TMI Tax Updates - e-Newsletter
September 12, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. Work carried out on lump sum basis does not falls under supply of manpower services

   By: Bimal jain

2. FREEZING OF BANK ACCOUNT FOR NON PAYMENT OF SERVICE TAX

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Statement of Srikant Kumar Jena on Consumer Price Index

2. Statement of Srikant Kumar Jena on IIP

3. Japan India Chalk Out Roadmap for Investment in Export Led Manufacturing ‘Business Matching’ to Yield Dividends for Auto, Energy and Creative Sectors

4. Japan Agrees to Resolve Shrimp Import Issue by Year End

5. Payment of Quarterly Advance Tax on or before 15th September, 2013; All Designated Branches of Authorized Banks to Function on 14th and 15th September, 2013 (Saturday & Sunday)

6. RBI Reference Rate for US $ and Euro

7. Accountancy & Commerce Education Summit

Notifications

FEMA

1. 285/2013-RB - dated 30-8-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Twelfth Amendment) Regulations, 2013

2. 284/2013-RB - dated 27-8-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2013

Circulars / Instructions / Orders

FEMA

1. 42 - dated 12-9-2013

Foreign Investment in India – Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

Companies Law

2. Draft Rules under Companies Act - dated 9-9-2013

CHAPTER XXVII - NCLT

3. Draft Rules under Companies Act - dated 9-9-2013

CHAPTER XXVII - NCLT salary of president & members

4. Draft Rules under Companies Act - dated 9-9-2013

CHAPTER XXVII- NCLAT salary of chairperson & other members

5. Draft Rules under Companies Act - dated 9-9-2013

CHAPTER XXIX - MISCELLANEOUS

6. Proposed Draft Corporate Social Responsibility Rules - dated 9-9-2013

CHAPTER IX-CSR RULES

Highlights / Catch Notes

Income Tax

• High Court Reduces 80% Interest Due to Taxpayer's Genuine Misunderstanding u/s 54EC and Section 234B.

  Case-Laws - HC : Waiver of Interest u/s 234B - default in payment of advance tax - bonafide belief - Failure to comply with the conditions of section 54EC for claiming exemption from capital gains - it is case of bonafide belief - Interest waived to the extent of 80% - HC
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• Dry Latrine Construction by Assessee Not Charitable u/s 2(15) of Income Tax Act Due to Commercial Nature.

  Case-Laws - AT : Charitable activity u/s 2(15) - Construction of shushk (dry) shauchalya (latrines) - since the assessee is carrying on the activity for consideration being the contract amount received from DUDA, the same cannot be said to be charitable purpose. - AT
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• Reimbursement of Expenses Between Associated Enterprises Qualifies as International Transaction u/ss 92F(v) & 92B for ALP Compliance.

  Case-Laws - AT : Transfer pricing adjustments - ALP - A pure reimbursement of expenses by one AE to another AE is very much a 'transaction' as per section 92F(v) and consequently was equally an international transaction as per section 92B requiring consideration as per section 92 of the Act - AT
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• Section 14A Disallowance Applies Even Without Exempt Income, Says Income Tax Ruling.

  Case-Laws - AT : Disallowance u/s 14A - The disallowance u/s 14A was warranted even if there was no exempt income. - AT
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• Section 68 Dispute: Prior Year Tax Credits Can't Justify Current Year Additions, Says Department.

  Case-Laws - AT : Addition u/s 68 – credit of earlier year, additions made during the current year under dispute - Whatever remedy available with the department could have been utilised in the preceding years. However, the same cannot be a ground to make the addition during this year. - AT
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• DEPB Benefits Must Be Included in Turnover for Accurate Profit Margin Calculation in Transfer Pricing Cases.

  Case-Laws - AT : Transfer pricing - DEPB benefit received during the year under consideration should be considered as part of the turnover of the assessee for working out the profit margin to make the comparison of like to like and similar to similar. - AT
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• Section 11 Exemption Denied: Chit Fund Subscriptions Not Considered Investments for Charitable Purposes u/s 2(15.

  Case-Laws - AT : Disallowance of Exemption u/s 11 - Charitable purpose 2(15) - Subscription paid by a subscriber of a chit to a chit company acting as the foreman of the chit cannot be considered as an investment. Subscribing to a chit fund is not with an intention to earn interest or dividend. - AT
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• Transfer Pricing Officer's Comparables Rejected; Commissioner of Income Tax (Appeals) Deletes Adjustments, Ruling Against Revenue.

  Case-Laws - AT : Transfer pricing adjustments - Arm’s Length Price - The arbitrary selection of comparables has in fact inflated the operating profit in the computation made by the Transfer Pricing Officer. - Deletion of transfer pricing adjustments by CIT(A) sustained - Decided against the revenue. - AT
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• Assessing Officer Lacks Jurisdiction Without Properly Served Notice u/s 143(2); Cannot Be Fixed by Section 292 BB.

  Case-Laws - AT : Reassessment proceedings - Defect in service of notice u/s 143(2) – In absence of notice being served, the Assessing Officer had no jurisdiction to make assessment. Absence of notice cannot be held to be curable under Section 292 BB of the Act - AT
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• Website Development Costs for Client Information Are Revenue Expenditures, Not Capital, Despite Long-Term Benefits.

  Case-Laws - AT : Expenditure on development of web site with a view to disseminate information about assessee’s business activities amongst its clients is revenue expenditure even though resulting in enduring benefit. - AT
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• Penalty Imposed for Claiming Exemption Without STT Payment and Incomplete Disclosure Under Income Tax Act Section 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) – Claim of exemption u/s 10(38) where no STT was paid - the assessee having not disclosed fully and truly all the material facts relevant to the said claim liable for penalty u/s 271(1)(c). - AT
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• Trading Nature of Transactions Determines Income Classification, Not Frequency of Share Deals.

  Case-Laws - AT : Nature of Income - Once it is established that the nature of transactions are such that the assessee is trading in shares, it does not make any difference whether he has transacted in the same shares more than four times or less than four times. - AT
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Customs

• Clarification on Additional Duty for Ship Imports: Exemption from Central Excise Duty Not Central to Notification No. 167/1986.

  Case-Laws - AT : Additional Duty - Notification No. 167/1986 - Rectification of Mistake - the actual product imported was a ship and therefore whether the product got from it was exempted from Central Excise or not was of no consequence. - AT
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• Vehicle Confiscation u/s 115(2) Requires Proof of Owner's Knowledge of Illegal Use.

  Case-Laws - AT : The vehicle was carrying the offended goods thus liable for confiscation u/s 115 (2)only when it was established that the owner or his agent was aware of the fact that the vehicle was used in the transportation of the offended goods. - AT
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• Misdeclaration of Re-Refined Oil as Virgin Oil Leads to Demand Being Set Aside Due to Lack of Established Standards.

  Case-Laws - AT : Misdeclaration of goods – re-refined oil can be equivalent to virgin oil standards thus making it difficult even for the chemical examiner to arrive at a conclusive finding - especially in the absence of admitted laid down characteristics of both - demand set aside. - AT
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Service Tax

• Assessed Parties Engaged in Manufacturing, Not Services; Exempt from Service Tax Liability Under Relevant Regulations.

  Case-Laws - AT : Liability to Service Tax - Manufacturing Activity OR Services Rendered - All the activities done by the assesses had to be seen together and when it was so seen it was clear that they were doing manufacturing activity - No service tax - AT
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• Insurance for Final Products Tied to Production is "Input Service," Qualifying for Cenvat Credit Under Service Tax.

