennai Vs. BPL Ltd. [2010 (7) TMI 66 - MADRAS HIGH COURT] - Much more was missing in this case as it was seen from the analysis of the CA certificate made above and the decisions cited by the AR – Decided against assesse.
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2013 (8) TMI 775
Undervaluation of Duty Demand – Interest and Penalty - Revenue was of the view that both Di-Octyl Phthalate (DOP) and Di-2-Ethyl Hexyle Phthalate (DEHP) were the same compounds and they started importing the goods adopting a new name with the purpose of undervaluing the goods with an intention to evade Customs duty – Held that:- veracity of the contentions of the revenue was not verified by investigations – there was no merit in the argument that the Commissioner, while adjudicating the SCN, erred in studying the literature on DnOP and then concluding that DOP and DEHP were different products. The evidences produced by Revenue can at best create a doubt but cannot prove a case of undervaluation because of three main reasons - Firstly, the case was made about quality of goods which were already cleared and there were no samples of goods available to prove or disprove the rival submissions about quality - Secondly, no investigations were carried out about the claim that the goods in question were in fact sold at low prices, corresponding to the Import prices, to end users - Thirdly, there was no proof of remittance of any additional amount by the importer to the supplier abroad - no reason to interfere with the order passed by the adjudicating authority and the same was upheld – Decided against Revenue.
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Corporate Laws
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2013 (8) TMI 774
Mistake in the scheme - Constitution of an arbitral tribunal u/s 11 of the Arbitration and Conciliation Act, 1996 - It was possible for the applicant to prosecute its request under Section 11 of the 1996 Act with a caveat that the order sanctioning the scheme as drawn up carried a mistake in the North Mill not having been specifically included in the schedule to the scheme - despite such mistake, the surrounding circumstances made it obvious that such property had passed to the applicant under the sanctioning order - The order on the request u/s 11 may then had been without prejudice to the applicant's contention that the order sanctioning the scheme was mistaken or left unaffected the applicant's right to urge such ground at a subsequent stage – Whether the North Mill was transferred to the petitioner – Held that:- Once the applicant had asserted its right to the North Mill on the basis of the order sanctioning the scheme as drawn up, and failed - it was no longer open to it to claim that the order was erroneously drawn up in the North Mill not being included in the schedule thereto - A mistake of court in an order that operates in rem may be corrected at the instance of any person demonstrating to be prejudiced thereby - but the right of such person may not be recognised any longer if he has stood by and allowed a previous opportunity to pass when he ought to have asserted the mistake and attempted to have it rectified particularly if such conduct has resulted in a right having accrued to any other - The consequence may be harsh and may confer an undeserving windfall on another - But the ethos of the applicable principles in matters of public policy demands that the applicant be left to its fate for a course of conduct that it consciously charted for itself at an earlier point of time.
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Service Tax
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2013 (8) TMI 786
On-line Information Retrieval Service - Taxable services u/s 65(105)(zh) – reverse charge - IP Services - DIAMIND basic (Deploying Intranet, Applications and Messaging On Notes Domino) - Philips E-mail to Applications Connectivity Enablement (PEACE) - CODE Desktop Client Service - Systems Management Infrastructure - Held that:- Revenue had not been able to demonstrate that the service results in providing access to the applicant to any data other than their own data - if access was provided only to their own data such services will not be covered by the entry for On-line Information Retrieval Service. Waiver of pre deposit – waiver was allowed on pre-deposit of dues – stay application allowed.
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2013 (8) TMI 785
Commercial Training or Coaching – Assesse was engaged in the activity of video tape production and also providing training in visual effects and animation – Held that:- Training provided in writing codes using languages like UNIX or for using a Relational Database Management System like Oracle or a Front End Tool like Java were on the same footing as a training in creating animation using a software in computer - There were similar training like CAD (Computer Aided Design) or CAM (Computer Aided Manufacture) which types of trainings also provided by Computer Training Institutes using computer and necessary software - The matter needs detailed examination in final hearing. The difference between the two type was very thin there was some difference in the level of knowledge of the internal structure of software that was imparted - The training provided by the applicant appears to be of the latter type where not much knowledge about the contents of a software was imparted but the skill to use a software was imparted - latter type of training also was known as computer training to common man. Waiver of pre deposit – 35 Lakhs were ordered to be submitted as pre deposit – rest of the duty waived and stayed till the disposal – stay granted partly.
