Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 31, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Deduction claimed u/s 10B - Reassessment - notice u/s 148 - reason to believe - change of opinion -Perhaps, in given fact situations, they can be legitimate grounds for revising an order of assessment under Section 263; but not for re-opening it, under proviso to Section 147 - HC
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Whether the expenditure regarding club membership and entrance fee is revenue in nature or capital – Deduction u/s 37 of the Income Tax Act - Held as revenue in nature - AT
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If the AO was to invoke the provisions of Sec. 50C, then A.O. should have first referred the matter to the Valuation Officer - CIT(A) has erred in not asking the AO to refer the matter for valuation - AT
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Adventure in the nature of trade - Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade - AT
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Contrary decision passed by A.O. against remand back order of Tribunal - Decision of the tribunal is binding on the Assessing Officer and he cannot pick up a word or sentence from the order of the Tribunal de hors the context of the question under consideration and construe it to be complete law declared by the Tribunal. - AT
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Writing off of stock - The action of the AO is a double addition. A figure which was never claimed or allowed as a deduction in the earlier year was added back - The write back of provision is not sale proceeds of slow moving/obsolete inventory. - no addition - AT
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Disallowance of expenditure on amount written off - Losses belong to JV / AOP or assessee - The assessee was merely financing the expenditure for the time being as a promoter of a member of the said AOP. - assessee not allowed to set off - AT
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Disallowance u/s 14A - Assessee is engaged in the banking activity - Normally, every amount lying in the current accounts is interest bearing ones, therefore, the provisions of clause-(iii) of Rule-8D(2) is rightly applicable - AT
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Notice u/s 148 - Validity of reassessment proceeding - Role of the Audit parties to point out of the factual mistakes and not to advise the AO on legal matters. Therefore if an AO, reopens the assessment on the legal advice of the audit party it cannot be held forming of an independent opinion. - AT
Customs
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Exemption – In the absence of any support for the conclusion that the product imported by the appellant had been chemically modified or it was not known as HDPE in the market - the benefit of exemption had to be extended to the assesse - AT
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Anti-Dumping Duty - The importers explained that origin of goods to be Malaysia but on verification, it showed that the certificate of origin showing Malaysia as country of origin was false. - Appellant contended that he is not importer - contention is not acceptable - stay granted partly - AT
Service Tax
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Supply of Tangible Goods - Department treated the Service provided by the assessee into the category of supply of tangible goods - the payment of VAT alone cannot be a conclusive evidence as to whether the appellant rendered the SOTG service or not - AT
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Business Auxiliary service (BAS) - import as well as export of these items on behalf of various traders/merchants - sale of goods on high sea basis - mark-up ranging from 1% to 1.5% of the value of the goods - the activity is in the nature of trading - not liable to service tax - AT
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Export of services - Technical Testing and Analysis Section 65(106) r.w. Section 65(zzh) - delivery of report to its client is an essential part of the service report was delivered outside India and same was used outside India - Held as export of service - AT
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Export of Goods - Credit of Input Services - Refund Claim – Revenue cannot be allowed to approbate and reprobate on the same issue though with reference to different parties - The first argument that classification of service cannot be changed in the hands of the recipient by itself was good enough to allow the appeal - AT
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Cenvat Credit - Input services - the payment of service tax for electronic subscription of research journals, periodicals, etc., on which service tax had been paid under the category of ‘online information and data base retrieval service’ was definitely an ‘input service’ - AT
Central Excise
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Valuation - Inclusion of Installation and commissioning charges - Merely because the said activity is being undertaken by the supplier of the goods does not mean that the consideration for the same has to be added in the assessable value of the goods. - AT
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Activity Manufacture or Not - The Cenvat Credit availed cannot be demanded in spite of the fact that the activity undertaken by the appellant does not amount to manufacture - AT
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Reversal of Cenvat Credit in case inputs are destroyed in an accident - it has to be concluded that goods which are destroyed in the fire in the bulk drug manufacturing section were the goods which have already left the inputs store and as such, same cannot be considered to be inputs destroyed as such, so as to call for reversal of Cenvat credit - AT
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SSI Exemption - Merely because the full address of the buyers in respect of cash sales were not given in the invoices, thus not making it possible for Revenue to conduct inquiries at their end, by itself cannot be held to be a strong evidence to hold that all those clearances were with the brand name of ‘needle fold’. - AT
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CENVAT credit on Capital Goods taken on lease - Prima facie the availment of capital goods Cenvat credit in the case by the appellant was not correct, as the words “financing company“ in Rule 4(3) of Cenvat Credit Rules cannot be read “as any person“. - AT
VAT
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Reassessment proceedings on the ground that one Form 3-B filed by the assesse claiming concessional rate of tax is invalid - procedural law lays emphasis on the spirit of law and not on form - reassessment proceedings not valid - HC
Case Laws:
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Income Tax
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2013 (8) TMI 839
Deduction claimed u/s 10B - Reassessment - notice u/s 148 - reason to believe - change of opinion - Held that:- when there was intensive examination in the first instance in respect of the issue, which was the basis for re-opening of assessment, it was necessary for the AO to indicate, what other material, or objective facts, constituted reasons to believe that the assessee had failed to disclose a material fact, necessitating reassessment proceedings. That is precisely the "tangible material" which have to exist on the record for the "reasons". When the assessment is completed, as in the present instance, under Section 143 (3), after the AO goes through all the necessary steps of inquiring into the same issue, the reasons for concluding that reassessment is necessary, have to be strong, compelling, and in all cases objective tangible material - There is no such tangible materials which have a live link that can validate a legitimate formation of opinion - It is not enough that the AO in the previous instance followed a view which no longer finds favour, or if the latter view is suitable to the revenue; those would squarely be change in opinion. Perhaps, in given fact situations, they can be legitimate grounds for revising an order of assessment under Section 263; but not for re-opening it, under proviso to Section 147 - assessee cannot be held to have failed to disclose truly and fully all the material facts. It is also not a case where fresh tangible material has come to the knowledge of the Assessing Officer. The Assessing Officer, at the time of original assessment, clearly formed an opinion on both the issues and a notice under Section 148 seeking to reopen the assessment is clearly an instance of change of opinion, which is impressible in law - Following decision of MOSER BAER INDIA LIMITED Versus DEPUTY COMMISSIONER OF INCOME TAX & ORS [2012 (12) TMI 456 - DELHI HIGH COURT] - Decided in favour of assessee.
