TMI Tax Updates - e-Newsletter
August 8, 2014

Case Laws in this Newsletter:

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

Articles

1. SERVICE TAX AUDIT UNDER RULE 5A OF SERVICE TAX RULES 1994 IS ULTRAVIRUS (CA SOHRABH JINDAL)

   By: CA SOHRABH JINDAL

2. No Service Tax Audit by Department or CAG

   By: Bimal jain

3. Point of Taxation Rules, 2011 - Rule 5 Ultra Vires the charging section 66B

   By: Manoj Agarwal

News

1. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

2. FEMA administration- Prospects and Challenges (Address by Mr. G Padmanabhan, Executive Director at the Seminar organised by Kuwait/Muscat Chapter of Institute of Chartered Accountants of India on August 3/5, 2014)

3. Estimation of Per- Capita Income and Gross Domestic Product

4. RBI Reference Rate for US $ and Euro

Notifications

Customs

1. 57/2014 - dated 7-8-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 08th August, 2014

DGFT

2. 89 (RE-2013)/2009-2014 - dated 6-8-2014 - FTP

Export benefits / incentives against exports to Iran.

SEZ

3. S.O. 1852(E) - dated 11-7-2014 - SEZ

To set up an IT/ITES Special Economic Zone at Kundalahalli Village, Krishnhrajapuram Hobli, Bangalore East Taluk, Bangalore in the State of Karnataka.

Circulars / Instructions / Orders

DGFT

1. 11/2014 - dated 7-8-2014

Review of SIONs A-1443, A-1170, A-3627 and K-134

Highlights / Catch Notes

Income Tax

• Court Allows Section 80IB Deduction for Proprietorship to Partnership Conversion Without Plant and Machinery Transfer.

  Case-Laws - HC : Deduction u/s 80IB - upon conversion of the proprietorship concern to a partnership concern there was no transfer of plant and machinery to the partnership firm, inasmuch as there was a transfer of the industrial undertaking as a whole along with its assets and liabilities - deduction allowed - HC
  Visit to Get Source

  ---

• Court Rules Varying Interest Rates Not Automatically Unreasonable u/s 40A(2)(b) of Income Tax Act.

  Case-Laws - HC : Solely because the assessee for whatever reasons/consideration charged the interest at different rates by that itself cannot be a ground to come to the conclusion that charging of interest at higher rate than charged from other party was excessive and / or unreasonable u/s 40A(2)(b) - HC
  Visit to Get Source

  ---

• High Court Rules Demonstration Machinery for Doctors as Revenue Expenditure, Not Capital Asset, in Promotional Activities.

  Case-Laws - HC : The machinery given to doctors for demonstration purposes is also a part of promoting sale of the said machinery - held as revenue expenditure and not capital asset - HC
  Visit to Get Source

  ---

• Court Orders Refund Under Income Tax Act Section 240(a) Due to Departmental Lapses by Assessing Officer.

  Case-Laws - HC : Refusal to grant refund u/s 240(a) – assessee cannot be made to suffer on account of lapse on the part of the AO or any other officer of the Department - revenue directed to grant refund - HC
  Visit to Get Source

  ---

• Partnership Firm's Goodwill Transfer to Partners Does Not Trigger Additional Tax Due to Retained Property Rights.

  Case-Laws - HC : Transfer of goodwill to partners - reconstruction of firm - the partnership firm did not cease to hold the property - its right to the property is not extinguished - no additions - HC
  Visit to Get Source

  ---

• Assessing Officer Rightly Includes Minors' Interest from Partnership in Total Income u/s 64(1)(iii) of the Act.

  Case-Laws - HC : Section 64(1)(iii) of the Act as it stood at the relevant time would be attracted and the AO rightly clubbed the interest earned by the minors on the amount lying that the partnership form while computing the total income of the assessee - HC
  Visit to Get Source

  ---

Customs

• Trader-Importer Entitled to Exemption Benefits Under Notification 102/2007-Cus Despite Missing Invoice Details on Duty Payment.

  Case-Laws - AT : A trader-importer, who paid SAD on the imported goods and who discharged VAT/ST liability on subsequent sale, and who issued commercial invoices without indicating any details of the duty paid, would be entitled to the benefit of exemption under Notification 102/2007-Cus, notwithstanding the fact that he made no endorsement that “credit of duty is not admissible“ on the commercial invoices - AT
  Visit to Get Source

  ---

• Export Duty for Iron-Ore Fines to Be Calculated on Dry Weight Value, Wet Weight Irrelevant.

  Case-Laws - AT : Valuation of export of iron-ore fines - the determination of export duty on the basis of dry weight or wet weight, in our opinion, is irrelevant as the duty to be computed on the value of the goods in dry weight condition, as agreed by the parties - AT
  Visit to Get Source

  ---

• Customs Officials Not Authorized to Validate IMEI Numbers on Handsets or Confirm Brand Ownership Legitimacy.

  Case-Laws - AT : Confiscation of goods - Customs authorities are not proper officer to examine the issue as to whether the IMEI numbers stand validly given on hand sets or as to whether the brand name owner was the actual owner of the said IMEI numbers - AT
  Visit to Get Source

  ---

Service Tax

• Service Export Valid Even if Conducted in India if Benefits Realized Abroad; Recent Case Upholds This Principle.

  Case-Laws - AT : Export of services - export of service may take place even when all the relevant activities takes place in India so long as the benefits of these services accrued outside India - stay granted - AT
  Visit to Get Source

  ---

• Authority Oversteps in Service Classification for Train Cleaning and Bed Roll Supply; Violates Show Cause Notice Scope.

