TMI Tax Updates - e-Newsletter
September 12, 2014

Case Laws in this Newsletter:

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

Articles

1. SERVICE TAX AUDIT UNDER RULE 5A OF SERVICE TAX RULES, 1994 BY SERVICE TAX AUTHORITIES – ULTRA VIRES?

   By: DR.MARIAPPAN GOVINDARAJAN

2. PLACE OF REMOVAL: IN CASE OF TARIFF VALUE UNDER SECTION 3 AND VALUATION UNDER SECTION 4(A).

   By: Rishi Chanan

News

1. Cabinet Apprised about the Progress made in Pradhan Mantri Jan-Dhan Yojana (PMJDY); 3.02 Crore Accounts opened till 8th September, 2014; Banks have Collected Deposits worth ₹ 1496.51 Crore; Survey of Unbanked Households also Started and Expected to be Completed by 15th October 2014.

2. RBI Reference Rate for US $

3. Financial support to the National Export Insurance Account for overseas project exports

4. Approval of Phase-V of Unique Identification project

5. Disinvestment of 5 percent paid-up capital in Oil & Natural Gas Corporation Ltd. out of Government of India shareholding

6. Disinvestment of 10 percent paid-up equity capital in Coal India Ltd. out of Government of India shareholding

7. Disinvestment of 11.36 percent paid-up equity capital of NHPC Ltd. out of Government of India shareholding

Circulars / Instructions / Orders

VAT - Delhi

1. 12/2014-15 - dated 11-9-2014

Regarding waiving off of penalty under the Amnesty Scheme.

SEZ

2. INSTRUCTION No. 82 - dated 11-9-2014

Guidelines for nomination as member of SEZ Authority

Highlights / Catch Notes

Income Tax

• Tribunal Finds Assessee in Default for Non-Compliance with TDS; Order Set Aside Due to Lack of Fair Opportunity.

  Case-Laws - HC : Assessee in default - failure to comply with TDS provisions -The Tribunal has proceeded on the assumption that the assessee has been denied a reasonable opportunity by the AO and therefore, the order requires to be set aside - HC
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• Film Production Companies Qualify as Industrial Undertakings u/s 80IB of Income Tax Act, Eligible for Tax Benefits.

  Case-Laws - HC : Nature of assessee – Industrial undertaking or not – the film production unit or Company is an industrial undertaking and therefore section 80IB of the Act can be invoked by it - HC
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• Reassessment Valid if Original Assessment Invalid Due to Late Notice u/s 143(2) of Income Tax Act.

  Case-Laws - AT : Reassessment - it cannot be said that the Assessing Officer has no reason to believe that the income chargeable to tax has escaped assessment once it is held that the assessment u/s 143(3) is not valid because notice u/s 143(2) of the Act was not issued and served in time - AT
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• Loss of Income Compensation Not Taxable Under Cash Basis: Income Recognized Only When Received.

  Case-Laws - AT : Accrual of income - Compensation received for the loss of income – cash basis of accounting - assessee as admitted that he was following the cash system of accounting and hence the amounts in question cannot be taxed as the same was not received - AT
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• Assessees must offset business losses against short-term capital gains; no separate carry forward allowed u/s 71(2).

  Case-Laws - AT : Provisions of section 71(2) cannot be construed to give option to the assessee to carry forward business loss separately without set off of income arising out of short term capital gain. - AT
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• Differences in "Fees for Technical Services" u/s 9 of Income Tax Act vs. Article 13 of Indo-UK Treaty.

  Case-Laws - AT : Fees for technical services remitted to non-resident – TDS - there are significant distinction between the definition as prescribed u/s.9 of IT Act of “fees for technical services“ as compared with the definition prescribed in Article 13 of Indo-UK treaty. - AT
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Customs

• High Court Dismisses Writ Petition on Deemed Export Benefits Due to Statute of Limitations Bar.

  Case-Laws - HC : Deemed Export Benefits (DEB) - The matter in fact is not res integra. - money claim, suit for which has become barred by time / limitation, cannot be allowed in writ jurisdiction. - writ petition dismissed - HC
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• Writ Petition Dismissed for Five-Year Delay, Exceeding Three-Year Limitation Period for Claims Against Government.

  Case-Laws - HC : Condonation of delay in filing writ petition - five years gap - In the normal course of things limitation to file a suit for recovery or to agitate a claim against the Government for refund of any amount wrongfully claimed or paid would be three years. - writ petition dismissed - HC
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• High Court Criticizes Tribunal for Relying on Unfit Judgment in Smuggling Case Without Independent Analysis of Facts and Law.

  Case-Laws - HC : Smuggling of goods - onus to prove - It is unfortunate that a Tribunal which is a specialised body, instead of applying its mind to the facts of this case, to the statutory provisions and the principles evolved for more than four decades, and decide the case has followed judgment which cannot be approved and cannot be treated as a judgment - HC
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Service Tax

• Parallel Colleges Exempt from Service Tax for Courses Leading to Recognized Educational Qualifications.

  Case-Laws - HC : Those institutions or colleges, namely, parallel colleges, who are parties before this Court, who are preparing students to obtain certificates or diploma or degree or any other educational qualifications, recognised by law will not be liable to pay Service Tax - HC
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• Tribunal Can't Hear Appeals on Rebate Disputes Under Finance Act, 1994; Lacks Jurisdiction on Export Service Rebates.

  Case-Laws - AT : Jurisdiction of tribunal to entertain appeal relating to rebate dispute arising under Finance Act, 1994 - claim of rebate on input service used in export of services - Tribunal has no jurisdiction to entertain a revisionary matter - AT
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• Matter Proceeds as Apex Court Denies Stay on Order; Larger Bench Upholds Decision to Avoid Delay.

  Case-Laws - AT : Whether adjudicating authority be directed to keep the matter pending till the Apex Court decides the appeal filed before it - no stay of operation of the order granted by the Apex Court - decision of larger bench - held no - AT
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Central Excise

• Court Denies Refund Claim: No Unjust Enrichment Found Due to Composite Pricing, Duty Not Passed to Consumers.

  Case-Laws - HC : Denial of refund claim - Unjust enrichment - invoice showed composite price - there was no passing over of the duty to the consumers and there was no unjust enrichment. - HC
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VAT

• High Court Confirms VAT on Crane Hire as Right to Use Goods Under Assam VAT Act, 2003.

  Case-Laws - HC : Hiring of the cranes - Assam Value Added Tax Act, 2003 - transfer of right to use the goods for consideration - The transaction clearly involved transaction of right to use - levy of vat confirmed - HC
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Case Laws:

• Income Tax

• 2014 (9) TMI 364
  Assessee in default - failure to comply with TDS provisions - Order u/s 201(1) r.w.s.201(1A) – Principles of natural justice – Held that:- The assessee was served with three notices dated 13-12-2011, 16-12-2011 and 21-12- 2011 claiming amounts mentioned therein and calling upon the assessee to show cause why the assessee should not be treated as an assessee in default u/s 201(1) of the Act - the assessee was also requested to furnish the above details month wise in the format mentioned in the said notice to enable the office to verify the TDS compliance and calculations of interest under Section 201(1A) - the assessee never complained of violation of principles of natural justice, on the contrary the liability was admitted and their difficulties in making the payment was expressed - They wanted to make payments in installments and a part of the amount was also paid - if assessee wanted an opportunity to produce statement, nothing prevented the assessee from producing them along with the appeal or file an application to the FAA requesting them to take note of the same and then frame an order of assessment - The Tribunal has proceeded on the assumption that the assessee has been denied a reasonable opportunity by the AO and therefore, the order requires to be set aside - The approach of the Tribunal is not in accordance with law and it has not borne in mind the distinction between the jurisdiction of the FAA in taxation laws as compared to other jurisdiction - The powers of the FAA are co-extensive with that of the AO - the order of the Tribunal cannot be sustained and accordingly, it is set aside. If an assessee who is required to deduct any sum in accordance with the provisions of the Act does not deduct or does not pay or after so deducting fails to pay the whole or any part of the tax as required by or under the Act, then such person shall be deemed to be an assessee in default in respect of such tax - not only the AO is competent to declare an assessee in default, by virtue of Section 221 which empowers an AO to impose penalty payable when tax is in default, authorizes the Assessing Authority also to impose penalty for failure to comply with Section 200 - order passed u/s 201 of the Act by the Assessing Authority is a valid order and Assessing Authority is the competent person to pass such orders - Assessing Authority shall take note of all these payments and if he is convinced about the said payments, give credit to the payments - If such payment do not discharge the entire amount due by the assessee, then recover the balance in accordance with law – Decided in favour of revenue.