  Case-Laws - AT : Cenvat Credit - The insurance cover has direct nexus with the final products manufactured by the appellant and the payment of service tax on such insurance is clearly eligible for cenvat credit as "Input Service" - AT
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• Understanding 'Exempted Services' in Export Cargo: Tax Exemption u/s 93 and Non-Taxable Services u/s 66.

  Case-Laws - AT : Value of Export Cargo Handling Service - The expression ‘exempted services’ covers not only the services taxable under Section 66 of the Act, which were fully exempt from service tax by some exemption notification issued under Section 93, but also those services which are not taxable under Section 66 of the Act - AT
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Central Excise

• Tribunal Rejects Emotional Plea for Exemption Error; Upholds Strict Interpretation of Duty Refund Rules.

  Case-Laws - AT : Area bases Exemption Notification No.56/2002 - payment of duty without utlizing Modvat / Cenvat Credit and claiming refund of duty paid in cash thereafter - Inadvertent mistake plea of appellant is certainly a misplaced sympathy to sway away Tribunal towards sympathetic consideration - AT
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• Exemption under Notification No. 56/2002-C.E. prohibits using BED credit to pay education and higher education cess.

  Case-Laws - AT : Area Bases Exemption under Notification No.56/2002 - Whether an assessee availing of exemption under Notification No. 56/2002-C.E. can pay education cess and S & H Cess through BED Credit - Held no - AT
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• SSI Units Can Claim CENVAT Credit on Inputs for Job Work Manufacturing, Confirms New Decision.

  Case-Laws - AT : CENVAT credit - SSI Exemption - Whether a job worker (SSI unit) entitled to take credit of duty in respect of duty paid inputs used by him in manufacture of goods on job work - Held yes - AT
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• Penalty u/s 11AC Not Applicable for Bona Fide Mistake; Rule 25 Penalty of Rs. 50,000 Sufficient.

  Case-Laws - AT : Default in Monthly Payment - Penalty under Section 11AC was not imposable in cases where default had occurred because of bona fide mistaken belief - It was only a deemed removal without payment of duty - Penalty of Rs. 50,000 under Rule 25 would meet the ends of justice in the case - AT
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Case Laws:

• Income Tax

• 2013 (9) TMI 347
  Computation of income - works contract - determination of expenditure incurred for execution of works contract - Held that:- Having taken 95% of the total contract amount receivable by the assessee from the society for determining the accrued income as on 31.3.2006, the Assessing Officer ought to have deducted 95% of the total expenditure incurred by the assessee for forming layout as accrued expenditure for the year ending 31.3.2006. The CIT(A), for determining the income, had considered the entire contract receipt and total expenditure incurred by the assessee. We find that the action of CIT(A) cannot be faulted. - Decided against the revenue.

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• 2013 (9) TMI 342
  Waiver of Interest u/s 234B - default in payment of advance tax - bonafide belief - Failure to comply with the conditions of section 54EC for claiming exemption from capital gains - Held that:- in order to obviate hardship to the assessees, the CBDT issued the order Annexure – N under Section 119(2)(a) of the Income Tax Act, 1961 permitting waiver of interest under Section 234(a), 234(b) and 234(c) of the Act on 26.6.2006. Clause (b) of Subsection (3) of Section 54EC as it stood prior to its substitution by Finance Act 2007 was without any limit over the ‘capital gain’ investment in capital gains bonds for exemption under Sec. 54EC, from capital gain tax under Sec. 45 of the Act, moreso in the light of the order passed by the CBDT extending the period of limitation for such investment upto 31.3.2007. The substitution by Finance Act 2007 with retrospective effect from 1.04.2006 is to the detriment of the petitioner, dehors which petitioner would have had the benefit of exemption from capital gain tax as the entire capital gain of Rs. 1,82,00,000/-. While there can be no dispute that the tax liability of Rs.29,09,800/- was discharged on 25.9.2007 nevertheless during the period from 1.4.2006 to 31.3.2007 and upto the Finance Act, 2007, receiving the assent of the President of India, petitioner was under the bonafide belief that he would be entitled to exemption from payment of capital gains tax under Section 54EC of the Act on Rs.1,82,00,000/-. In the circumstances, it would be incongruous to hold that paragraph 2(c) of the notification Annexure-N applies to cases where orders are passed by the High Court and are subsequently set-aside by a larger Bench of the Supreme Court or where there is retro activity of an amendment to the statutory provision. The very fact that the words ‘retrospective amendment of law’ used in paragraph 2(c) to establishes that it is one of the unavoidable circumstance by which an assessee would stand to benefit the waiver of interest under Section 234(b) of the Act. Decision in Bhanuben Panchal And Chandrikaben Panchal Versus Chief Commissioner Of Income-Tax. [2004 (3) TMI 35 - GUJARAT High Court] followed wherein it was held that, when the circumstances leading to delay in filing of return of income are also the circumstances resulting into late payment of taxes and when the same set of circumstances are considered to be unavoidable circumstances responsible for the delay in filing of the return of income, ordinarily, such circumstances would also qualify to be considered as unavoidable circumstances responsible for the delay in late payment of taxes. The retro active operation w.e.f. 1.4.2006 of clause (b) of explanation to sub-sec. (3) of Section 54EC of the Act substituted by the Finance Act, 2007, coupled with the voluntary payment of tax liability on 26.9.2007, the Chief Commissioner of Income-tax was not justified in declining the benefit of a waiver of interest under Section 234B. - Interest waived to the extent of 80% - Decided partly in favor of assessee.

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• 2013 (9) TMI 341
  Charitable activity u/s 2(15) - Registration of application u/s 12AA - Charitable work or public utility - Construction of shushk (dry) shauchalya (latrines) in the villages for proper sanitation - Held that:- assessee's case falls within the ambit of carrying on an activity for consideration. The assessee has not constructed the shushk shauchalya as a part of a social service but it only executed the contract awarded by DUDA. If the contention of the assessee is accepted, then every contractor who is constructing the roads, bridges or airports, power generation plants etc. can claim that they are doing the charitable work. From the income and expenditure account of the assessee for the immediately preceding two years, it is evident that the only activity carried out was for the execution of the contract awarded by DUDA. In view of the above, in our opinion, the assessee's case squarely falls within the ambit of proviso to Section 2(15) and, since the assessee is carrying on the activity for consideration being the contract amount received from DUDA, the same cannot be said to be charitable purpose. Once the activity of the assessee does not fall within the ambit of definition of 'charitable purpose', the learned CIT rightly refused to register the society for the purpose of Section 12A - Decided against assessee.

