TMI Tax Updates - e-Newsletter
September 1, 2014

Case Laws in this Newsletter:

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

Articles

1. SECTION 148 : ASSESSEE CAN CLAIM REAONS FOR ISSUE OF NOTICE U/S 148 EVEN BEFORE FILING OF RETURN U/S 148

   By: CA Paras Dawar

2. Date of assessment order cannot be doubted merely because of late service

   By: DEVKUMAR KOTHARI

3. ‘SIM’ CARD – CAPITAL GOODS OR INPUT?

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Finance Ministry: Performance of the Economy in the First Quarter of the Financial Year 2014-15 ss Broadly on Expected Lines

Notifications

Companies Law

1. F. No.17/60/2012-CL-V - dated 29-8-2014 - Co. Law

Amendment in schedule II of Companies Act, 2013

Highlights / Catch Notes

Income Tax

• High Court: Section 68 requires more than PAN and tax filings for private companies if facts suggest a cover-up.

  Case-Laws - HC : Addition u/s 68 - Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up - HC
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• Property Purchases: "On-Money" Transactions Require Clear Evidence for Assumptions or Additions to Purchaser's Records.

  Case-Laws - HC : Additions in the hands of purchaser (Assessee) – It is a common practice that the property is registered on the circle rate and remaining money is paid as “on-money“ - in the absence of any evidence/document, it cannot be applied by closing of the eye - There must be evidence on record to prove that “on-money“ was received from the assessees - HC
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• High Court Confirms Foreign Exchange Fluctuation Losses as Allowable Expenditures Under Income Tax Act Section 43A.

  Case-Laws - HC : Allowability of amount u/s 43A - foreign exchange fluctuation - But the word “expenditure” used in context of Section 37(1) would also cover loss even though the said amount had not gone out from the pocket of the assessee - HC
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• Taxpayer's Contingent Excise Duty Liability Not Deductible as Expenditure for Income Tax Purposes.

  Case-Laws - HC : Accrual of expenditure - proceedings initiated by the show-cause notices were dropped - the liability claimed by the assessee as a liability on account of excise duty was merely a contingent liability which cannot constitute expenditure for the purposes of income-tax - HC
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• High Court rules five flats as one unit for tax u/s 54F of Income Tax Act.

  Case-Laws - HC : Five independent flats treated as single unit u/s 54F – the built up area got translated into five flats - the transaction was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land - property should be assessed as one unit - HC
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• High Court: Possession of Photocopies Doesn't Prove Ownership of Original Documents Under Income Tax Act Section 153C.

  Case-Laws - HC : Notice u/s 153C – The finding of photocopies in the possession of a searched person does not necessarily mean and imply that they “belong” to the person who holds the originals - HC
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Customs

• Adjudicating authority in denovo proceedings cannot overturn original redemption fine on goods from prior notices.

  Case-Laws - AT : Confiscation of goods - the adjudicating authority in this denevo proceedings in respect of other notices and appellants could not have set aside the redemption fine which was imposed on the goods in the original proceedings - AT
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Service Tax

• Authorities Cannot Demand Duplicate Payment Due to Error in Registration Number on Service Tax Challan.

  Case-Laws - AT : Payment of service tax wrongly - Registration number inadvertently indicated in the challan - payment cannot be demanded second time from the appellant - AT
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Central Excise

• Penalty Waived for Confiscation of Goods: Intent for Clandestine Removal Not Proven as Goods Stayed in Factory.

  Case-Laws - AT : Confiscation of goods - Clandestine removal of goods - since goods were within factory, means rea manifesting that goods were ready for clandestine removal has not been reached the stage - penalty waived - AT
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VAT

• Goods Export Defined: Property Transfer Occurs Post-Customs Frontier for Foreign Export from India.

  Case-Laws - HC : Export of goods - when property in the goods passes to the buyer after they have crossed the customs frontier for the purpose of export to a foreign country, the sale is “in the course of export” out of the territory of India. - HC
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• Court Affirms Compounding Assessment Benefit u/s 3(4) Cannot Be Denied Due to Past Inter-State Purchases (4.

