Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 9, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Where there is a hotchpotch of funds and the expenditure both for investments and business purposes are incurred from the common pool and cannot be segregated, the principle of apportionment of expenses as provided under section 14A of the Act is upheld - AT
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Assessee having consistently followed percentage completion method as per the accounting standards and completed the project in the later years, no addition could be made on the advances received during the year - AT
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There is nothing wrong on the part of the assessee in not considering the amount representing work advances as income accruing or arising to it until a regular bill for work done is submitted and accepted by its clients - AT
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When assessment was made on income computed u/s115JB and tax had been paid on income so computed, penalty u/s 271(1)(c) would not be imposed with reference to addition that would have been made while making assessment under normal procedure - AT
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Deduction on municipal taxes – Income declared as income from other sources – claim of expenditure/deduction of actual payment made by the assessee in respect of the municipal taxes allowed - AT
Customs
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In case a person attempted to export Indian currency outside India without permission of RBI more than the prescribed limit, in that case the Indian currency can be absolutely confiscated - same can be allowed to redeem on payment of redemption fine and imposition of penalty - AT
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The products imported by the appellants if they are as per the definition of bituminous coal, the question of going into trade parlance or consider the item as steam coal does not arise - AT
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Appealable order - Order for auction of goods - The letter of the Asst. Commissioner of Customs cannot be considered as an appealable order for filing appeal before this Tribunal in terms of Section 129A(1) of the Customs Act, 1962 - AT
Service Tax
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Receipt of legal consultancy service for the purpose of obtaining patent rights from abroad - Activities can be better classified and more specifically covered by Legal Consultancy Service. - AT
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Refund of service tax - input service received and used in respect of export of goods - services of transport of export goods through national waterway, inland water and coastal shipping - refund allowed - AT
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Commercial Training or Coaching Services - the benefit of exemption notification is extended to the vocational training institute, which are enable the trainees to seek employment and not to others who are already employed - prima facie case is against the assessee - AT
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Denial of refund claim of CENVAT Credit on the ground output service was exempted - Nature of export of call center services - IT service or BAS - refund allowed - AT
Central Excise
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CENVAT Credit - while awaiting the decision on time relaxation towards claim of duty drawback, the petitioner continued to profit from the wrongly utilized CENVAT credit till May 2012, clearly in contravention of Rule 3(5) of the CENVAT Credit Rules - assessee not entitled for any relief - HC
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Validity of settlement Commission's order - The Settlement Commission noticed that the applicants had not accepted a substantial part of the duty liability and had in fact contested the evidence collected by the Revenue as being fabricated and tampered with - action of commission referring the matter back to department is correct - HC
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Exemption from affixing MRP on cement bags - rate of duty - Tariff rate or ad-valorum rate - Not for Retail Sale- meant for industrial consumer/institutional consumer/RMC consumption - decided in favor of assessee - AT
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CENVAT Credit - input services - event management service - The premise of the Authorities below, that temple premises is used only for religious functions and for no other social activity is misconceived - AT
VAT
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Levy of sales tax / VAT on deemed sale - The deemed sale under sub-clause (d) is only a consequential transaction which follows the completion of the sale in favour of the respondent and cannot precede it. - HC
Case Laws:
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Income Tax
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2014 (8) TMI 243
Advances received as unproved credits – Held that:- CIT(A) rightly was of the view that without bringing any cogent material on record, the AO could not have made the addition under challenge - There is nothing on record that the AO wanted the appellant to produce the prospective purchasers for his examination, so as to adhere to the principles of natural justice - There was no reason to interfere with the order of the CIT(A) as nothing was brought on record that the amount received as advance for sale of plot is in fact, unsecured loan - There is confirmation on record and the advances could have been settled at the time of sale of plots in the business in which assessee is indulging – decided against Revenue. Gifts received from brother-in-law through others – Held that:- CIT(A) is rightly was of the view that the assessee has explained that the donee has given post -dated cheques to his father, who is a small time businessman- As advised by his son, he has sent one of his employees to withdraw the money by submitting post-dated cheques and that's why the difference in signatures, which explanation was not accepted by the AO during the assessment proceedings - Except for not accepting the explanation given by the appellant, no other cogent material has been brought on record by the AO in making the impugned addition - there was confirmation from the assessee’s brother-in-law of the various amounts given to him - Since the source and the identity were established, there is no need to treat the amount as unexplained cash credit – Decided against revenue. Restriction of development expenses – Held that:- There was no reason to interfere with the order of the CIT(A) - there is no basis for disallowing the entire development expenditure when assessee is in the business of plot development and sale thereafter - CIT(A) restricted the amount to 10% of the expenses incurred - Even though, the disallowance of expenditure is made under section 37(1) nothing was brought on record by Revenue why the entire amount should be disallowed – thus, the order of the CIT(A) is upheld – Decided against Revenue. Commission on sales to representatives – Held that:- There was no reason to interfere with the order of the CIT(A) - Payment of commission is an incidental expenditure in the business of real estate - Without even giving show cause notice or asking for the details AO disallowed the expenditure without any reason – Decided against Revenue. Unexplained cash credit – Held that:- There was no reason to consider the Revenue ground as the AO and Ld. CIT should have accepted the mistake committed by the AO in making addition - Some of the amounts were already treated as income like gifts received from brother-in-law - there is certainly double addition by the AO - Just because assessee transferred funds from his business account to personal account, the same does not become unexplained cash credit – Decided against Revenue.
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2014 (8) TMI 242
Transfer pricing adjustment – Selection of comparables – Functionally different company - Held that:- Assessee is involved in manufacturing and marketing of food items, the four companies also should be included in comparability analysis - TPO was selective in selecting some and rejecting some which are in similar line of business - operating income should be excluded and manufacturing of snacks and operation of cold storage cannot be even considered to be closely related so as to aggregate it - the TPO is directed to re-examine this computation of mark-up by giving due opportunity to assessee and re-workout the adjustment and also by including the above four comparables which are also on the same line of business – Decided in favour of Assessee. Non-grant of TDS – MAT credit – Held that:- AO granted TDS credit only to the extent of ₹ 52,59,916 and denied TDS credit to an extent of ₹ 59,73,427 - even though the application u/s 154 was passed, it seems the same was rejected - Form 26A also reflects, TDS credit of more than what assessee claimed, there is no reason to deny the amount of credit which was already granted in an order u/s 143(1) – Decided in favour of Assessee.