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2013 (8) TMI 838
Penalty u/s 271(1)(c) - Compensation from Castrol UK, for delay in payment of proceeds of shares - Held that:- It is clear that the payment of interest was directed by the SEBI under regulations 22 and therefore it was held that this is not a penalty but the payment of interest on account of failure to make the payment by the acquirer as per the time schedule prescribed under SEBI regulations. It is clear that this payment of interest @ 15% was not on account of any accretion in the value of the asset in question because the market price of the share is determine as per the rates prevailing on stock exchange. The consideration for acquiring the shares under open offer was determined at Rs. 350.02 which was the market price as on 14.3.2000 when the holding company made a public announcement of acquisition. However, the case in hand the interest received by the assessee is for the period prior to the tendering of shares and acceptance of the same therefore, the interest relates to the delay in completing the process of buy back of shares under open offer. There is a difference between the interest which can be treated at par of consideration and the interest which is different form compensations or consideration. If the interest is paid for delay in making the payment then it cannot be treated as part of consideration. In the case in hand the delay for which the interest has been received by the assessee is in the process of buy back of shares in the open offer after announcement of the intention of acquiring of shares. It is not a case of delay in making the payment of the determined consideration after the transaction of purchase of sale is over - amount of interest which relates to the period prior to tendering and acceptance of the shares falls within the ambit of consideration received by the assessee against the shares tendered in the open offer - interest is received in pursuance to the directions of the SEBI and due to delay in completion of the process of buy back of shares as prescribed under the SEBI regulations. The real acquisition of shares took place only in the month of November 2001 and prior to the said date it cannot be said that the interest was paid due to delay in the payment of consideration - additional amount received by the assessee being 15% interest from 8.8.2000 to 22.11.2001 is part of sale consideration and accordingly will be treated as part of capital gain and not the income from interest - Decided in favour of assessee.
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2013 (8) TMI 837
Whether the expenditure regarding club membership and entrance fee is revenue in nature or capital – Deduction u/s 37 of the Income Tax Act - Club membership has been taken for the purpose of the business of the assessee as the directors of the assessee company conduct meeting/conference with the clients, suppliers and business associates – Held that:- Relying upon the judgment in the case of Otis Elevator Co. (India) Ltd. Vs CIT [1991 (4) TMI 53 - BOMBAY High Court]; CIT Vs Samtel Color Ltd [2009 (1) TMI 26 - DELHI HIGH COURT], it was held that the nature of the expenditure was one for the benefit of the assessee. The “business purpose” basis adopted for eligibility of expenditure under section 37 of the Act was the correct approach. Qualification of the expenditure under section 37 of the Act is that expenditure incurred should not be on capital account - Expenditure which gives enduring benefit is by itself not conclusive as regards the nature of the expenditure - The true test for qualification of expenditure under section 37 of the Act is that it should be incurred wholly and exclusively for the purposes of business and the expenditure should not be towards capital account - In the instant case, the admission fee paid towards corporate membership is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profitearning apparatus of a business enterprise. Expenditure made as donation for religious purposes – On souvenirs /booklets assessee name appeared on the religious occasion – Expenditure as advertisement expenditure – Held that:- These so called souvenirs/booklets are not the publication of any institution, industrial organisation or other association or institutions as permanent in nature and related to the business of the assessee. Accordingly, no merit in the assessee’s contention that the expenditure incurred for advertisement in souvenirs of all these parties is an allowable expenditure – Decided against the Assessee.
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2013 (8) TMI 836
Disallowance u/s 14A - Expenditure incurred for earning of exempt income - Held that:- It is not in dispute that the assessee has earned huge dividend income which has been claimed as exempt and for the purpose of disallowance under section 14A, it has disallowed a sum of Rs.5,46,16,385. The assessee’s working of disallowance was too based on rule 8D. However, in its working, the assessee has not considered those investments which have not yielded any income. In our opinion, such a working is not correct, as once the expenditure has been incurred in relation to an income which do not form part of the total income, then the provisions of section 14A, comes into play - it has been held that disallowance under section 14A can also be made in the year in which no exempt income has been earned or received by the assessee. When the expenditure is incurred in relation to income which does not form part of the total income, it has to suffer the disallowance under section 14A, irrespective of the fact that whether or not any income has been earned by the assessee. The section itself does not carve out any such exception - Once it is not disputed that the provision of rule 8D are applicable on the conditions stated therein, then disallowance has to be made as per the formula given in rule 8D, except when the assessee brings out cogent material on record to show that a particular expenditure as provided in the formula was not attributable to earning of the exempt income - Following decision of Cheminvest Limited. Versus Income Tax Officer, Ward 3(3), New Delhi. [2009 (8) TMI 126 - ITAT DELHI-B] - Decided against assessee.
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2013 (8) TMI 835
Capital or Revenue expenditure - Expenditure on acquisition of software - CIT held it as Revenue expenditure - Held that:- When the assessee acquires a computer software or for that matter the license to use such software, he acquires a tangible asset and becomes owner - software becomes obsolete with technological innovation and advancement within a short span of time. It can be said that where the life of the computer software is shorter (say less than 2 years), it may be treated as revenue expenditure. Any software having its utility to the assessee for a period beyond two years can be considered as accrual of benefit of enduring nature. However, that by itself will not make the expenditure incurred on software as capital in nature - Once the tests of ownership and enduring benefit are satisfied, the question whether expenditure incurred on computer software is capital or revenue has to be seen from the point of view of its utility to a businessman and how important an economic or functional role it plays in his business. In other words, the functional test becomes more important and relevant because of the peculiar nature of the computer software and its possible use in different areas of business touching either capital, or revenue Held or its utility to a businessman which may touch either capital or revenue field - CIT has not mentioned what is the exact span of life of the software and whether it satisfies the functional test to be treated as revenue expenditure - Following decision of Amway India Enterprises Versus Deputy Commissioner of Income-tax, Circle 1(1), New Delhi [2008 (11) TMI 432 - ITAT DELHI] - Matter remitted back - Decided in favour of Revenue. Disallowance of lab development charges - Held that:- assessee has failed to reconcile before the Assessing Officer not only at the time of assessment but also during the remand whether actually the amount of Rs. 48,95,925 was included in the lab maintenance charges of Rs. 1,37,86,523 and has been included in the gross income of the impugned assessment year - Therefore, matter is remitted back to A.O. - Decided in favour of Revenue.
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2013 (8) TMI 834
Applicability of Section 50C - Transfer of capital assets - A.O. computed capital gain u/s 50C - CIT confirmed computation by A.O. - Held that:- If the AO was to invoke the provisions of Sec. 50C, then A.O. should have first referred the matter to the Valuation Officer - CIT(A) has erred in not asking the AO to refer the matter for valuation - Decided in favour of assessee. Set off of brought forward unabsorbed depreciation - Held that:- current year's depreciation is to be allowed as set off from the Long term capital gains and brought forward depreciation is to be treated as current year's depreciation as per the legal fiction of Sec. 32(2) of the Act, the same is also be allowed to be set off from the long-term capital gains - Following decision of Suresh Industries (P) Ltd. Vs ACIT [2012 (11) TMI 674 - ITAT MUMBAI] - Decided in favour of assessee.