  Case-Laws - HC : Benefit of compounding system of assessment - There being no provision to deny the benefit of section 3(4) of the Act, on the mere ground of the petitioner's inter-State purchase in the previous years, benefit of compounding cannot be denied - HC
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Case Laws:

• Income Tax

• 2014 (8) TMI 907
  Revised return - Whether the revised return filed on 10.01.2007 was binding on the assessee, as the Trust was barred and could not have filed a revised return – Held that:- Assessee contended that the statement was made on wrong legal advice and there was no violation of Section 13(1)(d) – relying upon National Thermal Power Company Limited Versus Commissioner of Income-Tax [1996 (12) TMI 7 - SUPREME Court] - the legal issue, which does not involve disputed facts, can be entertained even at the appellate stage - there cannot be any doubt or debate, that the claim and submission could have been raised by the assessee before the appellate authorities – Decided against Revenue. Shares gifted or donated - Whether there was violation of Section 13(1)(d) of the Act as the assessee was gifted or donated 16,50,000/- shares of Nicholas Piramal India Limited by way of gift – Held that:- The letter in categorical terms states that the gift would be towards corpus of the assessee trust – Tribunal was rightly of the view that there was a specific direction that 16,50,000 shares would form part of the corpus and should not be treated as voluntary contribution - right from the very beginning that even when the return of income was filed on 30.10.06, the stand of the respondent assessee was that 16,50,000 shares of Nicholas Piramal India Limited were gifted towards and to form part of the corpus of the trust - the assessee trust had sold 4 lac shares in terms of Section 49(1)(ii) - The period of holding of the donor had been taken into consideration and the costs of acquisition was taken as “Nil” but the gain from transfer of the shares were exempt u/s 10(38) of the Act – Decided against Revenue. Exemption u/s 11 to 13 - Whether the assessee had violated Section 13(1)(d) of the Act and therefore should be denied exemption under Section 11 to 13 of the Act – Held that:- The shares were acquired by the assessee on 03.08.05 - as per Clause (iia) to the proviso, Section 13(1)(d), would be applicable, post period of one year from the end of the previous year in which the shares were acquired - there would be no violation of Section 13(1)(d) on the part of the respondent assessee till 31.03.07 - the assessee had rightly claimed that they had not violated Section 13(1)(d) – relying upon Director of Income Tax versus Shree Radha Krishan Charitable Trust [2011 (3) TMI 1064 - DELHI HIGH COURT] - the assessee has not claimed exemption from benefit of Section 11 to 13 of the Act with effect from 2007-08 onwards – Decided against Revenue.

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• 2014 (8) TMI 906
  Levy of interest u/s 217(1A) - Interest payable by assessee when no estimate made. - Whether the Tribunal was correct in deleting the interest levied by the AO u/s 217(1A) – Held that:- At the time of original assessment u/s 143(3), the AO had directed charging of interest u/s 201 and 217 - The computation form also referred to and computed interest u/s 217 - the AO had the right to reconsider the question of levy of interest u/s 217 and also examine and state under which sub-section interest was leviable - Right to correct and modify the assessment order was granted and allowed by the first appellate authority vide order dated 24th July, 1992 - Section 217(1) and (1A) both use the expression “on the making of the assessment” - the interest could be imposed after income of an assessee stands computed pursuant to the assessment - The interest component had to be calculated in the computation form - The computation form was/is not the assessment order, but quantifies the tax demand/tax payable, interest payable under different sections by the assessee or in case of refund, refund and interest payable by the Revenue - relying upon Kalyankumar Ray vs. CIT [1991 (8) TMI 291 - SUPREME COURT] - the assessment order dated 22nd March, 1991, had specifically directed levy of interest u/s 217 of the Act and did not specify the sub-section under which the interest should be charged - The direction to specify the sub-section could be read in the order dated 24th July, 1992, when it was directed by the CIT(A) that the AO should pass a speaking order. The order u/s 217 did not form part of the assessment order and it could be made after the regular assessment was made - mere omission on the part of the AO to impose or refer to Section 217 cannot lead to the inference that the AO had waived interest payable without giving reasons for doing so - it follows that the AO did not become functus officio after order of regular assessment was passed and it was permissible and permitted that he could pass an order u/s 217 after he had made regular assessment – the Commissioner was not justified in invoking Section 263 because the AO had failed to mention and state that interest u/s 217 should be levied while passing the regular assessment order - an order u/s 217 should be passed after regular assessment has been made – Decided in favour of Revenue.

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• 2014 (8) TMI 905
  Addition u/s 68 - Onus of proving the identity and credit-worthiness of the share subscriber - Genuineness of subscription - Whether the Tribunal fell into error in upholding the deletion which was directed to be added back by virtue of section 68 of the Act – Held that:- In COMMISSIONER OF INCOME TAX Versus NOVA PROMOTERS & FINLEASE (P) LTD [2012 (2) TMI 194 - DELHI HIGH COURT] the legal effect of section 68 of the Act is mentioned - the money was received through banking channels, but did not reflect actual genuine business activity - The share subscribers did not have their own profit making apparatus and were not involved in business activity - They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques - The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction - The beneficiaries, including the assessee, did not give any share-dividend or interest to the entry operators/subscribers - The profit motive normal in case of investment, was entirely absent - no profit or dividend was declared on the shares - Any person, who would invest money or give loan would certainly seek return or income as consideration. The court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction - The onus to prove the three factum is on the assessee as the facts are within the assessee’s knowledge - Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up - These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive - Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. The Tribunal has merely reproduced the order of the CIT(A) and upheld the deletion of the addition - the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the AO from the concerned bank, the AO has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions - the matter is required to be remitted back to the tribunal for fresh adjudication – Decided in favour of Revenue.