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2014 (8) TMI 241
Disallowance u/s 14A - Average rate of investment under Rule 8D(2)(iii) disallowed @ 0.50% - Held that:- The disallowance u/s 14A read with Rule 8D is to be made not only in respect of income which does not form part of the total income but also in respect of income which shall not form part of the total income that the section 14A(1) is enacted to ensure that the expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income, which means that the expenses which are not incurred not for the purpose of earning of taxable income cannot be allowed for the computation of net income - Relying upon CIT., Mumbai Versus M/s. Walfort Share & Stock Brokers P. Ltd. [2010 (7) TMI 15 - SUPREME COURT] - even if from the investments made, no exempt income has resulted but the expenditure cannot be said to be incurred for earning of taxable income, it cannot be allowed while computing the taxable income - Where there is a hotchpotch of funds and the expenditure both for investments and business purposes are incurred from the common pool and cannot be segregated, the principle of apportionment of expenses as provided under section 14A of the Act is upheld – Decided against Assessee. Stock in trade – Disallowance under Rule 8D(2)(iii) – Held that:- The issue relating to the disallowance u/s 14A in relation to shares held in stock in trade was decided in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - section 14A is attracted even in the case of dividend income from shares held as stock in trade – Decided against Assessee.
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2014 (8) TMI 240
Estimation of income at 8% on the advances received – Held that:- There was determination of total income under the normal computation before allowing deduction - Other income was brought to tax separately - It could not be understood as to how on the percentage completion method, the AO could arrive at some profits when project was not even substantially started - As seen from the advances received and amounts invested in the project, the advances received are much more as the assessee’s projects command respect in the market and customers simply paid advances once project was announced - estimation of income on advances cannot be sustained, considering the fact that assessee book results as such were accepted in later two years without resorting to estimation on advances to be consistent with first year’s method followed by the A.O. Relying upon Lingtec Constructors LP vs. ITO [2013 (5) TMI 469 - ITAT MUMBAI] - assessee having consistently followed percentage completion method as per the accounting standards and completed the project in the later years, no addition could be made on the advances received during the year – the order is modified and the AO is directed to accept book results as such - assessee has spent various amounts other than project related expenditure, the expenditure in the P & L Account gets set off as a loss from business to the ‘income from other sources’- Decided in favour of Assessee.
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2014 (8) TMI 239
Revenue recognition - Method of accounting – Mismatch between purchases and reflection in stock - Assessee neither followed neither mercantile system nor cash system of accounting – Held that:- As decided in assessee’s own case, it has been held that the advances were required to be utilized for the purpose of executing contract and as per the terms of the contract, the advances were adjusted as per actual progress of the contract - CIT(A) has recorded that no advance is adjusted in full in the first bill for the work done as the entire contract was not complete and that if the contract is not completely fulfilled the assessee has to return the amount of advances – the system of accounting of the assessee was followed by the assessee for the last 35 years i.e. from the year of its inception and all along has been accepted by the department - there is nothing wrong on the part of the assessee in not considering the amount representing work advances as income accruing or arising to it until a regular bill for work done is submitted and accepted by its clients - the order of the CIT(A) is correct in accepting the method of accounting followed regularly for the last 35 years – there was no reason to interfere in the order of the CIT(A) – Decided against Revenue.
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2014 (8) TMI 238
Sale of shares – Income from business or STCG – Held that:- Assessee has furnished before us the details of transactions in shares made by the assessee to show that the nature of transactions including their frequency, holding period etc. was similar in both these years – Relying upon CIT v/s Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - it was open to the assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business of dealing in shares - there should be uniformity in treatment given to transactions in shares and the rule of consistency should be followed when facts and circumstances for different years are identical – the AO is directed to accept the claim of the assessee for Short Term Capital Gain on sale of shares – Decided in favour of Assessee. Penalty u/s 271(1)(c) – Held that:- Assessee pointed out that from the assessment order passed by the AO, even after making the corresponding addition in respect of which the penalty is imposed, the total income of the assessee as computed as per the normal provisions of the Act was less than the book profit computed u/s 115JB and the assessee thus was finally assessed for the year under consideration on the basis of book profit as per the section 115JB of the Act – Relying upon CIT vs. Nalwa Sons Investment Ltd. [2010 (8) TMI 40 - DELHI HIGH COURT] - when assessment was made on income computed u/s115JB and tax had been paid on income so computed, penalty u/s 271(1)(c) would not be imposed with reference to addition that would have been made while making assessment under normal procedure – Decided in favour of Assessee.
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2014 (8) TMI 237
Deduction on municipal taxes – Income declared as income from other sources – Held that:- The assessee being the defacto owner of the building and enjoying the fruit thereon has to incur the municipal taxes on the building as agreed upon - for the new building brought into existence, higher municipal taxes could not have been levied - while the levy of municipal taxes arises on account of a statutory obligation, the payment of the municipal taxes by the assessee arises out of contractual obligation between the assessee and the land owner, irrespective of the fact that in whose name the demand has been raised by the municipal authorities - assessee is entitled for deduction of the municipal taxes paid, the AO is directed to assess the receipt as income of the assessee under the head ‘income from other sources’ and the claim of expenditure/deduction of actual payment made by the assessee in respect of the municipal taxes is allowed – Decided in favor of assessee.