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• 2014 (9) TMI 363
  Maintainability of appeal before CIT(A) - aggrieved person - Imposition of penalty u/s 271(1)(c) - Estimation of fair market value as on 01.04.1981 – Held that:- Following the decision in Sterling Machine Tools vs. Commissioner of Income Tax [1979 (10) TMI 53 - ALLAHABAD High Court] – The figure obtained from the registering authority was communicated - the assessee has given his consent to the cost of the land being Rs. 8,000/- per bigha, as on the relevant date, for the purpose of calculation of capital gains - assessee did not choose to make available any evidence in support of their contentions, which they seem to do now - when an assessment is made on the basis of the consent of the parties, in view of the provision creating the right of appeal, Section 246A in this case, unless there is any grievance for the party as such that the concession was wrongly recorded or that he was coerced into making such concession, which case also the appellants do not have in these cases; the order of the appellate authority, as affirmed by the Tribunal, that the appellants cannot be treated as aggrieved persons is not liable to be interfered with - the appellants have not made out a case for interference with the order of the CIT, as affirmed by the Tribunal. It may be true that penalty was levied in breach of the understanding between the parties - appellants seek to maintain an appeal against an assessment order, which was based on a concession relating to the fact as to the value of the property and, though with the condition that there would be no penalty proceedings, having regard to the penalty proceedings being cancelled, there is no ground for the appellants to maintain these appeals - Decided against assessee.

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• 2014 (9) TMI 362
  Nature of assessee – Industrial undertaking or not – Assessee qualified for deduction or not - Whether a film production unit or a Company is not an industrial undertaking within the meaning of section 80IB – Held that:- If cameraman, editor, sound technicians are engaged by the Assessee and who used their own equipments for filming, processing, sound recording and mixing or machines are hired on contract basis but they do not transfer these equipments to the Assessee – relying upon Commissioner Of Income-Tax Versus DK. Kondke [1991 (3) TMI 82 - BOMBAY High Court] - the film production unit or Company is an industrial undertaking and therefore section 80IB of the Act can be invoked by it – as such no substantial question of law arises for consideration - Decided against revenue.

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• 2014 (9) TMI 361
  Expenses disallowed – Project work in progress should be capitalized or not – Held that:- Method of accounting is one aspect and regardless of the treatment given in the books of accounts, the expenditure, if it is revenue in nature, can be claimed u/s 37 of the Act – relying upon Kedarnath Jute Mfg. Co. V/s Commissioner of Income-Tax 1971 (8) TMI 10 - SUPREME Court] - The core and important aspect which should have been determined by the AO was; whether or not, the expenditure was revenue or capital in nature - This was not the appropriate manner to deal with the contention and issue whether or not the expenditure was wholly or exclusively for purpose of earning of income – AO has not dealt with and examined the aspect but made the addition - even if addition is made in the year, the expenditure will have to be allowed as a deduction in the subsequent years - The income declared in the revised return filed on 30.11.2006 was income and in the revised return loss was declared - The tax effect and the tax involvement would be minimum, and in case we take a holistic view by taking future years in question, there possibly would not be any tax collection shortfall – Decided against revenue.

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• 2014 (9) TMI 360
  Deemed dividend u/s 2(22)(e) – Whether credit balances in the accounts can be construed as "advance" or "loan" by these companies - Held that:- The law- makers wanted to bring to tax monies paid by closely held companies to their principal shareholders, in the guise of loans and advances to avoid payment of tax – relying upon Navneet Lal C. Jhaveri V K.K. Sen [1964 (10) TMI 16 - SUPREME Court] - the provisions of section 2(22)(e) of the Act must be made applicable where dividend disguised as loan is paid by a company - it for a fact that only due to business necessity and expediency, the assessee agreed to collect dues from customers of the company - Sec. 2(22)(e) enacted a deeming fiction whereby the scope and ambit of the word "dividend" has been enlarged to bring within its sweep certain payments made by a company as per the situations enumerated in S.2(22)(e). The Court should ascertain for what purpose the fiction is created and after ascertaining the purpose, the Court has to assume all facts which are incidental to the giving effect to that fiction - Such a deeming fiction would not be given a wider meaning than what it purports to do - Sec. 2(22)(e) has not been enacted to stifle normal business transaction carried out during the course of business - It not obviously bring within its limited purview collection of debts from customers so to ensure the speedy recovery of trade debts - the amount received by the assessee can neither be treated as loan or advance for the purposes of S. 2(22)(e) - A loan is granted for temporary use of money or temporary accommodation - basic features which characteristics, a loan transaction are conspicuous by their absence - the amount cannot be construed as a loan. The addition which was collected by the assessee on behalf of CCPL in pursuance of resolution passed by the Company and deposited in the assessee's bank account for a short period which is a temporary loan and to the extent of amount remitted to the CCPL, cannot be considered as deemed dividend in the hands of the assessee - only that portion of the amount which was unsettled as on 31-03-2009, i.e., the closing day of the Company's account for F.Y. 2008-09, is to be considered as deemed dividend in the hands of the assessee under section 2(22)(e) of the I.T. Act – amount added to the income u/s. 2(22)(e), it was contended by the assessee that there are three accounts in the name of the assessee in the books of CCPL which is a temporary loan and applying the principle, the AO is directed to consider the consolidated Net balance in all the three accounts if the Accounts are in the individual capacity of the assessee, and only that outstanding balance in the books of CCPL if any, should be treated as deemed dividend in the hands of the assessee u/s. 2(22)(e) of the I.T. Act - The Account relating to the firm IRC is to be considered separately if that firm is having substantial interest in CCPL and decide afresh in accordance with law – Decided partly in favour of assessee.

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• 2014 (9) TMI 359
  Nature of transaction - STCG on transaction in shares – Assessee trader in shares or an investor – STCG treated as business income – Held that:- Following the decision in Spectra Shares and Scrips Pvt. Ltd. vs. CIT [2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT] - the closing stock was valued in its books of account consistently at cost and not at cost or market price whichever is lower - all the transactions of purchase and sale were delivery basis except the some instance of Reliance Industries Ltd. - Merely because of large frequency and volume of transactions, a conclusion that an assessee is a trader cannot be drawn - The fact that the assessee is monitoring the stock markets and buying at dips and selling at highs with an intention to make profit from these transactions is not conclusive of the fact that the assessee is a trader because even an investor would not buy or sell blindly and take the risk of suffering losses - assessee changes the shares contained in the investment portfolio so that the capital is preserved - The fact that the assessee is making repetitive purchases and sales of the same shares is a factor in favour of holding that the assessee is an investor - Revenue had accepted that the assessee was an investor whose income is chargeable under the head "capital gains" for a number of years – thus, the assessee is an investor and not a trader –Decided in favour of assessee.