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2013 (8) TMI 833
Adventure in the nature of trade - Treating income arising out of the sale of agricultural land as business income – Sale of agricultural land, a long term capital gain, exempted under Income Tax Act - Assessee owns the agricultural lands situated at Mankal village in Maheswaram Mandal of R.R. Dist - During the year, i.e., 2007-08, the assessee has sold the entire land on 1.12.2006 to M/s. Prajay Holding Pvt. Ltd. for a total consideration of ₹ 24,81,60,000 - Held that:- Agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee – Reliance is placed upon the cases s.a. DCIT vs. Arijit Mitra[2011 (8) TMI 556 - ITAT, KOLKATA]; M.S. Srinivas Naicker vs. ITO [2007 (1) TMI 149 - MADRAS High Court ] etc. It is important to note that what was the intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and with this intention assessee entered into lease agreement and even there was no intention to sell the land in future at that point of time. It was due to certain compelling circumstances came into picture at a later stages, the assessees were forced to sell the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade – Appeal allowed - Decided in favor of Assessee.
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2013 (8) TMI 832
Contrary decision passed by A.O. against remand back order of Tribunal - Deduction u/s 80IA - Power of Tribunal to review its own decision - Held that:- Once the Tribunal has set aside the orders impugned in the appeals before it on the issue and restored the matter to the file of the Assessing Officer with the above findings, the duty of Assessing Officer is to pass orders giving effect to the order of the Tribunal - Tribunal has not rejected the claim of the assessee under S.80IA and on the other hand, it was held that the assessee is entitled for deduction under S.80IA - assessee has carried on infrastructure projects, and it is for the purpose of considering other projects, if any, and to quantify the deduction, the issue was remitted back to the file of the Assessing Officer. If the Assessing Officer fails to properly understand or appreciate the directions of the Tribunal, all that can be done at this stage is to mention that the assessee has liberty to explore and pursue the remedies available under law, as the Assessing Officer is duty bound to pass the consequential orders in conformity with the order of the Tribunal cited and he has no discretion or choice to overlook the order of the Tribunal - Having decided the appeals of the assessee, before it, with its common order the Tribunal is ceased of its jurisdiction over those appeals, except to the limited extent of rectifying any mistake therein in terms of provisions of S.254(2) of the Act - Assessee has not mentioned any mistake in Tribunal's order which warrants rectification - Therefore, decided against assessee. Doctrine of Precedent - Whose decision is binding on whom - Held that:- It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunal subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise there would be confusion in the administration of law and respect for law would irretrievably suffer - It is elementary that what is binding on the court in a subsequent case is not the conclusion arrived at in a previous decision, but the ratio of that decision, for it is the ratio which binds as a precedent and not the conclusion Following decision of Baradakanta Mishra v. Bhimsen Dixit [1972 (9) TMI 142 - SUPREME COURT]. Decision of the tribunal is binding on the Assessing Officer and he cannot pick up a word or sentence from the order of the Tribunal de hors the context of the question under consideration and construe it to be complete law declared by the Tribunal. A judgment must be read as a whole. Being so, the Assessing Officer cannot sit in judgment over the order of the Tribunal, and he is required to give just effect to the order of the Tribunal. If he has any grievance, he is at liberty to appeal against that order of the Tribunal before higher forum
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2013 (8) TMI 831
Eligibility for deduction under section 80IA of the Income Tax Act – Held that:- Assessee should not be denied deduction under S.80IA of the Act as the contracts involves, development, operating, maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract - Contracts which contain the above features to be segregated and on this deduction u/s. 80IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitled for deduction u/s. 80IA of the Act – Decided in favor of Assessee. Rectification of mistake in the order by Hon’ble Tribunal u/s 254(2) of the Income Tax Act - Assessee speaks of is about the grievance that it has suffered on account of the consequential orders passed by the Assessing Officer for the years under consideration, while giving effect to the order of this Tribunal dated 16.3.2012 – Held that:- In Miscellaneous Applications or the Written Submissions furnished before Hon’ble Tribunal in support of their claim, the assessee did not pointed out any mistake in the order dated 16.03.2012 of Tribunal, which warrants rectification in terms S.254(2) of the Act - Consequential orders passed by the Assessing Officer constitute independent proceedings, and not part of the proceedings which led to the passing of the order of the Tribunal dated 16.3.2012 - Grievance of the assessee on account of alleged mistakes in such consequential orders, either on account of interpretational differences or even on account of disrespect/disregard to the directions of the Tribunal, shall not vest any power or jurisdiction back with the Tribunal, to oversee the correctness of the correctness of the consequential orders passed, much less, to give directions to revise or rectify the same, even if there is any mistake in the same - Remedy for the assessee lies elsewhere, viz. in the fresh proceedings commencing with such consequential orders and not in the proceedings that culminated with the order of this Tribunal dated 16.3.20120 - In the absence of any specific mistake which warrants any rectification within the scope of the provisions of S.254(2) of the Act, in the order of the Tribunal dated 16.3.2012, no rectification in the order required – Decided against the Assessee.
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2013 (8) TMI 830
Writing off of stock - CIT deleted addition - Held that:- provision for slow moving/obsolete inventory, which is created each year in the profits & loss account and balance sheet prepared in accordance with the Companies Act, 1956, has been specifically added back while computing taxable income under the IT Act, while filing the return of income of the respective year i.e. the assessee has not claimed deduction on the 'Provision' created in its accounts, in its income tax computation in the earlier years - assessee had sold the slow moving stock and disclosed the sale proceeds, in its sales account. The provision was written back as no longer required in the accounts and as the provision was not claimed as an expense in its income tax computation in the year in which it was created, the same need not be added back once again. The action of the AO is a double addition. A figure which was never claimed or allowed as a deduction in the earlier year was added back - CIT DR has mistook the write back of provision of inventory, as sale proceeds of slow moving/obsolete inventory of raw materials and thus the confusion. The write back of provision is not sale proceeds of slow moving/obsolete inventory. The sale proceeds have been accounted for as income under the head turnover "Gross turnover" in the profits & loss account. It is not a case where sale proceeds of these obsolete stocks are not accounted for at all - no infirmity in the order of the first appellate authority - Decided against Revenue.
