TMI Tax Updates - e-Newsletter
August 5, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• ST -Renting - merely because the licence fee is split into two components-one being fixed and the other based on revenue sharing, cannot make it non taxable -HC

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• Renting of immovable property - lease agreement - developing certain town - prima facie lease premium is subject to service tax - Tri

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Articles

1. TREATMENT OF EXPENDITURE FOR HIGHER EDUCATION ABROAD FOR EMPLOYEES

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Gross Capital Formation in Industry Was ₹ 3,242,727 Crore in 2012-13

2. Investment of Surplus Funds of CPSES

3. RBI Reference Rate for US $ and Euro

Highlights / Catch Notes

Income Tax

• Inland Storage Facility at Ports Qualifies for Deduction u/s 80IA; Agreement with Visakhapatnam Port Trust Noted.

  Case-Laws - HC : Deduction u/s 80IA - Inland storage facility operation at various ports – there is an agreement between the assessee and the Visakhapatnam Port Trust Authorities that any time the Port Trust can repossess the entire infrastructure facility - deduction allowed - HC
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• Court Affirms Assessee's Right to Capital Gains Exemption Despite Limited Bond Availability u/s 54EC.

  Case-Laws - HC : Capital gains u/s 54EC – assessee cannot be deprived of this right conferred by the Act for no fault of theirs - the availability of the bonds only for a limited time during the period cannot prejudice the assessee's right to exercise the same upto the last date - HC
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• Depreciation Claims Denied Without Capital Expenditure Classification u/s 32(1A) of Income Tax Act.

  Case-Laws - HC : Depreciation - unless the expenditure incurred for construction of the building is treated as capital expenditure, the question of her claiming the benefit u/s 32(1A) does not arise - HC
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• Penalty u/s 271(1)(c) Not Imposed Without Proof of Inaccurate or False Tax Return Details.

  Case-Laws - AT : Penalty u/s 271(1)(c) – Legal expenses disallowed – where there is no finding that the particulars furnished by the assessee in its return are in-accurate or erroneous or false, there is no question of imposing penalty - AT
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• Notice Period Income Qualifies for Deduction u/s 10A: Eligible Undertaking Income Recognized as Tax Deductible.

  Case-Laws - AT : The amount received by the assessee towards notice period is to be treated as income derived from the eligible undertaking and deduction u/s 10A shall be allowed - AT
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• Section 14A Disallowance Excluded from Book Profit Calculation u/s 115JB of Income Tax Act.

  Case-Laws - AT : The disallowance made u/s 14A cannot be included in the book profit for the purpose of section 115JB - AT
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• Court Upholds Revision Order u/s 263: Clubhouse Construction Expenses Not Deductible Without Bylaws.

  Case-Laws - AT : Revision order u/s 263 – The bylaws of the Society or of the club not framed not shown - It was a crucial question whether expenditure incurred on construction of club house ought to be allowed to the assessee while recognizing the revenue - revision upheld - AT
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Customs

• Goods Confiscated u/s 111 Cannot Be Re-exported Despite Fine Payment.

  Case-Laws - AT : Re-export of goods - When the goods are liable to confiscation under Section 111, re-export cannot be permitted on payment of fine - AT
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Service Tax

• Service Tax Levied on Lease Premiums and Rentals for Immovable Property Development, Highlights Taxable Transactions.

  Case-Laws - AT : Renting of immovable property - lease agreement - levy of service tax on amounts collected by way of premium and rental - developing certain town - prima facie lease premium is taxable - AT
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• Court Affirms Service Tax on Renting Property; License Fee Split Doesn't Change Its Status as Consideration for Use.

  Case-Laws - HC : Constitutional validity - renting of immovable property - merely because the licence fee is split into two components-one being fixed and the other based on revenue sharing, cannot by itself lead to a conclusion that the licence fee is not a consideration for use of premises - HC
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• Court Grants Partial Relief to Sub-Contractor, Waives Pre-Deposit After Main Contractor Paid Service Tax.

  Case-Laws - HC : Waiver of pre-deposit - levy of service tax on sub-contractor - main contractor themselves admitted that they have already paid the service tax - stay order modified - partial relief granted - HC
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• Diaphragm Wall and Anchor Slab Construction on Sabarmati River Exempt from Service Tax Under Current Laws.

  Case-Laws - AT : Classification - construction of diaphragm wall with reinforced anchor slab and special fill for Guide Bund, Retention Wall, Guide Wall on the bank of Sabarmati River - activity is not taxable - AT
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• Technical Know-How Transfer Not IPR Service, Stay Granted Under Finance Act 1994.

  Case-Laws - AT : Drawings and designs imported by the appellant - transfer of technical know-how - since the transfer is of permanent nature, it does not fall within the definition of IPR services as defined in the Finance Act, 1994 - stay granted - AT
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• Appellant Pays 25% Penalty u/s 78, Agrees No Refund; Relief Granted to Assessee.

  Case-Laws - AT : Levy of penalty - appellant puts on record that they have paid 25% of penalty under Section 78 and undertakes not to claim refund of the same - Relief granted to assessee - AT
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Central Excise

• Clerical Error in Consolidated Invoices Deemed Genuine; SSI Exemption Eligibility Uncontested by Revenue; Demand Set Aside.

  Case-Laws - AT : Collection of duty while availing SSI Exemption - The clerical error, in the consolidated invoices showing break up of excise duty appears to be genuine as the revenue has not disputed the eligibility of SSI exemption. - Demand was rightly set aside - AT
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• Cenvat Credit Approved for Pipes as Inputs and Service Tax on Pipeline Services for Water Transportation.

  Case-Laws - AT : Cenvat Credit on the pipes which were used for transportation of water as input and the service tax paid on the services rendered for laying of such pipeline and maintenance of such pipelines - credit allowed - AT
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• Penalty Imposed for Procedural Infraction on Cenvat Credit for Moulds and Dies u/r 4(5)(a) in Job Work Case.

  Case-Laws - AT : Cenvat Credit - goods (moulds/dies) removed for Job work - Rule 4(5)(a) - the only infraction the appellant could be attributed is only procedural infraction which only merits imposition of penalty rather than denial of credit - AT
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• Cenvat Credit on Molasses Deemed Acceptable for Sugar Duty Payment: Favorable Assessment for Assessee.

  Case-Laws - AT : Cenvat Credit - Utilization of credit taken on molasses for payment of duty on Sugar - prima facie is in favor of assessee - AT
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• Cenvat Credit Valid Despite Use of Commercial Transport Numbers Without Extra Proof of Unauthorized Removal.

  Case-Laws - AT : Cenvat credit - Clandestine removal - merely because the vehicles numbers were of commercial transport, the said fact alone cannot lead to denial of credit without their being any other evidence. - AT
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• Lost Circulation Control Additives Correctly Classified Under Chapter 47 for Central Excise Regulations Compliance.