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• 2014 (9) TMI 358
  Expenses disallowed u/s 14A r.w Rule 8D – Fund management fees - Held that:- AO while working out disallowance under rule 8D(2)(i) has taken the total investment irrespective of the fact whether they have yielded income or not during the assessment year under consideration - The reasoning of the AO in this regard is actual earning or receipt of income will not be a condition for disallowance of such expenditure under the provisions of section 14A as it speaks about expenditure in relation to income which does not form part of the total income - even if no income was received, expenditure incurred can be disallowed u/s 14A - investment, which has not resulted in any income cannot be considered for the purpose of disallowance under Rule 8D(2)(i) - while computing disallowance under rule 8D(2)(iii), the average of the total investment of the assessee as appearing in the balance sheet on the first day and last day of the year irrespective of the fact whether it has yielded income or not can be considered for the purpose of disallowance - The use of the words does not or shall not in Rule 8D(2)(iii) connotes that income not only does not form part of total income during the year but it also shall not form part of total income at any time. Had it been the intention of the Rule framing authorities to disallow under rule 8D(2)(i) expenditure relating to total value of investment or income which is not earned during the relevant previous year, then, they would have used the expression 'does not or shall not form part of total income' as appearing in rule 8D(2)(iii) instead of words 'does not form part of total income' - AO cannot disallow expenditure relating to investment which has not yielded any exempt income during the previous year relevant to the AY – thus, the AO is directed to disallow the expenditure relating to investments resulting in income earned/accrued which does not form part of total income of the impugned assessment year – Decided in favour of assessee.

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• 2014 (9) TMI 357
  Reopening of assessment u/s 147/148 – earlier the assessment u/s 143(3) was found not valid due to no proper service of notice u/s 143(2) - Held that:- The assessee contended that the provision of section 150 itself cannot be invoked to given any direction - there is no force in the contention of the assessee because the directions are given by CIT(A) and it is stated by him that this direction is u/s 150 of the Act - Section 150 of the Act is regarding the lifting the scope of limitation and the same was referred to by CIT(A) to make it clear that the AO is getting extended time for reopening and merely reference to section 150 in the order of CIT(A) does not affect the validity of the direction of CIT(A) in his order - for invoking the provisions of section 147, it is sufficient that the AO has reason to believe that the income chargeable to tax has escaped assessment and at this stage, no conclusive finding is required. The AO has made addition in the assessment completed by him u/s 143(3) of the Act, the income is taxable in the hands of the assessee in the present year and therefore, it cannot be said that the Assessing Officer has no reason to believe that the income chargeable to tax has escaped assessment once it is held that the assessment u/s 143(3) is not valid because notice u/s 143(2) of the Act was not issued and served in time - No further finding was required to be given by CIT(A) and whether this income is actually taxable or not will be determined in the assessment to be completed by the Assessing Officer u/s 147 and this question is premature at this stage – Decided against assessee.

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• 2014 (9) TMI 356
  Suppressed sales - Goods sold outside the books of account – CIT(A) set aside the additions made by the AO - Held that:- The ld. CIT(A) ought to have called remand report from the Assessing Officer with regard to the additional evidence or the explanations filed by the assessee before him. He should have afforded an opportunity to the Assessing Officer to conduct necessary enquiry with regard to the information received from the Excise Department for suppressed sales outside the books of account. But the ld. CIT(A) did not afford any opportunity to the Assessing Officer and has deleted the additions on the basis of explanations furnished by the assessee, having observed that the Assessing Officer has not made necessary enquiries before making the additions. - matter remanded back to CIT(A) for fresh decision - Decided in favor of revenue.

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• 2014 (9) TMI 355
  Profits and gains from portfolio management scheme - Dividend income taxed as business income - Whether profit earned on sale of equity share under portfolio management scheme was assessable as capital gains – Held that:- Funds were given by assessee to investment managers, who are managing the investments in shares and mutual funds - The stand of the assessee that shares are held as investments and profit earned thereon is liable to tax under capital gain tax and was not as business profit was accepted by the department in scrutiny assessment for the AY 2006-07 - the assessee sold share after being entered in the demat account of PMS, the profit of which was treated by the AO as business income - assessee is investing in shares in mutual funds through PMS only after selling the shares assessee has withdrawn all the money in the PMS and invested in the bank FD – Following the decision in Radials International Versus Asstt. Commissioner of Income Tax [2014 (5) TMI 18 - DELHI HIGH COURT] - Intention of investors was not to make profit - The terms of the agreement entered into with the portfolio manager indicate that regardless of the level of discretion handed over to the portfolio manager, there is neither any guarantee that the securities invested in will appreciate nor is the portfolio manager responsible to the client for nay loss from the deficiency of value of the securities. The PMS agreement at best, embodies the intention to appoint an agent with limited liability, who will invest on behalf of the investor and nothing more - it would not be possible to evaluate as to whether the transaction was actually in the nature of trade, until the securities are actually resold - in a discretionary PMS, it becomes all the more relevant and necessary to evaluate the intention of the assessee in conjunction with his conduct and other circumstances, since the intention of the assessee cannot be ascertained at the time of depositing the money in the investment, because the actual sale and purchase of securities happens at the hands of the portfolio manager, a mere agent - since the intention of the assessee cannot be ascertained, and the investments are made by the portfolio manager without the knowledge of the assessee/investor in a discretionary PMS, the manner in which the securities have been treated by the assessee can and ought to be evaluated only post the fact of investment, and not at the time of depositing the money – relying upon Commissioner of Income-Tax (Central), Calcutta Versus Associated Industrial Development Co. Pvt. Limited [1971 (9) TMI 3 - SUPREME Court] - whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and it should be in a position to produce evidence from its records as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment. As per the terms of agreement, the assessee has no control over the investment being made by the portfolio investor - The assessee puts his money with the portfolio manager, who makes investment as per the market study of their team of experts - as per the terms, the portfolio manager does not give any guarantee of profit or loss - the percentage to total quantity works out to be 29.55 for less than 90 days, 19.09 for 90-180 days, 16.36 for 181-365 days and 35.00 for more than 365 days - the shares of assessee held under portfolio management scheme was sold after holding for reasonable period – the order of the AO cannot be upheld for treating the profit on sale of portfolio shares under portfolio investment scheme as business income – also , the dividend income so earned is exempt u/s.10(34) of the I.T. Act - Decided in favour of assessee.

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• 2014 (9) TMI 354
  Undisclosed income in block assessment - Whether the amount being consideration received on surrendered of 1400 sq.ft. area from out of 3000 sq.ft. area in the building proposed to be constructed was rightly treated as undisclosed income in the block assessment – Held that:- The assessee has disclosed the amount in its block return of income - Though the assessee is not estoppal from taking a legal stands, the facts remains that the AO cannot be found fault with for accepting the return of income of the assessee – assessee contended that the authorities were in know of the transaction prior to the search and hence the transaction in question cannot be brought tax in the block assessment, does not have any merit for the reason that the assessee filed the regular return of income for the A.Y. 1997-98 on 12.01.1999, which is after the date of search and in this return of income, she did not declare the receipt while declaring this amount in her block return of income – Decided against assessee. Accrual of income - Compensation received for the loss of income – cash basis of accounting - Held that:- The amount was never paid to the assessee and the fact has been recorded in the agreement dated 25.09.2008 – assessee contended that she follows the cash system of amount and the amount was taxable only on its receipt - the assessee has not received this amount or the interest till date - assessee as admitted that he was following the cash system of accounting and hence the amounts in question cannot be taxed as the same was not received - the assessee has never received the amount of Rs. 2.90 crores and as he also could not controvert the claim of the assessee, that she follows the cash system of accounting and also the fact that the assessee had offered to tax the balance consideration of Rs. 8.00 crores in the year 2009-10 for the transfer of the property at 25-A, Akbar Road, New Delhi in the A.Y. 2009-10 - the amount of Rs. 2.90 crores and interest thereon cannot be taxed in the hands of the assessee during the block period - No addition can be made on account of accrued interest thereon - as regards, the amount which pertains to undisclosed interest income on IDBI bonds for the AYs 1997-1998 to 1999-2000, no arguments were advanced and hence the findings of the FAA are confirmed – Decided in favour of assessee.