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2013 (8) TMI 829
Disallowance of interest on securities - CIT deleted disallowance made by A.O. - Whether in the case of Government securities, interest accrues on day to day basis or only on the coupon dates - Held that:- assessee cannot prepare the computation of its income for income tax purposes in a manner different from the method under which it keeps accounts - Assessee cannot be prevented from urging in the return that the interest on govt. securities accrued only on the specified coupon dates notwithstanding that credit has been taken in the profit & loss account for the interest on day to day basis - interest accrues only on the specified coupon dates and not on day to day basis - Following decision of Indusind Bank Limited Versus The Addl. CIT, Range 2(3), Mumbai. [2011 (1) TMI 1244 - ITAT MUMBAI] - Decided in favour of assessee. Reduction of claim of bad debt under section 36(1)(vii) - Held that:- In the first place, the ad hoc deduction under s. 36(1)(viia) (b) being the last item on the computation of taxable business profits, it cannot be taken into account at the time of allowing deduction under s 36(1)(vii), and, to that extent, the actual deduction attributable to bad debts [i.e. 36(1)(vii) plus 36)(1)(vii)(b)] will indeed be more than the actual bad debts in that year However, since the provision so allowed under s 36(1)(viia)(b) is be taken into account while allowing deduction for actual bad debts in the subsequent year, the effect of excess deduction, if any, will be squared up in that subsequent year. Secondly, a view seems perfectly acceptable that the provision for bad debts allowable under s. 36(1)(viia)(b) being inherently attributable to the debts outstanding at the end of the year, provision allowable as such is against future bad debts out of debts outstanding at the year end, and, therefore, It need not he mixed up with actual bad debts incurred during the year. - AO to compute deduction allowable on account of bad debt in line with the decision of the Tribunal in case of Oman International Bank, SAOG vs. DCIT [2003 (11) TMI 286 - ITAT BOMBAY-H] and M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2011 (1) TMI 1244 - ITAT MUMBAI] - Decided in favour of assessee. Disallowance of loss on unmatured foreign exchange contracts - One of the due dates fell after the end of the previous year i.e. after 31st March - Held that:- where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract - Following decision of DCIT vs. Bank of Bahrain and Kuwait (2010 (8) TMI 578 - ITAT, MUMBAI) and M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2011 (1) TMI 1244] - Decided in favour of assessee.
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2013 (8) TMI 828
Disallowance u/s 14A - Expenditure towards the earning of dividend income - CIT confirmed addition - Held that:- some expenditure out of the administrative expenses is always incurred and, therefore, it is a matter of method of quantifying such attributable expenditure to the exempt income. It is a judicially finalized position in law that the provisions of Rule-8D read with section 14A cannot be invoked for the assessment years prior to AY 2008-2009 - Decided in favour of assessee. Quantification of such expenditure - Held that:- restricting the disallowance to 2% of the dividend income for this also must bring the peace between the parties for this AY 2005-2006 - Assessee is 100% Export Oriented Unit, invoking the provisions of section 14A of the Act has no tax implication. If any expenditure is disallowed under the said provisions, equalant amount needs to be reduced from the expenditure claimed in the P & L Account - Decided partly in favour of assessee. Deduction u/s 10A - Reduction of insurance and communication expenses from Export Turnover - Held that:- export turnover means consideration in respect of the export received by the assessee in convertible foreign exchange. But it does not include freight telecommunication charges or insurance attributable to the delivery of the stocks outside India or expenses incurred in foreign exchange in providing technical services outside India. Thus, the expenses incurred in local currency in India on account of telecommunications and insurance are outside the scope of the above said definition given in clause-(iv). It is not the case of the assessee that such expenses on account of telecommunication insurance are incurred outside India. In fact, it is an admitted position that the said expenditure was incurred in local currency in connection with different location within India - Decided in favour of assessee.
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2013 (8) TMI 827
Disallowance of expenditure on amount written off - Losses belong to JV / AOP or assessee - Held that:- The expenses, which stand now written off, i.e., on the JV or the project owner being no longer interested in executing the projects/s, was, firstly, only and on behalf of the JV or the AOP aforesaid. The assessee was merely financing the expenditure for the time being as a promoter of a member of the said AOP. The amount represented only a claim receivable; that received from JPPL being the extent to which the project development stood, under the circumstances, financed by it; the position of JPPL being para materia with that of the assessee. The loss under reference is therefore of the AOP, and not the assessee's loss; the balance loss being borne by JPPL, its JV partner or associate. These amounts, were the project/s to be set up, recorded in the books of the JV or the project owner as toward project cost - there is no reference to written off amounts nor any details thereof, either in the assessment order or in the impugned order. Even no submissions in this regard were made before A.O. or by before Tribunal. Under the circumstances, therefore, there is no basis to modify the findings in respect of this amount, which stands added back similarly - Decided against assessee. Disallowance of interest - CIT confirmed disallowance - Held that:- A bare reference to the balance-sheet, would show that the assessee-company is a profitable company - It is thus not understand as to how it could be said that the amount invested by the assessee in shares and securities, at the year-end, is out of borrowed funds, which, apart from secured loans, which are for fixed assets, are by way of unsecured loans - No case for disallowance, looking at the financials in any manner, is thus made out. The impugned disallowance is accordingly directed for deletion - Decided in favour of assessee. Disallowance under section 14A - Held that:- Rule 8D, though not mandatory for the current year, yet cannot be said to be unreasonable, so that the same can only be said to be form a reasonable basis for the disallowance u/s. 14A(1). Having said that, how the Revenue could invoke r. 8D(2)(ii), disallowing interest expenditure there-under; having already disallowed the entire interest u/s. 36(1)(iii). In fact, we have found the entire of it as allowable as a business expense u/s. 36(1)(iii), considering the sources and application of funds, so that no disallowance qua interest expenditure u/r. 8D(2(ii) would arise in the facts and circumstances of the case - Decided in favour of assessee.
