Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 11, 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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Liability to deduct TDS on payment of tax by employees if the employees had paid taxes as per the individual return/assessment, no amount as tax would be payable to that extent - HC
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Addition of notional interest accrual of interest - uncertainties exist - The relevant circulars of the Central Board of Direct Taxes cannot be ignored - interest can be taxed when collected - AT
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Computation of capital gains - Existence of Transfer u/s 2(47)(i) - handing over possession of the property is not the sole ctriteria but one of the criteria to construe 'transfer' u/s 53A of the T.P. Act - AT
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Depreciation on goodwill it could not be held that the transactions were sham or otherwise not for business purpose - depreciation allowed - AT
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Condonation of delay delay of 2984 days an experienced C.A firm could not have given such kind of wrong/ absurd advice on the facts prevailing in the instant case - even if it is considered that his C.A firm has given such an advice, it is not believable that a prudent man would not have cross verified the same or applied his mind over it - AT
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Provisions made for costs incurred on completed contracts There is nothing in the order of the FAA that could prove that provisions made by the assessee were not based on estimate given by experts - AT
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Invocation of proceedings u/s 153C the assessee being one of the signatory of the contents recording the transactions hence the documents was belonging to the assessee - AT
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Bar of limitation in passing assessment order There can be postal delay of a weeks time or a fortnights time at the maximum and it cannot be 47 days delay - AT
Customs
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100% EOU - cement plant with units both in India and Bangladesh - doctrine of promissory estoppel - learned single Judge has rightly applied doctrine of promissory estoppel against the revenue, particularly when there was no misrepresentation made by the writ petitioner - HC
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Confiscation of goods - redemption fine and penalty - mens rea - import of prohibited items - It cannot be accepted that on the mere score of re-export of the prohibited goods, no redemption fine was payable under Section 125 of the Customs Act. - HC
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Refund of Countervailing Duty (CVD) - import of against Advance licence - unjust enrichment - To deny what was paid and has to be refunded by law to the said person is not fair, just and equitable. - Refund allowed - HC
Service Tax
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Extended period of limitation - Commercial training or coaching services - computer training institute - exemption Notification No. 24/2004-ST - The demand beyond the normal period of limitation is set aside. - AT
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Commercial Training or Coaching - graduate or post graduate courses which are not recognized by law - the activities undertaken by the appellant would merit classification under commercial training or coaching as defined in the Finance Act, 1994 - AT
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Common service agreement with associate / subsidiary companies - The argument of the applicant that the services rendered by them to their associate/subsidiary companies on cost sharing basis, prima facie, appears to be not convincing. - AT
Central Excise
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Levy of interest on differential duty due to Revision in price supplementary invoice -. The payment of differential duty thus clearly came under sub-section (2B) of section 11A and attracted levy of interest under section 11AB of the Act - HC
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Reopening of assessment - Cenvat Credit - reasonable steps before availing credit - Merely because today, the original manufacturer, who is registered with the Revenue, is not traceable, it does not mean that he did not exist at the relevant point of time. - HC
Case Laws:
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Income Tax
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2014 (9) TMI 323
Addition of closing stock of finished goods - Whether the Tribunal was right in holding that no addition could be made in excess in the value of closing stock of finished goods made originally by the AO Held that:- Revenue did not contend that MODVAT credit or duty in respect of the inputs has not been included in the value of the closing stock - the AO while making the addition did not go into these factors and issues both the CIT(A) and Tribunal had rightly held that as per the assessee, the excise duty was payable at the time of removal of goods and not at the time of manufacture and the on the last date of the accounting year, the goods were lying in the bonded warehouse and the duty would be payable only at the time of unbonding - the duty had not been included and did not form part of the cost as it was not claimed in the profit and loss account - There is nothing on record to show that the Revenue in the appeal preferred before the Tribunal had raised the contention that the excise duty had, in fact, become payable and had been incurred in terms of the Excise Act or the applicable rules decided against revenue.
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2014 (9) TMI 322
Unexplained investment Gold jewellery seized - Whether the assessees in both the cases are entitled to plead that the quantum of excess gold jewellery seized does not warrant inclusion in the income of the assessees as unexplained investment in the light of the Board Instruction No.1916 [F.No.286/63/93-IT (INV.II)], dated 11.5.1994 Held that:- CIT(A) has correctly held that the Board Instruction does not make allowance in calculation of unexplained jewellery and it only states that in the case of a person not assessed to wealth tax, gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized - in the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return can be seized - this is only an enabling provision and will be applicable if there are circumstances to come to the conclusion that the status of the family and custom and practices of the community require holding of such jewellery - the assssees have not given any such explanation either before the Original Authority or the First Appellate Authority or the Tribunal - there no justification to interfere with the order of the Tribunal and no substantial question of law arises for consideration Decided against assessee.
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2014 (9) TMI 321
Penalty u/s 271G Refernce made to submit necessary documents - Held that:- Reference was not made to any particular or specific date by which assessee was required to submit the documents; or whether the same were furnished within 30 days or within the extended period of 30 days thereafter - Penalty u/s 271G cannot be imposed in this manner - A specific finding should be recorded on the date by which the assessee was required to furnish documents and whether documents were furnished, if not which documents were not furnished and whether any extension of time was granted by the Transfer Pricing Officer and if the required documents were then actually filed - The penalty order is bereft and devoid of the details and shows lack of application of mind - Transfer Pricing Officer had indicated that the AO might initiate proceedings u/s 271G but he also did not refer to date of notice, date of furnishing of information/documents etc. - There was no mandate or affirmative direction that penalty shall be imposed by the AO - the TPO had asked for specific details and documents and the details were fully complied - Compliance of the letter dated 12.06.2008 was made within period of 30 days on 25.06.2008 and then subsequently on 23.07.2008 - The date 23.07.2008 is within 60 days of issue of notice/letter dated 12.06.2008 Decided against revenue.
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2014 (9) TMI 320
Levy and payment of interest u/s 201(1) and 201(1A) Liability to deduct TDS on payment of tax by employees Held that:-The foreign employees of the assessee had paid tax in India either by way of advance tax or self-assessment tax - the AO had himself not levied interest commencing from the period of deductibility of tax till the end of the Financial Year relying upon Commissioner of Income Tax TDS vs. M/s. American Express Bank Ltd. [2011 (12) TMI 142 - DELHI HIGH COURT] - if the employees had paid taxes as per the individual return/assessment, no amount as tax would be payable to that extent and the liability for interest would be only for the period commencing from the date of such tax was deductible to the date on which tax was actually paid Decided against revenue.
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2014 (9) TMI 319
Renewal of exemption u/s 80G - Whether a new trust being formed and created by amalgamation of two trusts and with new name but no prior approval u/s 12A of the Income Tax Act having been obtained, can the certificate u/s 80G of the Income Tax Act be granted Held that:- There is no new trust - The trust is one and the same namely Dr. R.K. Dhote Public Charitable Trust - the Tribunal has not committed any error in holding that the material was not enough to refuse the request of renewal of the certificate u/s 80G - this was a case of mere renewal and no wider controversy or larger question was involved - the reasons assigned by the Tribunal are in conformity with the factual position thus, the reasonable request to renew the certificate has been rightly granted Decided against revenue.
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2014 (9) TMI 318
Deemed dividend u/s 2(22)(e) Loan or advance received Held that:- Following the decision in Assistant Commissioner of Income Tax V/s. Bhaumik Colour (P)Ltd. [2010 (3) TMI 323 - BOMBAY HIGH COURT] - the Tribunal had found that as a matter of fact no loan or advance was granted to the assessee, since the amount had actually been defalcated and was not reflected in the book of account of the assessee - The fact that there was defalcation had been accepted since this amount was allowed as business loss - Even assuming that it was a dividend, it would have to be taxed not in the hand of the assessee but in the hands of the shareholder Decided against revenue.