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• 2014 (9) TMI 353
  Computation of STCG on depreciable assets – addition of Rs. 29,77,989.21 was made by the assessee with regard to unsold property only after the date of sale i.e. after 20/4/2006. - reduction of such addition from STCG - Held that:- The addition shown by the assessee is in respect of unsold property falling in the block of assets - it cannot be an expenditure incurred wholly and exclusively in accordance with the transfer of the asset – it also cannot said to be the actual cost of any asset falling within block of asset acquired during the previous year as it is related to an asset which has not been acquired during the previous year and is a brought forward asset - assessee is not entitled to get deduction while computing short term capital gain as per provisions of section 50 – Decided against assessee. Entitlement of assessee to carry forward the business loss and was also entitled to get assessed capital gain separately without setting off the same against business loss – Held that:- there is no force in the claim made by the assessee. Firstly, sub-section (2) of section 71 does not give any option to the assessee to carry forward business loss separately despite there being income under the head capital gain. Section 71(2) contemplates a situation where in respect of any assessment year, the net result of computation under any head of income , other than "capital gain" is a loss and assessee has income assessable under the head "capital gains", in such situation, such loss may, subject to provision of Chapter VI (section 66 to 80), be set off, for and from assessment year 1992-93, against assessee’s income, if any, assessable for that assessment year under any head of income including the head "capital gains" (whether relating to short term capital gain asset or any other capital asset). Thus, provisions of section 71(2) cannot be construed to give option to the assessee to carry forward business loss separately without set off of income arising out of short term capital gain. Only on the basis of word "may" as appearing in section 71(2), such benefit cannot be granted to the assessee as has been sought by it. The language of the provision is clear. No option has been given to the assessee to carry forward loss under any other head to subsequent year without setting off of the same against short term capital gain. - Decision of Bombay High Court in the case of CIT vs. British Insulated Calender Limited [1993 (1) TMI 43 - BOMBAY High Court] distinguished – Decided against assessee.

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• 2014 (9) TMI 352
  Fees for technical services remitted to non-resident – Applicability of Article 13(c) Indo-UK DTAA – Effect of Explanation to section 9(1)(vii) w.e.f. 1.6.1976 – Held that:- In the case of Diamond Services International (P.) Ltd. v. Union of India [2007 (12) TMI 182 - BOMBAY HIGH COURT] it has been held that the job of grading diamonds in the laboratory and furnishing a grading certificate did not amount to transferring of any technical skill or knowledge to the customer - the grading report by GIA is a statement of fact regarding the characteristics of a diamond - the payment received by GIA is not one for the right to use the experience - if the fruits of the services remained with the service provider then out of the ambits of the term 'make available' but after the fruits of the service rendered remained with the service recipient and the service recipient is able to perform similar activity, for which the services were sought, without the help or recourse of the service rendered then the technology can be said to be transferred or made available to the recipient - there are significant distinction between the definition as prescribed u/s.9 of IT Act of "fees for technical services" as compared with the definition prescribed in Article 13 of Indo-UK treaty. The provisions of DTAA overrides the provisions of IT Act in the matter of ascertainment of taxability under the Income Tax Act – also in Union of India v. Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME Court] – it has been held that there was no obligation for withholding the tax on any person making payment to a non-resident if the payment made to the non-resident is not chargeable under the provisions of IT Act - the issue is limited to the applicability of the provisions of Article 13 of DTAA between India and UK – thus, the fees for technical services was not paid for making available the technical knowledge, experience, know-how to the assessee - the payment made by the assessee to the said resident is out of the ambits of the provisions of Section 195 of IT Act – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (9) TMI 351
  Disallowance u/s 14A r.w. Rule 8D – Held that:- Assessee was found to have earned exempt income by way of dividend on investments made in the mutual funds - The existence of such exempt income prompted the AO to invoke section 14A of the Act while computing the total income of the assessee - invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is neither automatic and nor is dependent merely on the existence of an exempt income in the hands of the assessee – relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is to be understood as being conditional on recording of an objective satisfaction by the AO with regard to the incorrectness of the claim of the assessee in respect of expenditure in relation to the exempt income, having regard to the accounts of the assessee - the parity of reasoning in relation to invoking of rule 8D of the Rules read with section 14A of the Act applies. In the absence of adherence to the requirements of section 14A(2) of the Act, the AO could not have proceeded to invoke rule 8D of the Rules and subject the interest expenditure for disallowance as per clause (ii) of rule 8D of the Rules - the CIT(A) records another finding which is to the effect that the dividend receipt has been directly credited into the bank account of the assessee, thus "leaving no scope for incurring any other expenses for earning exempt income" by the assessee - the indirect expenditure sought to be disallowed by invoking clause (iii) to sub-rule (2) of rule 8D of the Rules has also been faulted by the CIT(A) - the AO was not justified in invoking rule 8D of the Rules in order to compute the disallowance u/s 14A(1) of the Act –Decided against revenue. Income derived from the letting out of premises – Business income or not house property – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that CIT(A) in holding that the income earned by way of license of letting out of premises of 'Cyber City' is liable to be assessed as 'business income' and not under the head 'house property', as held by the AO – Decided against revenue.

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• 2014 (9) TMI 350
  Various expenses disallowed - Travelling expenses, Professional charges, Telephone expenses and other expenses – Held that:- Following the decision in M/s. Graham Firth Steel Products (I) Ltd. [2014 (9) TMI 294 - ITAT MUMBAI] - The assessee company had made bonafide efforts to revive its business which is supported by the fact that the BIFR sanctioned the rehabilitation scheme - the assessee company commenced its activities in subsequent years and has achieved substantial turnover which go to prove that the assessee never intended to windup its activity - it can be said that there were only a ‘temporary’ lull in the business – the order of the CIT(A) is upheld – Decided against revenue. Computation of book profits u/s 115JB – Held that:- For the determination of income u/s. 115JB, no adjustment can be carried out except those specifically required to in the section – relying upon Apollo Tyres Ltd. VS CIT [2002 (5) TMI 5 - SUPREME Court] - while determining the income u/s. 115JB, the computation has to start from the book profit as shown in the P&L account prepared in accordance with the provisions of Part-II and III of Schedule VI of the Companies Act, 1956 and as reduced by the adjustments as specified in the section - the AO is bound to make only such adjustments as has been specified in the said section to arrive at a MAT income – the order of the CIT(A) is upheld – Decided against revenue. Depreciation of goodwill disallowed – Held that:- As decided in assessee’s own case for the for the earlier assessment year, it has been held that the claim of depreciation holding that the assets said to have been put to use as the claim of depreciation allowed in earlier years and there are no different facts during the year under consideration, the depreciation on assets is directed to be allowed – following the decision in Commissioner of Income Tax, Kolkata Versus Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - goodwill is an asset eligible for depreciation - the AO is directed to allow the claim of depreciation on goodwill – Decided in favour of assessee. Treatment of surplus on reorganization/demerger – Held that:- Following the decision in Commissioner of Income Tax. Central-I Versus M/s. Pruthvi Brokers & Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] – merely dealing with such waiver with the assessee in its books of account could not alter the effect of the order of BIFR - No remission or cessation of liability towards interest nor the assessee became entitled to waiver of interest therefore Sec. 41(1) could not be invoked to at a waived amount - under section 41(1) remission can be only by an act of creditor and cessation of liability can come by agreement or by law - the liability was reduced under the scheme of BIFR and the assessee has not enjoyed any actual benefit of remission of liability in the nature of trading - CIT(A) has erred in confirming the findings of the AO – thus, the order of the CIT(A) is set aside and the AO is directed to allow the claim of deduction in respect of the waiver of loan – Decided partly in favour of assessee.