  Case-Laws - AT : Classification - cleaning of coaches and toilets of certain trains and supply of bed rolls to the passengers of ACs coaches - authority has traveled beyond the scope of show cause notice which is not permissible - AT
  Visit to Get Source

  ---

• Court Rules Pre-June 2007 Construction Contracts as Indivisible Works Not Taxable, Deems Previous Orders Unsustainable.

  Case-Laws - AT : Orders holding that during the period prior to 01/06/07 the services of civil or industrial construction or erection, installation or commissioning, provided as indivisible works contract were not taxable, are not sustainable - AT
  Visit to Get Source

  ---

• Appellant Faces Penalty for Collecting but Not Remitting Tax; Liability Cannot Be Avoided Under Tax Obligations.

  Case-Laws - AT : Levy of penalty - Having collected the tax, appellant should have paid the tax to the Government. Having failed to do so, in our opinion, they cannot escape penalty. - AT
  Visit to Get Source

  ---

• Service Tax Applies Only to Cargo Handling Services When Billed Separately from Transportation Charges on Actual Basis.

  Case-Laws - AT : If the bill amount indicates cargo handling service separately and transportation separately on actuals basis, then the Service Tax liability can be levied on cargo handling service only - AT
  Visit to Get Source

  ---

• Chartered Accountants' Representational Work Taxable Under Management Consultant Service, Not Exempt Per Notification No. 25/2006-S.T.

  Case-Laws - AT : Classification of services provided in the capacity of a firm of Chartered Accountants - No reason to find representational work exempted from tax under Notification No. 25/2006-S.T. should be classified under Management Consultant Service and taxed - AT
  Visit to Get Source

  ---

Central Excise

• Refund Required for Amounts Paid During Investigations if Successfully Contested in Higher Courts.

  Case-Laws - AT : Refund - if any amount is paid to the Revenue during the investigation and successfully challenged before the higher judicial fora, such an amount needs to be considered as deposit and refund needs to be sanctioned - AT
  Visit to Get Source

  ---

• Import Price in MOU Between Related Oil Companies Considered Transaction Value Under Central Excise Regulations.

  Case-Laws - AT : Valuation of goods - related parties / inter-connected undertaking - import price agreed between one OMC and another based on the MOU reached between them can be considered as a transaction value - AT
  Visit to Get Source

  ---

• CENVAT Credit Denial Overturned: Description Change from Wire Rods to Steel Rods/Rounds Deemed Insufficient for Rejection.

  Case-Laws - AT : Denial of CENVAT Credit - Merely because the description of wire rods was changed in some cases to steel rods or steel rounds, which is an alternative description of the wire rods, the Revenue cannot deny the credit to the appellant - AT
  Visit to Get Source

  ---

• CENVAT Credit Denied Due to Ink Discrepancies in Records from 2005-2009; Authenticity Questioned, Claim Rejected.

  Case-Laws - AT : Denial of CENVAT Credit - Since the entries pertain to the period 2005 to 2009, all the entries cannot be uniform and having the same colour of ink, having the same brightness - appellant has not come out with a clean hand - AT
  Visit to Get Source

  ---

VAT

• High Court Rules TDS Under VAT Applies for Goods Bought in Karnataka, Moved to Kerala for Works Contract.

  Case-Laws - HC : TDS under VAT - when there is factual material available to show that the goods were purchased from Karnataka and brought to Kozhikode (Kerala) for the purpose of the works contract, it is a clear incident of CST Act becoming applicable - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2014 (8) TMI 210
  Notice for reopening of assessment u/s 148 – Reason to believe – Held that:- Once the AO is satisfied that a permanent establishment of the petitioner exists in India and business is being conducted from this permanent establishment, the attribution of profits is a necessary consequence - The order of TPO will not come in the way for the reason that the TPO s order is in relation to the transactions between a subsidiary company and the petitioner - where the transfer pricing analysis does not take into account all the risk taking functions of the enterprise and it does not adequately reflect the function performed and the risk assumed by the petitioner, the situation would be different and there would be a need to attribute profits to the permanent establishment for those functions/risk that have not been considered. Relying upon Dit (International Taxation) Versus Morgan Stanley And Company Inc. [2007 (7) TMI 201 - SUPREME Court] - the survey was made much after the order of the TPO, which survey and documents so impounded revealed the existence of a permanent establishment of the petitioner and its business operations in India through its permanent establishment without disclosing its taxable income - the order of the TPO is not binding at the stage of issuance of notice and, in any case, it would be open to the petitioner to take a stand that the transactions with the subsidiary company and/or with the permanent establishment, being the same, no further tax could be levied – thus, there was no infirmity in the issuance of the notice u/s 148 of the Act – Decided against Revenue.

  ---

• 2014 (8) TMI 209
  Entitlement for deduction u/s 80IB - Conversion of proprietorship into partnership firm -Industrial undertaking formed by transfer of already existing proprietorship business and assets to the partnership firm – Conversion of firm into partnership firm - Held that:- The undertaking was already in existence and was not formed by splitting up or by reconstruction of the business - on the conversion of the proprietorship firm into a partnership firm there was no transfer of plant and machinery to the new firm - there was only transfer of the industrial undertaking as a whole along with assets and liabilities - the two conditions provided u/s 80-IB(2)(i) of the Act, which disqualifies the deduction are not present – thus, the benefit u/s 80-IB of the Act is available to the partnership firm – relying upon Commissioner of Income Tax Vs. Bullet International [2012 (5) TMI 187 - ALLAHABAD HIGH COURT] - the exemption granted to a proprietorship concern, which converted from a proprietorship into a partnership concern was still entitled for exemption u/s 10A of the Act – thus, the Tribunal was justified in holding that upon conversion of the proprietorship concern to a partnership concern there was no transfer of plant and machinery to the partnership firm, inasmuch as there was a transfer of the industrial undertaking as a whole along with its assets and liabilities – Decided against Revenue.