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• 2014 (8) TMI 904
  Exemption u/s 10(23C)(vi) – Held that:- The interest was paid on the basis of the resolution passed by the Executive Committee of the assessee - There was no discrimination between the creditors - all the creditors got the interest @ 18% - relying upon C.I.T. Vs. Amrit Soap Company 2008 (11) TMI 71 - PUNJAB AND HARYANA HIGH COURT] - the interest @ 18% to close relative and associated persons is covered under Section-40A (2)(b) of the Act - Expediency, legitimacy and the business need will have to be examined from the assessee's point of view and not certainly, from the Department's view – Decided against Revenue. Estimation after obtaining report from DVO – Held that:- The assessee has constructed the building. The AO did not accept the value shown by the assessee and referred the matter to the DVO, but without rejecting the books of account - The Tribunal held that without rejecting the books of account, addition cannot be made on the basis of D.V.O's report - books of accounts were maintained properly and were never rejected - the order of the Tribunal is upheld – Decided against Revenue. Depreciation on books – Held that:- The assessee is maintaining a library for lending the books on charges - As per Schedule to Income Tax Rules, 100% depreciation on books is permissible - the depreciation @ 100% was rightly allowed by the appellate authorities, as per the Income Tax Rules – Decided against Revenue.

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• 2014 (8) TMI 903
  Additions in the hands of purchaser (Assessee) – cash was found from the lockers of the vendors - vendors stated that the same as receipt of "on-money" for the sale of the property in question - Held that:- "on-money" was received by them from the assessee - the AO has not made any attempt to verify the accounts of the assessees - whether any search was conducted at the business premises of the assessees is not clear from the record - huge amount was found from the bank lockers of the vendors, who made the statement that the same was received from the assessee as "on-money" - It is a common practice that the property is registered on the circle rate and remaining money is paid as "on-money" - in the absence of any evidence/document, it cannot be applied by closing of the eye - There must be evidence on record to prove that "on-money" was received from the assessees - Assessees have purchased the property from the vendors - The vendors were not having sufficient source of income to accumulate the huge amount, which was recovered from the lockers alongwith the bank slips of Punjab National Bank - The AO has not examined the accounts especially withdrawal of the assessees in a proper manner – the matter needs deep investigation – thus, the matter is remitted back to the Tribunal for fresh adjudication – Decided in favour of Revenue.

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• 2014 (8) TMI 902
  Profit attribution to Indian operations – Permanent Establishment (PE) in India or not - business connection in India u/s 9(1)(i) – booking of air tickets - electronic distribution services to travel industry through Computerised Reservation System (CRS) - Held that:- Each assessment year is separate and distinct and principle of res judicata does not apply to proceedings for subsequent or other years - it was/is possible for the AO to depart from the finding or a decision in one year as it is final and conclusive only in relation to a particular year for which it is made but as observed in Radhasoami Satsang versus Commissioner of Income Tax, [1991 (11) TMI 2 - SUPREME Court] - when a fundamental aspect pervading through different assessment years has been found as a fact in one way or the other, it would inappropriate to allow the position to be changed in a subsequent year particularly when the said finding has been accepted - The principle is also based upon the rules of certainty and consistency that a decision taken after due application of mind should be followed consistently as this lead to certainty, unless there are valid and good reasons for deviating and not accepting the earlier decision. The role performed by the computers in India or the Indian agents was to merely get connected or be configured so that the travel agents could perform the booking function - The computers in India were not capable of processing data, which was processed abroad - the functions required huge investment and capacity, which was not installed and available in the computers at the desk of the travel agents in India but were available in the host computer in the USA - it was looking at the nature and the character of the functions undertaken in India viz., the functions and assets outside India, 15% was attributed to India - This worked out to Euro 0.45 and this was less than the commission of Euro 1, which was paid by the appellant-assessee to the distributor in India - The Tribunal has wrongly observed that earlier appellant-assessee was in losses - There is no such finding in the earlier orders - assessee was maintaining globalised accounts and India specific attribution of profits/losses was not undertaken in the accounts being maintained – Decided in favour of assessee.