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2014 (8) TMI 236
Deduction u/s 10B - Alternative claim u/s 11A – Assessee registered with STP as 100% EOU - Development and manufacture of software and IT enabled services – Held that:- The Tribunal had allowed the claim u/s 10B of the Act, the deduction was not allowable u/s 10B of the Act, however on a review petition directed the claim made be examined u/s 10A of the Act, if the same is allowable, provided conditions of section 10A of the Act are satisfied - also in THE COMMISSIONER OF INCOME TAX Versus REGENCY CREATIONS LTD. [2012 (9) TMI 627 - DELHI HIGH COURT] it has been held that the applicant had claimed the benefit of section 10B on the basis of the provisions which pertains to section 10A - Revenue has not raised the contention that assessee has not satisfied the conditions that are required for claiming deduction u/s 10A of the Act nor has the Revenue controverted the findings of the CIT(A) that assessee is entitled to the benefit of deduction u/s 10A of the Act - CIT(A) was justified in granting deduction u/s 10A – Decided against Revenue.
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2014 (8) TMI 235
Cancellation of order u/s 250(6) and u/s 154 – Held that:- CIT (A) had observed that the appeal arises from the order of the D.C.I.T., Panchkula u/s 154 of the Act, meaning thereby that the appeal was filed before the CIT (A) against the order passed u/s 154 of the Act which was dated 31.3.2010 - While deciding the appeal the CIT (A) had referred to the order passed u/s 250(6) of the Act dated 28.3.2006, against which the assessee is not in appeal - the CIT (A) has erred in canceling the order dated 28.3.2006 while deciding the appeal against the order passed u/s 154 of the Act dated 31.3.2010 - the order of the CIT (A) in canceling the order passed under section 250(6) of the Act dated 28.3.2006 is to be set aside – Decided in favour of Revenue. Non -charging of interest u/s 234D – Held that:- The interest is chargeable w.e.f. AY 2004 -05 as the provisions had been inserted w.e.f. 1.6.2003 and the provisions are not applicable retrospectively - the claim of the assessee with regard charging of interest u/s 234D of the Act is upheld – Decided in favour of Assessee. Reopening of assessment u/s 147 – Held that:- CIT(A) without appreciating the provisions of proviso to section 147 held that notice u/s 148 issued by the AO was barred by time - there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for his assessment, for that assessment year - The AO had validly initiated re-assessment proceedings by recording reasons and thereafter issuing notice u/s 147/148 of the Act which had been recorded within the prescribed period u/s 149(1)(b) of the Act and there being no case of change in opinion, the orders of the authorities below is upheld – Decided against Assessee. Actual payment of Pension out of pension fund – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee is entitled to the claim of expenditure incurred on payments being made to the pensioners as revenue expenditure - the total contribution to the pension fund was ₹ 34,09,048/-out of ₹ 56,33,188/- were actually disbursed to the pensioners -the allowance of expenditure is restricted in the hands of the assessee to ₹ 34,09,048 – Decided partly in favour of Assessee.
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Customs
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2014 (8) TMI 247
Confiscation of currency - Redemption fine - attempt to export Indian currency outside India without permission of RBI - Whether the proper officer can confiscate absolutely the Indian currency which is found more than ₹ 10,000/- with a person who is going outside India or not - Held that:- In case a person attempted to export Indian currency outside India without permission of RBI more than ₹ 5,000/- or ₹ 10,000/- (as the case may be) in that case the Indian currency can be absolutely confiscated and it is discretion of the proper officer in the facts and circumstances of the case be allowed to redeem on payment of redemption fine and imposition of penalty - matter sent to referral banch.
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2014 (8) TMI 246
Application for recusal - company came to know the fact that the case had already been discussed with the Judge by the Revenue - Held that:- letter is based on incorrect information. It was not mentioned that the matter had been discussed with the Judge by the Revenue. What was mentioned was that, Judge had heard about the issue and also heard that even one of the importers had informed the investigating officers that importers also are in agreement with the view taken by the Revenue about classification. This was a casual conversation, heard by the Judge and there was no application of mind on the issue and he had no occasion to discuss or study the issue at all thereafter. Even though it was a casual conversation heard by the Judge in the middle of a group of officers, yet he had offered to recuse since it has always been an endeavour to be not only fair but also seen to be fair - At the cost of repetition, Court would like to make it clear that there was no discussion about the case with anyone leave alone Revenue officers before hearing - the request made by the company for recusal is rejected. Classification of goods - Bituminous Coal or Steam Coal - benefit of lower rate of duty - benefit of concessional rate of duty under Notification No. 12/2012 - Whether the coal imported by the appellants is to be charged to basic customs duty and CVD treating the same as Bituminous Coal or Steam Coal - Department's contention is that according to sub-heading Note 2 of Chapter 27, the steam coal imported by the appellants which answers to the definition of bituminous coal, has to be classified as bituminous coal and therefore, the lower rate of duty benefit extended to steam coal would not be available for the importers - Held that:- Court cannot go by the history of taxation and we also cannot go by the trade parlance especially when a product is defined in the tariff. In fact, the learned sr. counsel fairly admitted that a statutory definition overrules trade parlance. Nevertheless, it was his submission that this case stands on a different footing and he would urge several more grounds in addition to the submissions hereinabove to support his contention that the impugned order classifying the product imported by the appellants as bituminous coal is not correct. The classification of goods in the schedule is governed by the principles laid down in the rules. The rules make it clear that titles of sections, chapters and sub-chapters are provided for ease of reference only and for legal purposes classification has to be determined according to the terms of the headings and any relevant section or chapter notes and provided such headings or notes do not otherwise require, according to subsequent rules. Rules 2 to 5 of rules for interpretation speak of heading all through. Therefore, Rule 6 would be relevant rule for our purposes since this rule comes into play when the dispute arises between two sub-headings and not between headings. This is in view of the fact that according to the tariff entries under chapter 2701, coal, whether or not pulverized, but not agglomerated is the main heading and Anthracite, Bituminous coal come under one category and coking coal and steam coal come under the category of other coal preceded by ‘--'. Therefore Anthracite and Bituminous coal and other coal form 3 sub-headings and we have to determine which sub-heading is applicable. Burden to show that he is eligible would fall on the importer since Indian manufacturers are eligible for credit on inputs and input service or capital goods. Inputs