  Case-Laws - AT : Classification of Lost Circulation Control Additives (LCCA) - product LCCA is a product derived from cellulosic fibre the classification of the said product under Chapter 47 is correct - AT
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Case Laws:

• Income Tax

• 2014 (8) TMI 76
  Deduction of interest on fixed deposits u/s 80V – Nexus between deposits and payment – Held that:- assessee failed to establish that the money was borrowed for the purpose of payment of taxes and as such the dis-allowance of interest u/s 40A(8) of the Act cannot be interfered with - Following the decision in Hindustan Cocoa Products Ltd v/s Commissioner of Income Tax [1998 (11) TMI 115 - BOMBAY High Court] - Decided against Assessee. Sales promotion expenses – Scope of term ‘other places of work’ as per Explanation 2 to section 37(2A) – Held that:- Whether expenses incurred in a hotel would fall within “or other place of their work” appearing in Explanation 2 to Section 37(2A) of the Act, would entirely depend on the facts of each case - Nothing has been brought to notice to controvert the findings or to show that they are perverse or vitiated by any error of law apparent on the face of the record - It can hardly be argued that by the employees accompanying their customers for lunches and dinner, they were engaged in work and would therefore fall within “other place of their work” as contemplated in the Explanation – Decided against Revenue.

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• 2014 (8) TMI 75
  Acceptance of book loss on sale of shares – Sale colourable device or not – shares were sold to the joint venture partner - Held that:- Assessee was required to obtain approval/permission of the Reserve Bank of India and Ministry of Industry, Department of Industrial Policy and Promotion to enable Plansee to purchase existing shareholding of the assessee - assessee had relied upon the valuation report, which was accepted by the Reserve Bank of India, Exchange Control Department when they granted express permission - Revenue submitted that the valuation report was ambiguous and mentions that the Seil Tizit Ltd. was not a listed company and the market price was not available. On this basis it cannot be held that the consideration declared and paid was sham and not the correct amount, which was paid - valuers do not normally undertake the exercise and valuation are made accepting and on the basis of audited accounts - It was open for the AO to point out and state why and for what reason the figures in the books of account were false and incorrect and the data/information was unreliable and should not have been the basis of the valuation - valuation was undertaken, report made as was required to get requisite approval under the exchange control regulations - it cannot be assumed that underhand or undeclared sale consideration was paid – No substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (8) TMI 74
  Exclusion of amount from export turnover – Deduction u/s 80HHC – Held that:- The assessee himself has accepted the order of the Tribunal dated 26.2.2009 holding that the benefit u/s 80HHC of the Income Tax Act will not accrue to the present transaction – the petition is itself stands disposed – Decided against Revenue.

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• 2014 (8) TMI 73
  Deduction u/s 80IA - Inland storage facility operation at various ports – Held that:- The initial claim made by assessee after complying with the provisions of Section 80IA(4)(b) of the Act for the AY 2000-01, was allowed by the AO - The Circular No.793 dated 23.6.2000 was applicable from the AY 2001-02 onwards - CBDT issued another circular No.10 of 2005 dated 16.12.2005 withdrawing the condition of transfer of assets to the Central Government, State Government or the Local Authority - when there is an agreement between the assessee and the Visakhapatnam Port Trust Authorities that any time the Port Trust can repossess the entire infrastructure facility and the assessee has an obligation to transfer the facility to the Port Trust Authorities on such compensation as may be determined by the Authorities, the assessee is entitled for deduction u/s 80IA of the Income Tax Act – thus, no substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (8) TMI 72
  Capital gains u/s 54EC – Investment in REC bonds beyond stipulated period - Whether the Tribunal has jurisdiction and was right in holding that the assessee is entitled to capital gains exemption u/s 54EC – Held that:- The assessee can make his choice based on what is available or wait for a better option - assessee chose to wait but by the meantime, the option ran out and hence had to wait till the next –opportunity – Relying upon Commissioner of Income Tax v. Cello Plast [2012 (8) TMI 527 - BOMBAY HIGH COURT] - the bonds were available for a limited time during this period between 1.7.2006 to 3.8.2006, makes no difference - The respondents had time till 21.9.2006, to invest in these bonds to avail the benefit u/s 54EC – assessee cannot be deprived of this right conferred by the Act for no fault of theirs - the availability of the bonds only for a limited time during the period cannot prejudice the assessee's right to exercise the same upto the last date - The bonds were admittedly not available except during the said period – no substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (8) TMI 71
  Various expenses disallowed – Binding precedent - Held that:- The expenses incurred in foreign currency on telecommunication charges and providing technical services outside India should not be excluded from the total turnover for the purpose of computation of deduction u/s 10A – Relying upon Commissioner of Income Tax v/s Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT] - merely because the SLP against the Division Bench judgment in Gem Plus Jewellery India Ltd is pending before the SC, it will not permit to discard and brush aside the binding precedent – No substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (8) TMI 70
  Depreciation - Expenses on construction of building on leasehold land – Applicability of section 32(1A) – Held that:- The expenses incurred by the assessee falls into the second category – Following the decision in CIT Vs. MADRAS AUTO SERVICE PVT. LTD [1998 (8) TMI 1 - SUPREME Court] - unless the expenditure incurred for construction of the building is treated as capital expenditure, the question of her claiming the benefit u/s 32 (1A) does not arise - The Act does not maintain any distinction as to the purport of capital expenditure with reference to different provisions - Either it has to be treated as capital expenditure for all purposes covered by the Act or not at all – Decided in favour of Revenue. Rents received from building property on leasehold land – Income from business or house property – Held that:- Assessee was treated as lessee, may be for a period of 30 years and for certain years, the income derived from the building was treated as the one from business -The construction of the building on the land taken on lease was obviously for the purpose of business and not with an intention to own it - If the intention of the respondent was to own the property, the transaction would have been different altogether - Though the lease is one of the forms of transfer of property, it does not lead to conferment of rights of ownership - That would be possible only when a sale as defined under Section 54 of the Transfer of Property Act takes place – income to be treated as business income - Decided against Revenue.

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• 2014 (8) TMI 69
  Reopening of assessment u/s 147 r.w section 148 - Disclosure of facts - Held that:- AO formed his opinion that the income had escaped assessment only on re-examination of the records and not from any other information or any new or additional fact coming to his knowledge – Relying upon Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] - if to a set of facts and circumstances, the AO has applied his mind and he was of the belief that there was no escapement of income then for invoking the provisions of section 147 of the Act, he is precluded, on the basis of same facts and circumstances, to say that he has reason to believe that income of the assessee has escaped assessment - the AO had not come to a conclusion that the full disclosure of the facts was not made by the assessee or that the income had escaped assessment on account of failure or omission of the assessee to make a true and full disclosure of material facts - assessment was reopened after four years and the AO had not attributed any failure on the part of the assessee to disclose truly and fully the material which required disclosure for making assessment, the action of the AO in reopening the assessment u/s 143(3) r.w. section 147 suffered from lack of jurisdiction - the reopening of assessment u/s 147 is set aside – Decided in favour of assessee.

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• 2014 (8) TMI 68
  Penalty u/s 271(1)(c) – Legal expenses disallowed – Expenses personal in nature or not – Held that:- The deduction claimed by the assessee on account of legal expenses was disallowed by the AO in both the years by treating the said expenses as of personal nature – assessee contended that similar legal expenses incurred has been capitalized in the subsequent years after having come to know about the disallowance made in the years which again goes to show the bonafide of the assessee - all the material particulars relevant to the claim made by the assessee were fully and truly furnished by the assessee - the legal expenses claimed by the assessee were actually incurred by him – Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - where there is no finding that the particulars furnished by the assessee in its return are in-accurate or erroneous or false, there is no question of imposing penalty u/s 271(1)(c) of the act merely because the claim of the assessee for deduction is disallowed in the quantum proceeding – thus, it is not a fit case to impose penalty u/s 271(1)(c) of the Act and the CIT(A) is not justified in confirming the penalties imposed by the AO for both the years – Decided in favour of Assessee.