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2013 (8) TMI 826
Adjustment of arm's length price - CIT revised order of TPO and enhanced assessee's income - Assessee used Cost Plus Method to determine International transaction relating to purchase and Net Margin Method for sale - TPO has applied TNMM as most appropriate method for bench marking - Held that:- The Commissioner of Income Tax(Appeals) has determined the ALP by taking the TNMM as most appropriate method but at the entity level of the assessee. The Commissioner of Income Tax(Appeals) has arrived at the arithmetic mean of the comparables operating profit at 8.33% against the operating profit at the entity level of the assessee at 4.71% - sale price of the assessee is within the tolerance limit of 5% as per the proviso to section 92C(2) of the Income Tax Act, which is clear from the working of the Commissioner of Income Tax(Appeals) - The operating cost of the assessee is within the 5% tolerance range of the ALP determined by the Commissioner of Income Tax(Appeals), therefore, no adjustment is called for on this account. It is pertinent to note that the Commissioner of Income Tax(Appeals) has determined the arm's length by considering the entity level results of the assessee which includes all the international transactions, therefore, when the over all price of the assessee is within the range of 5% of ALP being the arithmetic mean then no adjustment is permitted - Decided in favour of assessee. Computation of book profit u/s 115JB - The assessee in the return of income has not increased book profit computed u/s 115JB on account of diminution in value of investment debited to the profit and loss account, however, during the assessment proceedings the assessee conceded the adjustment in view of the retrospective amendment in section 115JB with effect from 1.4.2004 by the finance Act 2009 - Assessing Officer has not examined this issue from the angle of the actual written of the amount as the assessee conceded the same - Following decision of CIT Vs Yokogawa India Ltd. [2012 (9) TMI 390 - ITAT BANGALORE] - Matter remitted back for fresh adjudication.
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2013 (8) TMI 825
Disallowance u/s 14A - CIT deleted disallowance - Held that:- assessee made an investment in shares, which yielded dividend income and interest income - It is an admitted fact that assessee offered itself average cost of investment - it is the case where the assessee disallows the cost of investment applying the rate of 0.5% of the average cost of the investment in accordance with the Rule 8D(2)(iii) of the Income tax Rules 1962 but not out of the administrative expenditure as per the provisions of clause (i) and (ii) of the said Rule 8D(2) - where the accounts for exempt and taxable income are maintained commonly, it cannot be denied that some administrative expenditure was definitely attributable towards the earning of the dividend income - Assessee is engaged in the banking activity and it is an admitted fact the current balance is the source of investment in shares and assessee has not demonstrated how the interest bearing funds are lying in the current accounts of the assessee, a banking company. Normally, every amount lying in the current accounts is interest bearing ones, therefore, the provisions of clause-(iii) of Rule-8D(2) is rightly applicable - Once rule become applicable and the same has to be applied fully - Decided in favour of Revenue.
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2013 (8) TMI 824
Notice u/s 148 - Validity of reassessment proceeding - Change of opinion - Reopening at the instance of Audit objections - Held that:- Reassessment proceedings were initiated by the AO after objections were received from the internal audit party, the dates of audit objections and the dates of issue of notice u/s. 148 establish the fact that there was nexus between the two - while passing the original assessment order, AO had called for the details about lease equalisation reserve as well as about the writing off of non- performing assets - after considering the submissions of the assessee AO decided that lease equalisation reserve and provision of diminution in investment has to be given particular treatment. As stated earlier one of the items was taxed under normal provisions and not under MAT provisions, whereas the other item was considered for MAT provisions and not for computation under normal provisions of the Act. Thus an informed decision was taken by the AO about both the items. In these circumstances, if AO decided to issue a fresh notice for reopening the completed assessment it has to be treated as change of opinion - order of assessment that was passed by the AO under section 143(3) is not silent in respect of points on the basis of which the assessment was sought to be reopened - reopening was result of change of opinion. Fact that the AO did not record reasons for computing income under normal/MAT provisions, would be of no consequence - Decided in favour of assessee. Role of the Audit parties to point out of the factual mistakes and not to advise the AO on legal matters. Therefore if an AO, reopens the assessment on the legal advice of the audit party it cannot be held forming of an independent opinion.
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Customs
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2013 (8) TMI 853
Export of non – standard goods - The issue involved in this case was regarding the export of non-standard goods as received from an EOU by an SEZ – Held that:- The issue involved in the case needs to be gone into detail - It was to be appreciated that as to whether the duty liability on the SEZ would be customs duty or Central Excise duty and also how the poor quality of consignment entered into SEZ. Waiver of pre deposit of Penalty u/s 112 and 114 - applications for the waiver of pre-deposit of the balance amounts involved were allowed and recovery stayed – decided in favour of assessee.
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2013 (8) TMI 852
Mis – declaration - Whether there was mis declaration on the part of the assessee – department was of the view that there was mis declaration on the appellant and they impose the custom duty – Held that:- Prima facie it was case of mis-declaration in the appeal - upon reading of adjudication order the act of the appellant caused prejudice to the Revenue - But court did not express any opinion on such mis-declaration. Stay application - Waiver of Pre deposit – Held that:- pre-deposit has become condition in respect of stay application – 25% of the duty was ordered to be submitted – on such submission rest of the duty to be waived – decided in favour of assessee with conditions.
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2013 (8) TMI 851
Classification of goods – Benefit of notification - Assesse classified the product under CTSH 3901 2000 of Customs Tariff Act and claimed the benefit of concessional rate of duty of 5% available for High Density Polyethylene (HDPE) under Sr.No.477 of exemption Notification No.2/2002-Cus - Held that:- In the absence of any support for the conclusion that the product imported by the appellant had been chemically modified or it was not known as HDPE in the market - the benefit of exemption under Sr.No.477 had to be extended to the assesse - Revenue had not applied even the trade parlance test - The Revenue had not got even the test certificate from the Government laboratory which was essential in the case – Whether the product was a chemically modified HDPE or not and whether it was known as HDPE in the market, had not been considered at all – the lower authorities had not been fair – decided in favor of assesse.
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2013 (8) TMI 850
Benefit of Notification No. 21/2002 – Opportunity to Cross Examination - Assesse imported Crude Palm Oil at concessional rate of duty in terms of Notification No. 21/2002-Cus - Held that:- - the assesse should be given an opportunity to cross examine - The cross examination and the important witnesses of the Revenue should have been extended by the Adjudicating Authority - reasons adopted by the Adjudicating Authority for denial of cross examination were neither legal nor convincing - After the conclusion of the cross examination the assesse would file the reply to the notice within a period of 15 days therefrom and after affording an opportunity of personal hearing, the Commissioner would pass the order as soon as possible - the entire case of the Revenue was mainly based upon the records of assesse and the statement as regards the non-sale of the Caustic Soda, one of the main raw materials, to be used in the manufacture of laundry soap along with Crude Palm Oil – Decided in favor of assesse.