may be excluded since coal is extracted from earth. Credit on capital goods or input service would be definitely available and therefore, even an Indian manufacturer would not be eligible for lower rate of duty straightaway. - importers could never have shown that they fulfilled the condition for claiming lower rate of duty under the Notification 12/2012-C.E. - condition is relating to not taking credit on inputs and input service and not relating to payment of duty on the inputs. We do not find any substance on this point since availment of Cenvat credit arises only when duty is paid. Burden of proof as to why the product is not steam coal is on the Revenue - it is not for the Department to show that what is imported is not steam coal. Department has to correctly classify the same. Once the Department depending upon the definition and specifications comes to the conclusion that the product is bituminous coal and it fulfills the definition given therein and in view of the settled law that when there is a specific definition available in the tariff, trade parlance is not relevant. What is required the Department is to show that what is imported fulfills the definition as given in the tariff and if in trade parlance the product has another name, that could not make a difference to the classification issue. In any case, it is nobody's case, that bituminous coal is always called as steam coal. In fact, steam coal is also bituminous coal but vice versa is not always true. Therefore if the Department is able to show that what is imported is bituminous coal, in our opinion, the Department need not travel further especially In view of the fact that bituminous coal can be coking coal or steam coal also and tariff has chosen to give them separate headings and therefore it becomes necessary to classify coal imported as coking coal or steam coal only if and when it does not covered by the definition of bituminous coal given in the tariff. Invocation of extended period of limitation - in trade parlance, the coat imported by the appellants is steam coal. In any case this has not been contested. Further even if the exemption notification was issued, for quite some time, the Department had not taken up the issue which would also show that even Departmental officers did not think of the issue in the beginning. All these aspects show that the issue is one of classification, technical in nature and therefore mens rea to evade payment of duty cannot be alleged. Therefore extended period cannot be invoked and no penalty could have been levied and can be levied on the appellants even in respect of demand for normal period. In the result, it is confirmed that the products imported by the appellants if they are as per the definition of bituminous coal, the question of going into trade parlance or consider the item as steam coal does not arise and therefore the differential duty demand in respect of coal imported which are according to definition of bituminous coal has to be upheld. Similarly, we also make it clear that appellants are not eligible for the benefit of CVD at lower rate as per the notification No.12/2012-C.E. - differential duty demands of BCD & CVD within normal period with interest as per law in all cases are upheld. There will be no penalty on any of the appellants in all the appeals. - Decided partly in favour of assessee.
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2014 (8) TMI 245
Appealable order - Order for auction of goods - Order communicated by way of letter - to whether the referred letter of Asst. Commissioner can be considered as an order, against which appeal can be preferred before the Tribunal - Held that:- On a conjoint reading of the statutory provisions contained in Sections 129A and 2(1) of the Act, it would transpire that the order passed or decision taken by the Commissioner of Customs in the capacity of an adjudicating authority, can only be contested before the Tribunal. In other words, for ascertaining as to whether a communication or a letter can be construed as an appealable order, the real test to be applied, firstly is that whether there is a duty cast on the Commissioner to decide judicially; and the second requirement is that the Commissioner should decide the matter judicially and the decision requires communication to the aggrieved party. The impugned letter dated 05.12.2013 of the Asst. Commissioner of Customs cannot be considered as an appealable order for filing appeal before this Tribunal in terms of Section 129A(1) of the Customs Act, 1962 - Decided against the assessee. Validity of Auction - violation of IPR of the assessee - Held that:- parallel imports are allowed and therefore there is no violation of Intellectual Property Rights(Imported Goods) Enforcement Rules, 2007 and the department is free to proceed with the e-auction. - once the goods have been confiscated the Government has become the owner as per the provisions of Customs Act with which we are concerned. It would not be appropriate to sit in appeal against the decision to auction the goods by the Commissioner unless it is shown that it is in violation of provisions of Customs Act. We also find that the appellant was given a copy of the Circular No. 13/12-Cus dated 8th May 2012 wherein after referring to the nodal Ministry of UOI, and obtaining clarification, the parallel imports are permitted and appellant was informed that parallel imports are permitted and therefore their request not to auction the goods cannot be accepted. - Decided against assessee.
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2014 (8) TMI 244
Confiscation of goods - Prohibition on import of ATLAS since external boundaries of Indian was found wrongly depicted/not represented in the maps - Held that:- boundaries and names shown and the designation used on this map do not imply official endorsement or acceptance by UNESCO. Further, the map also indicates the line of control and clarifies that this line of control is as per the agreement between India and Pakistan and the matter is yet to be sorted out between different parties. - Tribunal has in past allowed books to be released after relevant objectionable maps were taken out by the Customs authorities for destruction. In the cases cited by the learned advocate, it is directed that the maps having any objectionable material in the book may be taken out from the book and destroyed in presence of the Customs authorities. The learned advocate for the appellant has made an offer that if, in the ‘UNESCO World Heritage Atlas', there is any objectionable material, the relevant pages may be taken out and destroyed in presence of Customs authorities. The Customs authorities, on being satisfied that in the left-out part there is no objectionable material or map, may release the ‘UNESCO World Heritage Atlas' to the appellant. Impugned order is otherwise upheld. However instead of absolute confiscation, book should be released after removing map or any other objectionable. Keeping in view nature of goods and the fact that consignment is pending clearance for over a year, no redemption fine is imposed. Penalty is however upheld - Decided partly in favour of assessee.
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Service Tax
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2014 (8) TMI 269
Waiver of pre deposit - Non compliance with pre deposit order - Held that:- Applicant had failed to deposit the directed amount within the stipulated time and also failed to produce any order staying the operation of order dated 10.02.2014 by any higher forum. In these circumstances the Appeal is liable to be dismissed. Consequently the Appeal is dismissed for non-compliance with the provisions of Section 35F of Central Excise Act, 1944 - Decided against assessee.