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• 2014 (9) TMI 349
  Bad debts written off u/s 36(1)(vii) – Details not provided by assessee – Held that:- The assessee has not provided addresses of the persons on whom loans have been advanced - But the assessee has filed copy of account since loan had been advanced - Mr. Ashwani Kumar is assessed to tax and PAN has been provided - Audit report and copy of Award is also on record - address of the person has not been provided and the genuineness of the transaction could not be verified unless the persons to whom loan has been advanced and examined or their records are examined by the AO - Therefore, it is not possible for the AO or the CIT(A) to decide the matter – thus, the matter is to be remitted back to the CIT(A) for fresh adjudication – Decided in favuor of assessee. Various expenses disallowed – Vehicle expenses, depreciation on car – travelling expenses – Held that:- These are expenses which have been disallowed by the AO and confirmed by the CIT(A) being personal element involved for which no supporting vouchers have been placed on record before any of the authorities - personal element cannot be denied – there was no infirmity in the order of the CIT(A) who has rightly confirmed disallowances on account of vehicle expenses, depreciation on car and traveling allowance – Decided against assessee.

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• 2014 (9) TMI 348
  Excess consumption of raw material – Held that:- As decided in M/s. Parle Biscuits Pvt. Ltd. Versus Addl. CIT. Cent. Mumbai[2010 (8) TMI 881 - ITAT MUMBAI] - It has been decided that if the formula of 108.190 is to be applied for the CMUs, then it is necessary that adjustments which are allowed in case of own manufacturing units of the assessee should also be allowed in case of the CMUs – thus, the matter is to be remitted back to the AO to allow such adjustments after making necessary verification – Decided in favour of assessee. Transfer pricing adjustment – Various international transactions with AE – Held that:- The transactions involving payment of share application money cannot be treated as international transactions of loans given by the assessee company to its AE merely because there was a delay in allotment of shares – following the decision in Bharti Airtel Limited (Bharti Crescent) Versus Additional Commissioner of Income Tax Range 2, New Delhi [2014 (3) TMI 495 - ITAT DELHI] - the interest rate of LIBOR plus 200 basis point therefore should be taken as arm's length rate of interest to bench-mark the international transactions of the assessee company with its AE involving giving the loans on interest - the AO/TPO is directed to re-compute the TP adjustment to be made in respect of the loan transactions by applying the arm's length rate of interest of LIBOR plus 200 basis point – Decided partly in favour of assessee.

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• 2014 (9) TMI 347
  Expenses incurred on public issue of equity shares disallowed u/s 35D – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been decided that the Tribunal rightly observed from the assessment as well as the impugned order that there is no discussion on this aspect of the matter – thus, the matter is liable to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Confirmation of disallowance u/s 14A r.w. Rule 8D – Indirect expenses - Held that:- In CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - if there are funds available with the assessee, both interest free and overdraft/loans taken, then presumption would arise that investments would be out of the interest free fund generated or available with the assessee - CIT(A) from the balance sheet of the assessee observed that own funds of the assessee were sufficient for making investments yielding exempt income and under such circumstances no disallowance u/s 14A read with rule 8D (2) (ii) was called for - The disallowance under rule 8D(2)(iii) is in fact related to indirect expenditure incurred for earning of exempt income – thus, there was no infirmity in the order of the CIT(A) and the disallowance under 8D(2)(iii) is upheld – Decided against assessee. Computation of income u/s 115JB – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that provisions of Section 115JB were not applicable to the assessee-bank - The provisions of Sec. 115JB do not apply to the assessee and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee – revenue could not bring any contrary fact or case law which may justify departure from the above finding of the Tribunal – Decided in favour of assessee.

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• Customs

• 2014 (9) TMI 380
  Deemed Export Benefits (DEB) - Bill of Entry in the name of the project authority - challenge is also to certain notifications and circulars of the Foreign Trade Policy on the basis of interpretation whereof the DEB was denied to the petitioner - Held that:- The present is clearly a case of the petitioner having indulged in fence sitting. The petitioner clearly chose not to pursue its own claim and was satisfied with the rejection of its request. The petitioner, in our opinion, cannot be permitted to revive such a claim which it had given up and / or which had become stale merely because some other who was not satisfied with a similar rejection of its claim having challenged the same and the said challenge having succeeded. The matter in fact is not res integra. - money claim, suit for which has become barred by time / limitation, cannot be allowed in writ jurisdiction. - writ petition dismissed - decided against the assessee.

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• 2014 (9) TMI 379
  Suspension of CHA licence - order has been passed in the absence of any action which is immediately necessary, as provided in sub-regulation (2) of Regulation 20 - no further action was taken under Regulation 22 of the Regulations - Held that:- unfortunately, though the impugned order was passed on 16.03.2010, the Commissioner of Customs, has not passed final order under Regulation 22 for the past four years. Absolutely, no reason has been offered by way of explanation for this inaction on the part of the Commissioner in the counter. Though the counter was filed on 22.11.2010, no reason has been stated even during the course of argument by the learned counsel for the respondent as to why no order has been made under Regulation 22, so far. The conduct of the Commissioner of Customs in this matter, though the allegations against the petitioner appear to be serious, cannot be appreciated. The learned counsel for the petitioner would submit that the suspension of licence may be revoked and the Commissioner may be directed to hold an enquiry and pass appropriate orders under Regulation 22 of the Regulations. In my considered opinion, that course is not possible and the only course which could be adopted is to issue a direction to the Commissioner to hold appropriate enquiry and pass a final order under sub-regulation (7) of Regulation 22 within a period of six weeks from the date of receipt of a copy of this order. The writ petition is dismissed as not maintainable, however, with a liberty to the petitioner to file appeal before the Tribunal, if so advised - Decided against the CHA.

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• 2014 (9) TMI 378
  Condonation of delay in filing writ petition - Rejection of refund of duty or drawback - fixation of brand rate - period of limitation - Sections 74 or 75 of the Customs Act, 1962 - export of 40 units of ultrasound scanners - Senior Analyst (DBK) referring to the letter of the petitioner dated 20-11-1992 informed the petitioner that its case had been reconsidered and found that the petitioner had not filed any application in the prescribed proforma enclosing the DBK statements and the export documents for fixation of brand rate within the time period prescribed under Rule 6(1) of Drawback Rules, 1971. Accordingly the petitioner was informed that the case had been once again rejected as time-barred. Held that:- In the present case there is no explanation forthcoming from the petitioner for the inordinate delay of about five years in approaching this Court. The only explanation is that the petitioners had been writing letters/representations. - The petitioner as far back as on 15-9-1991 was informed about the rejection of the claim of the petitioner which was then reiterated vide letters dated 4-6-1992 and 24-3-1993. Despite the rejection of the case of the petitioner, then chose to sit over the matter and let considerable time run by. The explanation that the petitioner was making representation is not an explanation which can be considered as a sufficient explanation for this inordinate delay of about five years in approaching this Court. In the normal course of things limitation to file a suit for recovery or to agitate a claim against the Government for refund of any amount wrongfully claimed or paid would be three years. - writ petition dismissed - Decided against the assessee.

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• 2014 (9) TMI 377
  Smuggling of wrist watch movement - onus to prove - the statement of government officials were rejected - Held that:- in the seizure list accused has put his signature. It is also an admitted fact that accused made a statement under Section 108 of Customs Act and in his statement he stated that search was made in presence of the independent witnesses. But in absence of any witnesses or not non-production of the independent witnesses created a doubt in the mind of the court whether the statement made by the accused under Section 108 was taken voluntarily or under pressure. According to the expert the seized wrist watch movements are of Swiss origin but the learned Trial court has failed to find any reason opinion of the expert to that effect. - the expert contended that he received a letter from Mr. Mazumder, Superintendent of Customs with a request to give number embossed in wrist watch movement made in Russia, France and Switzerland. - but said letter was not produced before the Court below - Moreover, none of the witnesses have stated that said letter either destroyed or misplaced or lost during the course of transaction. - So, the entire prosecution case depends upon the ocular version not only of the seizing party but also upon the opinion of the expert. The wrist watch movement bears some marks and it was claimed by the customs officers that those marks are made of foreign country but it was not proved beyond all reasonable doubt seizure witnesses were not produced though the cash were seized but there is no satisfactory explanation whether these seized cash were sale proceed of the smuggled goods. Moreover, no attempt was made on behalf of the customs officers to produce seizure witness to prove this case beyond all reasonable doubt or to prove that the wrist watch movement falls within the purview of prohibitory order. - revenue appeal dismissed - Decided against the revenue.