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• 2014 (8) TMI 67
  Unaccounted job work charges – Addition on impounded bill books – Held that:- The assessee could not place any evidence to co-relate that the entire job work charges shown were duly recorded in its books of account – there was no infirmity in the order of the CIT(A) in this regard and the addition is confirmed – the assessee could not place any evidence to explain that the cash sales shown in the bill book, which was duly recorded in the regular books of account - Decided against Assessee. Undisclosed capital employed – Held that:- CIT(A) reduced the amount to Rs. 5 lakhs - the assessee has made sales outside the books of account, in which additional capital is required and the CIT(A) has reduced the addition from Rs. 9 lakhs to Rs. 5 lakhs in this account - no further interference is needed for in the order of the CIT(A) – Decided against Assessee.

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• 2014 (8) TMI 66
  Penalty u/s 271 – Rejection of books of accounts and estimated net profit – Held that:- The books of account of the assessee were rejected by the AO have invoked the provisions of section 145 of the Act after noting discrepancy in the maintenance of the books of account - once the books of account are rejected and net profit is estimated, penalty u/s 271(1)(c) of the Act cannot be attracted, as there is no material on record to establish as to how assessee has concealed the income or has furnished inaccurate particulars of income for attracting penalty under section 271(1)(c) of the Act – Relying upon Naresh Chand Agarwal vs. CIT [2013 (6) TMI 68 - ALLAHABAD HIGH COURT] - in a case of estimation of income after rejection of books, no penalty could be imposed under section 271(1)(c) of the Act – thus, once the books of account are rejected and net profit is estimated by the AO, penalty u/s 271(1)(c) of the Act cannot be imposed – Decided in favour of Assessee.

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• 2014 (8) TMI 65
  Unexplained loan u/s 68 – Interest paid on loan – Held that:- CIT(A) has considered the remand report of the AO - the explanation given by the assessee along with confirmed copy of accounts and respective bank statement is prima-facie in order – the parties are assessed to tax - on the basis of the findings, he has come to the conclusion that under these facts, no addition can be made u/s 68 or 69 of the Act - regarding the advance given to M/s Yog International Pvt. Ltd. and M/s Oil Emporium (Proprietorship concern), it is noted by the CIT (A) that the advances were given by the assessee in his individual capacity whereas the borrowed funds were utilized in his proprietorship concern - there is no nexus between the borrowed funds and the advances given – thus, the order of the CIT(A) is upheld – Decided against Revenue. Unexplained jewellery found – Held that:- The addition have been deleted by CIT(A) on the basis of receipt of jewellery as per WILL of late Mama of the assessee Shri Shyam Lal Garg - the notarized copy of Will and a few marriage photographs have also been filed and placed on record - The second addition was deleted by CIT(A) on the basis that the addition is made in the hands of the assessee on protective basis and the same was added on substantive basis in the hands of the wife of the assessee Smt. Sneh Lata Gupta - the Will of Mama of the assessee Shri Shyam Lal Garg was produced before the AO - the Will was rejected by the AO on suspicion alone without giving any concrete reason - Decided against Revenue. Unexplained agricultural income – Bonafide of agricultural operations not proved – Held that:- The assessee has submitted six yearly "Khatauni" regarding land holding of the assessee, it is noted by CIT (A) that the assessee owns land of about 4.89 hectare - the assessee owns a tractor which is exclusively used for the purpose of carrying on agricultural activities - the agricultural income has also been accepted by the Department from year to year – order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (8) TMI 64
  Transfer Pricing Adjustment – Income from international transactions – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee was justified in undertaking internal bench marking analysis on standalone basis by placing on record working of operating profit margin from international transactions with AEs and transactions with unrelated parties undertaken in similar functional and economic scenario, and the same should be the basis for determination of arm’s length price in respect of international transactions undertaken with the associated enterprise - the matter is remitted back to the AO for fresh adjudication and for the purpose of determining the arm’s length price in respect of the international transactions undertaken with the associated enterprise by making internal comparison of profitability form the international transactions with associated enterprise and profitability from the international transactions with unrelated parties after allocating respective revenues and expenses to both the segments – Decided in favour of Assessee. GE-GDC different unit or the extension of existing STP – Held that:- Assessee company is engaged in the activities of software development and related services - The software related business is being carried out from the STP Unit and the exemption u/s 10A has been claimed - new STP Unit was treated by the assessee to be an independent unit for the purpose of exemption claimed u/s 10A of the Act – AO has not accepted the claim of the assessee by holding that the new unit is nothing but an extension of the existing unit and not entitled to separate deduction of exemption u/s 10A - as decided in assessee’s own case for the earlier assessment year, it has been held that the new unit cannot be treated to be as one and same unit with the existing unit for the purpose of computing deduction u/s 10A of the Act – Decided in favour of Assessee. Miscellaneous income part of business or income from other sources – Held that:- The notice period pay was to be considered as income derived by the eligible undertaking and as such notice period pay would go to reduce the expenses on account of salary and the real nature of the transaction will not have any affect on the income derived by the assessee from the eligible undertaking - because the assessee instead of crediting the notice period pay to the salary account and reducing the salary expenses, had shown the amount separately in the profit & loss account, that book-entry by itself would not change the real nature of transaction and it was accordingly held that the recovery of notice pay represents income derived from the industrial undertaking – thus, the amount received by the assessee towards notice period is to be treated as income derived from the eligible undertaking and deduction u/s 10A shall be allowed – Decided in favour of Assessee. Ad-hoc disallowance of interest expenses - Interest paid on short term loans which are invested in acquisition of fixed assets shall be capitalized along with fixed assets or not – Held that:- The interest expenditure on the utilization of borrowed funds for the acquisition of new assets, from the date of its acquisition till the date when the asset is put to use, is to be disallowed - the interest paid on the capital borrowed for acquisition of an asset for extension of existing business, shall not be allowed as deduction, from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was first put to use - no efforts has been done by the AO to find out the date on which the assessee borrowed the fund for acquisition of asset in the relevant AY and we also find that no attempt has been made by the AO to find out on which date the asset thus procured with the said borrowed fund have been put to use - Only after the dates has been found out then only one can compute the disallowance as prescribed by the proviso to section 36(1)(ii) of the Act – thus, the matter is remitted back to the AO with a direction to AO to find out the date on which the assessee borrowed the fund for acquisition of asset and also to find out on which date the asset for extension of business thus procured has been put to use – Decided partly in favour of Assessee.