  ---

• 2014 (8) TMI 208
  Assessee in default u/s 220(6) – recovery of demand - Held that:- An assessee has complied with directions issued either by the AO and/or the Jurisdictional Commissioner imposed while granting the stay and/or passing the order u/s 220(6) of the Act while not treating the assessee in default, there cannot be any further steps and/or coercive action to recover the amount of demand on the ground of pressure from the higher authorities to recover maximum amount of tax on or before 31.03.2014 - Under the guise of recovery of maximum amount of tax on or before 31.03.2014, there may not be any coercive action to recover the amount of tax which otherwise is not permissible under the law - The appeal before the CIT(A) is not being proceeded further as the AO has not responded to and/or has not send the comments to the reply submitted by the assessee to the comments submitted by the AO – thus, the order of the AO is set aside – Decided in favour of Assessee.

  ---

• 2014 (8) TMI 207
  Entitlement for registration u/s 12AA – Small amount spent for charitable purposes - Held that:- The Original Authority has not doubted the bona fides of the Trust or the activity of the Trust, but on the ground that the Trust had spent low quantum towards charitable activity, the Authority had declined registration of the Trust – relying upon Director of Income Tax Exemptions, Chennai. V. M/s.Seervi Samaj Tambaram Trust [2014 (2) TMI 32 - MADRAS HIGH COURT] - CIT cannot reject the application for registration merely on the ground that on the date of the application the assessee trust had not commenced its activities - It is not denied by the assessee that on the date of the application under Section 12AA, it was yet to commence its operation - The genuineness of the objects of the trust were not questioned by the Commissioner - the interpretation given by the Original Authority declining to register the Trust has no legal basis – that the Tribunal is correct in allowing the appeal filed by the assessee - Decided against Revenue.

  ---

• 2014 (8) TMI 206
  Excessive interest paid to associates u/s 40A(2)(b) – Held that:- There was no basis for the AO to come to the conclusion that amount of interest paid at the rate of 12% would relate to the concerned parties was otherwise excessive and / or unreasonable - solely because the assessee for whatever reasons/consideration charged the interest at different rates by that itself cannot be a ground to come to the conclusion that charging of interest at higher rate than charged from other party was excessive and / or unreasonable – Tribunal have rightly deleted the disallowance made by the AO u/s 40A(2)(b) of the Act – Decided against Revenue. Depreciation on wind measure equipment – Failure to prove that the assets have commissioned and put to use – Held that:- The Tribunal rightly noted that similar evidence produced by the assessee also for met masts put to use up to February 2009 was accepted by the AO as evidence for date of put to use of met masts - when AO itself accepted and considered the certificate as evidence sufficient to prove that the assets were commissioner and put to use for the purpose of business during the year, it cannot be said that the Tribunal has committed any error and deleting the disallowance u/s 32 of the Act – Decoded against Revenue.

  ---

• 2014 (8) TMI 205
  Depreciation on machinery installed in contractors premises – acquisition of machinery contrary to contract terms - Held that:- In order to claim depreciation under Sec.32, the condition to be satisfied is, the assessee should own wholly or partly the machinery used for the purpose of business or profession. Therefore how the machinery is acquired, whether acquisition of machinery is contrary to the terms of the contract between the parties, is totally irrelevant - Assessee has produced documents showing that he owns the machinery - the Assessing Authority seems to think the assessee has to demonstrate before him in the Income Tax office how this machinery is used in manufacturing the products and the same is not produced - asessee is entitled to depreciation as provided u/s 32 of the Act – Decided against Revenue. Nature of asset - Whether the character of the said equipment changes from revenue expenditure to capital asset – Held that:- The machinery given to doctors for demonstration purposes is also a part of promoting sale of the said machinery - It is only on such demonstration, the assessees goods are accepted in the market – Tribunal has rightly recorded that it amounts to revenue expenditure and not capital asset – Decided against Revenue.

  ---

• 2014 (8) TMI 204
  Refusal to grant refund u/s 240(a) – Whether the refund could be granted on fresh assessment only – Held that:- Assessee is not seeking refund of the tax payable on the basis of the returned income but seeking refund of the tax and interest paid in excess of that payable on the returned income – Relying upon Bharti Engineering Corporation vs. Union of India and ors. [2006 (5) TMI 52 - PUNJAB AND HARYANA HIGH COURT] - revenue is bound to refund the amount in excess of the tax payable of the return - If the argument of the revenue is accepted, it would mean that the assessee will not be able to get their refund even if an assessment is set aside and the matter is sent back for redetermination and the AO is under legal bar to pass a fresh order because of the expiry of the period permitted under law for the purpose - assessee cannot be made to suffer on account of lapse on the part of the AO or any other officer of the Department – revenue is directed to grant refund of the amount along with interest in accordance with law after due verification – Decided in favour of Assessee.