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2014 (8) TMI 268
Waiver of pre-deposit of service tax - Business Auxilliary service - Supply of inputs to sugar cane factory - Held that:- applicants are acting as an agent on behalf of cane growing farmers for providing service to the sugar factory in relation to the procurement of goods or services which are inputs for the client. The amounts in question are in respect of the harvesting and transportation of the sugar cane to the factory and activity undertaken by the commission agent in relation to the sale and purchase of agricultural produce is exempted from service tax as per Notification no. 13/03-ST dt.20.06.2003 as amended. In view of the above, prima facie we find that the applicants have made out a strong case in their favour. Therefore, the pre-deposit of dues are waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.
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2014 (8) TMI 267
Waiver of pre-deposit - Extended warranty service - Repairs to Vehicle Service - period from 01.05.2011 to 30.06.2012 - Held that:- Total Maintenance Plan (TMS) includes the wear and tear parts, Schedule Service Plans (SSP), includes all replacement and adjustments specified under TMS. It is seen that in the case of SSP, the wear and tear parts are not covered. - applicant had took a definite stand before the adjudicating authority that during the course of implementing the Schemes, dealers are required to replace some component or spare parts and VAT is payable on the said items. he Hon'ble Delhi High Court in the case G.D. Builders Vs Union of India [2013 (11) TMI 1004 - DELHI HIGH COURT] held that the cost of materials would be excluded, where VAT was paid for assessment, determination of value under Section 66 of the Finance Act, 1994. Considering the overall facts and circumstances of the case, stay granted partly.
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2014 (8) TMI 266
Waiver of pre deposit - Authorised Service Station and Repairs Service - reimbursement received in the course of rendering service - Held that:- There are Credit Notes issue by M/s. Tata Motors for cost of the goods and the contents of such Credit Notes are not disputed. That being the case, prima facie, the applicant is eligible for exemption under Notification No.12/2003-ST and, therefore, we grant waiver of pre-deposit of dues arising from the impugned order for the purpose of admission of the appeal and there shall be stay on collection of such dues during the pendency of the appeal - Following decision of assessee's own previous case [2014 (1) TMI 455 - CESTAT CHENNAI] - Stay granted.
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2014 (8) TMI 265
Denial of refund claim - tax collected and deposited with Department for construction work done - Charitable purpose - Bar of limitation - Held that:- Appellant has placed on record a copy of letter dated 12.07.2010 (Page 25 of the appeal papers) of the Trust, addressed to the appellant, evidencing that an amount of ₹ 18 lakh + ₹ 9,13,991/- (Total ₹ 27,13,991/-) of the appellant has been blocked by the Trust on account of non-payment of refund of service tax collected from the Trust without authority of law. This aspect has not been placed before the Adjudicating authority to examine the aspect of unjust enrichment. The case is, therefore, remanded to the adjudicating authority for verification of the facts and to decide the matter afresh after affording an opportunity to the appellant to explain their position including the reliance place on the relied upon judgments on time bar issue - matter remanded back.
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2014 (8) TMI 264
Receipt of legal consultancy service for the purpose of obtaining patent rights from abroad - Classification of service as operational or administrative assistance amounting to Business Support Service - Held that:- operational and administrative assistance were included in the category of Business Support Service only subsequently and during the period involved in this case, the definition did not include operational and administrative assistance. Activities can be better classified and more specifically covered by Legal Consultancy Service. However we also observe that appellant would be entitled to CENVAT credit of the entire tax paid and therefore extended period may not be invokable in this case at all. As regards the amount within the normal period, the situation would be revenue-neutral since the appellant would be entitled to CENVAT credit of the tax paid - prima facie case in favour of assessee - stay granted.
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2014 (8) TMI 263
Refund of service tax - input service received and used in respect of export of goods - services of transport of export goods through national waterway, inland water and coastal shipping - Notification No. 17/2009 dated 07.07.2009 - Held that:- the only ground taken by the learned A.R. for rejection of the refund claim is that Notification 40/2009-S.T. dated 30.09.2009 brought the service of transport of export goods through national waterways, inland water and coastal shipping were made eligible for refund of claim of unutilized CENVAT Credit w.e.f. 30.09.2009. It is not in dispute that the respondent has availed the said transport service and paid service tax thereon in the course of export of goods. Merely on the ground that the goods were exported prior to introduction of Notification 40/09-ST dated 30.09.2009 cannot be denied in the light of the decision of WNS Global Services (P) Ltd. [2008 (1) TMI 94 - CESTAT, MUMBAI] wherein it was held that refund of unutilized service tax credit not allowed to provider of output services, neither any conditions, safeguards and limitations provided in respect of provider of output services during relevant period nor any procedure was prescribed for claiming refund of unutilized CENVAT Credit availed on input services used in export of output services. - Decided against the revenue.
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2014 (8) TMI 262
Demand of service tax - Disallowance of CENVAT Credit - Held that:- Commissioner (Appeals) had not addressed the issues raised in the Memorandum of Appeal, which include short payment of service tax and imposition of penalty, even though he had allowed the Appeal on wrong availment of CENVAT Credit in favour of the Appellant - In absence of appropriate finding of Commissioner matter is remanded back - Decided in favour of assessee.
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2014 (8) TMI 261
Waiver of predeposit of tax - Commercial Training or Coaching Services - benefit of exemption notification No.24/2004-ST dt.10.9.2004 - Assessee claims itself as vocational training institute - Held that:- On a plain reading of the Notification no.24/2004-ST dt.10.9.2004, we find that the exemption benefit extended to enable the trainees to seek employment or undertake self-employment directly after such training or coaching. It is apparent from the plain reading of the exemption notification, it is extended to the vocational training institute, which are enable the trainees to seek employment and not to others who are already employed. - stay granted partly.
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2014 (8) TMI 260
Denial of refund claim of CENVAT Credit on the ground output service was exempted - Nature of export of call center services - IT service or BAS - Held that:- After going through the agreement and on a plain reading of Agreement between the foreign principal and respondent, it is found that services rendered by the respondent can be considered as a service rendered on behalf of the principal by the appellants to their clients. On going through the Agreement, the services provided by the appellants are classifiable under Business Auxiliary Service(BAS) which was taxable during the relevant period. Therefore, the respondent is eligible for refund claim - Matter remanded back - Decided in favour of assessee.