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• 2014 (8) TMI 63
  Reduction of GP – Unaccounted expenses – Held that:- The assessee had adopted 5% rate of profit for all the years - As against that the AO had adopted an average profit at 5.17% - The net profit percentage by CIT(A) had varied from 5.4% to 8.9% in AY 2001-02 and AY 2002-03 - It has further varied from 8.5% to 0.79% in AY 2003-04 to 2007-08 as per the calculation appeared of the appellate order - overall average arrives at 5.8% for those four years - But in a situation when there is no uniformity and vast variation in the percentage of year wise profits, which had shown steep rise up to 8.9% and thereafter steep fall up to 0.79% hence seems to be impractical method of calculation of profit - there were no sales/purchase Bills were detected, no unaccounted coal stock was unearthed, no assets beyond the income offered was seized and the application of unaccounted income has matched with the assets/expenditure hence the income so offered by and large appears to be reasonable - Still to cover up the difference between the disclosure of 1.07crore and income offered for all the years by adopting rate at 5%, for the AY 2001- 02, 2002-03, 2003-04, the profit is to be calculated by adopting net profit rate at 5.2% - Decided partly in favour of Revenue. Unaccounted transactions of cash purchases – Disallowance u/s 40A(3) – Held that:- The transaction being not a purchase and sale of the assessee in his own rights, there was no question of disallowance of any expenditure because the profit was declared on estimation - hence, the provisions of Section 40A(3) was not to be attracted – relying upon Commissioner of Income-Tax Versus Hynoup Food And Oil Ind. P. Limited [2005 (2) TMI 99 - GUJARAT High Court] – the issue of the applicability of the provisions of Section 40A(3) is to be decided on the merits and facts of this case only - even after the search was carried out there were no evidence of expenditure and the AO was not able to lay hands on unaccounted purchases - Because the evidence of total expenditure or purchases was not available to the Revenue, the assessee as well as the AO, both have decided to determine the income by applying a reasonable estimate of profit –the estimation was very close to the income offered by the assessee – Decided against Revenue. Undisclosed closing stock – Held that:- CIT(A) has correctly appreciated the facts of the case and held that in the absence of any stock found at the time of search there was no justification to tax unaccounted stock in the hands of the assessee - the AO was not definite about the stock - no authentic finding was given but it was held by him that there might be stock in godown - in such a situation CIT(A) was correct in deleting the addition which according to him was based upon conjecture only – Decided against Revenue.

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• 2014 (8) TMI 62
  Admission of additional evidence – Income from undisclosed sources – Held that:- AO could have easily realized that there was a prima facie mistake on the part of the Revenue to process the information received through the A.I.R - The A.I.R information was actually regarding the cash deposits through ABN Amro Bank - the cash deposits are small amounts on various dates - There is also cash withdrawal - assessee’s claim is that cash deposits are out of sale proceeds received in cash and cash withdrawal are for making purchases from wholesalers and small manufactures –AO without verify the matter proceeded to make an addition u/s 69 of the Act - CIT(A) has correctly analyzed the issue and reduced the addition - CIT(A) finding has not been controverted/dispelled by the Revenue – order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (8) TMI 61
  Penalty u/s 271(1)(c) – Capital gains liability u/s 50C – Held that:- The calculation of capital gains was ‘nil’ and on this belief transaction was not disclosed in assessee’s return of income - the assessee became liable for capital gain and he offered the same for taxation - The revised computation of capital gain was accepted by the Revenue and exemption u/s 54 was duly granted to the assessee - capital gains liability arose on account of application of sec. 50C of the Act - stamp duty value of the subject property was taken as the consideration deemed to have been received by the assessee - In view of the deeming provision u/s 50C, the assessee has made liable for capital gains tax - There has been no concealment or deliberate Act on the part of the assessee in furnishing inaccurate particulars of income, warranting imposing of penalty u/s 271(1)(c) of the Act - relying upon CIT Vs Harnarain [2011 (10) TMI 14 - DELHI HIGH COURT] - no penalty can be imposed, if the assessee surrenders his income voluntarily even after receipts of questionnaire, in absence of detection or information of concealment by the Revenue - the order of the CIT(A) has correct and in accordance with law and no interference is called for law – Decided against Revenue.

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• 2014 (8) TMI 60
  Land development charges and related expenses u/s 37(1) – Failure to produce books of accounts and documentary evidences – Held that:- CIT(A) has given a very cryptic finding by stating that during the year GP margin has been shown at 0.95% as against 0.20% in the immediate preceding year - The addition of the whole expenditure claimed, shows that the AO has acted in arbitrary manner without applying his mind - This assessment cannot be termed as “best judgement assessment” u/s.144 and the addition deserved to be deleted – the finding of CIT(A) is not correct - CIT(A) has not given finding as to how the expenditure claimed in the P&L account can be allowed without any supporting evidence – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee. Unexplained investment u/s 69 – Failure to explain the source of investment – Held that:- CIT(A) has simply stated that the investment has been fully explained by the assessee - CIT(A) has not sought any remand report from the AO - this ground is also restored back to the CIT(A) for fresh adjudication – Decided in favour of Revenue. Unexplained cash credits u/s 68 – Failure to produce documentary evidences – Held that:- The AO has observed that there is an increase in unsecured loans and the assessee was asked to explain the increase in secured loans and to furnish the details - CIT(A) has given a finding on fact that the amount does not represent cash credit but this is in fact loan/advance given – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Revenue.

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• 2014 (8) TMI 59
  Disallowance u/s 14A r.w. Rule 8D - Inclusion of amount in adjusted book profit u/s 115JB – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that relying upon Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] and the provisions of rule 8D, has remanded the issue to the file of the AO for re-examination - it is necessary for the assessee to point out how each item of expense debited to its profit and loss account is wholly incurred for the purpose of earning income which is taxable – thus, the matter is remitted back to the AO for re-examination. The direction is made that the addition of disallowance made u/s 14A cannot be made while computing book profit u/s 115JB of the Act - the AO has to record a categorical finding as to how he was not satisfied with the claim of the assessee regarding the expenditure incurred for earning the exempt income - The disallowance made u/s 14A cannot be included in the book profit for the purpose of section 115JB – Decided in favour of Assessee.

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• 2014 (8) TMI 58
  Revision order u/s 263 – Reframing of assessment u/s 143(3) – Held that:- The AO has accepted accounting entries as it is without making any inquiry on the issues entertained by the CIT in the 263 proceedings - the cost incurred by the assessee towards the club house has to be examined - assessee will not have any say in admission of the members in the club house or it will not enroll any outsider as a member - relying upon Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai [2006 (2) TMI 201 - ITAT BOMBAY-H] - The bylaws of the Society or of the club not framed not shown - It was a crucial question whether expenditure incurred on construction of club house ought to be allowed to the assessee while recognizing the revenue under the percentage completion method - Commissioner has rightly held that the assessment order is erroneous which has caused prejudice to the Revenue – Decided against Assessee.

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• Customs

• 2014 (8) TMI 80
  Confiscation of gold u/s 111 - contravention of notification No. 9/96 dated 22.1.1996, issued under Section 11 - Held that:- The prop. Of the said M/s. Dhancholia had also deposed to have sold the gold to the appellant. As such, by producing the said evidence, the appellant has discharged the initial burden of proof. If the revenue seeks to establish the said stand as false, it is for them to produce the evidence. Mere dismissal of the same, as an afterthought, when there is virtually no evidence to demolish the said stand of the appellant, especially when the same stand corroborated by production of invoice as also by the statement of Shri Sada Narain Sharma, prop. of M/s. Dhancholia & Sons, Chandni Chowk, New Delhi, is not legal and proper. Similarly, reliance on the initial statement, which stand retracted at the time of bail application and duly substituted by following statement is also, not in accordance with law. The said statement is not confessional in the strict sense, in as much as, the same nowhere admits the smuggling of the gold by the appellant himself and is based upon hear-say evidence. Further, there is admittedly no corroboration to the said retracted statement and no evidence indicating and establishing the smuggled natural of the gold - no merits in the Revenue’s case for confiscating of the gold or for imposition of penalties - Decided in favour of assessee.