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• 2013 (9) TMI 340
  Revision u/s 263 - Conduct of the revenue officers - Unexplained expenditure u/s 69C - Repayment of housing loan - Held that:- In this case, even though the assessing officer called for the details, he has not discussed the same in the assessment orders. Therefore, the reasons for allowing the claim of the assessee / not including the increase in wealth in the assessment are not forthcoming from the assessment orders. This Tribunal is of the considered opinion that the failure of the assessing officer to record reasons for the conclusions reached in the assessment orders is an error which is prejudicial to the interest of the revenue. The non application of mind to the materials filed by the assessee is an error which warrants the exercise of powers by the Administrative Commissioner u/s 263 of the Act. - Decided against the assessee. Allahabad High Court in a recent judgment [2013 (6) TMI 67 - ALLAHABAD HIGH COURT] expressed its shock and anguish the way in which the assessment orders and the revisional orders are being passed. - The Commissioner of Income- tax initiated proceedings to cancel the registration u/s 12A of the Act. However, it was dropped without recording any reason. Subsequently, the case was reopened and notice was issued u/s 147 of the Act. The assessee challenged the notice issued for reopening the assessment by way of writ petition. While considering the wit petition, the Allahabad High Court expressed its shock and anguish on the way in which the orders are being passed by the income-tax authorities. Assessment order does not reflect the application of mind by the assessing officer to the material filed by the assessee. The non application of mind to the material filed by the assessee is an error which is prejudicial to the interest of the revenue. Therefore, the Administrative Commissioner has rightly exercised his jurisdiction u/s 263 of the Act - Decided against Assessee.

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• 2013 (9) TMI 339
  Disallowance u/s 14A - no exempt income was realized - Held that:- It is observed that the Special Bench of the Tribunal in the case of Cheminvest Ltd. v. ITO [2009 (8) TMI 126 - ITAT DELHI-B] has held that the disallowance u/s 14A is warranted even if there is no exempt income. - In the case of Godrej & Boyce Mfg. Co. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - had held that the disallowance u/s 14A was required to be made as per Rule 8D in relation to the assessment year 2008-09 and subsequent years - For the earlier years, the direction was to compute the disallowance on some 'reasonable basis' - The disallowance u/s 14A was warranted even if there was no exempt income. Treatment of Rental Income – Sub-letting of property - Held that:- The assessee was neither the owner nor the deemed owner of the house property, applying the provisions of section 22, the annual value of such property could not have been charged to tax under the head "Income from house property" - As it was a case of simple subletting or property, not facilitating the carrying on of the assessee's business in any manner, the rental income so realized by the assessee in the present circumstances cannot be considered as 'Business income' - In such a situation, it was directed that the same should be included under the head 'Income from other sources' - The impugned order on the issue was set aside and the matter was restored to the file of the AO for doing the needful accordingly - The Assessing Officer will allow eligible deductions and allowances as per the relevant provisions under Chapter IV-F - While allowing such deductions, the Assessing Officer will also ensure that no deduction is doubly claimed/allowed, firstly, in computing of income under the head "Profits and gains of business or profession" and then under the head "Income from other sources". Transfer pricing adjustments – ALP - Reimbursement of expenses - Held that:- A pure reimbursement of expenses by one AE to another AE is very much a 'transaction' as per section 92F(v) and consequently was equally an international transaction as per section 92B requiring consideration as per section 92 of the Act - Be that as it may, the learned Departmental Representative could not demonstrate the fact that such reimbursement of expenses was without any markup - As the so called comparable case of Datamatics Financial Services Limited was included by the TPO in the final list of comparables, in our considered opinion, the same was liable to be excluded as it involves related party transactions at much higher level, as against the filter adopted by the TPO himself, being companies with less than 25% related party transactions – Following Assistant Commissioner of Income-tax, Circle 6(3) Versus Maersk Global Service Center (India) (P.) Ltd. [2011 (11) TMI 465 - ITAT MUMBAI] - the assessment order on this comparable case was also set aside and the matter was directed to be decided afresh by the AO/TPO in consonance with our ibid observations. The relevant factor in choosing comparable cases is to find out similarity in the nature of services rendered - In that view of the matter a case in which services are outsourced and then provided to its customers cannot be compared with the rendering of in-house services. The pertinent criteria for selection of comparable cases should be similarity in the nature of services and not the higher or lower margin of profit in one case vis-à-vis the other. As there is a vast difference in the cases where the services are outsourced or provided in-house, in our considered opinion, there cannot be any comparison between such types of cases. - matter remanded back - Decided in favor of assessee.

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• 2013 (9) TMI 338
  Addition u/s 68 – credit of earlier year, additions made during the current year under dispute - Held that:- After verification of the sub dealer deposit account, has noted that the addition was erroneously made - such deposits were received in A.Y. 2003-04 and 2004-05 for which the balance sheets for those years were filed. Further, the learned CIT(A) himself admits that technically the addition cannot be made u/s.68 during the year, still he had confirmed the addition, which in our opinion was not proper. Under these circumstances, the CIT(A), in our opinion, was not justified in confirming the addition made by the AO. Whatever remedy available with the department could have been utilised in the preceding years. However, the same cannot be a ground to make the addition during this year. In this view of the matter, we set-aside the order the CIT(A) and direct the AO to delete the addition. - Decided in favor of assessee. Unexplained Loan Credits for Nonbusiness Purposes - Held that:- Since the assessee had produced the loan creditors before the AO who have confirmed to have given the loan - therefore, the same in our opinion should be allowed - The AO disallowed an amount on account of loan from 7 loan creditors on the ground that the assessee could not substantiate the identity, credit worthiness and the genuineness of the transactions - We find the assessee filed certain details before the CIT(A) who called for a remand report from the AO - the assessee has produced the loan creditors before the AO who recorded their statements and since the loan creditors filed their bank accounts and the AO was satisfied regarding the genuineness of the transaction and their credit worthiness, therefore, we find no reason as to why the same should not be accepted - We therefore set-aside the order of the CIT(A) on these 2 loans and direct the AO to allow these 2 loans as genuine. - Decided in favor of assessee.

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• 2013 (9) TMI 337
  Disallowance of Interest - Loan to sister partnership firm - nature of loan, business purpose or personal purpose - Whether the interest-free amount advanced to AG Info Solutions (partnership firm) was for commercial expediency or not – Held that:- it has to be examined whether the funds advanced by the taxpayer company was used for the personal purpose or for business of the firm where the taxpayer company has its full interest. Since this aspect was not examined, this Tribunal is of the considered opinion that the matter needs to be re-examined. - In S. A. Builders Ltd. v. CIT [2006 (12) TMI 82 - SUPREME COURT] it was held that, whenever there was a nexus between the expenditure and the purpose of business which need not necessarily be for the business of the taxpayer itself, the payment of interest cannot be disallowed - the orders of the lower authorities are set aside and the issue is remitted back to the file of the Assessing Officer - decided partly in favor of assessee. Disallowance of Depreciation - business premises known as "DD Milestone". - The depreciation with regard to "DD Milestone" building has already been remitted back to the file of the Assessing Officer - In respect of the other two flats in Link Horizon, Marine Drive, Ernakulam and in Uni-Housing at Ernakulam the claim of the taxpayer is that the flats were given to the directors for the purpose of the taxpayer's business. Therefore, it has to be examined whether the flats were in fact given to the directors for the business purpose of the taxpayer or not. For the sake of consistency, this Tribunal is of the considered opinion that this issue also needs to be re-examined by the Assessing Officer. Accordingly, the orders of the lower authorities on this issue are set aside and the issue is remitted back to the file of the Assessing Officer for re-consideration. The Assessing Officer shall re-examine the issue afresh and find out whether the flats in question were used by the directors for the business needs of the taxpayer and thereafter will decide the issue in accordance with law after giving opportunity of hearing to the taxpayer. Exemption u/s 10A - whether, blending and packing of tea amounts to manufacture so as to qualify the taxpayer for claiming exemption under section 10A of the Act - Held that:- Commissioner of Income-tax (Appeals) had rightly allowed the claim of the taxpayer - The judgment of the jurisdictional High Court is binding on this Tribunal – Tata Tea Ltd. Versus ACIT [2010 (1) TMI 743 - Kerala High Court ] - industrial units engaged in the very same activity ; i.e., blending, packing and export of tea in the special economic zones and free trade zones, will continue to enjoy tax exemption under section 10A and section 10AA respectively. The still worse position is that the appellant would be denied of export exemption available under section 80HHC even to a merchant exporter - Provisions of section 10A and the EXIM policy and found that "manufacture" as defined under the EXIM policy has a wider and literal meaning covering tea blending as well - blending and packing of tea qualifies for exemption under section 10A of the Act. - Decided against the assessee.