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• 2014 (9) TMI 376
  Smuggling of goods - onus to prove - notified goods u/s 123 - confiscation and imposition of penalty - 99 sets of Intel Pentium four processors and cooling fan of foreign origin valued at Rs. 7,92,000/- were found in the Mitsubishi Lancer Car which was parked in Hotel - Tribunal observed that, these goods were freely available in the open market. The Revenue has not discharged their burden to prove that the goods were smuggled ones. - Held that:- the cases to which Section 123 is not attracted, the adjudicating authorities and the Courts have to bear in mind whether they are proceeding against the goods or against the person. If they are proceeding against the goods, the standard of proof that is required is far less when compared to a proceedings in which they are proceeding against that person. Similarly, in all cases to which Section 123 is not attracted, the initial burden of proving that the goods are smuggled goods is on the Department. Under no circumstances, it changes, but in discharge of that burden, once the department adduces evidence, the question is whether that burden of proof shifts to the opposite party, if so, at what stage. It is in this context, Section 106 is attracted as the smuggling being a clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. It is here the underlying principle of Section 106 is attracted and once prima facie evidence is adduced to show that the goods seized are smuggled goods, the burden of showing that it is not the smuggled goods shifts to the person from whose possession these goods are seized. There is a presumption of innocence, but it may be successfully encountered by the presumption of guilt arising from the unexplained lawful possession of the property. It is unfortunate that a Tribunal which is a specialised body, instead of applying its mind to the facts of this case, to the statutory provisions and the principles evolved for more than four decades, and decide the case has followed judgment which cannot be approved and cannot be treated as a judgment which is rendered after referring to those judgments to which a reference is made. It is the case of the respondents that the goods were purchased by them in Burma Bazaar, Chennai. Admittedly, they were not in possession of any documents to show that they purchased those goods from Burma Bazaar, Chennai. It is admitted that they are in the business of selling these electronic items which is for the purpose of selling them. These items were brought from Chennai to Bangalore through Mallapuram. If their statement is to be ignored, there is nothing on record to show that these goods were readily available in plenty in the open market. The initial presumption of innocence cannot be extended to the respondents. As the said goods are all having foreign markings, in the absence of any material to show that it is purchased from a registered dealer dealing with those goods and in the light of what they have stated in the statement under Section 108, burden of proving that they were acquired lawfully shifts on the respondents. They have miserably failed to substantiate their case. - The respondents are in the business of sale of smuggled goods and as no duty is paid on these goods, they are liable for confiscation under the Act. - Decided in favor of revenue.

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• Service Tax

• 2014 (9) TMI 387
  Renting of immovable property service - matter is still pending before the hon'ble High Court. - Held that:- Since it is a settled position that proceedings seeking remedy cannot be sought before two forums simultaneously and the matter is still pending before the hon'ble High Court, we dismiss the appeals and stay petitions as not maintainable before us, at this point of time. If the appellant is able to get suitable direction in this regard for restoration of the appeals, they are liberty to move applications for restoration of the appeals. - decided against the assessee.

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• 2014 (9) TMI 386
  Business support services - nature of trade discount of 3% when goods are supplied by the seller to the purchaser directly - they purchase the goods from the village industry units and supply the same to the PSUs. However, the goods are directly consigned by the village industrial units directly to the PSUs so as to minimize the cost of transportation. However, the village industrial units raise the bill on the appellant and the appellant in turn raises the bill on the PSUs. The appellant gets the trade discount of 3% of the values of their purchase. The said discount is for the purpose of meeting the operational costs of the appellant which is a non-profit organization. Held that:- Nevertheless the transaction undertaken by the appellant is one of purchase and sale of goods; in other words it is simple trading. Therefore, the trade margin obtained by the appellant is not in the nature of a commission. Therefore, we are of the view that the activity undertaken by the appellant cannot be classified as business support services attracting levy of service tax. However, as contended by the appellant that they were not able to produce before the adjudicating authority, the documentary evidences (purchase and sales invoices) in support of their claim that the activity undertaken was trading. Therefore, the matter has to go back to the adjudicating authority for fresh consideration. - matter remanded back.

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• 2014 (9) TMI 385
  Constitutional validity of levy of Service Tax treating Parallel Colleges as “commercial training or coaching centres” coming under Section 65(27) of the Finance Act, 1994 - Article 14 of the Constitution of India - Held that:- When we come to the real picture herein, it can be seen that whether it is parallel colleges run by the writ petitioners herein or by the regular colleges are concerned, they are not issuing any certificate or diploma directly and are not awarding any degree, etc. Going by the averments of both sides, these types of institutions are preparing the students to appear for the University examinations in various subjects, like arts, science, commerce, etc., leading to award of degree, diploma, certificate, etc., which are approved by law. To that extent there is no dispute also. The crucial aspect is whether, there is an intelligible differentia in the classification sought to be introduced. These students form a homogeneous class. The coaching centres which come within the first limb of the Section 65(27) alone are subjected to the tax liability. Therefore, since Parallel Colleges, which are involved herein are also conducting classes and preparing the students for appearing the very same University examinations like regular students, which fact is not disputed and has been practically agreed to in the counter affidavit filed by the respondents in the writ petitions also, we find no distinction between these two classes of students. Merely because some of the students who are less fortunate have found themselves in Parallel Colleges, that cannot lead to a situation where they have to bear the burden of Service Tax as rightly found by the learned Single Judge. The distinction provided in the section is not based on any other characteristics like the curriculum, period of study, infrastructure provided by the colleges, the way in which fees are collected in regular colleges and Parallel Colleges, etc. The legislative policy is clear from Section 65(27) itself. Therefore, we will have to find out, the real object of the provision and the impact of the same. Therefore, the plea raised by the learned counsel for the appellants that students undergoing regular course of study are covered by various other factors like curriculum, period of study undergone, University examinations, etc. are relevant cannot be accepted. Those institutions or colleges, namely, parallel colleges, who are parties before this Court, who are preparing students to obtain certificates or diploma or degree or any other educational qualifications, recognised by law will not be liable to pay Service Tax under Sections 65(26) and 65(27) read with Section 65(105)(zzc) of the Act. The Department will be free to find out the credentials of other institutions or coaching centres as to whether they will come within the first limb of Section 65(27). Such individual cases will have to be dealt with accordingly and in the proper legal manner, as the learned Single Judge has made clear that the judgment is not to be treated as declaring the Section unconstitutional insofar as any other category of educational institution or training centre is concerned. We are not making a Universal declaration in respect of all institutions in whatever manner they are being conducted. - Decided against the revenue.

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• 2014 (9) TMI 383
  Extended period of limitation - penalty - Cenvat Credit - Held that:- Like in the case of penalty under Section 78(1) of the Finance Act, 1994, under sub-section (1) of Section 73, the extended period of limitation for recovery of service tax would be available to the Department if the same is occasioned by the reason of fraud, collusion, willful misstatement, suppression of material facts or contravention of any of the statutory provisions with intent to evade payment of tax. When we find that the Tribunal gave sufficient reasons to come to the conclusion that such facts did not arise in the present case, the Tribunal’s direction for deleting the penalty and not permitting the extended period of limitation, was based on materials on record and would not give rise to any question of law. - Decided against the revenue.