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• 2014 (8) TMI 79
  Attempt to export of prohibited goods - Search and seizure of goods - Penalty - Knowledge of prohibited goods - Held that:- Prima facie, it is difficult to conclude that the applicants were aware of the concealment of red sanders because of the wrong classification of the goods indicated in the shipping bill as per the instructions of exporter. No other material to indicate that CHA was aware of the prohibited goods in the container is on record. Therefore, at this stage, I consider it proper to waive the requirement of pre-deposit of penalties for admission of appeals. Further, there shall be stay on collection of penalty amounts during pendency of the appeals - Stay granted.

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• 2014 (8) TMI 78
  Re-export of goods - Confiscation of goods already done - Commissioner has allowed the importer to re-export the goods and has reduced the fine for redemption of the confiscated goods - Held that:- When the goods are liable to confiscation under Section 111, re-export cannot be permitted on payment of fine. In this case also, Hooka Flavour containing nicotine was a restricted item and was imported without licence and there was under-valuation also rendering the goods liable to confiscation - Following decision of Commissioner of Customs, Kolkata Vs Grand Prime Ltd. [2003 (7) TMI 73 - SUPREME COURT OF INDIA] - Decided in favour of Revenue.

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• 2014 (8) TMI 77
  Classification of goods - Mis declaration of goods - Import of rough dolemite stone blocks or rough marble blocks - Confiscation of goods - Redemption fine - Held that:- Once this Tribunal has passed an order granting stay against recovery of penalties and waiving the requirement of pre-deposit of penalties, there is no question of recovery of any amount under the Head of penalties or duties from the appellants. Only the amount that the department is entitled to recover would be the redemption fine which is covered by the bank guarantee. The bank guarantee is executed only to safeguard the quantum of redemption fine and once the duties and penalties are stayed, the right course for the revenue is to encash the bank guarantee to the extent of the amount of redemption fine and allow the balance amount. In view of the above discussion, we find that this application has to be allowed and the concerned Commissioner is required to be directed to encash the bank guarantee to the extent of redemption fine and bank guarantee for the rest of the amount cancelled - Decided partly in favour of assessee.

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• Service Tax

• 2014 (8) TMI 103
  Renting of immovable property - lease agreement - levy of service tax on amounts collected by way of premium and rental - job of development of Navi Mumbai under the Maharashtra Regional Town Planning Authority under the said Act for developing certain town - Held that:- The expressions other similar arrangements used in Section 65(90a) and any other service in relation to such renting used in Section 65 (105) (zzzz) are expressions of width and amplitude. It would include not only the actual leasing or renting but also any other activity in relation to such leasing/renting. Therefore, the agreement to lease which is entered into prior to the actual leasing and which is in relation to the lease undertaken subsequently subject to construction of building, etc. would also come within the purview of service tax levy with effect from 01/07/2010, if not before. The distinction sought to be made by the appellant in respect of "agreement to lease" and the "lease agreement" would not matter and the levy would apply, in both the situations. Performance of sovereign function - Held that:- As regards the argument that the appellant was an agent of Government of Maharashtra and was performing a statutory function and therefore, the levy of service tax would not apply, this argument is completely misplaced. - The law does not distinguish between the Government and non-Governmental agencies. It merely says that the activities of rendering of services (as defined in law) would be leviable to tax. Regarding vacant land - Held that:- Prior to 01/07/2010, there was no provision for levy of service tax on vacant land given on lease. Considering the fact that the appellant does not have a prima facie case, especially for the period post 01/07/2010 and also taking into account the financial hardship pleaded, we direct the appellant to make a pre-deposit of Rs. 20 Crore (Rupees Twenty Crore only), which is approximately the demand for the normal period of limitation - stay granted partly.

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• 2014 (8) TMI 102
  Constitutional validity - renting of immovable property - use of premises - licence fee is split into two components—one being fixed and the other based on revenue sharing - section 65(90a) read with section 65(105)(zzzz) of the Finance Act, 1994 - validity of the Notification No.24/2007 dated 22.05.2007 and Circular No. 98/1/2008/ST dated 04.01.2008 - Held that:- merely because the licence fee is split into two components-one being fixed and the other based on revenue sharing, cannot by itself lead to a conclusion that the licence fee is not a consideration for use of premises. In a given circumstance, it is quite possible that lease rentals or fees for use of space may be based on the revenue that may be generated from use of the premises, in the course of business. This would not alter the nature of transaction or the nature of interest in the immovable property that is created in favour of the lessee/licencee. - Decided against the assessee. The question whether an arrangement is in nature of a joint venture where two or more parties come together with their separate contribution towards a common venture, would depend on various factors including the extent of participation of the co-venturers in the joint venture. We do not propose to examine the extent of participation of DIAL in the operation of the duty free shops in the present petition, as the same is a question of fact and the writ petition is bereft of any pleading in this regard. - Decided against the assessee. The contention that the licence granted by DIAL to the petitioner cannot contain any element of service on account of it being a statutory obligation delegated by the AAI to DIAL is not acceptable. - Decided against the assessee. Whether DIAL is liable to pay the cost for obtaining the bank guarantee furnished by the petitioner - Held that:- DIAL was fully aware of the implications of the stay order granted by this Court and had consented to an arrangement as recorded in the award dated 30.03.2011. In the given circumstances, it was not open for DIAL to seek that the petitioner deposit the entire amount of service tax as the same was contrary to the consent award dated 30.03.2011. Despite having a consent award in its favour, DIAL had insisted on the petitioner securing them by a bank guarantee. In the circumstances, it is only fair that DIAL be asked to bear the cost for the bank guarantee furnished by the petitioner.

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• 2014 (8) TMI 101
  Waiver of pre-deposit - Commercial Training and Coaching Services - training provided in writing codes using languages like UNIX or Oracle or Java - appellant directed to make a pre-deposit of Rs. 35,00,000/- by the tribunal - Held that:- It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no legs to stand on, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. Taking note of the fact that the appellant had already paid a sum of Rs. 7,95,612/- towards tax, the appellant shall make a pre-deposit of Rs. 15,00,000/- (Rupees Fifteen Lakhs only) - the order of the Tribunal dated 14.5.2013 dismissing the appeal for non-compliance of the stay order set aside and the appeal restored to the file of the Tribunal - Decided partly in favor of assessee.

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• 2014 (8) TMI 100
  Waiver of pre-deposit - levy of service tax on sub-contractor - main contractor themselves admitted that they have already paid the service tax - appellant directed to to deposit a sum of Rs. 30 Lakhs by the tribunal - Held that:- This Court, on a consideration of the above plea of financial hardship, deems it fit and proper to modify the order of the Tribunal so as to enable the appellant in this case to pursue the appeal without suffering on account of the liability of pre-depositing a huge amount. The substantial plea made by the appellant is that the main contractor has discharged the service tax liability and, therefore, the said liability need not be fastened on the appellant. But, this Court is of the view that the said issue that has to be considered by the Tribunal only in the appeal. However, the payment of service tax liability by the main contractor, which is a prima facie case, put forth by the appellant, enures to the benefit of the appellant. The order of the Tribunal dated 24.9.2013 is modified to the effect that the appellant shall make a pre-deposit of Rs. 15,00,000/= (Rupees Fifteen Lakhs only) - partly decided in favor of assessee.