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• 2014 (8) TMI 901
  Allowability of amount u/s 43A - foreign exchange fluctuation - Whether Rs. 49,98,072/- debited in the Profit and Loss Account were covered by Section 43A of Income Tax Act, 1961 and/or was otherwise expenditure of capital nature – Held that:- Reference to Section 43A would be redundant and not necessary as the revenue has not been able to state and point out that the loan taken under the heading FCNR(B) loan was for purpose of acquisition of any capital asset - AO has accepted that the loan was not for acquisition of an asset but he observed that assets had been acquired in the earlier period - He did not specify or hold that an asset was acquired - Finding of the CIT(A) is clear and categorical that the loan was not for acquisition of an asset, payment for which was to be made in foreign currency - Rs. 49,98,072/- was the actual expenditure incurred by the assessee as per the terms negotiated - The payment was to save and protect the assessee from foreign exchange fluctuation loss – thus, the payment of Rs. 49,98,072/- would be of revenue nature i.e. virtually in nature of payment of interest for the loan taken having regard to the nature and type of loan which was taken i.e. FCNR(B) Loan Account. Allowability of foreign exchange loss – Held that:- Following the decision in CIT vs Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] - exchange fluctuation arising on revenue account transaction should be allowed as deductible, expenditure - the expenditure is an allowable expenditure - the expression “expenditure” in Section 37(1) of the Act connotes “what is paid out” and what has gone irretrievably - But the word “expenditure” used in context of Section 37(1) would also cover loss even though the said amount had not gone out from the pocket of the assessee - Decided against revenue.

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• 2014 (8) TMI 900
  Accrual of expenditure - interest liability on excise duty - interest for the period 1.4.82 to 31.3.83 payable pursuant to the Gujarat High Court order dated 6.4.1984 – Held that:- Contingent liabilities do not constitute expenditure and cannot be the subject-matter of deduction even under the mercantile system of accounting. - There was no actual liability in praesenti - no demand was raised against the assessee - The assessee did not admit any liability and showed cause refuting the allegations made in the show-cause notices - the cause shown by the assessee was accepted by the excise authorities and proceedings initiated by the show-cause notices were dropped - the liability claimed by the assessee as a liability on account of excise duty was merely a contingent liability which cannot constitute expenditure for the purposes of income-tax – Decided against Assessee.

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• 2014 (8) TMI 899
  Five independent flats treated as single unit u/s 54F – Interpretation of term "a residential house" - Reinvestment of capital gain for claiming exemption u/s 54F – Held that:- The word 'a' appearing in Section 54F of the Income Tax Act should not be construed in singular, but should be understood in plural - Relying upon CIT V. Smt. K.G. Rukminiamma [2010 (8) TMI 482 - Karnataka High Court] - assessee was eligible for claiming exemption u/s 54F of the Act on the five flats received by her in lieu of the land she had parted with - all the Authorities below have clearly understood that the agreement signed by the assessee with M/s.Mount Housing Infrastructure Ltd., is that the assessee will receive 43.75% of the built-up area after development, which is construed as one block, which may be one or more flats - the built up area got translated into five flats - the transaction was not with regard to the number of flats but with regard to the percentage of the built up area, vis-a-vis, the Undivided Share of Land – thus, the property should be assessed as one unit, even though different flats are available – Decided against Revenue.

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• 2014 (8) TMI 898
  Notice u/s 153C – Search and seizure u/s 132(1) – Satisfaction note - Whether the AO of the searched person (the Jaipuria Group) could be said to have arrived at a satisfaction that the documents mentioned above belonged to the petitioners – Held that:- Relying upon Pepsi Foods Pvt. Ltd. Versus. Assistant Commissioner of Income Tax [2014 (8) TMI 425 - DELHI HIGH COURT] it has been rightly held that before the provisions of Section 153C of the said Act can be invoked, the AO of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person) - In the Satisfaction Note, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group - This is even apart from the fact that there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. The finding of photocopies in the possession of a searched person does not necessarily mean and imply that they “belong” to the person who holds the originals - Possession of documents and possession of photocopies of documents are two separate things - While the Jaipuria Group may be the owner of the photocopies of the documents it is quite possible that the originals may be owned by some other person - unless it is established that the documents do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise. The AO should not confuse the expression “belongs to” with the expressions “relates to” or “refers to” - none of the three sets of documents – copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement – can be said to “belong to” the petitioner - the ingredients of Section 153C of the Act have not been satisfied - thus, the notice issued u/s 153C is set aside – Decided in favour of Assessee.