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• 2014 (9) TMI 382
  Jurisdiction of tribunal to entertain appeal relating to rebate dispute arising under Finance Act, 1994 - claim of rebate on input service used in export of service - anomaly in charging filing fees by the Registry in respect of appeal involving refund - Held that:- although the amendment to Section 83 of Finance Act has been made w.e.f. 28-5-2012 incorporating Section 35EE therein, that does not confer right on the appellant to say that this incorporation having been a prospective legislation, Tribunal shall entertain Rebate claim appeals. Even before incorporation, rebate claim by virtue of first proviso to Section 35 of Central Excise Act, 1944, was out of Jurisdiction of Tribunal and well settled principle is that procedural law appearing in statute book as on the date of seeking redressal shall apply as declaratory legislation and two appeals filed under aforesaid diary numbers before Tribunal on 10-12-2012 are beyond Jurisdiction of Tribunal to be entertained. - Decided against the assessee. So far as changeability of appeal fee is concerned, we do not express any opinion at this stage although there was request from the Bar to look into this aspect and pass order. Once we hold that the Tribunal has no jurisdiction to entertain a revisionary matter, we are not inclined to decide the appeal fees payable on refund appeal which shall be mere academic and shall be prejudging the issue prematurely. - Decided against the assessee.

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• 2014 (9) TMI 381
  Whether adjudicating authority be directed to keep the matter pending till the Apex Court decides the appeal filed before it - no stay of operation of the order granted by the Apex Court - decision of larger bench - Held that:- it is fair to allow ld. adjudicating authority to exercise his power judiciously in accordance with law without encroaching over his powers. - It may be stated that Tribunal as a creature of statute has no power to bring a statutory proceeding to halt by its whim and statutory authorities should be allowed to act in their jurisdiction in accordance with law. - matter remanded to the Commissioner for a fresh adjudication after taking into account all the evidence produced by the appellant and to pass appropriate order accordingly.

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• Central Excise

• 2014 (9) TMI 369
  Denial of refund claim - Unjust enrichment - invoice showed composite price - Transfer of burden of duty to customer - Whether the Tribunal below committed substantial error of law in setting aside the order passed by the Commissioner of Appeals on the question of unjust enrichment by totally overlooking the fact that the assessee’s invoice showed composite price, and duty was not indicated separately and sale price before as well after reclassification remained the same - Held that:- finding of the adjudicating authority holding against the petitioner was not justified inasmuch as the same was arrived at by overlooking cogent evidence and material produced by the appellant in support of its contentions that it had not passed on the burden of duty to the buyers of the goods. The invoices evidencing the sale, which were on record, showed that the price charged did not include therein the Central Excise duty component. The assessee also produced certificate from the different buyers of its goods to the effect that the buyers had not recovered the duty for sale of appellant’s finished goods. In addition thereto, the certificate issued by the Chartered Accountant who had audited the accounts including the accounts for the period from 1-8-1982 to 31-12-1986, it was established that the Central Excise duty from the buyers of the finished goods were no collected, there was no passing over of the duty to the consumers and there was no unjust enrichment. - Decided in favour of assessee.

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• 2014 (9) TMI 368
  Calculation of entitlement of DTA sale - 100% EOU - Exim Policy - whether deemed export is equivalent to physical export - held that:- clearance made by one 100% EOU to another 100% EOU, which are deemed exports are to be treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contemplated under the provisions of Rules 5 of the Cenvat Credit Rules, 2004. Following decision of Commissioner of Central Excise, Surat Versus M/s. Anita Synthetics Pvt. Limited [2010 (2) TMI 711 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2014 (9) TMI 367
  Finalization of the provisional assessments - refund claim on LPG cylinders supplied to oil companies - assesses have paid differential duty on cylinders consequent upon enhancement of price after clearance - Whether on facts and in the circumstances of the case, the 2nd respondent is right in upholding the order of the Appellate Authority, which ordered finalisation of provisional assessment under Rule 9B of Central Excise Rules, 1944 and also pursuing refund claim thereafter, as the 1st respondent had not requested for provisional assessment for the relevant period, as envisaged in Section 11B of Central Excise Act, 1944 - Held that:- assessment in the case of the first respondent/assessees was not provisional. In this regard, the assessees’ letter dated March 25, 1999 addressed to the Assistant Commissioner of Central Excise, Chrompet Division acknowledging the receipt of provisional Assessment order for the financial year 1997-98 stated that such provisional assessment has been resorted to for price variation clause contained in the contract received from Oil Corporations and further stated that they have been paying the differential duty whenever required at the time of raising the supplementary invoices and approaching the Range Officer, Palavakkam requesting issuance of 57(E) certificate for differential duty payment. Further the assessee informed that as the price variation is regular to those goods, the provisional assessment need not be resorted to and undertook to pay differential duty in such cases wherever supplementary invoices are raised periodically in future. Assessment in both these cases related to 1997-98 and from the order passed by the Original Authority, it is seen that the final assessment was made in the year 1998 itself. Therefore, the claim for refund is wholly barred by limitation and the benefit of sub-clause (eb) of Explanation 5 to Section 11B of the Act claimed by the assessee was rightly denied by the Original Authority. However, the Tribunal under misconception that the assessments were provisional and taking into consideration that there are earlier decisions of other Tribunals, allowed the appeal filed by the assessee. claim for refund made by the respondents/assessees is barred by limitation - Decided in favour of Revenue.

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• 2014 (9) TMI 366
  CENVAT Credit - Whether the Tribunal is justified in holding that the words “in use of” in Rule 4(2) of the Cenvat Credit Rules, 2002 have to be treated as meaning “is available for use” of the manufacturer and whether the Tribunal ought to have held that for the purpose of taking balance amount of Cenvat credit under Rule 4(2)(b) of the Cenvat Credit Rules, 2002 in the financial year subsequent to the year in which capital goods are received, such goods should not only be in possession but should also be in actual use - Held that:- capital goods were received during the financial year 2002-2003. 50% credit on duty paid on such goods was, therefore, rightly taken by the manufacturer in such year. The manufacturer also thereafter took credit for the remaining 50% on 1-4-2004. The Revenue contends that since the said goods were not put in use for manufacture of final product till 13-8-2004, such credit was taken prematurely. Admittedly the capital goods so received by the respondent continued to be in possession and use on 1-4-2004 and thereafter also. In fact, such capital goods were utilized for the purpose of setting up of the laboratory. It can, therefore, not be stated that the goods were not in possession and use of the manufacturer. The manufacturer puts such goods to use for setting up of the laboratory which ultimately would be used for the purpose of manufacture of the final product. Admittedly, the task of setting up the laboratory was completed on 13-8-2004. Under the circumstances, to our mind, the Tribunal cannot be stated to have misconstrued the Rules so as to allow the Cenvat credit to the respondent on 1-4-2004 itself. - Decided against Revenue.

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• 2014 (9) TMI 365
  Availment of Cenvat credit - Double credit - Whether the Tribunal below committed substantial error of law in allowing Cenvat Credit of actual duty paid on the grey fabrics in terms of Rule 3 of the Cenvat Credit Rules, 2001 and simultaneously permitting the assessee to avail of deemed Modvat Credit on the same fabrics under the provisions of Notification No. 7/2001-C.E. (N.T.), dated March 1, 2001 and 53/2001-C.E. (N.T.), dated June 29, 2001, even though it is restricted in terms of paragraph 4 of these Notifications - Held that:- The assessee appears to be seeking to take Cenvat Credit under Rule 3 of the Cenvat Credit Rules, 2001 as well as under Rule 11 of said rules on the basis of paragraph 4 above. An attentive reading of explanation to paragraph 4 above makes it clear that the only exception to paragraph 4 is in the case of taking of actual credit under Rule 3 on capital goods. In other words, assessee may take deemed credit as well as actual credit on the capital goods only. When it comes to the inputs, it is only one time credit which is permissible. The assessee may take the benefit of deemed credit, in which case the actual credit benefit would not be available on inputs. Both the facilities cannot be availed together. In the instant case, the assessee had already availed deemed credit, therefore subsequently it was not justified in taking actual credit. It is evident that the assessee took double benefit of Cenvat credit, which was not permissible. The double benefit was obtained in respect of same goods namely unprocessed fabrics. It was taken at two stages. Once the deemed basis was adopted for claiming credit, and in the next stage the actual credit was taken and enjoyed. The Tribunal misdirected itself in reading and construing two Notifications and more particularly paragraphs 4 thereof. The Tribunal committed error in overlooking that the assessee had taken Cenvat Credit of actual duty paid on the grey fabrics in terms of Rule 3 of Cenvat Credit Rules, 2001. In that view on the same fabrics, deemed credit could not have been availed under the provisions of Notification No. 7/2001, dated 1-3-2001 and Notification No. 53/2001, dated 29-6-2001 and that such double benefit was restricted in terms of paragraph 4 of those notifications. Tribunal committed substantial error of law in holding that double credit on the same inputs can be availed of. - Decided in favour of Revenue.