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• 2014 (8) TMI 99
  Validity of order passed after considerable delay - principle of natural justice - Commercial Training or Coaching service - petitioner was issued with a show cause notice on 01.10.2012, a personal hearing was given to the petitioner on 26.02.2013, on which date, the petitioner submitted his written submissions putting forward his objections for levying service tax. - impugned order came to be passed after 11 months from the date of personal hearing given to the petitioner - petitoiner also relied on the Circular dated 05.08.2003 issued by the Central Board of Excise & Customs, New Delhi wherein directions have been given to the effect that in cases where personal hearing have been concluded, the copy of the order has to be communicated within 5 days or within 15 days or at most one month from the date of conclusion of personal hearing. Held that:- This argument of the learned counsel for the petitioner cannot be accepted. As per the decision of the Honourable Supreme Court Telestar Travels Pvt Ltd., vs. Special Director of Enforcement [2013 (2) TMI 396 - SUPREME COURT] the delay by itself will not be a ground for setting aside an order, which may otherwise be legally valid and justifiable, however, such order only requires a closer and careful scrutiny by the Court. In such event, the petitioner has to prove that the delay by itself has caused prejudice to him. - Decided against the assessee. Decision of tribunal - retrospective or prospective - Held that:- It is relevant to refer to the decision of the Honourable Supreme Court in the case of Assistant Commissioner, Income Tax, Rajkot vs. Saurashtra Kutch Stock Exchange Ltd., [2008 (9) TMI 11 - SUPREME COURT] wherein the Honourable Supreme Court held that if a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. Therefore in the light of the above decision of the Honourable Supreme Court, the reliance placed by the learned counsel for the petitioner on the order passed by the CESTAT cannot be of any use to the case of the petitioner. Even on merits, it has to be noted that the petitioner is an institution which is imparting training to the students in various activities. Admittedly, the petitioner institution is collecting fee from the students for imparting such training - Demand of service tax confirmed - Decided against the assessee.

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• 2014 (8) TMI 98
  Cenvat Credit - Extended period of limitation - provided taxable and non-taxable services both - reversal of credit under Rule 6 of CCR, 2004 - appellant has used the entire Cenvat Credit for discharge of the service tax liability on the output services during the period October 2004 to September 2007; wherein during the period they were supposed to use only 20% of the amount of the Cenvat Credit. - Held that:- appellant has contravened the provisions of the Cenvat Credit Rules, 2004 - the amount of Rs. 51,85,498/- paid by the appellant through PLA / cash is over and above the same amount which has been debited by them during the period October 2004 to September 2007 in their Cenvat Credit account. - lower authorities directed to allow the appellant to avail Cenvat Credit of an amount of Rs. 51,85,498/- as appellant has made good the said amount by paying it in cash. Levy of penalty - waiver of penalty u/s 80 - Held that:- appellant could not be charged with intentional evasion of service tax liability by utilizing excess amount of the Cenvat Credit for discharging service tax liability, in as much that there is no dispute that appellant had sufficient balance in the Cenvat Credit account. - the penalties imposed by the adjudicating authority under Section 76 and 78 of the Finance Act, 1994, are very harsh and unwarranted - the appellant is subsidiary of a Government of Gujarat undertaking and also noting that appellant could have had a bonafide belief that the ‘digital signature certification services’ would not fall under the category of exempted services, by invoking provisions of Section 80 of the Finance Act, 1994, we hold that appellant has made out a reasonable and justifiable cause for setting aside the penalties. - penalty waived - Decided partly in favor of assessee.

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• 2014 (8) TMI 97
  Classification - Construction service or Site Formation and Clearance, Excavation and Earthmoving and Demolition Services - appellants undertook construction of diaphragm wall with reinforced anchor slab and special fill for Guide Bund, Retention Wall, Guide Wall on the bank of Sabarmati River - Held that:- The said work is to reclaim a part of the river bad land of the Sabarmati River. Keeping in view, the nature of activity, we have no hesitation in holding that the whole activity is in connection with the reclamation of land. - even from the expenditure angle the amount spent in the said activity would form the major portion of expenditure in connection with the reclamation of the land (excluding the facilities like commercial complex, residential complex, roads etc. to be construed later on the reclaim land.) - the activity undertaken by the appellants are site formation and clearance, excavation and earth moving and demolition service. Exclusion from taxable service - Held that:- the water body is already existing what is being done is to renovate the banks of the river. In view of this position, we are of the view though the activity undertaken by the appellants are covered by the main definition but gets excluded due to the exclusion clause. In view of this analysis, the activity undertaken by the appellant will not get covered by the "site formation and clearance, excavation and earth moving and demolition service" and accordingly no service tax would chargeable. - Demand set aside - Decided in favor of assessee.

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• 2014 (8) TMI 96
  Drawings and designs imported by the appellant - transfer of technical know-how - demand under the category of design service - The contention of the appellant is that the same transaction cannot be treated as supply of goods for the purpose of Customs duty and supply of services for the purposes of service tax liability - Held that:- the entire transaction was treated as supply of goods for the purpose of customs duty and if that be so, we do not understand how the very same transaction can be treated as supply of service and levy of service tax can be made on the entire value of transaction once again. - the entire transaction is one of transfer of technical know-how inasmuch as R&D cess under Section 3 of the R&D Cess Act has been paid and therefore the transaction does not merit to be treated as ‘design services'. Design services would come within the category of IPR inasmuch as the supply of the drawings and designs, the foreign entities have applied for patent and since the transfer is of permanent nature, it does not fall within the definition of IPR services as defined in the Finance Act, 1994. The appellant has declared the transaction to the concerned authorities at the relevant time and there is no suppression of any fact or withholding of any information from any of the authorities. - stay granted.

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• 2014 (8) TMI 95
  Levy of penalty - Goods Transport Agency services - Reverse Charge - service tax with interest was paid before issue of SCN - assessee contended that no case of active concealment is made out - Held that:- no case of active concealment or willful suppression of facts, fraud or default has been made out against the appellant on the plain reading of the show-cause notice - it is an admitted fact that the appellant has paid the Service Tax along with interest before issue of show-cause notice under proper intimation to the department. In this view of the matter, the appellant has fulfilled the condition precedent in law and the requirement of Section 73(3) of the Finance Act, 1994 and is entitled to the benefit provided thereunder. - appellant puts on record that they have paid 25% of penalty under Section 78 and undertakes not to claim refund of the same. - Relief granted to assessee - Decided in favor of assessee.