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• 2013 (9) TMI 336
  Disallowance as per the provisions of section 14A r.w Rule 8D of Income Tax Rules – Held that:- Following GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D of Income-tax Rules, 1962 is applicable only from assessment year 2007-08. As further held by Hon'ble High Court, the disallowance u/s 14A for the years prior to assessment year 2007-08 has to be made by adopting some reasonable method – the order of the CIT(Appeals) was set aside on this issue and restore the matter to the file of the AO with a direction to recompute the disallowance of expenses to be made u/s 14A by applying some reasonable method after giving the assessee an opportunity of being heard. Addition made by Way of Transfer Pricing Adjustment – It was contended that since the price charged to AEs was more than the price charged to non AEs, the international transactions with AEs involving export of bathrobes should be considered at arms length. - Held that:- average price of bathrobes is likely to vary in a wide range depending on the type of bathrobes supplied and their product mix and in the absence of exact data made available by the assessee to compare the prices of similar products supplied to AEs and non-AEs, CUP cannot be applied as most appropriate method for the transfer pricing exercise. Moreover, there was also a difference in geographical location and size of the markets also in as much as the AEs of the assessee were in Italy whereas the non-AEs i.e. Wal Mart was based in USA having much bigger market than Italy. We, therefore, find no infirmity in the impugned order of the learned CIT(Appeals) confirming the action of the AO in rejecting the CUP method for benchmarking and applying the TNMM - Decided against the assessee. Consideration of DEPB benfits for working out profit margin - Held that:- DEPB benefit received during the year under consideration should be considered as part of the turnover of the assessee for working out the profit margin to make the comparison of like to like and similar to similar. Since the profit margin of the assessee after taking into consideration the DEPB benefit as part of its turnover comes to 12.30% as against the average net profit margin of 13.05% of the comparables which is within the safe limit of 5%, we find ourselves in agreement with the learned CIT(Appeals) that no TP adjustment in respect of transactions made with the associated enterprises was required to be made in the case of the assessee - Decided against the revenue.

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• 2013 (9) TMI 335
  Disallowance of Exemption u/s 11 - Charitable purpose 2(15) - Subscription paid to Chit Fund company - Violation of the nature specified in Section 13(1)(d) - As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed under Section 11 of the Act. - Held that:- Subscription to chit funds itself will be utilization of the funds of the assessee since right of the assessee is only to prize a chit or participate in a draw of lots. It is not an investment or deposit of a money which is available as surplus with assessee. Lower authorities fell in error in concluding that such subscriptions were investments which violated the modes specified under Section 11(5) of the Act. - The question of denial of exemption under Section 11 would arise only if investments were there. - assessee could not have been denied exemption claimed by it under Section 11of the Act, for a reason that it had subscribed to the chit funds. There is no case for the Revenue that any of the Trustees, Managers, contributors of relatives of such persons were having interest in the two chit companies. - assessee was eligible for exemption under Section 11 of the Act and its claim was denied unjustly. Relying upon CIT v. Kottayam Co-operative Bank Ltd. [1974 (4) TMI 2 - KERALA High Court] - The annual income of the Trust against which, utilization for charitable purpose which was well above the limit of 85% prescribed u/d 11(1)(a) of the Act - As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed u/s 11 of the Act - Subscription paid by a subscriber of a chit to a chit company acting as the foreman of the chit, in our opinion, cannot be considered as an investment. Subscribing to a chit fund is not with an intention to earn interest or dividend.

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• 2013 (9) TMI 334
  Transfer pricing adjustments - Arm’s Length Price - selection of comparables - Rule 10B(4) - Held that:- the deviation took place in the final list of comparables relied on by the Assessing Officer as against the companies selected by the assesseecompany. The list of comparable companies relied upon by the assesseecompany has been rejected by the Transfer Pricing Officer without stating any reason, even though the Transfer Pricing Officer has, by and large, agreed with the general premises on which the assessee has computed its arm's length price. Even though the Transfer Pricing Officer has adopted the transactional net margin method to compute the arm's length price, he has overruled the objections of the assessee without stating any reason. The arbitrary selection of comparables has in fact inflated the operating profit in the computation made by the Transfer Pricing Officer. - Deletion of transfer pricing adjustments by CIT(A) sustained - Decided against the revenue. Disallowance of Dividend Tax delay charges, interest for delay in remitting TDS, expenses incurred for delay in UTI dividend payments, etc. It is to be seen that the delay charges attributable to dividend tax partakes the character of dividend tax itself. Dividend tax as such is not deductible - the delay charges also are not deductible - This is the same case in respect of interest for delay in remitting TDS - There cannot be a different view on expenses incurred for delay in UTI dividend payments - Therefore, these expenses claimed by the assessee are not deductible in computing its income. - Decided against the assessee.

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• 2013 (9) TMI 333
  Exemption u/s 10(23)(v) / 10(23C)(iiiad) – Nature of Society – Educational institution - Exemption u/s 10(23C)(iiiad) – Held that:- If the donations were received compulsorily for admission of students, the assessee is not entitled for exemption either u/s. 10(23C) or u/s. 11 of the IT Act. Since the lower authorities were not examined the collection of capitation fees in this case, in our opinion, the matter requires to be examined by the assessing officer whether the assessee is collecting the capitation fees from students or not and it is necessary for bringing the actual facts on record for deciding the issue effectively. - Following the decision in Vasavi Academy of Education (2010 (1) TMI 1094 - ITAT HYDERABAD), matter remanded back.

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• 2013 (9) TMI 332
  Reassessment proceedings - Defect in service of notice u/s 143(2) – Validity of Assesment as per Section 292BB - irregularity curable u/s 292BB - Whether the CIT(A) was right in holding that in absence of issuance of notice u/s 143(2), the assessment was null and void not appreciating provisions u/s 292BB – Held that:- Notice was not served within the stipulated time. Mere giving of dispatch number will not render the said finding to be perverse. In absence of notice being served, the Assessing Officer had no jurisdiction to make assessment. Absence of notice cannot be held to be curable under Section 292 BB of the Act - Following CIT v. Cebon India Ltd [2009 (7) TMI 26 - PUNJAB AND HARYANA HIGH COURT ] - It was held in this case that absence of notice is not curable defect under s. 292BB of the IT Act - the objection of the Revenue is not maintainable - Therefore, the learned CIT(A) was justified in setting aside the entire assessment order. Section 292BB has been inserted by Finance Act, 2008, has no retrospective effect and is to be construed prospectively - The provision of s. 292BB of the IT Act would not apply in the case of the assessee - Further, no notice under s. 143(2) has been issued or served upon the assessee - The assessment order under appeal is 2001-02 - Therefore, the provision of s. 292BB of the IT Act would not apply in the case of the assessee - Further, no notice under s. 143(2) has been issued or served upon the assessee. Reopening of Assessment u/s 148 -Disallowance of various heads like unexplained investment, loans raised and unexplained capital - when entire reassessment order has been set aside and quashed by the learned CIT(A) and confirmed - rest of the grounds in the Departmental appeal regarding reopening of assessment under s. 148 and deletion of addition on merits were left for academic discussion only. Therefore, we do not propose to decide the same at this stage, as no notice under s. 143(2) was issued in this case. Therefore, there would not be any valid reassessment proceedings under s. 147 of the IT Act and all resultant additions made in such reassessment order would stand deleted.