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2013 (8) TMI 784
Franchisee Service - Management, Maintenance and Repair - appellants engaged in marketing and licensing of the software "SAP" - whether service tax was leviable on the activity done by the appellant – appellant contended that they are selling the software but is only granting a license to use the software - not doing any service or process identified when they are passing on the updates to the software - Held that:- it is prima facie clear that payments under the first two relate to licensing of software and for continued support for updates. The third payment does not involve any service to the clients of the appellant to consider it as franchisee service. We are prima facie in agreement with the argument that for the first two services the classification of service received by the appellants from their principals abroad and that rendered by the appellant to clients in India has to be the same because the nature of activities is the same. It is not in dispute that a new entry specifically covering the impugned services from 16/05/2008 came into force when the entry for taxing 'information technology service' was introduced in Finance Act, 1994. The question whether service tax was leviable on this activity done by the appellant prior to the said date under another heading viz., Management, Maintenance and Repair Service, was before the Tribunal earlier and the decision was given in favor of the appellant specifically observing that in view of the new taxable service it has to be considered that the service was not taxable earlier. Now Revenue has come up with their case under yet another old entry for the period prior to the date of introduction of the new entry. This old entry also is not one where the activity was specifically covered. In fact the old entry now proposed appears to be less suited to cover the activity as compared to "Management, Maintenance and Repair". So the principle adopted in the said decision should apply to the present case also. The Appellant is doing consultation and advisory services for business process re-engineering that is required for implementation of software and also customizing of the software to suit the business environment of each client. - It is difficult to agree with the argument of the Revenue that the appellant was receiving franchisee services. - Stay granted.
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2013 (8) TMI 783
Commercial or Industrial Construction Service - whether the cost of free supplied materials should be part of the taxable value – Held that:- No prima facie case against a part of the demand of service tax Orders passed that as per the Explanation to the abatement notification the provider of "Commercial or Industrial Construction Service" need not include cost of free supplied materials in the taxable value - LARSEN & TOUBRO LTD. Versus UNION OF INDIA (2007 (4) TMI 197 - MADRAS HIGH COURT). Waiver of pre- deposit - 50% of the duty ordered to be submitted – on such submission the stay would be allowed – application decided with conditions in the favour of the assessee.
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2013 (8) TMI 782
Double taxation - services have been provided by two persons jointly - one partner has discharge the service tax - demand of service tax from another partners also - Commercial coaching and training services - Revenue had raised demand against the assesse on the ground that they were also beneficiary of the said services - Held that:- There was no dispute that the commercial coaching services had been provided by two persons jointly - The service had been provided once, amount of service tax had been collected once and service tax have been paid by MAAC, the service tax can not be demanded from assesse for the same transaction/service for the second time legally - in the strict legal sense double taxation mean taxing the same property or subject matter twice -Demanding service tax on the taxable value on which service tax had already been paid under the same service would definitely lead to double taxation - Classification of service rendered was not the subject matter of the notice and nor the matter falls under my jurisdiction, being beyond the issue involved in the show cause notice - there was no prima facie reason to direct the assesse to deposit any amount of tax or penalty - Stay granted – Decided in favor of assessee.
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Central Excise
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2013 (8) TMI 773
Classification of goods under sub-heading 1704.90 of Central Excise Tariff and claiming concessional rate of duty of 8% vide Sl. No. 247 of Notification No. 6/2002-CE dated 1.3.2002 or classifiable under sub-heading 1704.10 in which case they were to pay duty at the rate of 16% instead of 8% as paid by them – Held that:- Strong merit in the contention of the appellant that a small percentage of gum in sugar confectionary may not be sufficient to consider the product as gum, though not examining the merits of the issue. Extended period of limitation – Held that:- Appellant were manufacturing the same product even during the period when the system of filing classification list and getting it approved was in vogue. Revenue has not brought out any change in manufacturing process or the contents used after self-assessment is introduced. No suppression of information during the earlier period is brought out much less any mis-declaration - No justification to invoke extended period of five years provided in Section 11A for issuing demand notice - Demand is tie-barred – Decided in favor of Assessee.