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• Central Excise

• 2014 (8) TMI 90
  Cenvat Credit - input service - motor cab - appellant had used the bus for its staff - Nexus with manufacturing activity - Held that:- the department's case was that the bus was being used to transport the employees of the appellant and contended that CENVAT credit could only be given to motor cab and could not be given to a bus since more than six passengers' travel on a bus - Tribunal has gone beyond the pleadings in rejecting the appeal of the appellant, on the ground, that no evidence was filed to show that the bus was actually being used to ferry the employees of the appellant. Cenvat Credit on event management programme - denial of credit on the ground that expenses were incurred outside the factory premises - Held that:- There was no dispute before the lower appellate authority that the event management programme had not occurred and expenses were not incurred by the appellant. The question of filing proof of such expenses before the Tribunal consequently did not arise. The Tribunal committed a manifest error in rejecting the appeal of the appellant, on the ground, that no proof of the event taking place, had been filed by the appellant, such as poster, photograph and advertisement. An opportunity should have been given by the Tribunal to the appellant to produce such evidence before the Tribunal - matter remanded back - Decided in favor of assessee.

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• 2014 (8) TMI 89
  Collection of duty while availing SSI Exemption - Demand u/s 11D - The main allegation of the department is that the respondent realized the duty from IOCL but not deposited the same with the department. - Held that:- It is not a case here that respondent have collected in excess of excise duty over and above what was paid. - as per the contract, IOCL paid only fixed amount of Rs. 300/- per cylinder as per their approved NDP rate and nothing extra irrespective of the fact whether the respondents are availing SSI exemption or clearing on payment of duty. The only lapse on the part of the respondent is while opting for SSI exemption from 1.4.2005, the computer generated invoices continued to indicate the excise duty, ie. from 1.4.2005 to 14.5.2005. - the respondent has not collected any excess amount over and above the price of the cylinder which is fixed at NDP by IOCL which is inclusive of excise duty. The respondent had charged only Rs. 300/- while availing the exemption and continued to charge Rs. 300/- even after crossing the exemption limit. The clerical error, in the consolidated invoices showing break up of excise duty appears to be genuine as the revenue has not disputed the eligibility of SSI exemption. - Demand was rightly set aside - Decided against the revenue.

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• 2014 (8) TMI 88
  Cenvat Credit - manufacturing of Supari - Supari has to be considered as non-excisable - Held that:- In the case of Narmada Chematur Pharmaceuticals Ltd. (2004 (12) TMI 93 - SUPREME COURT OF INDIA), the Honble Supreme Court held that the amount of cenvat / modvat credit wrongly availed is exactly equivalent to the amount of excise duty paid by not availing the exemption, the consequence is revenue neutral and hence demand for such wrong availment of credit rightly quashed by the Tribunal. - Decided in favor of assessee.

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• 2014 (8) TMI 87
  Cenvat Credit on the pipes which were used for transportation of water as input and the service tax paid on the services rendered for laying of such pipeline and maintenance of such pipelines - appellant is a manufacturer of pharmaceutical goods and needs to draw water for manufacturing purposes - Held that:- where a service is of the description which is specified in Rule 6(5), the manufacturer is entitled to credit of the whole of the service tax unless the service is used exclusively, that is to say solely in or in relation to the manufacture of exempted goods or any provision of exempted services. - Decided in favor of assessee. Regards the Cenvat Credit of the central excise duty paid on pipes - Held that:- The earlier appeal involving identical issue was not pressed and was therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd. (2000 (10) TMI 122 - CEGAT, CHENNAI) cannot be permitted to take the opposite stand in this case. - Decided against the assessee.

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• 2014 (8) TMI 86
  Clandestine clearance - demand based on two spiral diaries were recovered from the cabin of the co-noticee containing details of despatches of paper based decorative sheets manufactured in the said factory and on the basis of statement of various persons recorded during and after the searches - Held that:- The entire grounds of appeal of the appellants before the tribunal only states ratio of the various case laws has to be applied in the case in hand and has to be concluded that here was no clandestine removal. In my considered view, this will be a erroneous proposition made by the appellants in as much as, in all the case laws which has been referred, the tribunal has gone into details of each and every aspect of the evidences produced during the hearing. In the cases in hand, I find that except for assertion of no clandestine manufacturing etc., there is no evidence on record, to consider submissions in correct perspective. - demand confirmed - Decided against the assessee.

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• 2014 (8) TMI 85
  Cenvat Credit - goods (moulds/dies) removed for Job work - whether the vendor is a job-worker or not? - procedure prescribed under Rule 4(5)(a) of cenvat credit rules - Held that:- As per the definition under Rule 2(n) it is clear that the vendor who procured the raw material himself is not a job-worker as defined in law and prior to 27/02/2010, there was no specific provision for sending the moulds and dies to another manufacturer. Therefore, the procedure of sending moulds and dies to a vendor who is not a 'job-worker' was not envisaged under the CENVAT Credit Rules. However, the question remains whether the appellant should be denied benefit of CENVAT credit if he was also utilizing these moulds and dies in his factory for manufacture of excisable goods. From the show-cause notice and from the impugned order, this issue appears not to have been examined by the adjudicating authority. If the appellant was also utilizing the same moulds and dies, which was also occasionally sent to the vendors, the appellant could not have been denied the benefit of CENVAT Credit. In such a situation, the only infraction the appellant could be attributed is only procedural infraction which only merits imposition of penalty rather than denial of credit, as provided for in the law. - Matter remanded back - Decided in favor of assesee.

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• 2014 (8) TMI 84
  Cenvat Credit - Utilization of credit taken on molasses for payment of duty on Sugar - credit of duty paid on molasses was taken for use in the manufacture of ethyl alcohol in the Distillery Division - Held that:- From a reading of sub-rule (3), it is abundantly clear that there is no one-to-one correlation required between the input and the output and the duty paid on any input can be utilized for payment of any duty of excise on any final product. The decision of this Tribunal in the various case laws relied upon by the appellant also support this view. Therefore, prima facie, the appellant has made out a case for grant of stay. - stay granted.

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• 2014 (8) TMI 83
  Cenvat credit - Clandestine removal - shortages of the finished stock were detected - Wrongful availement of - excess credit inasmuch as the verification of the truck no. mentioned in the Cenvatable invoice revealed that there were no such truck numbers and same belonged to some Vikram taxi vehicles. - Held that:- Except the inquiry from the RTO that vehicles numbers were belonging to some three wheelers who were capable of only transporting 21 Kgs. material and it is possible that number of such vehicles were used for transportation of the material. As such, he accepted the assessees stand that merely because the vehicles numbers were of commercial transport, the said fact alone cannot lead to denial of credit without their being any other evidence. - Decided against the revenue. Regarding shortage of goods - Held that:- As per the appellants, they have not disputed the short found goods, which can be on account of number of factors and have admitted their duty liability and have reversed the same from their Cenvat credit account, during the course of investigation. - inasmuch as there is no evidence that said shortages are on account of any clandestine removal, imposition of penalty was not justified. - Decided against the revenue.

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• 2014 (8) TMI 82
  Cenvat Credit - Manufacture activity or not - activity of packing, labeling, etc. undertaken by the appellant on the various chemicals - Held that:- It is not in dispute that the appellant discharged duty liability on the activity undertaken by him by treating it as “manufacture” and the payment of duty so made was more than the amount of credit taken on the various inputs - in view of the decision of the Hon'ble Apex Court in the case of Narmada Chematur Pharmaceuticals Ltd. (2004 (12) TMI 93 - SUPREME COURT OF INDIA), since the amount of duty paid is more than the credit taken, the same would tantamount to reversal of credit.