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2014 (9) TMI 317
Addition of notional interest accrual of interest - uncertainties exist - Benefit of circular dated June 20, 1978 - The interest income has been recognized in the books of accounts only to the extent of actual collection, which is the recommended/ recognized method as per Accounting Standard 9 of ICAI - Held that:- To arrive at a real income, accrual basis cannot be a justifying factor and the commercial and business realties of the assessee, should be considered - The interest income has been recognized in the books of accounts only to the extent of actual collection, which is the recommended/ recognized method as per Accounting Standard 9 of ICAI which lays down that when uncertainties exist regarding the determination of the amount or its collectability, the revenue shall not be treated as accrued and hence shall not be recognized until collection - for the purpose of determining whether there has been accrual of real income or not, recourse is to be made to ascertain the nature of business and character of the transaction and the realities and peculiarities of the situation - the income cannot be taxed on hypothetical basis, and it is only the real income that is to be brought to tax relying upon CIT vs. Godhra Electricity Co. [1997 (4) TMI 4 - SUPREME Court] - interest which had accrued on a "sticky" advance has to be treated as income of the assessee and taxable as such - ultimately, if the advance takes the shape of a bad debt, refund of the tax paid on the interest would become due and the same can be claimed by the assessee in accordance with law - The relevant circulars of the Central Board of Direct Taxes cannot be ignored - So long as such a circular is in force it would be binding on the departmental authorities in view of the provisions of section 119 to ensure a uniform and proper administration and application of the Income-tax Act the addition made by CIT(A ) is set aside Decided in favour of assessee. Rebate u/s 88E in respect of Securities Transaction Tax paid Held that:- Though furnishing of evidence as to payment of Securities Transaction Tax along with the return filed is prescribed by the statutory provisions, those provisions are only procedural, and non-furnishing of the same is not fatal to the claim for relief under S.88IE of the Act - the claim of the assessee for rebate u/s 88E is an off-shoot of conversion loss returned into positive income on account of additions made there was no justification for rejection of the assessees claim for rebate under S.88E of the Act the order of the CIT(A) is set aside and the AO is directed to verify whether the assessee had filed the required evidence in the prescribed with regard to provisions of S.88E of the Act - CIT(A) allowed similar claim in later year on which Revenue has come up in appeal - the assessee had made the payment of an amount of ₹ 27,07,315 towards Securities Transactions Tax during the previous year, the claim of the assessee for allowance of rebate under S.88E of the Act has to be considered in the light of the evidence furnished in that behalf Decided in favour of assessee. Expenses on earning of dividend income disallowed u/s 14A Held that:- Assessee contended that the CIT(A) failed to appreciate the legal position that Rule 8D was inserted w.e.f. 24.03.2008 and hence is not applicable to the facts of the case since it is held to be prospective in nature - The issue relating to retrospective nature of the provisions of Rule 8D has been decided in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] provisions of Rule 8D are not retrospective in nature - the provisions of Rule 8D are not applicable to the facts of the assessee's case for the AY 2005-06 - considering the volume of dividend income earned and the nature of the business of the assessee, the disallowance made by the AO estimating the expenditure relatable to dividend income at 10% of income is quite reasonable Decided against assessee. Interest expenses disallowed u/s 40(a)(ia) Held that:- The assessee has remitted all the amounts of TDS effected from the interest payments before the due date for the filing of the return u/s 139(1) of the Act - Following the consistent view taken by the coordinate benches of the Tribunal under identical circumstances where remittance of the TDS amounts were made into government account before the due date for the filing of the return u/s 139(1) as well as on the nature of amendment under Finance Act, 2010, there was no justification for the disallowance in terms of S.40(a)(ia) of the Act thus, the order of the CIT(A) is set aside and the AO is directed to delete disallowance after due verification of the claim of the assessee with regard to remittance of the amounts of tax deducted before the due date of filing of the return u/s 139(1) of the Act Decided in favour of assessee. Reopening of assessment u/s 147 - mere change of opinion Held that:- The CIT(A) noted that the disallowance made u/s 14A of the Act in the original assessment order was subject matter of adjudication by the CIT(A) and on that very issue further appeal against the disallowance sustained by the CIT(A) was also pending before the Tribunal - the reopening of the assessment is based on the very same material which was already available on record at the time of completion of the original assessment - Since the AO after detailed analysis of the material already available on record at the time of completion of original assessment, made certain disallowance in terms of S.14A of the Act, and such disallowance made by the AO having been contested by the assessee on appeal, it was also examined and adjudicated upon by the first appellate authority, the findings of the CIT(A) is upheld that reopening of assessment in this case is based on mere change of opinion Decided against revenue.
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2014 (9) TMI 315
Depreciation on goodwill Held that:- The depreciation on goodwill is allowable - The objections of authorities below are not founded on sound legal principles - The authorities have misconstrued the provisions of section 32 of the Act, while rejecting the claim of the assessee - the authorities have doubted the transactions effected by the assessee-company - CIT(A) has proceeded on the assumption that the contracts as entered into by the assessee-company were not genuine - Such assumption was on the basis that the assignment agreement was executed on a plain-paper and termination agreement was executed on a stamp-paper - Under the Contract Act, there is no distinction between a contract executed on plain-paper and executed on a Stamp-paper. Both the contracts are enforceable under the Contract Act - Any non-payment of the stamp duty attracts the provisions of the respective Stamp Act - The authorities have not given any finding as to how this contract is the sham transaction without even examining the persons who have executed the same it could not be held that the transactions were sham or otherwise not for business purpose following the decision in CIT vs. Smifs Securities Ltd [2012 (8) TMI 713 - SUPREME COURT] - the assessee is eligible for depreciation on goodwill as claimed and this addition made on this count is hereby directed to be deleted Decided in favour of assessee. Levy of interest u/s.234B Held that:- The Finance Bill introduced was passed in both the Houses of Parliament, receiving the assent of the hon'ble President of India, on May 11, 2001 - Till that time, the assessee could not have visualized that the individual liability would be fastened on him - the assessee fairly deposited a sum by way of self-assessment before the date of filing the return which also proved the bona fide credentials of the assessee - the authorities below were not justified in levying the interest u/s.234B of the Act, when the liability to pay the tax is due to retrospective amendment in the provisions of section 115JB of the Act - Decided in favour of assessee.
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2014 (9) TMI 314
Condonation of delay delay of 2984 days Whether the explanations furnished by the assessee can be considered as "sufficient cause" for condoning the delay or not - Held that:- The assessee has claimed that he was following the advices given by his C.A firm - it is imperative to examine the claim on the basis of facts available on record - the assessee has also filed separate appeals before CIT(A) against the assessment orders passed for AY 1994-95 and 1996-97 - it is inconceivable that a CA would have advised the assessee to wait for outcome of a past appeal to decide about the course of action to be taken for the years under consideration - under the principle of 'Doctrine of Merger', an assessment order would merge with the order of CIT(A) in respect of the issues decided by the first appellate authority and hence the question of rectification of assessment orders of both the years under consideration on the impugned issues, after receipt of first appellate orders, would not arise at all. The C.A. firm would have given the letter as well as the affidavit only to accommodate the assessee herein - the conduct of the C.A. firm not only denigrates its name/reputation, but also badly affects the high standards, confidence, quality, prestige, reputation etc. enjoyed by the C.A. profession - the assessee is having connection with many tax professionals and, in all probabilities, the assessee might have had consultation with any one or more of them on the problem the C.A firm might have given the affidavit only to accommodate the assessee, which conduct is also not expected from a Professional - If it is considered that the C.A firm has colluded with the assessee for giving such kind of affidavit, then it only warrants disciplinary action against them - Even, if it is considered that the said C.A. firm has really given such advices, then also it may require disciplinary action against them for giving such kind of advices, without proper verification of facts and without proper consideration of law - strict actions and fast disposal of disciplinary proceedings would not only instill discipline among the C.A fraternity, but also help curtail these kind of undesired practices adopted by some of the Chartered Accountants. The assessee has failed to show that there was sufficient cause for the substantial delay occurred in filing these appeals. we have particularly noticed that an experienced C.A firm could not have given such kind of wrong/ absurd advice on the facts prevailing in the instant case - even if it is considered that his C.A firm has given such an advice, it is not believable that a prudent man would not have cross verified the same or applied his mind over it - the conduct of the assessee is beyond the comprehension of human conduct and probabilities - the assessee has failed to show the reasons for entire period of delay, i.e., no reason has been for the delay that occurred in between periods thus, no credence could be given to the letter and affidavit furnished by the Chartered Accountant and hence they will not come to the help of the assessee - the affidavit given by the assessee is also liable to be rejected Decided against assessee.