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• Customs

• 2014 (8) TMI 911
  Restoration of Appeal - Importation of computer bags - Plea to recall Tribunal order on the ground that valuation issue was not addressed - Held that:- Court had examined the bag produced before us in the course of appeal hearing on 03.04.2013 in great detail. That was visible as computer bag to the nacked eye with different features therein including safety cushion to accommodate a laptop which is a delicate instrument being (electronic goods) with memory needing cushion for its resting. Order was passed upon physical examination holding the bag produced before us was computer bag. On the basis of material components, compartments available in the bag and its capability to accommodate laptop computer inside, that enabled us to come to the conclusion that the goods presented for physical verification was computer bag. But that was mis-declared as school bag. Mis-declaration of the description of goods resulted in fraud against Revenue. Once fraud surfaced, the imports did not call for any consideration for further relief to the appellant on valuation. The bag presented during hearing of this application was altogether different from the bag produced during appeal hearing. The facts and evidence recorded in the appeal order passed is conclusive proof of the pleadings made by both sides and evidence adduced in the bar. Present application is in disguise a review application and Tribunal having no power of review in absence of statutory conferment thereof, that is liable to the dismissed - Decided against assessee.

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• 2014 (8) TMI 910
  Confiscation of currency - Currency neither declared nor permitted by RBI for export - Penalty - Held that:- The general principle is that on whose possession the goods are found then that person is to be owner of the goods. In this case, the currency has been recovered from the possession of the appellant and the appellant claims the owner of the goods and the adjudicating authority is holding that he is not the owner of the goods. Therefore, the onus lies on the adjudicating authority to find out who is the owner of the goods. As he has not arrived at a decision as who is the actual owner of the goods, therefore, in all probability the appellant is the owner of the goods as the currency has been recovered from his possession on 08.12.2004. Further, the absolute confiscation has been done by the adjudicating authority holding that the appellant is not the owner of the goods is incorrect in the light of the findings here-in above. Therefore, in these circumstances, I hold that the absolute confiscation of the currency is not warranted. Accordingly, I hold that the Indian currency can be released to the appellant on imposition of redemption fine and penalty - appellant has suffered for 9 ½ years and the quantum of currency is about Rs. 24 lakhs which was seized on 08.12.2004 and also has made expenses on litigations to get the currency released therefore quantum of redemption fine is determined to 10% of the currency seized. I also find the penalty of Rs. 2 lakhs is appropriate. - adjudicating authority to release the currency seized on payment of redemption fine of 10% of currency seized and on payment of penalty of Rs. 2 lakhs - Decided partly in favour of assessee.

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• 2014 (8) TMI 909
  Confiscation of goods - Redemption fine - Adjudicating authority dropped redemption fine demand - Held that:- Bench had remanded the matter aback in respect of the appellants as indicated in original proceedings to adjudicating authority to reconsider the issue. It is also noticed that M/s Agro Canners never filed an appeal against the confirmation of demands of customs duty or against the amount of redemption fine imposed in the original proceedings. In our considered view, the adjudicating authority in this denevo proceedings in respect of other notices and appellants could not have set aside the redemption fine which was imposed on the goods in the original proceedings. - The impugned order is set aside which has set aside redemption fine on the respondent in original proceedings - Decided in favour of Revenue.

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• 2014 (8) TMI 908
  Stay application – Repeated requests by the revenue for adjournments opposed by the appellant as Bank Guarantee was given for Rs. 6.5 crores and the same is kept alive which involves substantial costs - The stay order passed earlier by the Tribunal has referred to only the merits of the case as also to the clarification given by the DGCA - Held that:- earlier vide Stay Order, appellant was directed to deposit 50% of the duty amount as a condition of hearing of his appeal. The subsequent miscellaneous order passed on the modification application filed by the assessee, rejected the said application vide Misc. No. C/14/10 dt. 18.01.10 but extended the period to deposit. The said order was challenged by the appellant before the Hon'ble Delhi High Court who set aside the same and the matter was remanded to the Tribunal for fresh consideration of the stay petition. Subsequently vide Misc. Order No. C/191/10 dt. 12.10.10, the Tribunal allowed the stay petition un-conditionally, thus not requiring the appellant to deposit any part of duty or penalty etc., imposed upon them. Tribunal has referred to only the merits of the case as also to the clarification given by the DGCA. The Tribunal observed that in the facts and circumstances of the case we find it difficult at the Interim stay to insist for compliance of requirement of pre deposit of the amount demanded in the impugned order. In as much as the stay was granted based on the merits and not taking into consideration the fact of execution of bank guarantee and there are no directions in the stay order to keep the bank guarantee alive, we deem it fit to allow the release of the same especially in view of the fact that Revenue seeks final hearing of the matter only after the decision of the Hon'ble Supreme Court as discussed above - Petition adjourned.