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2013 (8) TMI 849
Origin of Goods – Demand of Anti-Dumping Duty - Confiscation of Goods - The importers explained that origin of goods to be Malaysia but on verification, it showed that the certificate of origin showing Malaysia as country of origin was false. - Appellant contended that he is not importer - The Commissioner vide his Order-in-Original primarily basing on the various statements of Shri Nalin Bakul Zaverilal Mehta has come to the conclusion that the real owner of the imported vitrified tiles was Shri Nalin Bakul Zaverilal Mehta and the names of three companies/firms were used by him to shield himself for future liabilities. Held that:- A statute to be construed according “to the intent of them that make it” and “the duty of judicature is to act upon the true, intention of the Legislature - the mens or sententia legis” - The expression, ‘intention of the Legislature was a shorthand reference to the meaning of the words used by the legislature objectively determined with the guidance furnished by the accepted principles of interpretation - State of Himachal Pradesh v. Kailash Chand Mahajan[1992 (2) TMI 322 - SUPREME COURT] - The true or legal meaning of an enactment as derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed - The wording used in Section 129E is infallible as it reads as “the person desirous of appealing against such decision or order shall pending appeal, deposit with the proper officer the [duty and interest] demanded or the penalty levied”. Appellant cannot be absolved of the liabilities and responsibilities only on the basis of certain commissions and omissions - Prima facie the adjudicating authority cannot be faulted at this juncture. Waiver of Pre-deposit - No strong prima facie case was made out for complete waiver of the amounts involved – 2 crores were ordered to be submitted as pre-deposit – stay granted partly.
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Corporate Laws
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2013 (8) TMI 848
Recall of Order - There was no objection raised by the counsel for the petitioner that such an order could not have been passed - Pursuant to the order the DRT disposed of T.A. No.3/2005; the application seeking review of the orders was filed several months later - No satisfactory explanation was furnished in the said application and this was evident from the perusal of the same - These applications were dismissed by the DRAT - It was noted that the OTS was with regard to both the accounts i.e. O.A. and T.A. - The review application seeking recall of the order was dismissed - this was in terms of the provisions of Order XLVII Rule 9 of the Code - admittedly a second review was not maintainable. It was only the last two aforenoted orders which were the subject matter of challenge before the Court – The challenge was limited and confined only to the parameters and guidelines to be followed by the court while dealing with a review application - There was no fault in either of these orders - Unless and until there was an error apparent on the face of the record or there was a discovery of a new fact which after exercise of due diligence was within the knowledge of the petitioner at the time when the impugned order was passed - no ground for review was made out - Within these parameters the orders suffer from no infirmity - That apart the Court had gone on to examine all the averments made by the petitioner on merits and the earlier order passed by the DRT as also the order of the DRAT also with-stand the test of fairness - On no count does the petitioner deserve any relief – Decided against petitioner.
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Service Tax
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2013 (8) TMI 858
Supply of Tangible Goods - Department treated the Service provided by the assessee into the category of supply of tangible goods - Held that:- Prima facie it cannot be concluded that it had completely gone to Port Trust - the payment of VAT alone cannot be a conclusive evidence as to whether the appellant rendered the SOTG service or not - The tug had been hired on a monthly basis and the calculation of the number of days on which the tug was used is made by deducting 24 hours for maintenance which is to be accumulated on a monthly basis and after availing more than 24 hours the Trust can deduct proportionate amount - MPT was not liable to third party because of the use of tug on the contract and the contractor was required to take third party liability insurance - The points as urged by the learned AR create a doubt about the case of the appellant in their favour. Waiver of Pre-deposit – Prima facie assessee was not able to made out a prima facie case in their favour - having regard to the fact that the amount involved in respect of the normal period is only Rs.44 lakhs only Rs.10 lakhs would be sufficient for the purpose – after such submission rest of the duty to be waived till the disposal of the case – Conditional stay granted.
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2013 (8) TMI 857
Business Auxiliary service (BAS) - import as well as export of these items on behalf of various traders/merchants - sale of goods on high sea basis - mark-up ranging from 1% to 1.5% of the value of the goods - The Revenue was of the view that the applicants are rendering services of import and export to the customers and, therefore, they are liable to Service Tax under the category of “Business Auxiliary Services”. - Held that:- The transaction was one of the Sale and Service Tax liability was not - Following INDIAN OIL CORPORATION LTD Versus COMMISSIONER OF CENTRAL EXCISE, GOA [2012 (2) TMI 319 - CESTAT, MUMBAI] - From perusal of the import documents as well as invoices it was evident that the transaction was one of trading or sale - The mark-up/trade margin charged by the appellant was also subject to customs duty as part of the transaction value - there was no reason why the same part of the transaction value should be taken out of the customs transaction and subjected to Service Tax under the guise of Business Auxiliary Services - The Board's Circular dated 11.05.2004 also clarified that the customs duty liability was to be discharged on the value inclusive of trade margin in the case of High Seas Sales transaction - pre-deposit of the dues was waived adjudged against the appellant and stay recovery thereof during the pendency of the appeal – stay granted. Condonation of Delay - The delay occurred due to fact that the appellant was directed to file separate appeals instead of a composite appeal which was filed in time - Considering the reason stated as satisfactory the COD application was allowed.
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2013 (8) TMI 856
Export of services - Technical Testing and Analysis Section 65(106) r.w. Section 65(zzh) - whether the service conducting clinical trials provided by the assessee are taxable service - assessee provided services to the foreign clients as export of service – Held that:- Assessee satisfied the conditions of Rule 3(2) and accordingly eligible for the exemption under Notification No. 11/2007-S.T. dated 1-3-2007 - when reports were delivered to the clients outside India it amounts to taxable service partly performed outside India - performance of testing and analysing has no value unless and until it is delivered to its client - service is to be complete when such report is delivered to its client - performance of the taxable service has no validity/sanctity unless its report is submitted to the service receiver/client - delivery of report to its client is an essential part of the service report was delivered outside India and same was used outside India – relying on the decision of M/s. B.A. Research India Ltd. Versus CST Ahmedabad (2010 (5) TMI 89 - CESTAT, AHMEDABAD) – appeal decided against the revenue.
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2013 (8) TMI 855
Export of Goods - Credit of Input Services - Refund Claim – Benefit of Notification No. 41/2007-S.T. - The appellants were manufacturers of excisable goods and also exported goods manufactured by them and take benefit of credit of input services - Revenue rejected the claim - Held that:- The appellants were eligible for refunds of the credit - The amounts were refundable to them as per provisions of the Notification No. 41/2007-S.T. - Government had amended by Finance Act, 2010 the definitions in Section 65(105)(zn) to cover any service rendered in port area which shows the intention of the Government in this regard - While such amendments may operate only prospectively to cause liabilities to assessees, in the case of a beneficial Notification like 41/2007-S.T. for granting refund of tax incidence on goods exported, the matter needed to be interpreted more liberally. Revenue cannot be allowed to approbate and reprobate on the same issue though with reference to different parties - The first argument that classification of service cannot be changed in the hands of the recipient by itself was good enough to allow the appeal - there was no reference to the classification in the notification - This appears to be a serious lacuna - But such missing words cannot be supplied by anyone interpreting the provisions - The expression “port services” was known to the persons drafting the notification because such expression was used in taxable entry – Decided in favour of Assessees.