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• 2013 (9) TMI 331
  Revision u/s 263 - Nature of Expenditure – Capital Expenditure OR not - web site development expenses - order u/s 263 was passed setting aside the order under Section 143(3) of the Income Tax - Held that:- In view of the nature of expenses, we have no hesitation to come to a conclusion that the expenditure in question is in the revenue field – Following CIT vs. Indian Visit.Com Pvt.Ltd. [2008 (9) TMI 8 - DELHI HIGH COURT] - Expenditure on development of web site with a view to disseminate information about assessee’s business activities amongst its clients is revenue expenditure even though resulting in enduring benefit. - Decided in favor of assessee. Assessee was capitalizing the expenditure in the earlier years - Held that:- Applying project completion method does not mean that the expenditure which is not claimed in the current year, becomes a capital expenditure. In fact project completion method comes into play only when the expenditure is in the revenue field. Otherwise, it would have been called “capital work-in-progress.” The difference between project completion method and percentage completion method is the year of allowability of expenditure and the year of booking of income. - Decided in favor of assessee. Revision u/s 263 is not correct - CIT is wrong to direct the AO to treat the entire expenditure of Rs.9,49,039/- as capital in nature and disallow the same.

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• 2013 (9) TMI 330
  Addition on Account of Low GP - Whether the Ld. CIT (A) erred in restricting the addition on account of G.P. @ 5% to 2% on the ground that the turnover for the year has been reduced compared to preceding year and in not appreciating the fact that the G.P. for the immediately preceding year was 10.84% and that the substantially increased figures show by the assessee in manufacturing expenses like power, fuel addition other expenses has resulted the G.P. in negative figure and addition on facts in partly confirming the addition on account of gross profit - The confirmation of such addition being unjust and unlawful be deleted - Held that:- The books of accounts have not been rejected by A.O. nor has any defect been pointed out in the books of accounts - CIT (A) though has granted partial relief to the assessee has held that in the context of reduced turnover in the current year, increased expenditure partly explains the negative G.P. during the year - the A.O. was not right in making addition. Following CIT vs. Amitbhai Gunwatbhai [1980 (6) TMI 10 - GUJARAT High Court] - if there was no challenge to the transactions represented in the books then it is not open to Revenue to contend that what is show by the entries is not the real state of affairs - Secondly, even if for some reason, the books are rejected it is not open to the A.O. to make any addition on estimate basis or on pure guess work - No specific discrepancies or defects in the books of account of the assessee have been pointed out before us nor was any material brought to our notice to establish that purchases were inflated or receipts suppressed - CIT vs. Vikram Plastic [1998 (8) TMI 43 - GUJARAT High Court] - there were no discrepancies or defects pointed out in the books of account and further that they were regularly maintained addition also on the finding that there was no material brought on record to establish that purchases or expenses were inflated or sales suppressed and also in view of the finding that it was not the case that there was no method of regular accounting employed, the Tribunal was fully justified in coming to the conclusion that the provisions of Sec. 145(2) of the Income Tax Act,1961, could not be invoked - This conclusion was based on a finding of fact and raised no question of law - this ground of the assessee is allowed and that of Revenue is dismissed. Disallowance of Deduction u/s. 40(a)(ia) - Whether the expenditure on which TDS is deducted and paid after the due date as prescribed u/s. 200, calls for disallowance in view of the provisions of Sec. 40(a)(ia) - Held that:- Following M/s. Alpha Projects Versus DCIT, Ci rcle-1(1), [2012 (4) TMI 466 - ITAT, Ahmedabad] - No disallowance is called for in the present case since the TDS has been deposited before filing of return - it is also a fact that the A.O. has not examined the issue of disallowance u/s. 40(a)(ia) in light of the aforesaid decision of coordinate Bench - We therefore feel that in the interest of justice the issue be remanded to the file of A.O. for verification - We accordingly direct the A.O. to examine as to whether the assessee had paid the TDS to the account of Government, before filing of Return of income - If the assessee has deposited the TDS before filing of Return of Income the deduction be allowed following the aforesaid decision of Co-ordinate Bench - By this order, we also direct the assessee to furnish all the information required by the A.O. to decide the issue. The A.O. shall also grant an opportunity of being heard to the assessee. Thus this ground of the assessee is allowed for statistical purposes.

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• 2013 (9) TMI 329
  Penalty u/s 271(1)(c) – Claim of exemption u/s 10(38) where no STT was paid - long term capital gain from sale of shares - Penalty was questioned to the extent it was in respect of addition made on account of long term capital gains - Held that:- The assessee has not been able to show satisfactorily that the so called mistake committed by him while making a wrong claim for exemption u/s 10(38) is a bonafide and genuine mistake and the assessee having not disclosed fully and truly all the material facts relevant to the said claim, we are of the view that it is a fit case to impose penalty u/s 271(1)(c). In that view of the matter, we uphold the impugned order of the learned CIT(Appeals) confirming the penalty imposed by the AO u/s 271(1)(c) and dismiss this appeal of the assessee. - Decided against the assessee.

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• 2013 (9) TMI 328
  Nature of Income - The dispute is regarding the nature of income from sale and purchase of shares by the assessee - Whether the income from sale and purchase of shares in a particular case should be treated as capital gain or as business income – Held that:- we have no hesitation to hold that the assessee is engaged in the business of purchase and sale of shares considering the peculiarity of the facts and circumstances in which the transaction has been done - Once it is established that the nature of transactions are such that the assessee is trading in shares, it does not make any difference whether he has transacted in the same shares more than four times or less than four times. - income is liable to taxed as income from business - Decided against the assessee. Claim of Set Off of Business Loss - Held that:- In the light of the provisions of Sec. 43(5), the AO was of the opinion that only the income earned from the trading in derivatives before 25.1.2006 is allowed to be set off against the brought forward speculation loss from the activity of trading in derivatives. However, as we have held that the income from shares is to be treated as business income, we accordingly restore this issue back to the files of the AO. The AO is directed to consider the claim of loss in the light of our decision, as per provisions of the law. Disallowance of the Set Off of Loss - Loss disclosed under the head brought forward Long Term Capital loss – Held that:- As the underlying nature of the transaction was the same i.e. F&O, therefore brought forward losses which were erstwhile treated as speculative losses were allowed to be set off against subsequent years F&O profit - the loss which the assessee claims to set off is Long Term Capital loss and there is no such amendment so far as claim of such loss is concerned. Therefore we do not find any merit in the claim of the assessee to allow set off of Long Term Capital loss against business income - prior to the amendment to Sec. 43(5), F&O transactions were treated as speculative transaction but post amendment, the same was treated as business transaction. Rebate u/s 88E on account of STT paid by the assessee - Interest u/s. 234B and 234C - Whether the CIT(A) erred in not allowing the entire loss arising on account of valuation of closing stock and the shares written off as per the recognized method ‘cost or market value whichever is lower’ - Held that:- The issues were Restored back to the file of the AO. The AO is directed to examine the claim of loss of the assessee in the light of the decision that entire STCG is to be taxed under the head business income, after giving reasonable opportunity of being heard to the assessee – Rebate also requires verification by the AO - The AO is accordingly directed to consider the claim of the rebate u/s. 88E as per the provisions of the law after giving a reasonable opportunity of being heard to the assessee.