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• Service Tax

• 2014 (8) TMI 924
  Waiver of pre deposit - payment of service tax wrongly - Registration number inadvertently indicated in the challan - Commissioner(A), Noida dismissing this claim & rejecting appeal - Assistant Commissioner, Division-IV, Service Tax-II, Mumbai confirming that the amount is paid and the same is still lying in Mumbai unit account and not utilized - Held that:- Payment of Rs. 25 lakhs indicated in the challan has been paid and the Government has received the amount of Rs. 25 lakhs as credit to their account. Thus, the government has received the money and the same cannot be demanded second time from the appellant - stay granted.

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• 2014 (8) TMI 923
  Business Auxiliary Service - Penalty u/s 76, 77 & 78 - visa consultancy service to students who want to study abroad - commission from local visa consultancy agents for referring students - Held that:- Appellant has discharged the service tax liability and the interest thereof, on being pointed out about the tax liability. It is also noted that the statements of the concerned officials of the assessee also clearly indicate that they were unaware of the law as to the taxability of the service rendered to them by the local agents. We also find that the first appellate authority while setting aside the penalties imposed on the appellant under section 78 of Finance Act 1994 as recorded that the adjudicating authority has not recorded any findings on the imposition of penalty under section 78. This itself would reinforce the argument of the appellant that they were under bonafide belief that the service tax liability does not get attracted. We find strong force in the of contention raised by the Ld. Counsel that the appellant had never collected the amount of service tax liability from the service recipient though the bills were raised for the service rendered - appellant could have entertained a bonafide belief that the service rendered by him may not be taxable. We are of the view that the appellant had made out a reasonable cause for setting aside the penalties imposed on him under section 76 and 77 of the finance act 1994 - Decided in favour of assessee.

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• 2014 (8) TMI 921
  Valuation of service - Industrial or commercial construction - erection, commissioning and installation service - Held that:- The Larger Bench of the Tribunal held that value of goods and materials supplied free of cost by the service recipient to the provider of taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value of the gross amount charged within the meaning of the expression in Section 67 of the Finance Act. The Larger Bench further held that the value of free supply by service recipient does not comprise the gross amount charged under Notification No. 15/2004-ST, including the Explanation thereto as introduced by Notification No. 4/2005-ST - Decided in favour of assessee.

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• 2014 (8) TMI 920
  Waiver of pre deposit - renting of immovable property service - Revenue wants to add to the assessable value of taxable service the notional interest on the security deposits received from the lessees - Held that:- Tribunal in the case of Magarpatta Township Development & Constructions Co. Ltd. vs. CCE, Pune-III reported in [2013 (7) TMI 669 - CESTAT MUMBAI] waived the pre deposit of the dues which were confirmed on the same grounds. In view of the above stay order, pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.

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• 2014 (8) TMI 919
  Renting of immovable property service - Revenue wants to add to the assessable value of taxable service the notional interest on the security deposits received from the lessees - Held that:- Tribunal in the case of Magarpatta Township Development & Constructions Co. Ltd. vs. CCE, Pune-III reported in [2013 (7) TMI 669 - CESTAT MUMBAI] waived the pre deposit of the dues which were confirmed on the same grounds. In view of the above stay order, pre deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal. - stay granted.

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• Central Excise

• 2014 (8) TMI 916
  Waiver of predeposit of duty - Accumulation of CENVAT Credit - manufacture of cotton yarn - exemption vide Notification No.30/2004 dt.9.7.2004 - Held that:- It is seen from the SCN that the proceedings were initiated on the ground that as per Notification No.30/2004 dt. 9.7.2004, the applicant cannot accumulate any cenvat credit on the inputs or capital goods. Prima facie , I find that Notification No.30/04 read with corrigendum dt. 9.7.2004 restriction was imposed only in respect of the goods where are credit of duty taken on inputs only. This view is also supported by the stay order of the Tribunal in the case of Arvind Ltd. Vs CCE Bangalore – [2012 (9) TMI 877 - CESTAT BANGALORE]. Hence the applicant made out prima facie case for waiver of predeposit of entire amount of duty along with interest and penalty. - Stay granted.

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• 2014 (8) TMI 915
  Confiscation of goods - Clandestine removal of goods - penalty imposed under Rule 26 of Central Excise Rules, 2002 - clearance of the goods from the factory - Held that:- On perusal of the judgement rendered in the case of Eurasia Marbles Pvt. Ltd., referred to above, it is observed that this judgement relating to 100% EOU and cannot be applied to the facts of present case. It is observed that the Commissioner (Appeals) has modified the order of adjudicating authority by reducing redemption fine to 10% of the value of the confiscated goods. I find that very liberal view was taken by the Commissioner (Appeals). I find no interference in respect of reduction of redemption fine is warranted. Regarding imposition of penalty of equivalent amount of Rs. 3,25,753/- on the confiscated goods, ld.Chartered Accountant has made a point that since the goods have not been cleared from the factory though it is admitted fact that there was excess stock of 70.375 MT of ingots which is the production of almost of 3 to 4 days clearly indicate that production was not properly recorded in the accounts, violations are clearly noted which point finger towards non-accountal with intent to clear later on. However, since goods were within factory, means rea manifesting that goods were ready for clandestine removal has not been reached the stage, accordingly, I find force in his contention that this is not the case of imposition of equivalent penalty under section 11AC and this is case of only confiscation of goods and imposition of penalty. Decided partly in favour of assessee.