  ---

• 2014 (8) TMI 203
  Transfer of goodwill to partners - reconstruction of firm - transfer - extinguishment of right - AO noticed that assessee firm had created and self-generated assets in the form of goodwill and transferred it to the current accounts of the four partners proportionately consequent to reconstitution of assessee firm - Whether there was transfer or not and in view of the circular of CBDT notional transfer cannot be subject to taxation – Held that:- The assets of the partnership was revalued and for the first time they valued the goodwill at Rs. 7,59,28,000 - No portion of the goodwill is transferred to the retiring partners, there is no transfer of the capital asset – Tribunal rightly was of the view that if there is no transfer of capital asset, Section 45(4) is not attracted - the partnership firm did not cease to hold the property - its right to the property is not extinguished - the retiring partners did not acquire any right in the property as no property was transferred in their favour – thus, the order of the Tribunal is upheld – Decided against Revenue.

  ---

• 2014 (8) TMI 202
  Clubbing of income u/s 64(1)(iii) – Interest paid to minors from partnership firm - Whether the amounts standing to the credit of respective account of the respective minors on which the interest have been paid was required to be treated as capital or as loan advanced to the firm and/or the deposit – Held that:- The AO rightly was of the view that the provision of Section 64(1)(iii) of the Act cover the payments of interest made to minors on their deposits with the firms as it amounted to income which arose indirectly to the minors - there was no other material and/or basis for the Tribunal to come to the conclusion that the account in the respective partnership firms were the loan and/or advance - Considering the relevant clauses in the partnership deeds the amount credited in the account of the respective minors on which interest has been paid, is to be treated as capital investment - section 64(1)(iii) of the Act as it stood at the relevant time would be attracted and the AO rightly clubbed the interest earned by the minors on the amount lying that the partnership form while computing the total income of the assessee – Decided in favour of Revenue.

  ---

• 2014 (8) TMI 201
  Unaccounted cash receipts – Held that:- It is very much essential to know how the payments have been treated at the hands of the company - Neither the assessment order nor any other material brought on record could even remotely establish that payments to the extent indicated in the loose sheet were actually made to the assessee - neither the AO nor the CIT(A) have conducted any enquiry to ascertain the real fact - Solely relying upon the single piece of paper addition cannot be made at the hands of the assessee considering the fact that there is serious doubt with regard to authenticity of notings made - As it appears, the AO has made the addition merely on presumption without making any enquiry to establish the fact that payments as per the impounded document was actually received by assessee - the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh consideration – Decided in favour of Assessee. Addition of accrued interest – Held that:- It contains notings of certain amounts on specific dates against the name of some persons - one of the noting is for an amount in the name of “Raji” - assessee cannot blow hot and cold at the same time - When the assessee accepts a part of the seized material by offering the amounts mentioned as his unexplained income, he cannot reject the interest on advance forming part of the same seized material - when the assessee accepts the advances mentioned in the seized material as his income, the interest calculated on the amount advanced as noted in the very same seized material certainly have to be considered to have been earned/received by the assessee – thus, there was no infirmity in the order of the CIT(A) – Decided against the assessee.

  ---

• Customs

• 2014 (8) TMI 214
  Denial of refund of SAD - Notification 102/2007 - whether refund of SAD can be allowed when no endorsement was made on the commercial invoices as stipulated in paragraph 2 (b) while all other conditions stipulated in the notification stood satisfied - Held that:- Condition relating to endorsement on the invoice was merely a procedural one and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice. Since the object and purpose of the condition is achieved by non-specification of the duty element the mere non-making of the endorsement could not have undermined the purpose of the exemption. Thus we concur with the view taken by this Tribunal in the cases of Equinox Solution Ltd. and Nova Nordisk India Pvt. Ltd. (2013 (11) TMI 756 - CESTAT MUMBAI) - A trader-importer, who paid SAD on the imported goods and who discharged VAT/ST liability on subsequent sale, and who issued commercial invoices without indicating any details of the duty paid, would be entitled to the benefit of exemption under Notification 102/2007-Cus, notwithstanding the fact that he made no endorsement that "credit of duty is not admissible" on the commercial invoices, subject to the satisfaction of the other conditions stipulated therein. The reference is returned to the referring bench for further action as necessary.

  ---

• 2014 (8) TMI 213
  Valuation of export of iron-ore fines - levy of export duty is on ad valorem basis - Department proposed to calculate the duty on the wet weight - Held that:- Hon’ble Supreme Court has decided the question whether for the quantification of export duty chargeable on the specific criterion of weight, as the basis, be on the dry weight or on wet weight of the iron-ore fines. Needless to say, when the charge of export levy was on specific rate basis, that is on the weight of the iron-ore, irrespective of its value, then the basis of dry or wet weight, of the goods become relevant for determination of the quantum of duty. Whereas, in the present case, the duty is levied on the basis of the transaction value agreed between the Respondent and the overseas purchaser on the criterion of dry weight of iron ore fines. - Therefore decision in the case of UOI Vs. Gangadhar Narsingdas Agarwal [1995 (8) TMI 73 - SUPREME COURT OF INDIA] distinguished. Therefore, the determination of export duty on the basis of dry weight or wet weight, in our opinion, is irrelevant as the duty to be computed on the value of the goods in dry weight condition, as agreed by the parties. - Decided against Revenue.