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2013 (8) TMI 772
MODVAT credit - Interpretation of the Notification No. 58/97-CE - During MODVAT verification it was found that the supplier of inputs had not discharged full duty liability for the period covered by the invoices - Whether the manufacturer of final products was entitled to deemed credit, under Notification 58/97-CE dated 30.8.97 when the manufacturer-supplier of inputs had not paid Central Excise Duty and given a wrong certificate on the body of invoices about duty dischargement under Rule 96ZP of Central Excise Rules, 1944 - Held that:- One had to assume that the importer of polyvinyl alcohol had actually manufactured the same in India - One can further assume, possibly without any difficulty, that the said polyvinyl alcohol had been manufactured from vinyl acetate monomer, but it was not possible to assume or presume or imagine that the raw material used was the one on which appropriate amount of duty of excise had been paid in India and hence, the condition which was contained in the said notification had to be fulfilled in order to get the benefit of the notification. The notification clearly states to which of those inputs it shall apply and to which of the inputs it shall not apply and what is the duty of the manufacturer of final inputs. Thus, when there is a prescribed procedure and that has been duly followed by the manufacturer of final products, we do not perceive any justifiable reason to hold that the assessee-appellant had not taken reasonable care as prescribed in the notification. Due care and caution was taken by the respondent. It is not stated what further care and caution could have been taken. The proviso postulates and requires “reasonable care” and not verification from the department whether the duty stands paid by the manufacturer-seller - When all the conditions precedent had been satisfied, to require the assessee to find out from the departmental authorities about the payment of excise duty on the inputs used in the final product which have been made allowable by the notification would be travelling beyond the notification, and in a way, transgressing the same - This would be practically impossible and would lead to transactions getting delayed – Decided against the revenue.
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2013 (8) TMI 771
Refund Claim of Differential Amount by way of CENVAT credit - Whether the refund of duty initially paid through Cenvat credit account can be made in cash in a situation when by the time the duty amount had become refundable, the assessee’s factory had closed down and the registration certificate had been surrendered - Held that:- lower authorities were directed to refund the amount in cash to the appellant-assessee as the factory was closed – following the judgement of COMMISSIONER OF C. EX., JALANDHAR Versus KOCHAR SUNG-UP ACRYLIC LTD [2010 (8) TMI 330 - CESTAT, NEW DELHI] - There was no dispute about the fact that when the duty was paid through Cenvat credit account, the unit was functioning and by the time the matter was decided by the Tribunal partly in the favour of the respondent, which resulted in refund and the refund was sanctioned - the unit had closed down and even the registration certificate had been surrendered – assessee is eligible to receive the refund in cash - Decided in favor of assesse.
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2013 (8) TMI 770
Determination of Assessable Value - Job work - Undervaluation of the Goods - The assesses were manufacturers of dumpers/body built motor vehicles and accessories falling under Chapter 87 of the Central Excise Act - they were also engaged in building body on the chassis on job work basis - Department was of the view that the assesses had undervalued the goods to the extent that fully built up vehicles were sold at an higher price from the place of removal other than the factory gate - Held that:- The value of the goods supplied by the assesses was to be determined under Rule 10A of the Central Excise Valuation Rules, 2000 and not under Rule 6 – there was no infirmity in the Orders-in-Original with regard to valuation of the goods under Rule 10A of the Valuation Rules - Since the duty was required to be paid under Rule 10A, interest was also required to be paid on the duty quantified by the department – the Orders-in-Original with regard to confirmation of duty under Rule 10A of the Valuation Rules along with interest was upheld – Penalties were set aside. Following AUDI AUTOMOBILES Versus COMMISSIONER OF CENTRAL EXCISE, INDORE [2009 (5) TMI 426 - CESTAT, NEW DELHI] - once it was sought to be contended that Rule 10A will have no application in the facts of the case, it was for the assesses to produce relevant documents like the invoice and agreement which would support the case put forth by the assesses - it was necessary for the assesses to disclose the nature of the understanding between the manufacturer of chassis and the said firms, and in case, such understanding was in the form of writing, to place on record the document in that respect. It was apparent that the firms had cleared the goods in relation to the body fabricating and mounting on the chassis which were supplied to the said firms free of cost by the manufacturer of chassis - the activity for the purpose of valuation would squarely fall under Rule 10A and not under Rule 6 - Decided against assesses.