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• 2014 (8) TMI 914
  Waiver of predeposit - valuation under Rule 6(b) or Rule 8 - Supply a portion of the finished goods to their other units as well as in the market - appellant paid the duty on the inter-unit transfer on the comparable price which was rejected on the ground that comparable price is a contract price - Held that:- Applicant has sold the same goods to the independent buyers during the relevant period and therefore it appears to be covered by the decision of the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. (2007 (2) TMI 5 - CESTAT, MUMBAI) - Stay granted.

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• 2014 (8) TMI 913
  Denial of CENVAT Credit - Cenvat Credit availed by the respondent on MS Bar, CTD bars, beams etc. which was used by the respondent for setting up the klin cooler and chimney in their factory - Revenue is of the view that these items does not cover under Rule 2(k) of the CENVAT Credit Rules, 2004, therefore, the respondents are not entitled for input credit, therefore the show-cause notice was issued, the matter was adjudicated, and demand was confirmed by the Adjudicating Authority along with interest and equivalent amount of penalty - Held that:- There is no doubt that the larger bench of the Tribunal has held that the explanation amended in 2009 of Rule 2(k) of CENVAT Credit Rules, 2004, is clarificatory. Despite that, the Hon'ble Apex Court in Rajasthan Spinning & Weaving Mills Ltd. (2010 (7) TMI 12 - SUPREME COURT OF INDIA) held that Cenvat credit on the above said items is available if same has been used for setting up capital goods. The decision of the Hon'ble Apex court will prevail over the decision of the Larger Bench of the Tribunal. Therefore, following the decision of the Rajasthan Spinning & Weaving Mills Ltd. (supra), I hold that the respondent are entitled for Cenvat Credit on the items in dispute during the impugned period, which has been used for setting up capital goods i.e. kiln, cooler and chimney. - Decided against Revenue.

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• 2014 (8) TMI 912
  Imposition of penalty - non maintenance of separate records - consumption of inputs/input services used in the manufacture of dutiable as well as exempted products - Held that:- This is a case where demand @ 10%/5% of the value of bagasse cleared without payment of duty has been made during the course of manufacture of sugar. Bagasse is a waste/by-product - In a recent decision the hon'ble apex Court in the case of Hindustan Zinc Ltd. held that the provisions of Rule 6(3) of the CENVAT Credit Rules 2004 will not apply to by-products arising in the course of manufacture and, therefore, reversal of credit or payment of a sum @ 10%/5% of the value of exempted by-product would not arise at all - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (8) TMI 922
  Reopening of assessment - UPTT - why reassessment proceedings under Section 21 of the Act should not be reopened on the ground that enzymes was not a chemical since it only acts as a catalyst and, therefore, is taxable at the rate of 10% as an unclassified item - Held that:- There has been no discussion in the original assessment order as to whether enzyme is a chemical or not. In the absence of any finding being given by the Assessing Officer on this aspect, the issue as to whether enzyme is a chemical or not has not been determined. When there is an application of mind and an opinion is formed, in that case reopening the assessment proceedings could be held to be illegal as it would amount to a change of opinion but, in the instant case, we find that there has been no determination as to whether enzyme is a chemical or not. No finding has been given by the Assessing Officer. Consequently, no opinion has been formed. In the absence of determination of a vital issue as to whether enzyme is a chemical or not, the competent authority was justified in granting permission to the Assessing Officer to reopen the assessment. The word "reasons to believe" would mean cause or justification. The Assessing Officer was justified in forming an opinion that there has been an under assessment. The expression "reason to believe" cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The same principle applies to the competent authority while granting permission. Only a limited reason is required to be given by the competent authority while granting permission to reopen the assessment. The Court finds that there was sufficient application of mind in coming to a conclusion that it was a case of under assessment and that a finding is required to be given as to whether enzyme is a chemical or not. reassessment proceedings can only take place when there is an assessment order and there is reason to believe that there has been a case of under assessment or escaped assessment. In the event, there is no assessment order there can be no reassessment proceedings. Consequently, initiation of proceedings under Section 21 of the Act when there is no assessment order is a clear case of non application of mind. Consequently, the order of the competent authority granting permission to reopen the assessment proceedings under Section 21 (2) of the Act as well as the consequential notice issued by the Assessing Officer under Section 21 of the Act for the assessment year 2006-07 under U.P. Trade Tax Act was wholly illegal and is quashed - Decided in favour of assessee.