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2014 (9) TMI 313
Provisions made for costs incurred on completed contracts Held that:- PCCC is based on identified liability, though it is only an estimate - the assessee had made provisions for eleven unfinished projects and in subsequent two years after completing the projects wrote off the provisions and offered the balance for taxation - the AO cannot take two stands-he cannot tax the assessee in later years for a part of transaction for which provision has been made for earlier years - In the commercial world provisions are made for contingencies and court are of view that same have to allowed - AS-7 recongises the principal of making provisions for certain expenses - It is a normal feature of business world that at the end of a particular AY, it may not be possible for an assessee to determine the probable future expenditure of an ongoing project or scheme - If it recongnises income from such project in that year, it will have to make some reasonable provisions for the expenditure to be incurred in subsequent year. Provision will vary from project to project and from year to year - It would also depend on stage of completion of the project. For that purpose assessee will have to rely on earlier years experience and report of the technical personnel following the decision in M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - travelling cost of the engineers and technical staff, testing cost, supplies of replacement spares, site related costs, cost of completion of punch list work, cost of modification for uncompleted projects has to be considered while making provisions when an assessee carries out a business of providing diversified engineering services - the assessee had to make provisions for additional cost if sustainable production capability is not demonstrated within the guarantee period. There is nothing in the order of the FAA that could prove that provisions made by the assessee were not based on estimate given by experts - the assessee was following some system in estimating provisions - without pointing out major defects it was not proper on part of the FAA to state that system was - writing off of provisions in subsequent years cannot be basis for disallowing it - Accounting standards expect that assessee should write back such amounts in later years - he was not justified in confirming the disallowance without analysing the terms and conditions of the projects thread bare for which provisions were made Decided in favour of assessee. TDS credit not given Held that:- The assessee is entitled to get credit of taxes paid in one of the years-either in year of payment or in the year of completion of contracts - AO is directed to verify the facts and give credit for taxes paid by the assessee Decided in favour of assessee. Software maintenance expenses disallowed Held that:- As decided in assessees own case for the earlier assessment year, it has been rightly held that the assessee has filed details of expenses debited under the head software development - the expenses booked are software maintenance expenses and all the expenses are either in the, nature of annual maintenance contracts, up gradation and installation of anti-virus, which cannot be held to be enduring in nature and called capital expenses thus, the expenditure incurred by the assessee for maintenance of software is to treated revenue expenditure Decided in favour of assessee. Bad debts written off Held that:- The assessee had entered into an agreement with SG, that it had agreed to render services to S.G. that SG had jointly signed the mechanical completion of certificate on 23.05.2002 that it had engaged an advocate for pursuing the matter of recovery from S.G. - as the amount was actually written off in the books of accounts, there was no justification for the disallowance made/ confirmed by the AO/ FAA under the head bad-debts - after the amendment to section 36 of the Act, it is clear that if an assessee writes off any amount in its books of accounts, it has not to prove any other thing Decided in favour of assessee.
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2014 (9) TMI 312
Expenses incurred by HO in Thailand for Indian Project Held that:- AO was of the view that the expenses are initial startup expenses and are in the capital field AO as well as the CIT(A) have not stated that the expenditure claimed have no nexus with the Project in India - As the photocopy of all the vouchers have been furnished before the bench in the form of a paper book, and as it has been brought to our notice the letter addressed by the assessee, wherein the required details were filed with the AO the matter is remitted back to the AO for verification Decided in favour of assessee. Disallowance u/s 40(a)(ia) Non-compliance u/s 195 Held that:- Italian Thai Development Co. Ltd. (ITDL) is a non resident company and that it has provided certain machinery on "hire" to the assessee company on chargeable basis - ILD has charged hire for the machinery provided to the assessee and raised bills on the assessee towards "Hire charges" - A perusal of the Clauses does not in any way support the arguments of the assessee that these payments were not, in substance, rental payments made by the assessee to ITDL - Just because certain obligations, terms & conditions etc. have been agreed to between the parties, it does not lead to a conclusion that there is no hirer and hiree relationship - The fact remains that the assessee bills ITDL for the total contract work done and ITDL also bills the assessee for hire charges payable. Method of settlements of accounts is of no consequence - even a credit entry attracts provisions of Sec.195 when services were not rendered in India, the amount shall not be taxable and consequently S.195 is not attracted and consequently the disallowance made u/s 40(a)(ia) is bad in law - Decided partly in favour of assessee.
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2014 (9) TMI 311
Admission of additional evidence Held that:- The documents go to the root of the matter and have to be admitted for arriving at the arms length price for interest on working capital loan - the assessee was prevented by reasonable cause in submitting these documents before the TPO or the DRP, for the reason that he adopted CUP method by taking LIBOR rate for the purpose of bench marking and In that process, these evidences were not required - The DRP has changed the basis of determining the ALP - While doing so it did not ask the assessee to furnish these documents the additional evidences are to be admitted thus, the matter is to be remitted back to the TPO for fresh adjudication Decided in favour of assessee. Determination of Arms length interest rate term loan of working capital loan Held that:- With regard to ALP of interest on term ban sanctioned by the assessee to the AE, the submissions of the assessee is accepted that the DRP has in arbitrary manner determined 2% mark up on 12.7% interest rate charged by the assessee from its AE - There is no basis for arriving at this 2% - relying upon M/s. Four Soft Ltd. Hyderabad Versus DCIT, Circle 1(3) Hyderabad [2011 (1) TMI 651 - ITAT HYDERABAD Ltd.] - for the proposition that LIBOR rate should be the basis of bench marking the interest payments for the purpose of determining the ALP thus, the TPO is directed to determine the ALP de-novo Decided in favour of assessee. Determination of notional interest at 10% - Deemed income on the loans given to wholly owned subsidiary company Held that:- Following the decision in Highway Construction Co. (P.) Ltd. v. CIT [1992 (11) TMI 86 - GAUHATI High Court] - there was no finding of fact to the effect that actually the loan had been granted to the MD or any other person on interest or that interest had actually been collected by the collection of interest was not reflected in the accounts - The finding of the ITO was that the assesses ought to have collected interest - If the assessee had not bargained for interest, or had not collected interest, the Income tax authorities could not fix a notional interest his due, or as collected by the assessee - There was no provision in the IT Act empowering the income tax authorities to include in the income interest which was not due or not collected. The addition of amounts as notional interest was not justified Decided in favour of assessee. Adhoc disallowance of advertising and sales promotion expenses Held that:- Following the decision in Joint Commissioner Of Income-tax, Special Range - 16, Kolkatta. Versus ITC LIMITED [2007 (9) TMI 295 - ITAT CALCUTTA] - The auditors have also not pointed out that any such expenses was not related or incidental to the business needs of the assessee - the action of AO in disallowing 10 per cent of such expenditure without bringing any material evidence on record was not justified and the CIT(A) has rightly deleted the addition - the auditors have not pointed out any Instances which can lead to a conclusion that the expenditure was not related to a business or not incidental to business decided in favour of assessee. Whether the return of the Income in Form No.1 and schedule, which lays down the manner of computing the Total Tax payable by the assessee prevails over the substantial provisions of the Act Held that:- Following the decision in CIT v. Chemplast Sanmar Ltd. [2009 (4) TMI 61 - MADRAS HIGH COURT] - Rule 12 (1) (a) and form 1 cannot go beyond the provisions of the Act - as the Tax has to be computed on the Total income as assessed under the normal provisions in the Income Tax Act and surcharge and education cess has to be added to such Tax, and there after credit of Tax paid u/s 115 JAA has to be granted decided against assessee.