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2013 (8) TMI 854
Cenvat Credit - Input services - Nexus Between Input Services and Manufacturing Activity - Online journal subscription - Outdoor Catering Service - The appeal was on the ground that the lower appellate authority had not discussed the nexus between the input services and the manufacturing activity of drugs undertaken by the assesse - Held that:- the payment of service tax for electronic subscription of research journals, periodicals, etc., on which service tax had been paid under the category of ‘online information and data base retrieval service’ was definitely an ‘input service’ as defined in Rule 2(l) of the CENVAT Credit Rules - the nexus between the two can be reasonably established - The service was an ‘input service’ and CENVAT credit of service tax paid can be taken except on the portion relating to the cost recovered by the manufacturer from the workers in respect of such service. CCE, Nagpur Versus Ultratech Cement Ltd., [2010 (10) TMI 13 - BOMBAY HIGH COURT] - The invoices clearly indicated the category of service supplied as a category of “online information and data base retrieval services - The assesse being a drug manufacturing company had subscribed to international research journals - The research activity in drug manufacturing industry was well known and without research, no new drug can be developed and such research activity was inherent and integral to the manufacturing activity - The credit entitlement was limited to the amount borne by the assesse -company and service tax on that portion of service charges recovered from the employees was not permissible - If the respondent had availed any such impermissible credit, the same should be reversed forthwith along with interest. Rent-a-Cab Service - Maintenance and Repair Service - Held that:- Service tax paid on Rent-a-Cab Service’ can be allowed as CENVAT credit in respect of cab rented for transportation of employees - Commissioner of Central Excise, Bangalore-III v. Stanzen Toyotetsu India (P) Ltd.[ 2011 (4) TMI 201 - KARNATAKA HIGH COURT] - it was seen that the service tax credit had been availed in respect of ‘Annual Maintenance Contract’ for the Xerox machine installed in the factory premises - So long as service tax has been paid under the said category of service, the respondent can rightly avail the CENVAT credit – Decided against Revenue.
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Central Excise
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2013 (8) TMI 847
Penalty u/s 11AC - Held that:- in case of confirmation of demand of duty on the allegations of suppression, etc, the authorities have no discretion to impose less penalty and the penalty is required to be enhanced to 100% of the duty confirmed - original adjudicating authority had imposed penalty of Rs.96,211/- on Unit No. II, which is almost 25% of the duty confirmed against the assessee - Decided in favour of Revenue.
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2013 (8) TMI 846
Valuation - Inclusion of Installation and commissioning charges - Held that:- contract entered between the appellant and M/s BSNL is relatable to two separate activities one for supply of the goods and the other for installation. The activity of installation and commissioning could have been got done by M/s BSNL from an independent third person. Merely because the said activity is being undertaken by the supplier of the goods does not mean that the consideration for the same has to be added in the assessable value of the goods. In any case, the appellant has already discharged their service tax liability in respect of the said consideration, in which case the same cannot be taxed to Central Excise duty - Following decision of Ericsson India Pvt. Ltd. vs. CCE, Pondicherry [2007 (2) TMI 26 - CESTAT, CHENNAI] - Decided in favour of assessee.
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2013 (8) TMI 845
Cenvat Credit - Authorities denied benefit in respect of MS fabricated structure - Held that:- such credit availed by the appellant was being reflected in their monthly returns as there is no allegation to the contrary. As such, where the demand for the period February 2001 to April 2001 having been raised by show cause notice dated 26/6/02 is barred by limitation - Following decision of Vandana Global Ltd. vs. CCE, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - Decided in favour of assessee.
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2013 (8) TMI 844
Activity Manufacture or Not - Assesse was importing Chassis from their Principals in Japan - The Assesse was taking the credit of CVD and SAD - A Show Cause Notice was issued to the assesse for denial of the Cenvat Credit availed and utilized by them during the period - revenue contended that there was no factory at the premises and it was only a parking slot/warehouse/godown - Whether the activity was being carried out by the assesse will amount to manufacture - Held that:- Activities undertaken by the assesse will not amount to manufacture - assesse cannot be considered as a manufacturer and therefore not eligible to take the Cenvat Credit under Rule 3 of Cenvat Credit Rules 2004 - The activities undertaken by the assesse alone will not constitute manufacturing the vehicle, the final product - These activities were very minor in nature and would not entitle the assesses to be considered as manufacturer of motor vehicle - These activities may be needed to satisfy the requirements of Central Motor Vehicles Act or some other law but that will not amount to manufacture for excise purpose. Activities carried out by them was inspection of the same and fixing of some parts, if required and thereafter sending it to the job worker who undertakes the body building activities - The goods received form job workers were vehicles - Again inspection was carried out by the assesse and certain parts like kits etc. were fixed in order to comply with the Central Motor Vehicles Acts and Rules thereof. CENVAT credit - Interest and Penalty – Whether Cenvat Credit can be demanded when they have utilized the same for payment of duty on final products – Held that:-There was no dispute that the duty on the final product had been paid by the assesses by utilizing the Cenvat Credit being demanded and department had not disputed payment of duty on vehicles - ASHOK ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI [2007 (11) TMI 67 - CESTAT, CHENNAI] - The Cenvat Credit availed cannot be demanded in spite of the fact that the activity undertaken by the appellant does not amount to manufacture – appeal allowed.