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• 2014 (8) TMI 918
  Cancellation of registration - in the survey made at the Head Office of the petitioner at Lucknow neither books of account nor stock of Menthal Oil were found - Held that:- Impugned order is absolutely cryptic and does not even refer to the facts of the case nor to the case laws referred to by the petitioner. It has failed to consider that the case of the petitioner throughout was that he had only applied for permission for transfer of his Head Office from Mausali, Barabanki to Kanchanpur Matiyari Chauraha, Faizabad Road, Lucknow whereas the business continued to function from Masauli, Barabanki. The Member, Tribunal while passing the impugned order has also failed to take into account whether the cancellation of the registration of the petitioner would result in loss of revenue to the State or otherwise that if registration was not cancelled it would result in financial loss to the State. Considering the matter in the totality of the facts and circumstances of the case and in the light of the observations made herein above and the case law referred to, this writ petition is finally disposed of with a direction that the impugned order of cancellation of registration dated 8.7.2014 shall remain stayed during the pendency of the appeal of the petitioner before the Tribunal and shall be subject to the outcome of the final decision of the Tribunal - Stay granted.

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• 2014 (8) TMI 917
  Nature of transaction - local sale or export of goods - Failure to furnish evidence - Whether in the facts and circumstances of the case, the appellant Appellate Tribunal VAT was correct in holding that the transfer of property in the goods from the appellant company to M/s Hyaat, Katmandu (Nepal) took place after and not before the goods were cleared for export out of India - Held that:- Law was settled and the expression “in the course of export” was well established and understood. Transactions in questions were covered under the expression “in the course of export” and were, therefore, exempt. The Supreme Court has recorded that when property in the goods passes to the buyer after they have crossed the customs frontier for the purpose of export to a foreign country, the sale is “in the course of export” out of the territory of India. This clarification and elucidation was required as the assessee, the exporter, in B. K. Wadeyar’s case (1960 (9) TMI 64 - SUPREME COURT OF INDIA) was both the consignor and consignee in the FOB contract. But that does not mean that there cannot be and would not be any other case covered by the expression “in the course of export”. The quoted passage relates to and deals with second part of Section 5(1) of the Central Sales Tax Act, 1956. A case may well be covered by the first part. Facts of each case have to be examined to ascertain whether the transactions in question were “in the course of export” or not. Further, actual export has to be established and shown. Latter aspect has been dealt with in the case of Sita Juneja (1998 (9) TMI 649 - DELHI HIGH COURT). Matter remanded back - Decided in favour of assessee.

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• 2014 (8) TMI 897
  Benefit of compounding system of assessment - Assessee made inter state purchases in earlier years - Tamil Nadu Value Added Tax Act, 2006 - Held that:- dealer effecting second and subsequent sale within the State having a business relating to taxable goods less than Rs. 50 lakhs may pay tax at his option, for each year on his turnover relating to taxable goods at the rate not more than 0.5 per cent. The option to pay at the compounded rate has to be exercised (a) within 30 days from the date of commencement of business, (b) in cases of assessee whose turnover during the previous year is less than Rs. 50 lakhs he has to exercise the option on or before 30th of April of the year for which he exercises the option for the year 2008-09 within 30 days from the date of commencement of the Tamil Nadu Value Added Tax Ordinance, 2008. The proviso to sub-section (b) states that if a dealer's turnover reached Rs. 50 lakhs during the previous year, he shall not be entitled to exercise the option for, subsequent year. Section 3(4) of the Act refers to the entitlement of assessee to have the benefit of compounded rate at 0.5 per cent subject to his turnover relatable to taxable goods being less than Rs. 50 lakhs. The definition of "turnover" given under section 2(41) refers to aggregate amount for which goods are bought or sold, or delivered or supplied. Given the fact that the turnover assessed relates to taxable goods, the same has relevance to taxable turnover. As per section 2(38) of the Act, "taxable turnover" means the turnover on which the dealer has to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. Thus as far as section 3(4) is concerned, when the taxable turnover is less than Rs. 50 lakhs, he is entitled to have the benefit of compounded rate under section 3(4)(a) of the Act. There being no provision to deny the benefit of section 3(4) of the Act, on the mere ground of the petitioner's inter-State purchase in the previous years, I do not find any legal support in the order of the second respondent denying the benefit of section 3(4) of the Act for the assessment year 2009-10. The second respondent is hereby directed to apply provisions contained under section 3(4) of the Act subject to the petitioner satisfying all the other requirements of the Act. Decided in favour of assessee.

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