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2014 (9) TMI 310
Invocation of proceedings u/s 153C assessment made on the basis of material found during seizure - Whether the seized material found from Shri Vikas A. Shah belongs to the assessee and assessment made on the basis of material is in confirmation of Section 153C of Income Tax Act Held that:- Revenue was of the view that the assessee being one of the signatory, therefore, the document in question belonged to the assessee - relying upon Central Bureau of Investigation v. V.C. Shukla [1998 (3) TMI 675 - SUPREME COURT] They had admittedly executed such sale deeds - It cannot be stated that the sale deeds do not belong to them - the receipts of payments also are documents belonging to the petitioners - They are alleged to have received various payments in cash from the purchasers - If there are documents evidencing such particulars and if such documents are also signed by the petitioners, it can certainly be stated that such documents do belong to the petitioners - the action initiated u/s 153C of the Act cannot be quashed - after examining the document it was found that it belonged to the assessee although it was requisitioned from the possession of an another person, hence, the action u/s. 153C was rightly initiated against the assessee Decided against assessee. The document is written in gujarati which was duly signed by the concerned two parties in the presence of the witnesses - the document has been signed in the name of God as also in the presence of the witnesses - it is difficult to hold that the said document was merely a dumb document or an irrelevant document - the amount of the construction, as well as the details of the plot have clearly been noted - The assessee was given sufficient opportunity to rebut the said document but he has preferred not to attend properly the proceedings before the AO - in a situation when any books of account or documents, etc. have been delivered to the requisitioning officer having jurisdiction over "such other person" i.e., other than the person who has been searched; then those documents, etc., delivered or requisitioned shall be dealt with as if they have been found in the possession or control of "such other person" against whom the proceedings have been initiated u/s.153C of IT Act - Such books of account or documents shall be deemed to have been found in the possession or control of such other person as if recovered in the course of search u/s. 132 of IT Act - the assessee being one of the signatory of the contents recording the transactions hence the documents was belonging to the assessee - the amount was rightly assessed in his hand Decided against assessee.
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2014 (9) TMI 309
Transfer pricing adjustment Selection of comparables Exensys Software Solutions Ltd. Extraordinary event in the company because of merger - Held that:- There is a merger of Holool India Ltd. and in the director's report there is a clear mention that the company's income is possible with the amalgamation of Holool India Ltd. - Assessee company has got benefit by advanced latest technical expertise on various technology domains of the transferor company - This was clearly stated in Notes that claim was with reference to the AS-14 and also due to amalgamation of two companies - out of gross assets, Brands alone consist of ₹ 5 crores, therefore, intangible assets comprising of substantial part of this company's assets - Not only in the correspondence with the TPO that Assessee expressed its inability to furnish separate accounts for two amalgamated companies but also further it has clearly mentioned vide letter dated 26-04-2007 to the TPO that there is a gap in the expenditure expected to incur and actual expenditure incurred which made the company record high operating margin on cost - These factors indeed support assessee's contention that this exceptional profit with the fact of amalgamation effected operating profit of the company and this cannot be taken as comparable relying upon Intoto Software India (P.) Ltd. Versus Assistant Commissioner of Income-tax, Circle -2(1), Hyderabad [2013 (10) TMI 599 - ITAT HYDERABAD] - there is an extra-ordinary event which resulted in high operating margin of that company - the case of Exensys Software Solutions Ltd. cannot be taken as comparable - the other cases, Third ware Solutions Ltd., Infosys, Sankhya Infotech Ltd., etc, are also to be excluded - The AO is directed to exclude the comparable and re-work out the arm's length margin Decided in favour of assessee. Matter pending before AO u/s 154 - Exclusion of export turnover Computation of deduction u/s 10A Held that:- There is no need for adjudication of this ground when the matter is pending before the AO u/s 154 - AO is directed to examine the issue and consider necessary relief to Assessee regarding the amounts received within 12 months as per the directions of RBI vide its General Circular dated 01-11-2004 issue Decided in favour of assessee.
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2014 (9) TMI 308
Bar of limitation in passing assessment order delay of 47 days - order passed u/s 143(3) - scrutiny assessment Held that:- The date noted for framing of assessment order is 31.12.2008 but this is disputed by the assessee - the assessment order and demand notice were received by assessee after 47 days, which is beyond the prescribed date of limitation for passing of assessment order u/s. 143(3) of the Act - The assessment was getting time barred as on 31.12.2008 and demand notice and assessment order were served on 16.02.2009 - Where an assessment order has been purported to have been passed within the prescribed period of limitation but the same is served on the assesse after a long delay, without there being an explanation coming forward for such delay, in the absence of any explanation, whatsoever, it can be presumed that the order was not made on the date on which it is purported to have been made - the revenue has not furnished any explanation and has not produced any documentary evidence despite repeated directions on 27.10.2011 and 09.07.2012 that let the assessment records and dispatch records be produced for verification. There is no requirement that service must be effected before the expiry date but there must be evidences to show that assessment order was indeed passed before the limitation - no such evidence has been adduced by revenue that the order was indeed passed on or before 31.12.2008 - evidences are against the revenue that the assessment order and demand notice were dispatched only on 12.02.2009 and the same was served on assessee on 16.02.2009 i.e. beyond 47 days of limitation - There can be postal delay of a weeks time or a fortnights time at the maximum and it cannot be 47 days delay - in order to make the assessment order complete and effective, it should be issued so as to be beyond the control of the authority concerned for any possible change or modification and this should be done within the limitation period though actual service of the assessment order may be beyond that period - When an assessment order has been purported to have been passed within the prescribed period of limitation but the same is served on the assessee after unreasonable delay without being an explanation coming forward for such delay, in the absence of any explanation whatsoever it can safely be presumed that the order was not made on the date on which it purports to have been made and on the basis of such presumption it can be held that the order was passed after the expiry of limitation - the assessment order was barred by limitation Decided in favour of assessee.
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Customs
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2014 (9) TMI 328
Recovery proceedings of customs duty - attachment of property (Flat) of sister company (Group company) - group assets - Held that:- a closer look at the record would indicate that this is an attempt made by the Respondent No.1 to justify the issuance of the communication which is reproduced above. Even if now there is an attempt made to show that there is a Group of Companies and the import was for various Companies and which are sister concerns, what we find from the Order in Original is that therein a specific and distinct legal entity has been termed as Importer and that is not the Petitioner No.1. Infact M/s Surlux Medicare is stated to be the Importer. M/s Surlux Mediquip Limited has been referred to in the order of adjudication/ Order in Original. In such circumstances when the communication and all recovery measures are traceable to this Order in Original dated 31.05.2000, then, the contents thereof cannot be discarded or brushed aside by us. The connection between the Petitioner Nos.2 and 3 and with the alleged Group of Companies has not been established. It is in these circumstances that addressing the communication to the Respondent No.2 was not justified. The communication which we have reproduced above informs the Society that M/s Surlux Medicare is owner of the Flat No.58 and that has failed to pay penalty of ₹ 2 crore and Redemption Fine of ₹ 2.81 crore imposed by the order in original. That is how the recovery action under Section 142 of the Customs Act, 1962 has been initiated. - Writ Petition succeeds. The communication dated 29.05.2013 addressed by the Respondent No.1 to the Respondent No.2 is set aside. - Decided in favor of petitioner.