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2013 (8) TMI 843
Reversal of Cenvat Credit in case inputs are destroyed in an accident - Appellant is engaged in the manufacture of excisable goods falling under Chapter 29 and 30 of the first schedule to the Central Excise Tariff Act, 1985 - On 7.5.07, a fire broke out in the bulk drug plant of the appellant which resulted in the destruction of the stock lying therein, to the tune of around Rs.25 crores. The fact of fire incident was immediately brought to the notice of their jurisdictional Central Excise authorities by way of writing a letter to them on 8.5.07 - On scrutiny of the fire insurance claim filed by the appellant with M/so. United India Insurance Company, it was found that the total stock of loss was shown as Rs.25,11,70,548/- - The audit entertained a view that all the goods destroyed in the fire as such and not were inputs issued for the work in progress, the appellants are required to reverse the credit – Held that:- Relying upon the decisions in the various cases s.a. Commissioner of Central Excise and Customs, Pune vs. Spectra Speciality [2008 (5) TMI 209 - CESTAT MUMBAI ] as upheld by the Hon’ble Supreme Court ; Commissioner of Central Excise Chennai vs. Indchem Electronics [ 2002(9)TMI 195 – CEGAT, CHENNAI, it has been held that where inputs were actually issued and thereafter destroyed in fire accident, there is no requirement of reversal of Cenvat credit. The factual position, as disputed by the Revenue, is required to be ascertained - The Revenue is contending that it was actually the inputs which were destroyed, the appellants stand is that it was the work-in-progress, which was destroyed in the fire - Appellant, right from their first letter onwards, in all their communications addressed to the Revenue, have repeatedly submitted that the fire broke out in the bulk drug unit of the appellant, which unit is located in the manufacturing section. Inasmuch as the bulk drug manufacturing section of the plant is away from the stores, where the inputs were stored, the said fact itself establishes that the inputs had been issued for manufacturing and were work in progress - Manufacturing unit, where drugs are being manufactured is separate from the stores, formulation unit, solvent storage etc. There is a dividing road between the bulk drug manufacturing section and the store meant for storing inputs which is around 20 feet wide road. If that be so, it has to be concluded that goods which are destroyed in the fire in the bulk drug manufacturing section were the goods which have already left the inputs store and as such, same cannot be considered to be inputs destroyed as such, so as to call for reversal of Cenvat credit – Appeal allowed – Decided in favor of Assessee. Limitation – Held that:- Demand having been raised after a period of around two years from the date of incidence of fire and consequent destruction of goods is hopelessly barred by limitation. Revenue is not disputing that the fact of fire was intimated to them on the next date. The Revenue s stand that inspite of repeated reminders, the appellant did not provide the detailed list of the destroyed goods and as such, invocation of extended period is justified cannot be appreciated. The jurisdictional Central Excise authorities are expected to visit the factory of the assessee within a period of 24 hours in case of any report of fire incident and are required to assess the losses. Though we note that the appellant had been responding to all the communications of the Revenue, but presuming that they were not, the Revenue was within their right and power to issue summons to the appellants to call for such details or to visit their factory to find the exact losses – Show-cause barred by limitation – Decided in favor of Assessee.
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2013 (8) TMI 842
SSI Exemption - Use of brand name of others -manufacture of threaded screw made of iron and steel, commonly known as wood screws falling under Heading 7318.10 of the Schedule to the Central Excise Tariff Act, 1985 - Held that:- There was no positive and tangible evidence to hold against the appellant - The entire case of the Revenue was based upon the surmises and conjectures - And it was not justifiable to confirm the demand or to impose penalty upon the appellant on the basis of assumption and presumption - Merely because the full address of the buyers in respect of cash sales were not given in the invoices, thus not making it possible for Revenue to conduct inquiries at their end, by itself cannot be held to be a strong evidence to hold that all those clearances were with the brand name of ‘needle fold’. Prima facie a credit invoice to a person who cannot be located or to a person who denied receipt of the goods was more incriminating than goods sold on cash basis where the address of the buyer was found to be wrong - It was also not clear from which entries from which annexures were picked up to arrive at the value on which demand was upheld – Decided in favour of Assessee.
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2013 (8) TMI 841
Entitlement for MODVAT Credit - Appellant was manufacturer of Diodes and Transistors classifiable under sub-heading 8541.00 of Central Excise Tariff Act, 1985 – The Department was of the view that 90,000 pieces of “Diodes Cell Type un-marked” (imported) involving Cenvat credit were finished product and not entitled to avail modvat credit in respect of those pieces - Held that:- Cenvat credit was rightly availed by the respondent - The jurisdictional adjudicating authority had looked into the process the imported semi-finished diodes were subjected to make them marketable to conclude that the process amounts to manufacture of the finished product and it also amounts to value addition to the semi-finished diodes - There were no contravention of provisions of Rules 51A, 57G, 57F(1), 173(1) and 173G of Central Excise Rules, 1944. The diodes seized by the department were per se not marketable and respondent after processing those semi-finished diodes used to clear the same on payment of excise duty - it was evident that the adjudicating authority had looked into the process to which imported semi-finished diodes were subjected to before marketing the same came to the conclusion that the aforesaid process amount to manufacture as defined under Section 2(f) of Central Excise Act, 1944 - Only fact which was established from the test report was that diode action was observed in the sample at the time of testing - The report does not answer the question as to whether or not the sample could have been used as diodes in electronic equipment nor it answer that the assessee was to required the subject ‘imported semi-finished diodes’ to further process to convert into the value added finished product - the test report in the absence of any other evidence was of no avail to the Department as such order cannot be sustained – Decided against Revenue.
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2013 (8) TMI 840
CENVAT credit on Capital Goods taken on lease from Corporate Ispat Alloys Ltd. (CIAL) - Rule 4(3) of the Cenvat Credit Rules, 2004 - Stay - Held that:- Prima facie the availment of capital goods Cenvat credit in the case by the appellant was not correct, as the words "financing company" in Rule 4(3) of Cenvat Credit Rules cannot be read "as any person". Bar of Limitation – Held that:- Prima facie there was no intimation in this regard to the department - In any case, the point of fact can be examined in detail only at the time of final hearing - while AIL and CIAL had intimated the leasing of their plant and machinery to the appellant and also the payment of amount equal to the Cenvat credit availed by issue of invoices, it was not known as to whether the availment of Cenvat credit by the appellant on the basis of invoices issued by AIL and CIAL was specifically intimated to the department. Appellant directed to to deposit an amount of Rs.6 Crores - stay granted partly.
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CST, VAT & Sales Tax
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2013 (8) TMI 859
Reassessment proceedings on the ground that one Form 3-B filed by the assesse claiming concessional rate of tax on the turnover of raw material i.e. liquid detergent supplied by it to selling dealer holding recognition certificate for an amount exceeds Rs.5 Lakhs in view of Rule 25B (4) of the Rules framed under the U.P. Trade Tax Act is invalid - Held that:- There was sufficient force in the argument of the learned counsel for the assesse that it was not a case of escapement of turnover as contemplated u/s 21 of the Act or under assessment or the like - Allied Motors Private Limited Versus Commissioner of Income-Tax [1997 (3) TMI 9 - SUPREME Court] - the amended Sub-rule (4) of Rule 25-B which includes (ii) of second proviso as it stood on the date of issuance of form 3B will be available to the assesse. The irregularity, if any, was form 3-B curable and it will not in any manner invalidate the form 3-B which had been found valid otherwise - The assesse had fulfilled the conditions of section 4-B (i) (b) of the U.P. Trade Tax Act at least in the spirit of law - Filing of required form was the only mode to prove the existence of certain facts which had been done and if such form was not a forged or fabricated document and there was no element of fraud or suppression of facts, the defect, if any, was more in the domain of procedural part - procedural law lays emphasis on the spirit of law and not on form - The approach in such fact situation of courts should be justice oriented and not to find some fault here or there – Order set aside – Decided in favor of assesse.
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