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• 2013 (9) TMI 327
  Revision u/s 263 - Held that:- an order erroneous or prejudicial to revenue - Held that:- At the time of original assessment, the A.O. has made the necessary enquiries and called for the necessary explanation and material from the assessee - The ld. Authorised Representative has demonstrated as discussed in submission of the ld. Authorised Representative above that the A.O. has made the assessment after considering all relevant records and materials. - The CIT has wrongly invoked section 263 of the Act. Therefore, order of the CIT is quashed - Decided in favor of assessee.

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• Customs

• 2013 (9) TMI 354
  Additional Duty - Notification No. 167/1986 - Rectification of Mistake - Whether the appellant was liable to pay additional duty in respect of a vessel brought in by them for breaking up in terms of the provisions of the Custom Tariff Act, 1975 - The appellant had claimed general exemption under Notification No.167/1986 for exemption from CVD on the vessel imported for breaking - Held that:- The appellant was eligible for the benefit of Notification No.167/1986 needed to be allowed to that extent - Following the judgement of ENGEE INDUSTRIAL SERVICES (P) LTD. Versus UNION OF INDIA [2003 (5) TMI 458 - KARNATAKA HIGH COURT] - the actual product imported was a ship and therefore whether the product got from it was exempted from Central Excise or not was of no consequence. By Notification No. 167/86-C.E. the Central Government, had exempted goods falling under Chapter 89 from the whole of the levy of excise where no operation was carried on in or in relation to the manufacture of the said goods with the aid of power - The vessels imported by the appellant were not seaworthy and they were admittedly for the purpose of breaking - There was a separate entry for this purpose both under the Customs Tariff Act and Central Tariff Act - The product actually imported was the material that can be retrieved from the ship - the structure by itself was of no value and the appellant subjects the vessel to a process to retrieve the material from the structure without the use of power - appeal was allowed to the extent it was challenging the imposition of CVD and not extending the benefit of Notification No.167/1986 to the appellant-applicant - The application for rectification of mistake was disposed off – Decided in favor of Assessee.

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• 2013 (9) TMI 353
  Condonation of delay - Assessee had been filed the applications for condonation of delay and the appeal beyond the period of 90 days - appellate authority had dismissed the appeal – Held that:- appellate authority was correct in dismissing the appeal filed by the appellant as belated – u/s 128 the appellant should have filed the appeal on within 60 days available to him - appellant was eligible for file an appeal within next 30 days subject to there being an application for condonation of delay and the said application entertained by the first appellate authority on the merit – court followed the judgement of SINGH ENTERPRISES Versus COMMISSIONER OF C. EX., JAMSHEDPUR (2007 (12) TMI 11 - SUPREME COURT OF INDIA) – appeal decided against the assessee.

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• 2013 (9) TMI 352
  Abetting diversion – Revenue was of the view that all the assesses were engaged in abetting diversion of Muriate of Potash which was imported at concessional rate of duty for use as fertilizer or in the manufacture of composite fertilizer – Held that:- The benefit of notification which does not had post importation condition compliance, cannot be invoked against them for confirmation of demand as well as imposition of penalty - M/s Indian Potash Limited had made out a prima facie case for waiver of pre-deposit of the amounts involved - the allegations in the Show Cause Notice as well as confirmation of demand seems to be incorrect as M/s Indian Potash Ltd had produced records of proper accounting of imported fertilizers in their record and sale thereof to the persons who were authorized to deal in such kind of goods. Stay application – waiver of pre deposit of penalty u/s 112(b) and 114(i) - Held that:- One of the assesse’s appeal was allowed by way of remand - For other assesses the penalties imposed u/s 112(b) will not arise as the issue in all these cases was regarding improper export in the guise of industrial salt – All the other assesses had made out a case for waiver of pre-deposit of amount of penalties imposed by the adjudicating authority – Stay Petitions for waiver of pre-deposit of penalties were allowed – Decided in favor of assesses

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• 2013 (9) TMI 351
  Confiscation of goods u/s 115(2) - whether the vehicle carrying betel nuts of Third Country Origin was liable for confiscation u/s 115 (2) – Held that:- Department was not correct as no summon was issued to the assesse nor he was recognized as an authorized person for the said vehicle - the vehicle was carrying the offended goods thus liable for confiscation u/s 115 (2) - only when it was established that the owner or his agent was aware of the fact that the vehicle was used in the transportation of the offended goods. The appellant was not recognized as the authorized operator of the said vehicle, which is evident from the fact that his request for provisional release of the vehicle was turned down and the Power of Attorney executed by the owner in his favour was not accepted. Besides, the penalty on the appellant was based on the premise that he has failed to appear before investigating officers in spite of repeated summons issued to him, giving raise to the suspicion that he was involved in the act of smuggling. The said basis has been found to be un-true. - order of confiscation and penalty set aside. - Decided in favor of assessee.

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• 2013 (9) TMI 350
  Misdeclaration of goods – Whether the goods imported by the assesse and described by them as recycled base oil was virgin base oil or not - Revenue was of the view that the base oil imported by the appellant was not ‘recycled base oil’ as declared by them but appeared to be ‘virgin base oil’ - the transaction value did not appear to be acceptable under Rule 4 of the Customs (Valuation) Rules, 1988 and should be based upon transaction value of similar goods under Rule 6 - Held that:- The sole reliance on the half-hearted report of the chemical examiner read with his cross examination and in the absence of rebuttal of declaration made by foreign supplier in various documents was unjustified and cannot be made the basis for holding against the assesse - re-refined oil can be equivalent to virgin oil standards thus making it difficult even for the chemical examiner to arrive at a conclusive finding - especially in the absence of admitted laid down characteristics of both – order set aside – decided in favor of assesse.

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• Corporate Laws

• 2013 (9) TMI 349
  Permanent Injunction - Infringement and Passing Off of Registered Trademark “easyJet” - Suit for permanent injunction restraining infringement of registered trademark, passing off, delivery up and damages has been filed by Plaintiffs - Held that:- The defendants must be permanently restrained from using the plaintiff’s trademark easyJet or any other deceptively similar mark - The plaintiffs had successfully established prior use of the suit trademark from the year 1995 - the reputation of the plaintiff had spilled over into India, as was evident from the coverage given to the plaintiff airline by Indian publications and the business generated by the plaintiffs from customers in India - This coupled with the fact that the defendants were using the plaintiff’s coined trademark in respect of services that were covered under Class 39, for which the plaintiffs hold a valid and subsisting registration. The plaintiffs had established prior use of the trademark since 1995 - when it was first registered, and since 1998 when their services became accessible to Indians via their website - if the plaintiffs have customers in a country, it can be presumed that they enjoy a reputation in that country - Owing to the fact that Indians could access the plaintiff no 2’s services through its website as far back as in 1998 - the same was sufficient to constitute prior use - By virtue of Section 28 of the Act, a registered proprietor of the trademark had the exclusive right to the use of the trademark in relation to the goods and services in respect of which the trademark was registered and to obtain relief against infringement of the trademark. The plaintiff and the defendants were operating in the same sphere of activity - The services provided by the plaintiff and defendants were identical in nature - Therefore, the likelihood of confusion and deception was strong on account of the public at large associating the defendants services to be those offered by the plaintiff - The acts of the defendants in using the impugned trademark coupled with a lack of plausible explanation offered by the defendants for the same, leads to the conclusion that the defendants were in fact passing off their services as those of the plaintiffs in an attempt to cash in on the plaintiff’s reputation worldwide as well as in India. The plaintiff had been vigilant about protecting and defending its intellectual property rights - The plaintiff’s intellectual property rights had also been protected by international dispute resolution bodies such as WIPO - WIPO administrative panel decision wherein the respondent was ordered to transfer the domain name easyjets.com to the plaintiff in the present suit on the grounds that it was confusingly similar to the trademark in which the plaintiff had rights.