  ---

• 2014 (8) TMI 212
  Clearance of capital goods imported duty free for use in NEPZ - Valuation of goods - Commissioner held that duty shall be leviable on the depreciated value of the capital goods - violation of the terms of relevant Customs Notification No.133/94, dated 22.06.1994 read with Notification No. 339/85-Cus dated 21.11.1985 - Held that:- real controversy was whether the assessee had utilised the capital goods in accordance with the terms of Notification. But the issue framed by the Tribunal was altogether different. The issue framed erroneously was answered as the date debonding is the material date for the purpose of rate of duty for clearance of goods on payment of duty. The appeal was thus allowed by way of remand for re-calculating the amount of duty. Unfortunately, Revenue did not file appeal against this order - When the matter touches the root and Show Cause Notice alleges that no manufacture and export of end product was done for which duty forgone on the imported capital goods was sought to be recovered, that calls for a detailed examination of the entire material evidence on record to enquire whether the capital goods allowed to be imported by the assessee duty free were installed in NEPZ and utilized for any manufacturing activity carried out and whether export of end product was made - Following decision of appellant s own case reported in [2002 (8) TMI 369 - CEGAT, NEW DELHI] - matter remanded back - Decided in favour of assessee.

  ---

• 2014 (8) TMI 211
  Confiscation of goods - International Mobile Equipment Identity number of phones were allocated to other brands like Nokia and Samsung and exported phones did not pertain to the declared brand - Re-export of goods - Redemption fine - whether the Customs authorities were justified in confiscating the goods and allow the re-export on payment of redemption fine and imposition of penalties on the ground that IMEI numbers available in respect of phones belonging to original equipment manufacturer like Nokia and Samsung - Held that:- the only requirement under the law is that mobile handsets should be carrying the IMEI numbers which admittedly the present consignment was having. As per the appellants, Bonac Company is only de-designing and embellishing the casing of existing handsets which are manufactured by the original equipment manufacturers like Nokia and Samsung, by using cutting edge engineering / technology. In such a case, the IMEI number has to be belonging to the manufacturer of mobile phones. Customs authorities are not proper officer to examine the issue as to whether the IMEI numbers stand validly given on hand sets or as to whether the brand name owner was the actual owner of the said IMEI numbers. If the IMEI numbers allocated to Nokia and Samsung are being used by another company, M/s. Nokia and M/s. Samsung are aggrieved party, and would have definitely taken action against M/s. Bonac. In the absence of any indication to that effect and in the absence of admitted position of mobile handsets carrying of IMEI numbers, I find no justification for confiscation of the goods or for imposition of penalties - Decided in favour of assessee.

  ---

• Service Tax

• 2014 (8) TMI 234
  Waiver of predeposit of tax - Export of services - Business Auxiliary Services - commission agent - identification of the supplier of sports goods in India - Held that:- agreement as referred by the learned AR on behalf of Revenue is in between the Decathalon SA, France and the applicant as a principal and agent. Hence, prima facie, it cannot be accepted that the supplier performed the agreement - We have also noticed that the Board Circular dated 24.2.2009 had categorically clarified that in respect of the clause (III) of Rule 3(1) of Export of Service Rules, the relevant factor is the location of the service receiver and not the place of performance. It is also clarified that the export of service may take place even when all the relevant activities takes place in India so long as the benefits of these services accrued outside India - prima facie, there is no dispute that the benefit of this service accrued to Decathalon SA, France. In view of that, prima facie, we find that the applicant made out a strong case for waiver of predeposit of entire dues. - stay granted.

  ---

• 2014 (8) TMI 233
  Classification - cleaning of coaches and toilets of certain trains and supply of bed rolls to the passengers of ACs coaches - Business Support services - Commissioner held services as business auxiliary service under Section 65 (105) (zzb) readwith Section 65 (19) - Held that:- There is no allegation in the show cause notice that in the alternative the Appellants services may be taxable as business auxiliary service under Section 65 (105) (zzb) readwith Section 65 (19) (vi). The Commissioner (Appeals) in the impugned order after giving a finding that the Appellants activity is not support service of business or commerce has gone on to examine the taxability of their activity as business auxiliary service under Section 65 (105) (zzb) readwith Section 65 (19) and in doing so, he has traveled beyond the scope of show cause notice which is not permissible - Following decision of CCE, Nagpur vs. Ballaspur Industries Ltd. reported in [2007 (8) TMI 10 - SUPREME COURT OF INDIA] and CCE, Bangalore vs. Brindavan Beverages (P) Ltd. reported in [2007 (6) TMI 4 - SUPREME COURT OF INDIA] - Decided in favour of assessee.

  ---

• 2014 (8) TMI 232
  Denial of refund claim - transportation of export goods - Jurisdictional Asstt.Commissioner had initially sanctioned the refund claims but subsequently, the Commissioner exercising his powers under Section 84 had reviewed the Asstt . Commissioner's order holding that refund claims have been wrongly sanctioned under notification no.41/07-ST - lack of evidence to prove that service provider had paid the service tax in respect of the service of transportation of the goods from ICD to the gateway port under Section 65(105)( zzzp ) - Held that:- while the appellant had received services in question from M/s. KNPL which included transportation of the goods by rail from the ICD, to the gateway port and the customs clearance of the goods at the ICD as well as at the gateway port for export, there is no document showing that service tax in respect of these services had been paid. We, therefore, hold that there is no infirmity in the Commissioner's order-in-review - Decided against assessee.