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• 2014 (8) TMI 81
  Classification of Lost Circulation Control Additives (LCCA) - CETH No.4701.00 attracting Nil rate of duty or CETH 3824 - Held that:- on a question of fact which indicate that the product LCCA is a product derived from cellulosic fibre the classification of the said product under Chapter 47 as held by first appellate authority is a correct view. - the first appellate authority was correct in recording that the opinion of the chemical examiner could be restricted to the analysis of the product in question and hence he cannot opine on the classification of the product. - Decided against the revenue.

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• CST, VAT & Sales Tax

• 2014 (8) TMI 94
  Disallowance of Input tax credit - vendor's registration certificates were cancelled ab initio - liability to pay certain amount of tax without penalty and interest - Held that:- after the order of assessment when the challenge was made before the Deputy Commissioner in the First Appeal, the Deputy Commissioner directed pre-deposit for sum of Rs. 10 lakh. Such order was challenged before the Tribunal by the present appellant. The Tribunal though had directed the appellant to pay 20% of the tax amount making such sum to be Rs. 1.79 lakhs (rounded off) and the same was directed to be paid within a period of 30 days, however, curiously thereafter, without any request from either sides and also without reasonings, the Tribunal also directed the registry to place concerned matter along with the hearing of other group and disposed of the matter on merits. Tribunal thus has chosen to by pass the first appellate authority as is noticed in many other matters. If either side approaches the Tribunal, being aggrieved by the order of either grant or rejection of requirement of pre-deposit, it is open for the Tribunal to take into consideration the law on the subject and decide the validity of the order of directing or not directing the amount of pre-deposit. However, that would not ipso facto entitle the tribunal to give a complete go bye to the well laid down procedures of law as also such requirement of pre-deposit and decide the matter on merit - Resultantly, impugned order dated 11.9.2013 passed by the Gujarat Value Added Tax Tribunal is quashed. Appeal is placed back before the tribunal for fresh consideration and disposal on the issue of pre-deposit - Decided in favour of assessee.

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• 2014 (8) TMI 93
  Waiver of pre deposit - Whether in an appeal filed by the assessee questioning the decision of the Appellate Authority to demand a portion of tax by way of pre-deposit, the Value Added Tax Tribunal can go into the merits of the order of assessment without deciding the question of pre-deposit - Held that:- If either side approaches the Tribunal, being aggrieved by the order of either grant or rejection of requirement of predeposit, it is open for the Tribunal to take into consideration the law on the subject and decide the validity of the order of directing or not directing the amount of predeposit. However, that would not ipso facto entitle the Tribunal to give a complete gobye to the well laid down procedures of law as also such requirement of predeposit and decide the matter on merit. - Following decision of Commissioner of C.Ex., Chandigarh v. Smithkline Beecham Co. Health C. Limited [2003 (9) TMI 82 - SUPREME COURT OF INDIA] - Matter remanded back - Decided in favour of assessee.

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• 2014 (8) TMI 92
  Liability of tax - Rejection of books of accounts - Enhancement in turnover of company - Held that:- Perusal of impugned assessment order passed under U.P. Vat Act shows that in relevant year 2010-11 the turn over declared by the assessee is Rs. 8,14,461.93 but on the basis of survey dated 07.10.2010 the Assessment Officer has not accepted the account books of the assessee as well as turn over declared by him and has enhanced turn over to Rs. 1,89,00,000/-. First Appellate Authority as well as Tribunal both has upheld rejection of account books and turn over fixed by Assessment Officer. - According to survey report dated 07.10.2010 at the time of survey account books were not produced. It has been mentioned in the survey report that at the time of survey employee of assessee Jogesh was present who informed that account books are with munim ji. It is apparent from the survey report that at the time of survey the work in the factory of assessee was over and labourers had gone. Therefore, there appears reasonable ground for non-production of account books at the time of survey. Perusal of impugned order of assessment passed under Entry Tax Act shows that Assessment Officer has himself mentioned that levy of entry tax on cement has been abolished with effect from 19.02.2010 even then the Assessment Officer has levied entry tax at the rate of 2% on cement fixing turn over of Rs. 10,00,000/-. Thus the levy of entry tax on the said turn over of cement by Assessment Officer is illegal and the assessment order passed by Assessment Officer is contrary to law but neither First Appellate Authority nor Tribunal has considered this aspect in their impugned judgments - Perusal of impugned judgement passed by Tribunal shows that Tribunal has not considered any objection raised by assessee against assessment order passed under Entry Tax Act and has dismissed the appeal filed in respect of assessment made under entry tax without application of mind. - matter remanded back - Decided in favour of assessee.

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• 2014 (8) TMI 91
  Waiver of pre-deposit - Furnishing of Bond for disputed amount - Haryana Value Added Tax Act, 2003 - Sections 33(5), 36 - interest - Whether the provisions of Section 33(5) of the Act notified on 20.03.2009 can be applicable for the Assessment year of 2005-06 in the absence of it not having retrospective effect - Held that:- In view of various judgments referred to above and on the reading of section 61(2) of the HVAT Act, 2003 it is concluded that section 61(2) of the HVAT Act does not give any retrospective effect to the provisions of the aforesaid Act either expressly or by necessary implication. Sub-section (2) of section 61 of the HVAT Act, 2003, contemplates transfer of pending proceedings pertaining to application, appeal, revision or other proceedings to the authorities constituted under the HVAT Act, 2003 and to be disposed of by the authorities so constituted. Such authorities constituted under the HVAT Act has been given deemed fiction to be in existence for the purpose of such application, appeal, revision or such other proceedings so as to be in force on the date such application, appeal, revision or other proceedings have been made or preferred. Since expressly or by necessary intendment, no retrospective effect is sought to be given, therefore, the effect of repeal of the HGST Act, is required to be examined with reference to section 4 of the Punjab General Clauses Act, 1898. In civil proceedings, lis commences on the presentation of the plaint or in cases claiming compensation under the Motor Vehicles Act on filing claim application. The question is when lis can be said to commence under the taxation laws. Section 25 of the HGST Act enjoins a duty upon an assessee to file quarterly return and deposit tax thereon. If such returns are accepted, there is no lis. Consequently, there would be no occasion for the parties to file an appeal. However, if such returns are not accepted, the cause of action which arise on the date when returns are required to be filed. The cause of action can be said to be arisen also when an assessee is called upon to furnish return on his failure to do so in terms of the provisions of the old Act. Wherein the substituted sub-section (5) of Section 20 of Punjab General Sales Tax Act, 1948 was examined. The amendment makes it mandatory for appeal to be entertained, prior minimum deposit to the extent of 25% of tax, penalty, if any imposed and the interest accrued thereon. The provision prior to the said amendment, gives discretion to the Appellate Authority to dispense with the pre-deposit of tax, interest or penalty. It was held therein that since return in all the writ petitions have filed prior to the amendment in the Act, therefore, provision as it existed prior to amendment would be applicable - In view of the judgment of Division Bench of this Court examining the similar matters in Oswal Agro Mills Ltd.’s case (2004 (3) TMI 723 - PUNJAB AND HARYANA HIGH COURT), the return filed before amendment would be governed by unamended provisions. We find that the conditions of entertaining the appeal by Haryana Act No.10 of 2009 could not be made applicable in respect of assessment proceedings initiated prior to the amendment - Matter remanded back - Decided in favour of Assessee.

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