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2013 (8) TMI 769
Shortage of Imported Goods - The appellant had been importing the fabrics which were consumed for the manufacturing of the goods for export - on the verification of the records it was found that there was a shortage of imported fabrics - Held that:- The issue in the case had not been properly addressed by the adjudicating authority - there were various submissions which had been made by the appellant before him which remained un-addressed and a summary conclusion had been arrived - The issue needs re-consideration by the adjudicating authority - order set aside and remand the matter back to the adjudicating authority to reconsider the issue afresh, after following the principles of natural justice - nothing incriminating was found in as much as they have never admitted to have procured the imported fabrics which were allegedly diverted by the appellant. The Panchnama witnesses had retracted the statements and cross-examination conducted, indicates that there was something amiss - The Department had not produced the four brokers for cross-examination whose names came up during the recording the statement which was required to substantiate the case of diversion of imported goods - The finding/remarks were unsubstantiated as in the entire case record there was no evidence to claim that the appellant had been resorting to making deliberate entries in RG-1 register. Whether the Removal of the Goods were clandestine Removal - As decided in ASSISTANT COLLECTOR OF CUSTOMS Versus KUNHI KORATH BALAN [ 1990 (8) TMI 156 - HIGH COURT OF JUDICATURE AT BOMBAY] - The Panchnama was faulty, no adverse inference can be drawn and such Panchnama had to be excluded from the consideration of the case against any person - shortage of goods in itself does not mean that clandestine removal and clandestine removal needed to be proved by the Department and also for the proposition that the assessee was entitled to give proper explanation of the difference in stock taking even at the time of the reply to the show cause notice - appeals were allowed by way of remand – Decided in favor of Assesse.
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2013 (8) TMI 768
Liability to Pay Interest - Excess Credit - Reversal of Credit - Whether the assesse was liable to pay interest in terms of Rule 14 of the CENVAT Credit Rules, 2004 - Held that:- Relying upon UOI vs. Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court] - The respondent was liable to pay interest on the amount of CENVAT credit for the period from the date of its irregular availment to the date of its reversal - the period being covered by Rule 14 pre-amendment - A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal - Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service - Decided in favor of Revenue. Whether the respondent was entitled to take CENVAT credit on certain invoices issued by a registered depot of the manufacturer of inputs - Held that:- The assesse took CENVAT credit of the duty indicated in the depot invoices - the availment of the CENVAT credit by the assesse cannot be questioned - The case of the revenue was that there was no evidence of the amounts of duty shown in the depot invoices having been paid by the manufacturer – If the department had doubts regarding the amounts of duty paid by the manufacturer, appropriate proceedings should have been taken at their end - Any short-payment of duty by the manufacturer could have been taken care of through such proceedings - CENVAT credit was taken on valid documents and the inputs in respect of which such credit was taken were duly used in, or in relation to, the manufacture of final products - Therefore there was no reason to deny the credit to the assesse – Decided against Revenue.
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CST, VAT & Sales Tax
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2013 (8) TMI 787
Validity of Search and Seizure - Whether in exercise of powers of search and seizure under Section 54 of the Act strict compliance regarding search and seizure as laid down in Chapter VII Cr.P.C. more precisely Section 100 (4) Cr. P.C. was imperative - Held that:- The search team having made an attempt to get independent witnesses but looking to the time of search operation, if two independent witnesses as required were not available the search can not be held to be invalid. This apart, the search had been witnessed atleast by one independent witness of the locality itself and by another who happens to be the salesman of respondent no. 6 - Thus, the authenticity of carrying out the search operation stand established - It was not the case that no search was conducted - The factum of seizure of the holograms and other material had not been denied which clearly leads to an inference that the petitioner was involved in sale of spurious liquor by using fake holograms - Accordingly, the license of respondent no. 6 was rightly cancelled and the said order was not liable to be set aside by the appellate authority on a mere technicality that there was no second independent witness to the search as contemplated by Section 100 (4) Cr.P.C. The argument that the revisional order holding the search to be invalid having become final and therefore there was no occasion to enter into the above controversy is without force - The revisional order was an order of remand directing the first appellate authority to reconsider the matter in the light of observation made in the revisional order. The observations made in the revisional order were to the effect that there does not appear to be sufficient compliance of Section 100 (4) Cr.P.C. and that the compounding aspect as contemplated by Section 74 and 74-A of the Act was left out from consideration - There was no final verdict that the search was invalid for non compliance of provisions of Section 100 (4) Cr.P.C - It was misconceived to contend that the revisional order had expressed any final opinion regarding search - There was no finding by the revisonal authority that the search was invalid or that it cannot form the basis for passing any order in exercise of power under Rule 21 of the U.P. Excise (Settlement of Licenses for Retail Sale of Country Made Liquor) Rules, 2002. The appellate authority was fully empowered to go into the merits of the validity of the search and to pass appropriate orders but the appellate authority had taken a too technical approach in setting aside the order of cancellation of license passed by the District Magistrate/licensing authority for the reason that there was no independent second witness to the search completely ignoring that Section 54 of the Act does makes the provisions of Section 100 (4) Cr.P.C., absolute in its applicability to the search operation under the Act which have to be applied "as far as may be" depending upon the facts and circumstances and the situation of each case – Order set aside.
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