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Central Excise
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2014 (8) TMI 255
CENVAT Credit - entitlement of duty drawback - audit team noted that the petitioner had wrongly availed of CENVAT credit of the Excise duty, contrary to Rule 3(5) of the CENVAT Credit Rules, 2004, as the goods were temporarily imported capital goods, meant to be re-exported - Claim of drawback claim was rejected on the ground of period of limitation - petitioner contends that it has suffered a double tax by virtue of having paid duty at the time of import in 2007, and then having complied with the CENVAT demand along with penalty and interest in 2012, to make good its wrongful utilization of CENVAT credit. Held that:- time period to claim a duty drawback had expired by 2009, it is also equally clear that the petitioner could have reversed the CENVAT credit it had claimed in August 2009, while it awaited a relaxation of the time period under Rule 7A. The petitioner, had it paid the CENVAT demand when it received the Show Cause Notice in November 2009, would not have incurred any penalty. The petitioner was, in fact, only liable to an amount of ₹ 8,58,235/- at that time, with interest. However, the petitioner did not reverse the CENVAT credit amount in 2009, but instead only paid the CENVAT credit amount after it received the Show Cause Notice of 1.5.2012. Regardless of the petitioner's possible entitlement to a drawback, it did not reverse the CENVAT credit in 2009 despite its awareness that it had wrongly availed of the same in 2007, and thus acted contrary to Rule 3(5) of the CENVAT Credit Rules. This Court thus need not labour to discern that the petitioner had willfully retained the CENVAT credit from November 2009, when its wrongful utilization was brought to its notice, all the way up to May 2012. During this period, this credit could have in all probability been used by the petitioner for whatever purposes necessary, as all availed credit accumulates in the CENVAT credit account, which is a common account used to pay service tax, central excise duty etc. Such wrongful utilisation of CENVAT credit amounts to a loss to the Revenue, as tax owed to the Revenue is in effect being withheld. However, while awaiting the decision on time relaxation, the petitioner continued to profit from the wrongly utilized CENVAT credit till May 2012, clearly in contravention of Rule 3(5) of the CENVAT Credit Rules. The petitioner cannot be allowed a drawback on the Excise duty as that would tantamount to allowing it to profit from its unjustly derived benefit of the CENVAT credit till May 2012. This Court is thus of the opinion that the petitioner cannot be granted relief as its claim to relief is not made with clean hands - Decided against assessee.
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2014 (8) TMI 254
DTA clearance by 100% EOU - Levy of Eduction cess (for the third time) on the aggregate of the duties of the customs - whether a Tribunal is justified in holding that the education cess is not leviable under Section 93 (1) of the Finance Act, 2004 upon the 100% EOU in clearance of DTA? - Notification No. 23/03 CE dated 31.03.2003 ignored by Tribunal - Maintainability of appeal - Held that:- While passing the impugned judgement and order, the learned tribunal has relied upon the decision of the tribunal in the case of Sarla Performance Fibers Ltd. Versus CCE, Vapi, reported in (2010 (2) TMI 335 - CESTAT, AHMEDABAD). It is reported that against the aforesaid order passed by the learned tribunal in the case of Sarla Performance Fibers Ltd. (supra), the department preferred Tax Appeal [2013 (4) TMI 481 - GUJARAT HIGH COURT], the Division Bench of this Court has held that against the order passed by the learned tribunal in the case of Sarla Performance Fibers Ltd. (supra), appeal would not be maintainable before this Court and the appeal would be maintainable before the Hon'ble Supreme Court - all these appeals are not required to be entertained and are required to be returned to the appellant to prefer appeals before appropriate Court and/or the Hon'ble Supreme Court to challenge the impugned order passed by the learned tribunal before the Hon'ble Supreme Court, if permissible under the law. Under the circumstances, all these appeals are not entertained and are disposed of - Decided against Revenue.
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2014 (8) TMI 253
Validity of settlement Commission's order - Clandestine removal of goods - unaccounted purchases of raw materials, unaccounted production of finished goods - Evasion of duty - Matter remanded back by Commission - Held that:- Under sub-section (1) of section 32-E, the applicant is required to make a full and true disclosure of his duty liability and merely because the Settlement Commission has, after considering the explanation offered by the applicant, allowed the application to be proceeded with under sub-section (1) of section 32-F, will not mean that the Settlement Commission has accepted that the applicant has made full and true disclosure of his duty liability because that is not the stage to make such an inquiry. It is after examination of the records and the report of the Commissioner of Central Excise that the Settlement Commission, after giving an opportunity to the applicant and to the Commissioner of Central Excise to be heard, is required to pass an order as it thinks fit under sub-section (5) on the matters covered by the application. It cannot, therefore, be asserted that once the application filed under sub-section (1) of section 32-E has been allowed to be proceeded with under sub-section (3) of section 32-F, the Settlement Commission has necessarily to make a settlement. If that was so, then in that event power would not have been conferred on the Settlement Commission under sub-section (8) of section 32-F to reject the application. Since a complaint had been filed under section 200 of the Code of Criminal Procedure in which charges had been framed on 10 December 2013, the officers, with a mala fide intention made attempts to ensure that the case was not settled. The officers have not been impleaded by name as party respondents and even otherwise the allegations are very vague and have not been substantiated. The Settlement Commission has given good and cogent reasons for sending the case back to the adjudicating authority. The Settlement Commission noticed that the applicants had not accepted a substantial part of the duty liability and had in fact contested the evidence collected by the Revenue as being fabricated and tampered with. It also noticed that the Revenue had given reasons to substantiate its position regarding the investigation as well as the quantification of duty liability. In such a situation, the Settlement Commission thought it appropriate, particularly when the applicants had not made a full and true disclosure and that complex questions of fact, which required appreciation of evidence, were required to be settled through adjudication. Unless it is established that the discretion has been exercised in an arbitrary or perverse manner or that it is not based on relevant considerations or has taken into consideration irrelevant matters, Courts will not interfere in the exercise of such discretion by the Settlement Commission under Article 226 of the Constitution. There is, therefore, no illegality in the impugned order which may call for any interference by this Court under Article 226 of the Constitution - Decided against assessee.