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• Service Tax

• 2013 (9) TMI 359
  CENVAT credit - Dredging Service - The appellant was rendering dredging service during the entire period - Whether, for the period from 16/06/2005 to 17/04/2006 the appellant should pay service tax at the rate of 12% - Held that:- Prima facie from the documents, it appeared that an endeavour was made by the party before the adjudicating authority to prove that the entire dredging activity pertaining to the aforesaid demand of service tax of was undertaken prior to 18/04/2006 – the demand arises out of denial of CENVAT credit to the said extent taken by the assessee and utilized for payment of service tax - According to the Revenue, the appellant was not entitled to take such credit on the capital goods which were procured after 10/09/2004 and were found in stock as on 16/06/2005 in the absence of enabling provisions. Waiver of Pre- deposit – Period of Limitation - Prima facie case for the appellant on merits was not found - the claim of the appellant was not supported by any specific provision of law - The show-cause notice specifically invoked the proviso to Section 73(1) of the Finance Act, 1994 for recovery of service tax by alleging mis-statement of facts with intent to evade payment of service tax, it did not raise any such allegation to invoke the said proviso for recovery of the amount It is not in dispute that the entire demand was for the extended period - the plea of limitation was, prima facie, tenable - there would be waiver and stay as prayed.

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• 2013 (9) TMI 358
  Liability to Service Tax - Manufacturing Activity OR Services Rendered - Whether the impugned activity can be split into two - one as manufacturing by JLSL and the other as service by appellant (earlier known as PMSL) to JLSL - Whether there can be two manufacturers for the same goods - Held that:- The activities under taken by the assesse during the period April 07 to Sept. 09 being a manufacturing activity carried out cannot be classified as business support service and subjected to service tax and hence the demand failed - The demand failed on account of time-bar also because all relevant facts had been disclosed to the department in time - The same activity cannot be considered as manufacturing and subjected to excise levy and at the same time considered to be a service and subjected to service tax - Revenues contention was that what JLSL was doing was manufacturing and what assesse (earlier known as PMSL) was doing was support services. In the instant case JLSL claimed to be the manufacturer and the claim was accepted by Central Excise Department and JLSL was paying excise duty - There was no scope for PMSL to claim that their activity should also be considered as manufacturing activity in respect of the same goods - In a situation where the other party (JLSL in this case) was willing to pay excise duty at the time of clearance of the goods from the factory of manufacture there was no need to adopt the procedure laid down in Notification 214/86 - The predominant activities for manufacture were done by assesse (earlier known as PMSL). All the activities done by the assesses had to be seen together and when it was so seen it was clear that they were doing manufacturing activity - The fact that they were charging separately for fixed costs and variable costs was not disclosed to the department - this aspect could not actually change the nature of the activity - Decided in favor of Assesse.

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• 2013 (9) TMI 357
  CENVAT credit on GTA service – Held that:- Benefit of Cenvat Credit is available to them based on the decision in Commissioner vs. ABB Ltd. [2011 (3) TMI 248 - KARNATAKA HIGH COURT] – Appeal allowed – Decision in favor of Assessee.

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• 2013 (9) TMI 356
  Input Service credit availed based upon the insurance policy and not a document on which service tax liability has been indicated separately – Held that:- Credit on input service would be admissible even if the appellant does not satisfy the other limbs – “Services used in relation to activities relating to business" are also shown as one of the categories eligible for "Input Service" – Insurance premium expenses are clearly expenses which are directly or indirectly in relation to manufacture of their final dutiable products. The insurance cover has direct nexus with the final products manufactured by the appellant and the payment of service tax on such insurance is clearly eligible for cenvat credit as "Input Service'' - The service tax paid on such "input service" is eligible for taking cenvat credit. Decided in favor of Assessee.

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• 2013 (9) TMI 355
  Value of Export Cargo Handling Service - Duty demanded in terms of Rule 6(3) of the CCR, 2004 - CENVAT credit on telephone service and repair/maintenance - Held that:- There was no evidence on record of the two services having been used in or in relation to the rendering of output services - The expression ‘exempted services’ covers not only the services taxable under Section 66 of the Act, which were fully exempt from service tax by some exemption notification issued under Section 93, but also those services which are not taxable under Section 66 of the Act. In view of the wordings of Rule 2(e) of Cenvat Credit Rules, 2004, the services, in question, have to be treated as ‘exempted services’. BHEL-GE TURBINE SERVICE PVT. LTD. Versus COMMR. OF C. EX., HYDERABAD [2009 (12) TMI 407 - CESTAT, BANGALORE] - Where there was a final order holding that even services on which no service tax was leviable under Section 66 were also to be treated as ‘exempted services’, the same had to be followed as precedent - the appellant had not made out a prima facie against demand in respect of export cargo handling service - CENVAT credit was denied on the telephone services - The case of the Revenue was that the telephone was installed in the premises of one of the partners of the appellant and had not been shown to have been used by the appellant for providing any output services - CENVAT credit had also been denied on repairs/maintenance of a car which was claimed to have been used for business purposes. The Revenue had set up a similar case vis-a-vis the CENVAT credit claimed by the appellant on repairs/maintenance of vehicle. Waiver of Pre-deposit - The appellant failed to make out a prima facie case on merits - They were directed to pre-deposit an amount of Rs.1,36,989/- upon such submission rest of the duty to be waived till the disposal.

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• Central Excise

• 2013 (9) TMI 348
  Stay Application - Pre-deposit – Held that:- Action against the consignee to reverse/recover the CENVAT credit availed of in such cases need not be resorted to as long as the bona fide nature of the consignee's transaction is not in dispute - Pre-deposit is waived and recovery thereof is stayed during the pendency of appeal. Decided in favor of Assessee.