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2014 (9) TMI 327
100% EOU - cement plant with units both in India and Bangladesh - doctrine of promissory estoppel - revenue appeal - initially board has given LOP in favor of assessee - assessee made investment in crores with regard to long conveyor belt - writ petitioner has taken the plea that the withdrawal of duty free import facility in respect of long conveyor belt and the appellants are bound of doctrine of promissory estoppel. - learned single Judge has quashed the the decision of withdrawing the exemption granted earlier to the writ petitioner vide Board Resolution dated 31-5-2004 from payment of import duty. Held that:- On behalf of the appellants, it is argued that since the writ petitioner (assessee) had made misrepresentation as such the appellants were justified in changing their decision and withdrawing the facility. We agree with the principle that in case of misrepresentation, decision can be withdrawn but having gone through the entire record on the evidence discussed as above, we do not find any misrepresentation made by the writ petitioner. No doubt, area of warehouse was mentioned in the licence dated 25-5-2004 of the writ petitioner as 100 hectares for limestone mining area, and 7.6 hectares of land for crushing area. But the project report submitted in July, 2002 with application for licence clearly shows that the writ petitioner had mentioned in para 18 that it proposes to install the long belt conveyor from the mine site to the cement plant at Chhatak in Bangladesh to transport crushed limestone. Summary capital cost of 977 millions which is also part of the project discloses the amount to be spent on long belt conveyor facility. As such it cannot be said that the writ petitioner had concealed any fact from the appellants. The principle contained in above cases cannot be made applicable to the cases where two different companies registered in two different countries have established their units dependant on each other. In our view the ground on which this writ appeal is liable to be dismissed is that the learned single Judge has rightly applied doctrine of promissory estoppel against the appellants, particularly when there was no misrepresentation made by the writ petitioner. - Decided against the revenue.
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2014 (9) TMI 326
Confiscation of goods - redemption fine and penalty - mens rea - import of prohibited items - R-22 refrigerant gas, which is an ozone depleting substance - principles of natural justice - Adjudicating Authority held that the imported item was nothing but R-22 refrigerant gas, consequently, proceedings were initiated for misdeclaration on the imported prohibited item - Held that:- The Customs, Excise and Service Tax Appellate Tribunal looked into letters as well as the DRI officials inspection report and the statement recorded and ultimately came to the conclusion that there was no straight jacket formula to allow cross-examination in all the cases, consequently, there was no violation of principles of natural justice. - Decided against the assessee. The reasons given for misdeclaration were rightly rejected by the Revenue stating that if the misdeclaration had not been detected by the Department, the assessee would have defrauded the Government in succeeding the import of the restricted item apart from defrauding the Government of its due huge revenue. It cannot be accepted that on the mere score of re-export of the prohibited goods, no redemption fine was payable under Section 125 of the Customs Act. Prayer for reduction in fine and penalty - Held that:- As to the imposition of fine on the assessee as well as the penalty levied on the Directors of M/s. CMTPL, we do not find there exists any good ground justifying any reduction, particularly, in the context of the statement made by the Directors indicating the awareness of import of R-22 refrigerant gas and the goods imported were misdeclared on the quantity as well as on the value assigned to them. - Decided against the assessee.
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2014 (9) TMI 325
Refund of Countervailing Duty (CVD) - import of against Advance licence - unjust enrichment - appellant contended that in terms of Notification No. 149/95, they were not required to pay countervailing duty on the imported goods against their Advance licence in terms of Section 3 of the Customs Tariff Act and since this duty was incorrectly paid by them by mistake, therefore, they were entitled to the refund thereof. - Held that:- While examining the question whether or not burden of duty has been discharged by the assessee, one has to be practical and adopt a realistic approach and not be oblivious as to nature and character of proof which will be available. When the assessee is able to show that the burden of duty has not been passed on, he asserts and submits affidavits and certificate of a chartered accountant along with copy of the balance sheet, indicates and shows sales invoices for pre and post-period and when there is no other negative factor or evidence to the contrary to disbelieve, the contention should be accepted. To deny what was paid and has to be refunded by law to the said person is not fair, just and equitable. - Refund allowed - Decided in favor of assessee.
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2014 (9) TMI 324
Benefit of Customs Notification No. 14 of 2004, dated 8 January, 200 - Classification of imported goods - Held that:- As no duty demand has been quantified by the order dated 11 June, 2012, no occasion to deposit any amount of duty for the purpose of the petitioners appeal being heard on merits by the Commissioner of Customs (Appeals) would arise. It is pertinent to note that the impugned order dated 9 January, 2013, nowhere records the amount of duty payable consequent to and/or in accordance with the order dated 11 June, 2012 passed by the Deputy Commissioner of Customs. This is for the reason that the amount of duty payable has yet to be quantified. In view of the above, the requirement of pre-deposit of any duty does not arise as duty demand has not yet been quantified by order dated 11 June, 2012. We are informed that the aforesaid exercise of classifying the imported goods on merit has not yet been carried out by the Customs Department. In the result, the appeal of the petitioner before the Commissioner of Customs (Appeals) from the order dated 11 June, 2012 passed by the Deputy Commissioner of Customs is to be heard on merits without insisting on any pre-deposit of duty. Decided in favour of assessee.
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Service Tax
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2014 (9) TMI 346
Extended period of limitation - Commercial training or coaching services - computer training institute - exemption Notification No. 24/2004-ST - Held that:- the decision of the Tribunal in the case of Sunwin Technosolution [2007 (6) TMI 34 - CESTAT, KOLKATA] was in favour of the assessee and it was subsequently set aside by the Hon'ble Supreme Court [2010 (9) TMI 71 - SUPREME COURT OF INDIA] and in view of the fact that the appellant wrote a letter regarding their activity and sought advice, we find merit in the contention that the allegation of suppression with intent to evade payment of duty is not sustainable in respect of demand which is confirmed in respect of computer training. The demand beyond the normal period of limitation is set aside. - As we are setting aside the demand beyond the normal of limitation, therefore penalty is also set aside in this regard. - Decided in favor of assessee. Manpower Recruitment or Supply Agency Service - Held that:- The appellants are providing their employees to various companies temporarily. Therefore, appellants are liable to pay service tax with effect from 16.6.2005 - The demand prior to 16.6.2005 is set aside - Decided partly in favor of assessee. Intellectual Property Service - Held that:- admittedly the fact is that the appellants have the property right over a software which they allowed to be used by their clients. - demand within limitation confirmed with penalties - Decided against the assessee.
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2014 (9) TMI 345
Commercial Training or Coaching - principle of judicial discipline - retrospective amendment was made Vide Section 76 of the Finance Act, 2010 - graduate or post graduate courses - assessee contended that education has never been intended to be taxed. Education is different from training or coaching and is not covered by the levy. - Held that:- From the retrospective amendment cited above, it is clear that any centre or institute, by whatever name called, where training or coaching is imparted for a consideration is liable to service tax. There is no dispute in the present case that the appellant herein is charging for the so called under graduate or post graduate courses conducted by them and they are operating their business in a commercial manner. It is also an accepted fact that the courses conducted by the appellant are not recognized by law. In view of the decision of the Tribunal in ICFAI case [2013 (6) TMI 446 - CESTAT BANGALORE], we are bound to follow the same as a matter of judicial discipline. - the activities undertaken by the appellant would merit classification under commercial training or coaching as defined in the Finance Act, 1994. - Decided against the assessee. Extended period of limitation - Held that:- Mere failure to register with the department and pay service tax, by itself can not amount to suppression unless the same was with an intent to evade payment of tax. There is no evidence led by the Revenue to that effect either in the show cause notice or in the Impugned order. Therefore, the demand is sustainable only for the normal period of limitation. - Decided in favor of assessee. Valuation - inclusion of mess charges, hostel charges and payment for the laptops supplied to the students - Held that:- Mess charges and hostel fees are for providing boarding and lodging to the students and cannot be attributed to the training or coaching rendered. Similarly, the amount recovered for the supply of laptops also cannot be attributed to the services rendered (it relates to supply of goods) and therefore, these amounts collected towards mess charges, hostel charges and laptops are excludible from the taxable value of the service rendered - Decided in favor of assessee. Levy of penalty - Since we have held that there is no suppression on the part of the appellant, penalty under Section 78 of the Finance Act, 1994 also does not sustain - penalty dropped - Decided partly in favor of assessee.