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2014 (8) TMI 252
Stay application - Assessee already paid duty confirmed along with a penalty amount - Held that:- As the disputed amount has already been deposited by the appellant, therefore, we are of the view that the appellant has complied with the provisions of section 35F of the Central Excise Act, 1944. In the circumstance, the appellant is not required to file stay application for consideration - Application discharged.
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2014 (8) TMI 251
Exemption from affixing MRP on cement bags - rate of duty - Tariff rate or ad-valorum rate - concessional rate of duty - cement bags cleared after specifically declaring on the packages as “Not for Retail Sale- meant for industrial consumer/institutional consumer/RMC consumption” - benefit of Sr. No. 1C of Notification NO. 4/2006-CE dated 1.3.2006 - Held that:- packages of commodities containing a quantity of more than 25 kg or 25 litre excluding cement and fertilizers sold in bags upto 50 kg and packaged commodity meant the industrial or institutional consumer are excluded from the provisions of the said Rules. In other words, the Rules exclude two categories - the first category is packaged commodity containing a quantity of more than 25 kg or 25 litre and cement and fertilizer bags containing more than 50 kg. The second category is packaged commodity meant for industrial or institutional consumer. As regards the second category there is no restriction with respect to the quantity of the goods contained in the package. There is a ‘semi colon' between the two clauses. This would clearly indicate that the word ‘and' between the two clauses have to be read disjunctively and not conjunctively. Goods were sold by the appellant directly to the builders/developers/Ready Mix Concrete (RMC) manufacturers. RMC is an excisable product and therefore, the sale of cement for manufacture of RMC would definitely come within the category of sale to industrial consumers. As regards builders/developers etc., construction activity is a service activity as is well understood and there is also a Service Tax levy on construction activity. Therefore, sale to such builders/developers would certainly qualify as sale to institutional consumers. From a reading of the Notifications, especially the third proviso to entry at Sl. No. IC, it is clear that if the declaration of retail price is not required to be made in terms of PC Rules, then such goods are deemed as cleared in ‘other than packaged form' and the rate of duty prescribed under Sl. No. IC would apply. The position is the same in respect of Notification No. 12/2012 also. In the case of Mysore Cement Ltd. - [2009 (5) TMI 445 - CESTAT, BANGALORE], this Tribunal held that construction industry is a service industry and benefit claimed by the appellants under the aforesaid Notifications shall be admissible. The said decision was upheld by the Hon'ble High Court of Karnataka (2010 (8) TMI 246 - KARNATAKA HIGH COURT ). cement cleared to industrial/institutional consumers in 50 kg bags are eligible for the benefit of Notification No. 4/2006 under Sr. No. 1C. Thus it can be seen that this Tribunal as also the High Court have been consistently holding that institutional/industrial consumers are eligible for the benefit of Notification No. 4/2006 and Notification No. 12/2012 - Decided in favour of assessee.
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2014 (8) TMI 250
CENVAT Credit - input services - event management service - proof of holding event in a temple premises - Held that:- The appellant claimed to have remitted service tax on ‘event management’ service provided by a third party to facilitate organisation of a dealer/ retailer meet for promotion, marketing, advertisement and promotion of its products, though in a temple premises. If this fact is to be rebutted, the Authorities below should have cogent and clear evidence to come to a contrary conclusion. At any rate speculation and vacuous hypothesis cannot be a substitute for evidence, to support a finding. The premise of the Authorities below, that temple premises is used only for religious functions and for no other social activity is misconceived. It is well established by contemporaneous social evidence as well that temple premises are employed for a variety of social functions including marriages - adjudication order passed by the primary authority as confirmed by the order of the Appellate Commissioner impugned is unsustainable and is accordingly quashed - Decided in favour of assessee.
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2014 (8) TMI 249
Waiver of duty - Availment of CENVAT Credit - common input and input services - Held that:- Admittedly, the Applicant had availed the CENVAT Credit on inputs and input services, which were used in or in relation to the manufacture of both dutiable and exempted final products. It is also not in dispute that the Applicant had neither maintained separate records nor exercised their option for reversal of the proportionate CENVAT Credit, attributable to inputs that were used in the manufacture of inputs/input services of the exempted goods as per Rule 6(3)(ii) of the CENVAT Credit Rules, 2004. Also, prima facie, we find that the Department in computing the proportionate credit on inputs/input services, found a difference of around ₹ 39.45 and ₹ 21.03 on credit on input service, based on the report of the field formation, a copy of which was not handed over to the Applicant. There is no dispute about the reversal of the total CENVAT Credit of ₹ 56,85,699/- on inputs and ₹ 3,53,768/- on input services, attributable to the exempted final products. In the above circumstances, the amount reversed at this stage, in our opinion, is sufficient to hear their Appeal. Consequently, pre-deposit of balances dues adjudged would stand waived and its recovery stayed during the pendency of the Appeal - Stay granted.