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• 2013 (9) TMI 346
  Area bases Exemption Notification No.56/2002 - payment of duty without utlizing Modvat / Cenvat Credit and claiming refund of duty paid in cash thereafter - In terms of the said notification, the appellant was required to pay duty by first exhausting their Modvat credit available and then through PLA - Held that:- The credit was not availed by the appellant at all and question of utilization does not arise – Relying upon CCE, Jammu v. New India Wire & Cables [2008 (7) TMI 213 - CESTAT NEW DELHI] - Benefit of a Notification was to be strictly construed so as to achieve the object thereof - Right to exemption of duty (refund) arised only upon fulfilling mandatory conditions of the Notification in question which prescribed priority, mode and sequence of discharge of duty liability during tax holiday period. The notification in question having limited the exemption (refund) to duty paid only on incremental value of output through PLA, exemption (refund) of duty on input component contained in finished goods was not permitted - Claim of Modvat credit during material period being mandate of law, failure to seek set off thereof duly, debars exemption (refund) and right to claim that at a future date is deniable - It may be stated that when inputs extinct upon use in manufacture of the finished goods, deferment of set off of Modvat credit was not permitted - No right was vested with the assessee to carry forward input credit beyond material period in absence of carry forward provision in the Notification in question - Apart from this, no claim for set off of input credit duly during material period proves oblique motive as well as premeditated design of assessee against Revenue intending to be enriched at the cost of the exchequer. Such an act also debars to plead that the proceeding is time-barred. It was rightly observed by ld. Technical Member that there was failure to fulfil mandatory condition of the Notification by the appellant when it failed to use the Modvat credit available to it during tax holiday period. Inadvertent mistake plea of appellant is certainly a misplaced sympathy to sway away Tribunal towards sympathetic consideration. Accordingly observation of learned Technical Member in this regard cannot be brushed aside since claim for Modvat credit was within the exclusive knowledge of appellant in view of its past experience of several years being engaged in the line of manufacture. Failure of appellant to set off Modvat credit diminished its right to exemption (refund) and the plea of revenue neutrality is baseless for non-fulfilment of statutory obligation. Dissenting Opinion – Member (Technical) was having a dissenting opinion from Member(Judicial) therefore he delivers a separate judgement – as per the majority the Assesse was able to established Prima facie case and was allowed for the waiverd of pre-deposit – but the pre-deposit of excess exemption availed from 1-4-2008 onwards (to be quantified by applicant) was required to be made.

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• 2013 (9) TMI 345
  Area Bases Exemption under Notification No.56/2002 - Whether an assessee availing of exemption under Notification No. 56/2002-C.E. can pay education cess and S & H Cess through BED Credit - Held that:- A unit availing of exemption under Notification No. 56/2002-C.E. cannot utilize BED credit for payment of education cess and S & H cess which were not exempted under the notification - Extra BED paid through PLA on account of diversion of BED credit for payment of education cess and S & H cess would not be refundable under Notification No. 56/2002-C.E. A manufacturer availing of Notification No. 56/2002-C.E. cannot utilize BED credit for payment of education cess and S & H cess - it will amount to the indirect refund of education cess and S & H cess, which was not permissible - The payment of education cess and S & H cess through BED credit was in conflict with the scheme of this exemption which does not exempt the education cess and S & H cess and which was available only in respect of the duties mentioned in it subject to following of condition of the notification - CCE, Shillong v. Dharampal Satyapal Ltd. [2011 (8) TMI 99 - GAUHATI HIGH COURT]- the notification does not exempt education cess. These two education cess were not covered by Notification No. 56/2002-C.E. the same cannot be paid by the respondent in the manner they seek to pay the same i.e. by utilizing BED credit before utilizing the BED credit to the extent possible for payment of BED as doing so would result in refund of education cess also. A manufacturer availing of exemption under Notification No. 56/2002-C.E., while the restriction on utilisation of Cenvat credit of duties/taxes as mentioned in Rule 3(7)(b) would be applicable, there would be one more additional restriction on utilization of credit of duties/taxes other than those mentioned in Rule 3(7)(b), i.e. credit of BED, AED (GSI) etc. and this restriction was that this credit cannot be used for payment of duties not exempted under this notification if this was permitted, this would result in refund of duties like education cess, S & H cess, NCCD etc. which was not permitted under this notification, while it is well settled law that what was not permissible directly cannot be allowed indirectly. Therefore, in order to ensure that an assessee availing of exemption under this notification does not end up availing this exemption in respect of education cess and S & H cess also, he cannot be allowed to use BED credit for payment of education cess and S & H cess, though this may be permitted under the provision of Rule 3(4) of the Cenvat Credit Rules, 2004 - The orders were set aside – Decided in favour of Revenue.

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• 2013 (9) TMI 344
  CENVAT credit - SSI Exemption - Value Based Exemption under Notification no. 8/2003 - Revenue was of the view that in terms of Rule 11(2) of CENVAT Credit Rules, 2004, a manufacturer who opted for exemption based on value or quantity, the balance of CENVAT credit account would lapse and shall not be allowed to utilize for payment of duty on any excisable goods and he would not be entitled to avail the CENVAT credit under Rule 3 or Rule 11 of CENVAT Credit Rules, 2004 - Whether a job worker entitled to take credit of duty in respect of duty paid inputs used by him in manufacture of goods on job work basis or not - Held that:- Availment of CENVAT Credit of duties paid on such inputs in question was absolutely in order, and in accordance with the Scheme of CENVAT Credit Rules - The appellant was entitled to avail CENVAT Credit. Following STERLITE INDUSTRIES (I) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PUNE [2004 (12) TMI 108 - CESTAT, MUMBAI] - The Scheme of Rule 57C of the erstwhile Central Excise Rules had been similar to the Scheme of Rule 6 of CENVAT Credit Rules now in operation - Under Rule 57F of the erstwhile Rules, removal of duty paid inputs to a job worker for carrying out further operations and processes was permissible and the same scheme of allowing a job worker to produce or process goods using the inputs sent by the principal manufacturer was contained in the CENVAT Credit rules also - The appellants had received duty paid inputs directly and the same had been used in relation to manufacture of the goods on job work basis, but the inputs being duty paid inputs and the same having been received by the appellant directly and having been used in relation to manufacture of goods on job work basis, Rule 6(1) of the CENVAT Rules was not attracted - Since the appellant succeeded on merit, the question of imposition of penalty does not arise – Decided in favour of Assessee.

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• 2013 (9) TMI 343
  Default in Monthly Payment - Penalty under Rule 25 of Central Excise Rules, 2002 - Revenue was of the view that the appellants defaulted in monthly payment of duty in the month of July 2008 to November 2008 beyond 30 days and cleared the goods by utilizing the CENVAT credit and without payment of duty exclusively from the account current during the default period as contravention of provisions of Rule 8(3A) of Central Excise Rules, 2002 - Held that:- Penalty of Rs. 5 lakhs vis-à-vis duty involved of Rs. 8.25 lakhs was harsh and reduction was warranted - It would not be fair to impose penalty to the extent of 60% of duty when the omission was limited to default of payment of duty and the same had been discharged with interest - In fact, CENVAT account had been debited and therefore it cannot be said that there was removal without payment of duty - Relying upon CCE, Meerut v. Kitply Industries Ltd.[ 2010 (2) TMI 221 - ALLAHABAD HIGH COURT] - Penalty under Section 11AC was not imposable in cases where default had occurred because of bona fide mistaken belief - It was only a deemed removal without payment of duty - Penalty of Rs. 50,000 under Rule 25 would meet the ends of justice in the case - while rejecting the appeal otherwise penalty was reduced. Rule 8(3A) provided that in the case of default beyond 30 days, the facilities of monthly payment of duty and utilization of CENVAT Credit during the period of default was withdrawn without any necessity of any specific order in this regard by the Assistant Commissioner or the Dy. Commissioner - It had become the responsibility of the assessee to pay duty consignment-wise from account current and clear the goods - In the event of failure, the goods were to be deemed to have been cleared without payment of duty and the consequences and penalties as provided in the Central Excise Rules were to follow – Decided partly in favour of Assessee.

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