  ---

• 2014 (8) TMI 231
  Denial of refund claim - Commercial or industrial construction service - Period of taxability of services - Held that:- both the respondents during the period of dispute had provided the services of commercial or industrial construction which were taxable at that time under Section 65 (105) (zzq) readwith Section 65 (25b). The respondent’s plea is that since w.e.f. 01/06/07, their activity became taxable as works contract service under Section 65 (105) (zzzza), during the period prior to 01/06/07, their activity would not be taxable - impugned orders holding that during the period prior to 01/06/07 the services of civil or industrial construction or erection, installation or commissioning, provided as indivisible works contract were not taxable, are not sustainable - Following decision of G.D. Builders vs. Union of India [2013 (11) TMI 1004 - DELHI HIGH COURT], Alstom Projects India Ltd. vs. CCE reported in [2011 (3) TMI 538 - CESTAT, NEW DELHI] and Instrumentation Ltd. vs. CCE, Jaipur - I reported in [2011 (3) TMI 546 - CESTAT, NEW DELHI] - Decided in favour of Revenue.

  ---

• 2014 (8) TMI 230
  Levy of penalty - Tax paid before issuance of SCN - Determination of basis of income shown in the balance sheet which is prepared following accrual method - Held that:- Having collected the tax, appellant should have paid the tax to the Government. Having failed to do so, in our opinion, they cannot escape penalty. Nevertheless, the only difficulty which we face in taking the case entirely against the assessee is the observation of the Commissioner in Paragraph 21 which reads as ‘In this regard, I find that the Annexure to SCN is based on the assessee’s balance sheet and the same is accounted as direct income for the respective years. When an assessee makes a claim that balance sheet is made on accrual basis and service tax demand cannot be on that basis', if the learned Commissioner makes an observation like this, it would prima facie go in favour of the assessee and it would also disable us from determining the correct duty liability. In this case with great reluctance, we have to remand the matter back to the original authority only because we do not have the details of month-wise receipts of service charges; tax payable; tax paid with interest and the duty of payment; tax and interest - Decided conditionally in favour of assessee. - matter remanded back - appellant to deposit 25% of the penalty.

  ---

• 2014 (8) TMI 229
  Waiver of penalty - Penalty u/s 78 & 80 - Tax collected but delay in making deposit - Held that:- keeping in view the nature of dispute, explanation given by the respondent as also the fact that the demand constitutes only .17% of the tax paid during 2007-08 and 2.2% of the tax paid during 2006-07, Respondents have been able to explain that there was reasonable cause for the said failure and Commissioner (Appeals) has correctly waived the penalty - Decided against Revenue.

  ---

• 2014 (8) TMI 228
  Waiver of pre-deposit of Service Tax - Valuation - Cargo Handling Services - inclusion of reimbursement of expenses for the transportation, for execution of oral contract of unloading of coal from the field and transferring the same within the port area and loading in rail wagon - Held that:- appellant herein had separately prepared two bills - one for transportation and other for cargo handling service. It is also undisputed that the appellant has discharged the Service Tax liability under the cargo handling service category on the bills which have been raised by him for cargo handling service, while for transportation, he has not discharged Service Tax liability under the category of cargo handling service - reproduced clarification given by the Board that in 2002 itself, the Board has clarified that if the bill amount indicates cargo handling service separately and transportation separately on actuals basis, then the Service Tax liability can be levied on cargo handling service only - At the same time, the Board’s circular which has issued in 2002 was correctly followed by the appellant herein, raising separate bills for cargo handling service and transportation - appellant has made out a prima case for waiver of pre-deposit of the amounts on limitation at this juncture - Stay granted.

  ---

• 2014 (8) TMI 227
  Classification of services provided in the capacity of a firm of Chartered Accountants - Management Consultant Service - Chartered Accountant’s Services - Held that:- No reason to find representational work exempted from tax under Notification No. 25/2006-S.T. should be classified under Management Consultant Service and taxed - only services in the nature of providing consultancy or advices for improving the Management of a business entity only will be covered by the definition and not executory type of responsibilities of management got done through another agency. - Though the definition at Section 65(65) includes any service in connection with management of any organization, the scope of the definition gets restricted to services in relation to consultancy as is evident from the name given to the service and commercial understanding of the expression “Management or Business Consultancy.” In the case of services for complying with the laws of the country it has been specifically ruled in the case of Ernest and Young (2012 (7) TMI 667 - CESTAT, NEW DELHI ) that the service cannot be covered by definition at Section 65(65), because such services are executory in nature and not in the nature of consultancy or advice - Decided in favour of assessee.

  ---

• 2014 (8) TMI 226
  Disallowance of CENVAT Credit - erection, installation and commissioning service - Interest u/s 11AB - Applicable section whether Section 11AB or Section 75 - Held that:- the appellant, having been registered with the Department as a provider of "erection, installation and commissioning service", could not have assumed for a moment that the said service was an input service. The plea of bona fide belief is, therefore, not sustainable. Though, in their periodical returns, the amounts of Cenvat credits taken on input services were mentioned, none of such services was specified. The fact that Cenvat credit was taken on "erection, installation and commissioning service" was not disclosed to the Department. Section 11AB of the Central Excise Act was correctly invoked in this case wherein Cenvat credit was wrongly availed of and utilized for payment of duty of excise on final product thereby creating a situation of short-payment of duty of excise on final product. It was the short-paid duty which was paid by the assessee before show-cause notice but without interest. This interest has been paid by the assessee after the impugned order was passed and the same is interest on duty of excise, which cannot be demanded under section 75 of the Finance Act, 1994. The correct provision of law governing this interest is section 11AB of the Central Excise Act - Decided against assessee.