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2014 (9) TMI 344
Common service agreement with associate / subsidiary companies - no profit motive - Support Services of business or commerce - Section 65(104c) - Held that:- Prima facie, the arguments of the appellant that these services are not taxable, are not acceptable, mainly for two reasons. Firstly, an apparent analysis of the conditions of the Agreement and the list of services annexed thereto, vis-a-vis the definition of Support Services of Business or Commerce as was in force during the relevant period, it would be difficult to accept that these services have been rendered by the Applicant and availed by their associate/subsidiary not in relation to their business or commerce activity but for some other purpose. Secondly, it is not in dispute that the Applicant have been continuing to render the same set of services before and after they got themselves voluntarily registered with the Department w.e.f. 10th May, 2008 under the category of Support Services of Business or Commerce and since then discharging their service tax liability on the said services without any protest or dispute. Hence, it sounds illogical to assume that for the period from 1-5-2006 to 9-5-2008 under similar circumstances the services would fall outside the scope of Support Services of Business or Commerce when there has been no change in the definition prescribed at Section 65(104c) of the Finance Act, 1994. The argument of the applicant that the services rendered by them to their associate/subsidiary companies on cost sharing basis, prima facie, appears to be not convincing. The issue of revenue neutrality cannot ipso facto be considered as a ground for total waiver of pre-deposit of duty and penalty invariably in all cases without considering other attendant circumstances while disposing an application under Section 35F of the Central Excise Act, 1944. - stay granted partly.
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2014 (9) TMI 343
Waiver of pre-deposit - tribunal directed the petitioner to make the total pre-deposit of ₹ 2.5 crores (Rs. 67 lakhs + ₹ 183 lakhs) - Valuation - construction services - CESTAT took note of the fact if abatement as provided under Notification 18/2005-S.T., dated 7-6-2005 and Notification 1/2006-S.T., dated 1-3-2006, is allowed, the taxable value of service net of value of input services works out to ₹ 61.38 crores (33% of ₹ 186 crores), as against which, the petitioner claims that the value of service (inclusive of value of input service) is only ₹ 35 crores and the genesis of the dispute is the difference of ₹ 26.38 crores. Held that:- CESTAT, while passing the impugned order of pre-deposit, considered all the facts and figures in proper perspective and also took into account, the prima facie case, undue hardship, balance of convenience and the financial burden of the petitioner and observed that the case of the petitioner is a matter of expediency and it was of the prima facie view that the Service Tax authorities have every right to look into the issue as to whether the value has been correctly split and also observed that the lower authority has not looked into the same at any stage, because adequate documents other than payment of VAT have not been placed before the lower authority, as the issue had been argued more on question of law, rather than question of fact before the lower authority and it has also been highlighted before the CESTAT for stay and ultimately, the CESTAT passed the impugned order of pre-deposit. As far as the amount of pre-deposit ordered by the first respondent-CESTAT at ₹ 67 lakhs in respect, of Meadows Project is concerned, the same is accepted by the petitioner - As far as the pre-deposit of ₹ 183 lakhs in respect of Pacifica Project is concerned, the same is interfered with by this Court to the extent of depositing only 75% of ₹ 183 lakhs. - Partial relief granted to assessee regarding pre-deposit.
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2014 (9) TMI 342
Monetary limit for filing revenue appeal - held that:- as the amount involved in these two appeals is ₹ 45,000/- and ₹ 25,000/- respectively, which is below the limit of ₹ 2 lakhs prescribed in the circular dated 20-10-2010, we are dissuaded from considering the merits of the appeal and find it not necessary to go into the merits. Even as the appeal was filed before the issuance of circular dated 20-10-2010, it cannot be disputed that when the appeal came up for consideration for the first time before this court on 4-5-2011 the said circular dated 20-10-2010 prescribing the monetary limit of ₹ 2 lakhs was in vogue. Had the appellant pointed out to the court about that and the description of monetary limit therein, this court would not have issued notice. In any view when the circular was in vogue and the monetary limit was applicable on the date of consideration of appeal, the same would apply. - Decided against the assessee.
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2014 (9) TMI 333
Clearing and Forwarding Agent service - challenge to the correctness and validity of the show cause notice - Interest u/s 75 - Penalty u/s 75A, 76, 77 and 78 - Held that:- The respondents have not seriously disputed the overlapping of the transactions and the period covering those transactions under two assessment proceedings. This aspect, therefore, requires consideration by the respondent authorities. The petitioner has already submitted a reply highlighting these issues. Therefore, Respondent No. 2/ Commissioner Customs and Central Excise, before proceeding further in the matter, shall minutely scrutinize and if necessary, obtain information from the Kolkata office with regard to the petitioners liability of payment of service tax under the head of Clearing and Forwarding Agent relating to the transactions covered under notice dated 23-5-2006. In respect of the period subsequent to 31-3-2004, it would be open for the respondent to proceed further against the petitioner by considering petitioners reply to show cause notice in that regard, if at all found necessary in the changed circumstances after excluding the period of transaction from 1-9-1999 to 31-3-2004. A clear order of exclusion of transactions in respect of overlapping period shall be passed by respondent No. 2 before proceeding further with the matter. Thereafter, if the respondent No. 2 further requires, it may proceed against the petitioner in respect of the period and transactions which have not been covered by the order of assessment passed by the Commissioner Service Tax, Kolkata. It would be open for the petitioner to raise all the grounds to assail correctness and validity of the proceedings, if continued, in respect of the period subsequent to 31-3-2004 including grounds which have been urged before this Court. - Petition disposed of.
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Central Excise
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2014 (9) TMI 336
CENVAT Credit - Wrongful availment - Invocation of extended period of limitation - Whether the CESTAT has erred in holding that extended period of limitation is not available without ascertaining the presence of the ingredients specified in section 11A(4) of the Central Excise Act, 1944 - Held that:- Tribunal ought to have specifically dealt with the grounds which had weighed with the Adjudicating Authority and the Commissioner (Appeals) in applying the extended period of limitation. Both the authorities have noted that the assessee had made a suppression of fact in regard to the material which was used while filing a declaration and availing Cenvat credit. Without displacing this basic finding of fact, the Tribunal ought not to have, in our view, disturbed the order which was passed - matter remanded back - Decided in favour of Revenue.
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2014 (9) TMI 335
Levy of interest on differential duty due to Revision in price supplementary invoice - The assessee gave its reply stating that the payment of differential duty was made by it at the time of issuing supplementary invoices to the customers and, therefore, there was no question of charging interest much less any penalty - Held that:- It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of section 11A and attracted levy of interest under section 11AB of the Act. Following decision of Commissioner of Central Excise, Pune Versus M/s SKF India Ltd. [2009 (7) TMI 6 - SUPREME COURT] - Decided against assessee.