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2014 (8) TMI 248
CENVAT credit - respondent was directed to pay the amount of ₹ 24,74,092.20 being 8% of the value of clearance of Wet lapped bagasse pulp for the period July 2000 to December 2001 under Rule 57AD of the Central Excise Rules, 1944 and Rule 6(3)(b) of CENVAT Credit Rules, 2001 - adjudicating authority dropped the proceedings - Held that:- Respondents had reversed the credit attributable to inputs used in the manufacture of wet lapped chemical bagasse pulp removed during the material period and thereafter, they started maintaining separate accounts of inputs used in the exempted final product. We find that the Hon'ble Karnataka High Court in the cases of CCE Vs. Himalaya Drug Company - [2011 (2) TMI 1165 - KARNATAKA HIGH COURT] and CCE Vs. Kudremukh Iron & Steel Co. Ltd. - [2011 (4) TMI 950 - KARNATAKA HIGH COURT] held that common inputs used in the manufacture of dutiable and exempted final products, proportionate credit to use of inputs in exempted products is reversed, there is no requirement to reverse 8% of the price of the exempted goods, even if they had not maintained separate accounts by them. We have also noticed that Rule 57AD and Rule 6 was retrospectively amended by Finance Act, 2010 and once the CENVAT credit taken is reversed there is no liability to pay the amount of 8% of the price of the exempted goods. - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (8) TMI 259
Whether a State can levy sales tax on transfer of right to use goods merely on the basis that the goods put to use are located within its State irrespective of the facts that-(a) the contract of transfer of right to use has been executed outside the State; (b) sale has taken place in the course of an inter-State trade; and (c) sales are in the course of export or import into the territory of India? Held that:- In the light of discussion, as the equipment involved was unspecified goods and indeed an order for purchase of an unspecified equipment was made by the respondent after the lease, the respondent did not become owner of the equipment till the same was despatched to the hirer so the transaction under sub-clause (d) could be complete only after the completion of the sale of the equipment which happened only when the equipment was actually delivered to the hirer in Hyderabad (Andhra Pradesh). Therefore, the transaction of deemed sale under sub-clause (d) cannot be said to be complete on the execution of the contract of master lease. If that be so, the question of the deemed sale being an inter-State sale would not arise In the instant case, the purchase of the equipment was by the respondent, the fact that the hirer wanted to hire the equipment might have prompted the respondent to place an order for its purchase but that fact is irrelevant in arriving at the conclusion whether the lease in respect of non-existent unspecified equipment would be complete on the execution of the master lease. On this aspect, we have held that before an unspecified equipment reaches the hirer, the sale of the equipment by the respondent itself would not be complete. The deemed sale under sub-clause (d) is only a consequential transaction which follows the completion of the sale in favour of the respondent and cannot precede it. - Following decision of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra [2000 (5) TMI 980 - SUPREME COURT OF INDIA] - Decided against Revenue.
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2014 (8) TMI 258
Demand of additional tax - Commissioner ordered pre-deposit of 20% of total demand for obtaining stay in the matter - Appeal dismissed for non complaince - tribunal allowed appeal in part by remanding matter relating to penalty to Assessing officer - Held that:- Decision in ANILKUMAR Versus STATE OF GUJARAT [2014 (4) TMI 730 - GUJARAT HIGH COURT] followed - Tribunal committed serious error in examining the appellants grievances on the merits of the order of assessment. The order of assessment was passed by the adjudicating authority, which was appellable by way of first appeal before the Appellate Commissioner. Section 73(4) of the Gujarat Value Added Tax Act, 2003, requires that no appeal against the order of assessment shall ordinarily be entertained by the Appellate Commissioner, unless such appeal is accompanied by proof of payment of tax in respect of which the appeal has been preferred. Proviso to section 73(4), however, provides that the appellate authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order (a) without payment of tax, interest, if any or as the case may be, of the penalty, or (b) on proof of payment of such small sum as it may consider necessary or (c) on the appellant furnishing in the prescribed manner security or such as the appellate authority may direct. In view of section 73(4) of the Act, therefore, such appeal could not have been entertained unless in terms of proviso, the appellate authority for reasons recorded in writing relaxed the requirement of full predeposit - Commissioner did not committed any serious error in imposing the condition of pre-deposit - it would however, be open for the appellant to satisfy such condition even now for which purpose time is granted upto 31.8.2014. If so done, the Commissioner shall hear the appeals on merits - Decided conditionally in favour of assessee.
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2014 (8) TMI 257
Denial of Input tax credit - Whether in case an assessee has purchased a property from a registered dealer, thus, when the assets were resold by the assessee, it was entitled to claim input tax credit on such purchases - Held that:- Tribunal has come to a factual finding that full details of sales and purchases and the tax paid was available on record, despite which, the Appellate Authority summarily dismissed the appeal observing that no such details are produced. The Tribunal came to the conclusion that the appellant had purchased the property from Cynemid, which purchases were from registered dealer, therefore, when the assets were resold by the assessee, it was entitled to claim input tax credit on such purchases. The assets were purchased by the assessee from Cynemid, and later on transferred to Atul Pharma. All the entities are registered dealers registered under the Gujarat Sales Tax Act. The deed of assignment was also produced on record, which contains all the details. So far as moveable assets are concerned, the assessee also produced invoices for the same. In such background, the Tribunal overrules the findings of the Appellate Authority that no details were furnished. These are thus pure factual findings giving rise to no question of law - Decided against Revenue.
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2014 (8) TMI 256
Waiver of pre-deposit - Consideration of appeal by Tribunal on merits – Whether the Tribunal is justified in deciding the issue on merit when the Tribunal was required to decide whether insistence by the Commissioner to deposit twenty per cent tax demand by way of a pre-deposit was correct or not - Held that:- Decision in ANILKUMAR Versus STATE OF GUJARAT [2014 (4) TMI 730 - GUJARAT HIGH COURT] followed - In view of section 73(4) such appeal could not have been entertained unless in terms of proviso, the appellate authority for reasons recorded in writing relaxed the requirement of full pre-deposit – The Tribunal ought to have placed appeal back to the Appellate Commissioner, on such condition that the Tribunal thought fit to impose on the appellant - without expressing any opinion on the Appellate Commissioner imposing the condition of part pre-deposit on the appellant, the Tribunal accepted the appellant's Second Appeal as if there was no intermediary stage of the appeal before the Appellate Commissioner or any requirement of pre-deposit under section 73(4) – Assessee also contributed to the complication as he never prayed for setting aside the appellate order of imposing condition and subsequently, dismissing his appeal when he failed to fulfil such condition - The Tribunal could have either permitted the appellant to suitably amend the prayer or if the appellant was not willing to do so, dismiss his appeal as not maintainable - the Tribunal could not have by-passed the first appellate authority and statutory requirement of pre-deposit, unless it was waived by an order in writing - Earlier order of Tribunal quashed - Assessee directed to amend the appeal - Matter remitted back to Tribunal for fresh consideration - Decided in favour of Assessee.
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