  ---

• Central Excise

• 2014 (8) TMI 222
  Denial of refund claim - Unjust enrichment - whether the appellant is eligible for the refund of an amount debited by them during the investigation; culmination of which has ended in favour of the appellant by the order of Tribunal - Held that:- if any amount is paid to the Revenue during the investigation and successfully challenged before the higher judicial fora, such an amount needs to be considered as deposit and refund needs to be sanctioned. In the case in hand, it is the issue and having succeeded before the Tribunal, the Revenue could not hold back an amount which is due to the assessee. when an assessee prefers an appeal, it itself tantamounts not to accepting the orders of the Revenue and the amount paid is in dispute. In my view, the question of unjust enrichment also will not arise - amounts were debited by the appellant on an allegation that they have removed the goods without payment of duty; allegation set aside by the higher court - Following decision of CCE., Chandigarh vs Modi Oil & General Mills [2007 (1) TMI 31 - HIGH COURT , PUNJAB & HARYANA] - Decided in favour of assessee.

  ---

• 2014 (8) TMI 221
  Denial of CENVAT Credit - appellant availed credit of duty paid on Liquid Nitrogen and LDO used in the manufacture of both dutiable and exempted final products, but used to reverse input credit in respect of these common inputs on input-output basis whenever they cleared exempted final product from their factory - Held that:- Appellant has reversed CENVAT Credit proportionate to inputs used in the manufacture of exempted final product as and when removed from the factory - If the fact of reversal of Cenvat credit attributable to the inputs which are used in the manufacturing of exempted goods is undisputed, we find that the issue is now squarely covered by the retrospective amendment of the Cenvat Credit Rules by the Finance Act, 2010 which contemplates for reversal of Cenvat credit attributable to the inputs which are used in the manufacturing of exempted goods. impugned order confirming the demands of an amount equivalent to 8%/10% of the value of the exempted goods is incorrect and unsustainable and hence liable to be set aside - Following decision of Unimed Technologies Ltd. Vs. Commissioner of Central Excise, Vapi [2012 (11) TMI 820 - CESTAT, AHMEDABAD] - Decided in favour of assessee.

  ---

• 2014 (8) TMI 220
  Valuation of goods - related parties / inter-connected undertaking - transaction value with the Oil Marketing Companies (OMC) - Held that:- in case of BCPL [2009 (6) TMI 166 - CESTAT, MUMBAI] it was held that, IPP based price cannot be considered as transaction value as it was an artificially fixed notional value. In such an agreement, price was definitely not the sole consideration for sale. It is based on this reasoning, it was held in the BPCL case that sale price to OMC cannot be accepted as sole consideration for sale. - Decision of BCPL case in not applicable in the present situation. However, we find that the reasoning adopted is flawed as Import Parity Price is not an artificially fixed price. It is an actual price at the time and place of import which is also place for the sales effected by the Refinery or OMC to another OMC. To say that such a price is an artificially fixed notional value is completely contrary to facts. Import price cannot be influenced by the marketing companies situated in India. Therefore, there is a major flaw in the reasoning adopted in the order relied upon by the Revenue - import price agreed between one OMC and another based on the MOU reached between them can be considered as a transaction value and such a finding was also be upheld in the case of HPCL [2005 (2) TMI 357 - CESTAT, BANGALORE] - Decided against Revenue.

  ---

• 2014 (8) TMI 219
  Denial of CENVAT Credit - whether CENVAT credit of services like document processing charges paid by the appellant is admissible or otherwise - Held that:- The services of document processing are availed by the appellant for processing of export related documents from the place of removal to the point of export and also for claiming of rebate claims from the Central Excise department after export of the goods. Proper flow of funds for manufacturing activity/business of a unit are required as financial management where such finances are arranged from the banking channels or by speedy recovery of amounts due from clients or from any government department. Prima-facie, appellant has made out a case for complete waiver of the confirmed dues as the services for document processing can be considered as a service in relation to managing the finances of the appellant - Stay granted.

  ---

• 2014 (8) TMI 218
  Denial of CENVAT Credit - description of the goods was changed from wire rods to steel rods or steel rounds alongwith the change in tariff entry - Imposition of penalty - Held that:- During the course of further investigation the statement of Shri Vijay Kohli, authorised signatory of the appellant was also recorded wherein he clarified that they have procured Steel Rods/Steel rounds from M/s.Regal Metals & Ferro Alloys and except the procurement of the goods from the said dealer on which they have availed the credit, they have not received any other raw-material from any other source. The said raw-material received by them has been used in the manufacture of final product which was cleared on payment of duty - Revenue s case is only based upon assumptions and presumptions. Revenue is infact, not disputing that the appellant had not received raw-material from the dealer. Merely because the description of wire rods was changed in some cases to steel rods or steel rounds, which is an alternative description of the wire rods, the Revenue cannot deny the credit to the appellant, who had admittedly received the goods and have utilized the same in the manufacture of their final product. As such, I set aside the impugned orders, without going into the alternative plea of the appellant, as regards the demands being time barred - Decided in favour of assessee.