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2014 (9) TMI 334
CENVAT Credit on capital goods used in energy saving project - denial as the capital goods were used in the manufacture of exempted product (Ammonia) exclusively - Whether the Tribunal was right in law and on facts in holding that the respondent-manufacturer was entitled to avail of Cenvat credit on capital goods on the premise that such capital goods were used for manufacture of not only Ammonia used for manufacture of fertilizer which was exempted from duty but also in the process manufactured a byproduct namely, carbon dioxide which was sold in the open market after payment of duty and that therefore, the limitation contained in Rule 6(4) of the Cenvat Credit Rules, 2004 would not apply - Held that:- Following decision of Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs reported in [1993 (9) TMI 107 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2014 (9) TMI 332
CENVAT Credit - Whether the services which have been availed of could be said to be input services within the meaning of Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that:- When we were taken through the definition of the term input service and the facts in the present case, that we found that none of these aspects have been considered by the Tribunal. The Tribunal merely proceeds on the footing that being an exporter, all services have been availed of during the course of export of goods and that is how this Cenvat credit was admissible. Which of the services during the course of export availed of by the present assessee would be covered by this definition and the judgment of this Court has not been considered or decided by the impugned order. Such unsatisfactory and unhappy disposal of Appeals in matters of Revenue and Taxes therefore leaves a lot to be desired. The expectation given from the Appellate Tribunal is therefore not fulfilled and particularly when it is manned by persons drawn from judicial services. In these circumstances, we have no alternative but to allow this Appeal only on this short, but substantial question of law and that is that the Appeals cannot be disposed merely by recording rival submissions and not discussing them elaborately but, in a perfunctory manner. The impugned order is therefore quashed and set aside - Decided in favour of Revenue.
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2014 (9) TMI 331
Reopening of assessment - Cenvat Credit - reasonable steps before availing credit - original manufacturer of fabrics were alleged to be fictitious - endorsed invoices - period of limitation - Held that:- Issues being identical all the questions raised in this tax appeal require to be answered in the same manner as done in the case of Prayagraj Dyeing & Printing Mills Pvt. Ltd. & Org. v. Union of India & Ors. [2013 (5) TMI 705 - GUJARAT HIGH COURT] Merely because today, the original manufacturer, who is registered with the Revenue, is not traceable, it does not mean that he did not exist at the relevant point of time. If today, a manufacturer is not available for various reasons that does not mean that at the relevant point of time, such manufacturer who was registered with the Central Excise, did not exist. Reasonable steps - held that:- The Appellants in these cases, however, not having taken those steps, cannot get the benefit of the credit even though he is not party to fraud. Period of limitations - held that:- in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur v. E. Merck India Ltd. [2007 (7) TMI 299 - SUPREME COURT] where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent-assessee, there was no scope of invoking Section 11A of the Act. The documents, invoices in question, issued by the registered licencee being genuine and in the absence of any allegations against the appellants of fraud, the Tribunal should not have remanded the matter back as the claim was totally barred by limitation. - Decided in favor of assessee.
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2014 (9) TMI 330
Denial of refund claim - Revenue appeal - monetary limit - Held that:- In the present appeal the amount involved is 36,505. Appellant could not dispute the contents of the circulars and the monetary limits respectively fixed therein. It is true that though the appeal was filed on 15-9-2010 and thus before the date of circular, however when it came up for admission on 28-4-2011 at that time the circular was in force. appellant ought to have brought to the notice of this Court the Circular dated 20-10-2010 and, if this circular had been brought to the notice of this Court, the appeal would not have been admitted. It cannot be said that the Department is bound by its own circular. Since in the instant appeal the amount involved is ₹ 50,904/- only, in view of the circular dated 20-10-2010, the appeal could not have been preferred by the Central Excise and Customs Department before this Court. Though the appeal has been admitted, we did not go into the substantial question of law formulated by this Court. As we have recorded on being informed from the side of the Department in our order in Tax Appeal No. 1294 of 2011, it may be stated that after circular dated 17-8-2011, no other circular has been issued by the Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, Government of India, New Delhi, authorizing the Department to file appeals where the amount is less than ₹ 10 lacs. Decided against Revenue.
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2014 (9) TMI 329
Discrepancy in RG1 Register - finished goods in excess as against its recorded balance in RG-I register - Whether the learned Appellate Tribunal was justified in holding vide para 4.2 of the impugned order with regard to the duty demand of 12.12 MT Pig Iron and 153.36 MT of CI scull whereas there is no notice for demand of duty for 12.12 MT of Pig Iron in the show cause notice dated 15-2-2001 and the same is also observed by the Commissioner (Appeals) Raipur in his order-in-appeal dated 29-1-2007 vide paragraph 9 and therefore held that no duty is payable under the present proceedings - Held that:- No notice for payment of duty for shortage of 12.12 MT was issued and as such no duty was payable, is contrary to facts and the Commissioner (Appeals) had also not recorded the fact correctly. A show cause notice dated 15th February, 2001 was issued to the appellant. Additional Commissioner considered the facts and held that the stock of 56.424 MT of Pig Iron and 58.575 MT of C.I. Scull valued at Rs .3,55,471/- and ₹ 2,92,375/-, respectively, was held to be in excess of the adjusted recorded stock in form IV/RG.23 Part-I, was ordered to be confiscated under Rule 173Q(1) of the Rules, 1944 with option to be redeemed on redemption was passed. On the basis of shortage of 12.12 MT vis-a-vis excess stock of Pig Iron and C.I. Skull Scrap a notice was issued on 15th February, 2001 for confiscation of alleged excess stock under Rule 173Q(1) of Rules, 1944 and for imposition of penalty on them under the same Rule. The show cause notice includes the demand of notice and, as such, finding of the Commissioner (Appeals) was rightly not upheld by the CESTAT and the CESTAT was justified in holding that the payment in respect of shortage of 12.12 MT of cenvated Pig Iron and 153.36 MT of cenvated C.I. Skull Scrap must be re-determined after adjusting the shortage detected in respect of this item on 25th June, 1999. Penalty u/s 11AC - Mens rea - Held that:- On bare reading of Section 11AC of the Act, 1944, it is crystal clear that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined. Thus, it is necessary to examine and hold that the short-levy or short-payment are willful misstatement or contravention of provisions of the Act or the rules was done with intention to evade payment of duty and for this there has to be pleadings and issues raised by the appellant or the department before the assessing authority or the appellate authority. No finding has been recorded at any stage. Necessary ingredients for penalty under Section 11AC of the Act, 1944 is intention of the assessee to evade payment of duty. In the case on hand, as no determination in respect of the intention to evade payment of duty or on mens rea was done, penalty cannot be imposed. Imposition of penalty under Section 11AC of the Act, 1944 without determining the necessary ingredient of intention to evade payment of duty or mens rea is quashed. However, liberty is reserved to the Department to re-determine the question of imposition of penalty after affording an opportunity of hearing to the appellant and on recording finding on the issue of intention to evade payment of duty or mens rea on the part of the appellant. - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (9) TMI 341
Unjust enrichment - refund of sales tax - Merger / amalgamation - revision proceedings to deny the refund - Transactions of sale and purchase between the two companies were subject to sales tax regime. The assessee accordingly filed returns of tax so paid/collected. By virtue of the subsequent order of the High Court sanctioning the amalgamation scheme and operation of law, such merger related back to the effective date envisaged in the merger scheme. Thus by virtue of such deeming fiction all transactions which took place between the date of the merger scheme and the date of the High Court sanctioning the merger, became those in the nature of branch transfers. - Held that:- even in absence of statutory provisions, in case of indirect taxes, Indian Courts have been applying the principle of unjust enrichment on the premise that collection of tax though may have been declared unlawful, if in the meantime, the assessee had passed on the burden thereof to the consumer, refund of such tax to the assessee would amount to unjust enrichment and such refund, therefore, should not be granted. In the present case, from the available material on record, it is neither possible nor our desire to ascertain as to what extent the burden of tax deposited by the petitioner with the Government authorities was passed on to the third party. Learned counsel for the petitioners strenuously urged that in majority of the cases, transactions were in such a nature that the taxes were paid/collected by the transferor and the transferee-companies and no third party transactions were involved. We are not inclined to go into such an issue. This is so because we propose to permit the Commissioner to hear the revision application on the merits. Secondly, full records are not before us. Thirdly, in such complex situation, we would not like to examine the issue at the first instance which can be better done by the Commissioner in the process of hearing revision application. In the result, subject to the declaration made above, namely, that the order of the High Court sanctioning the amalgamation scheme would relate back to the effective date as envisaged in the scheme and that therefore, the merger should be effective from June 1, 1985, we permit the Deputy Commissioner to proceed further with the pending revision application in accordance with law. While doing so, the question of refund/ adjustment of tax, burden of which is passed on to the third party would also be examined. To the extent it is found that such burden was passed on by the petitioners to the third party, principle of unjust enrichment will apply. However, we clarify that if the transaction was purely between the transferor and transferee-companies with no further repercussions, such a transaction would not come within the principle of unjust enrichment.
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2014 (9) TMI 340
Reassessment of proceedings - Escapement of income - Rejection of books of accounts - best judgment assessment - Held that:- From a perusal of the order-sheet, which has been annexed to the rejoinder affidavit that no reason was recorded by the Assessing Officer on or before 05.09.2005 indicating that pursuant to a survey conducted by the Special Investigating Branch, the officer had reason to believe that some part of the turnover had escaped assessment to tax. There is nothing to indicate from the counter affidavit that the survey report was on the record, which was considered by the Assessing Officer at the time of issuance of the notice date 05.09.2005. In the absence of any reasons being recorded, one finds that the notice was issued without recording any reason therein thereby indicating non-application of mind. Subsequent recording of reasons in the notice dated 14.09.2005 will not validate the original notice dated 05.09.2005. The mandate under Section 21 of the Act is, that there must be reasons to believe that some part of the turnover had escaped assessment to tax. The reasons to believe must be formed on the basis of material before the issuance of the notice by the Assessing Officer, i.e. prior to 05.09.2005 indicating a belief that some part of turnover had escaped assessment. Supplying reasons subsequent to the issuance of notice by the Assessing Officer cannot validate the notice. In the light of the circular, reasons in brief should be given in the notice issued under Section 21 of the Act and that there must be reasons recorded on the file by the Assessing Officer coming to a prima facie conclusion or forming a belief that some part of turnover had escaped assessment to tax before issuance of a notice under Section 21 of the U.P. Trade Tax Act - there is no reason recorded by the Assessing Officer coming to a belief that some part of turnover had escaped assessment to tax prior to the issuance of notice under Section 21 of the Act. Consequently, the impugned notices dated 05.09.2005 issued under U.P. Trade Tax Act and Central Sales Tax Act for the assessment year 2003-04 cannot be sustained and are quashed - Decided in favour of assessee.
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2014 (9) TMI 339
Quashing the demand notices of taxes payable under Jharkhand Sales Tax Act and Central Sales Tax Act for the periods 2001-02 to 2005-06 - Without availing the statutory remedy available under Bihar and Orissa Public Demand Recovery Act, 1914, whether the petitioner can challenge the demand notices and Certificate Proceedings by invoking the writ jurisdiction - Held that:- while the petitioner was pursuing writ petition, W.P(C) No.167/2005, the petitioner did not seem to have been diligent in pursuing his application for certified copies of the assessment orders. When there is delay and laches on the part of the petitioner, the Court will be loath to come to the aid of such person. Challenging the certificate proceeding and having not filed appropriate application in the prescribed Form, the petitioner cannot plead for showing indulgence. In fact, W.P(C) No.167/2005 was dismissed on 22.12.2008 giving liberty to the petitioner to avail the statutory remedy of appeal for redressal of its grievance. Having not availed the statutory remedy of appeal, the petitioner cannot turn around and challenge the notices of demand on the ground that the certified copies of the assessment orders were not issued to him and the petitioner was not able to avail of the statutory remedy of appeal. Therefore, the petitioner cannot seek for a direction upon the respondents to issue certified copies of the assessment orders to pursue the statutory remedy of appeal. If the party is aggrieved by the order of the Certificate Officer, it is always open to him to pursue the remedy of appeal as per the provisions of Section 60 of the PDR Act. In our considered view, the petitioners have filed the writ petitions circumventing the procedures of the Bihar and Orissa Public Demands Recovery Act, 1914 and the provisions of the appeal thereon and by invoking the writ jurisdiction, the petitioners are directly trying to agitate the issues based on facts and on consideration of evidence. When efficacious alternative remedy is available to the petitioners, no relief can be granted to the petitioners in these writ petitions - The order of winding up of the petitioner company is subsequent to the initiation of the certificate proceedings. In fact, the petitioner, in objection under Section 9 of the PDR Act, has also indicated about the pendency of the winding up petition. It is for the petitioner to bring to the notice of the Certificate Officer regarding the winding up order passed on 2.2.2013 and merely on the ground of pendency of the winding up petition, the certificate proceedings cannot be quashed. - Decided against assessee.
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2014 (9) TMI 338
Denial the benefit of sales tax incentives to the petitioners under the Scheme for Economic Development of Kutch District - Disallowance of investment for sales tax incentives - Disallowance as amount not being eligible - Held that:- From amongst the four grounds deliberated in this judgment, barring the fourth ground of consultancy expenses, this court is of the opinion as far as rest of the three grounds are concerned that the denial of the benefit of capital investment made by the petitioner up to June 11, 2005 in various fixed assets has been discarded by the State Level Committee either on some misconception or on hyper-technical grounds disregarding the objectives and intent of the scheme. This was so done even when otherwise, the investments made by the petitioner-company is found genuine by the respondents and at no point of time, any doubt is created with regard to the increase of expenditure claimed by the petitioners. And therefore, in light of the observations made by this court, there is a need to have a fresh look at the request of the petitioners of considering this capital investment made in the fixed assets, which have been certified by the chartered accountant and substantiated by the documentary evidence before the State Level Committee, and therefore, petition is being allowed partially with the following directions. - Decided partly in favour of assessee.
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2014 (9) TMI 337
Disallowance or allowance of trade discount under the law - period of limitation in passing order of revision - Held that:- There is no reason to hold that a power of review had been exercised in view of a wrong section being quoted in the order. In his capacity as a superior authority, the Senior Joint Commissioner revised the order of the Assistant Commissioner. Such exercise of power was made in terms of the provisions of section 80, read with sub-rule (3) of rule 244 and rule 245 of the West Bengal Sales Tax Rules, 1995. The order of re-assessment passed on March 22, 2004 was revised on February 9, 2010. It is evident from the record itself that such power under section 80 of the West Bengal Sales Tax Act, 1994 read with rule 245 of the West Bengal Sales Tax Rules, 1995 had been exercised within the stipulated period of six years as prescribed in the proviso to rule 245 of the West Bengal Sales Tax Rules, 1995. The order of revision, therefore, cannot be called to be barred by limitation. The question of discount by way of credit notes was not dealt with in proper perspective by the assessing authority. The settled principle of trade discount was not at all applied in allowing the discount. It was an apparent mistake on the face of the record. There being glaring irregularity and illegality on the face of the order of reassessment passed by the Assistant Commissioner, it was modified in the order of revision passed by the Senior Joint Commissioner, Commercial Taxes, Corporate Division in suo motu revision Case No. SMR-17/CD/09-10. The Senior Joint Commissioner acted within the ambit of power under section 80 of Act, 1956 and sub-rule (3) of rule 244 and rule 245 of the West Bengal Sales Tax Rules, 1995. The law relating to trade discounts has also been properly discussed. The well reasoned judgment, therefore, does not call for any interference - Decided against assessee.
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