  ---

• 2014 (8) TMI 217
  Denial of CENVAT Credit - credit has been denied on the ground that capital goods on which the credit has been taken were neither found to be received in the factory nor reflected in the IT returns in Form 3CD and the balance sheet - Held that:- On a perusal of the said register and the entries made therein, it is seen that the entries are in the same handwriting using the same ink and all of them appear to be of the same age, that is made more or less at the same time. Since the entries pertain to the period 2005 to 2009, all the entries cannot be uniform and having the same colour of ink, having the same brightness. We further notice that even though there are columns for “physical verification and by whom”, no such verification appears to have been done during the whole period which appears quite strange. Therefore, it prima facie appears that the document now produced before us is a manipulated/cooked up one and, therefore, cannot be accepted as a reliable evidence. As the appellant has not come out with a clean hand, in the absence of any evidence of having received and installed the capital goods in the factory, the appellant has not made out any case for grant of stay - assessee directed to deposit the entire duty demand confirmed along with interest thereon - balance amount stayed.

  ---

• 2014 (8) TMI 216
  Valuation - labelling of goods has to be undertaken in bond prior to ex-bond clearances - Whether the excise duty demanded on the basis of MRP is a revenue neutral exercise inasmuch as the appellant has discharged CVD liability on the imported goods on the same MRP - Held that:- appellants would have been entitled to CENVAT credit of the CVD paid on the imported goods, even if there was a variation in the MRP declared to the Customs and the MRP on which excise duty liability is being demanded. In these circumstances, we are of the view that the matter has to go back to the adjudicating authority for verification of the fact whether MRP on which CVD liability has been discharged and the MRP on which excise duty is being demanded are one and the same. If they are found to be same, the question of demand of any excise duty liability would not arise at all. The appellants are directed to furnish before the adjudicating authority all the evidences by way of Bills of Entry and other documentary evidences in support of their contention that they have discharged CVD liability on the same MRP on which excise duty is being demanded vide the impugned notice and the order. - Matter remanded back - Decided in favour of assessee.

  ---

• 2014 (8) TMI 215
  Valuation of goods - Addition of advertisement expenses incurred by Kitex to the assessable value of the goods cleared by the appellants on the ground that the price was not the sole consideration and advertisement expenses is to be considered as development cost - Commissioner dropped the demand beyond the normal period of limitation - Held that:- As regards addition of advertisement expenses, we find that the demand is no longer res integra. In the case of Phillips India Ltd Vs Collector of Central Excise, Pune [1997 (2) TMI 120 - SUPREME COURT OF INDIA] and in the case of Commissioner of Central Excise Surat Vs Besta Cosmetics Ltd. [2005 (3) TMI 130 - SUPREME COURT OF INDIA], Hon’ble Supreme Court took a view that advertisement expenses cannot be included or added to the assessable value. We find that both these decisions are applicable to the facts of this case and Commissioner (appeals) has simply ignored the citation in the case of Philips India Ltd. referred to by the appellants in their appeal memorandum. As regards related persons, the proper course to adopt would have been to take the value at which the goods are sold by the related person to the customers for the purpose of levying central excise duty. In the absence of such a step being taken, we are required to examine the correctness of inclusion of advertisement expenses in the assessable value, which we have already done and held to be not applicable - Decided against Revenue.

  ---

• CST, VAT & Sales Tax

• 2014 (8) TMI 225
  Applicability of limitation period - Whether in view of section 106(4) the entire provision of revision as contemplated u/s 46 of the 1975 Act including the period of limitation prescribed therein would be applicable to such revisions - Held that:- On a plain reading of sub-section (4) of Section 106 of the DVAT Act, 2004, insofar as it applies to a case of revision, it would be evident that notwithstanding the repeal of the 1975 Act, for the purposes of a revision which relates to any period ending before the 1st day of April, 2005 or for any other purpose connected with or incidental to such revision, the repealed Act, (i.e., the 1975 Act) would continue to have effect as if the DVAT Act, 2004 had not been passed. It is absolutely clear that the entire provision of revision as contemplated under Section 46 of the 1975 Act including the period of limitation prescribed therein would be applicable to such revisions notwithstanding the repeal of the said Act by the DVAT Act, 2004. This was not noticed by the Court in previous judgment passed - Order Recalled - Decided in favour of assessee.

  ---

• 2014 (8) TMI 224
  Deducation of VAT at source - Exclusion of tax situs - Whether when the assessee buys materials from a neighbouring State for completing works contract and discharges CST on the same, the payer for which contract was executed, is liable under the Kerala VAT Act to deduct local VAT at source - Whether the assessee is under obligation to take registration with the local VAT for such a transaction - Held that:- when there is factual material available to show that the goods were purchased from Karnataka and brought to Kozhikode (Kerala) for the purpose of the works contract, it is a clear incident of CST Act becoming applicable and once the dealer has suffered the liability to pay tax under the CST Act, it is not known as to how a different view is possible. - Decided in favour of assessee.

  ---

• 2014 (8) TMI 223
  Legality of the penalty imposed under Section 69(1) - business of sale and purchase of Cement at Bhopal manufactured by M/s Diamond Cements, Damoh - concealment of fright or transportation charges - Held that:- From the documents and material available on record, it is clear that in the matter of concealment of fright or transportation charges infact the amount was included in the Bill for purchase of Cement and the Assessing Officer has bifurcated the amount and did not permit addition of the transportation or fright charges in the cost price of product purchased i.e. cement. Therefore, it is not a case where the petitioner has concealed any item, which is taxable but has only include it to be a amount in a particular head i.e. purchase price which is not permissible. It is a case where in the particulars and details supplied by the petitioner certain incorrect and erroneous claim is made which is not sustainable under law - imposition of penalty on concealment of fright charges is not correct. It is a case where the petitioner erroneously included the amount as it was included in the bill by the Manufacturer of Cement - Decided in favour of assessee.

  ---