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• CST, VAT & Sales Tax

• 2014 (9) TMI 375
  Condonation of delay - Haryana General Sales Tax Act, 1973 - Section 42(1), 48 - court fee stamps - escalation charges - Whether in the context of providing condonation of delay, the existence of sufficient cause depends upon facts of each case - Held that:- Law of limitation has been enacted which is based on public policy so as to prescribe time limit for availing legal remedy for redressal of the injury caused. The purpose behind enacting law of limitation is not to destroy the rights of the parties but to see that the uncertainty should not prevail for unlimited period. Under Section 5 of the 1963 Act, the courts are empowered to condone the delay where a party approaching the court belatedly shows sufficient cause for not availing the remedy within the prescribed period. The meaning to be assigned to the expression "sufficient cause" occurring in Section 5 of the 1963 Act should be such so as to do substantial justice between the parties. The existence of sufficient cause depends upon facts of each case and no hard and fast rule can be applied in deciding such cases. Whether there is sufficient cause or not depends upon each case and primarily is a question of fact to be considered taking into totality of events which had taken place in a particular case. According to the learned counsel for the petitioner, in July, 2012, the applicant-petitioner requested the counsel to verify the status of the case from where they came to know that the said reference has been returned unanswered on 25.2.2010. Thereafter, immediate steps were taken to file the application but the same was rejected. Thereafter, application for recalling the order dated 25.2.2010 was filed. The said application was also dismissed as withdrawn by this Court vide order dated 15.2.2013. After that, the review application was filed which was barred by 1127 days. Learned counsel further argued that the delay was unintentional and due to the circumstances beyond the control of the petitioner. The reference was returned unanswered by this Court vide order dated 25.2.2010. Thereafter, the application for recalling the said order dated 25.2.2010 was filed which was also dismissed as withdrawn vide order dated 15.2.2013. However, the review application was filed before this Court on 26.4.2013, after a delay of 1127 days. The applicant-petitioner has not furnished any particulars of events that have taken place whereby inordinate delay in filing of review petition has occurred. The applicant-petitioner has vaguely tried to substantiate the plea that there existed sufficient cause for condoning colossal delay of 1127 days in filing the review petition without furnishing sequence of events in detail - Delay not condoned.

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• 2014 (9) TMI 374
  Revision of assessment - non inclusion of the Anti Dumping Duty (ADD) - Revenue proposed to levy tax on the estimated sale value by including an amount equivalent to the ADD paid - Held that:- writ petition is disposed of, by directing the respondent to defer the implementation of the impugned order, dated 06.06.2014 till the disposal of the revision to be filed by the petitioner and the revisional authority, namely, the jurisdictional Joint Commissioner is at liberty to dispose of the said revision as expeditiously as possible in accordance with law - Decided in favour of assessee.

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• 2014 (9) TMI 373
  Vacation/modification of the interim order - Valuation - deduction from works contract value - Tripura Value Added Tax Act, 2004 - Held that:- Rule is based on public policy but the motivating factor is the existence of a parallel jurisdiction in another court. But the apex court has also held in C.B. Gosain Bhan v. State of Orissa [1963 (4) TMI 2 - SUPREME Court], that even when an alternative remedy has been availed of by a party but not pursued that the party could prosecute the proceeding under article 226 for the same relief. This court has also held that when a party has already moved the High Court under article 226 and failed to obtain relief and then moved an application under article 32 before this court for the same relief, normally the court will not entertain the application under article 32. In absence of any prescription or any other charges in the statute the Revenue cannot by way of exercise of the powers as provided under section 87 of the Tripura Value Added Tax Act cannot make any law in the form of "the rule" which stands contrary to what has been provided in the Act. Section 5(2)(c) of the Tripura Value Added Tax Act, 2004 is one of such rule which is entirely unworkable and vague. He has further submitted that in the present writ petition the horizon is much wider for consideration and it is different in nature. For non-disclosure of pendency of the previous writ petition or the interim order passed in connection therewith, it cannot be said there have been suppression of material facts. It cannot be denied that the writ petitioner has suppressed some facts, which were apparently material to the dispute as raised in the present writ petition. Therefore, the interim order dated March 12, 2013, stands modified and the direction that until further order the impugned memorandum dated June 25/30, 2005, the notification dated September 21, 2011, the notification dated November 26, 2011 and the notification dated February 1, 2011, shall remain suspended is hereby vacated. However, that part of the impugned assessment order for the years 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12 whereunder in absence of any books of accounts the value towards the labour service charges and the other like charges have been assessed and deducted from the gross bill as per the amended rule 7A to determine the taxable turnover shall remain suspended till disposal of the writ petition. However, the Revenue shall be at liberty to redraw the demand notice in view of this order and also to proceed with the attachment proceeding in terms of the redrawn assessment order as indicated. - Decided in favour of Revenue.

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• 2014 (9) TMI 372
  Waiver of pre deposit - Whether the condition precedent for pre-deposit of 20 per cent of tax or interest or both in dispute in addition to payment of admitted tax for entertaining an appeal as provided under section 77(4) of the OVAT Act read with proviso to rule 87 of the OVAT Rules is unreasonable, oppressive, violative and ultra vires of article 14 of the Constitution of India - Held that:- Section 77(4) of the OVAT Act provides that no appeal against any order shall be entertained by the appellate authority, unless it is accompanied by satisfactory proof of payment of admitted tax in full and twenty per centum of the tax or interest or both in dispute. it becomes crystal clear that appeal is a statutory remedy and the same is maintainable provided that the statute enacted by a competent Legislature provides for it. Further, there can be no quarrel that the right of appeal cannot be absolute and the Legislature can put conditions for maintaining the same. - provisions of section 77(4) of the OVAT Act requiring deposit of 20 per cent of the tax or interest or both in dispute as a precondition for entertaining an appeal against the order enumerated under section 77(1) of the OVAT Act does not make the right of appeal illusory and such a condition is within the legislative power of the State Legislature and cannot be held to be unreasonable and violative of article 14 of the Constitution. - Decided against the assessee. Imposition of penalty under section 42(5) - penalty equal to the twice of the demand - Held that:- even if further opportunity will be given to the assessee before imposing penalty that will be a futile exercise. Penalty is not independent of the tax assessed. If the tax is assessed, imposition of penalty under section 42(5) is warranted. section 42(5) of the OVAT Act authorizing imposition of penalty equal to twice the amount of tax assessed under section 42(3) or (4) of the OVAT Act is constitutionally valid. It is not arbitrary, unreasonable, oppressive, or hit by article 14 or in any way ultra vires the Constitution of India. - Decided against the assessee. Failure of the authorized officer to submitt audit visit report to the assessing authority within seven days - Held that:- notice issued in form VAT 306 and the accompanying audit visit report reveal that the audit of the business of the petitioner was undertaken by the officers of the audit unit on October 1, 2007 and audit visit report was to be submitted within seven days from October 1, 2007 as contemplated in section 41(4). But the audit visit report was submitted on March 31, 2008, i.e., after six months of the completion of the audit. This is in clear violation of the statutory provision contained in section 41(4) since there is a time-limit prescribed for submission of audit visit report and the same has not been complied with. Therefore, the said audit visit report has no validity. - Decided in favor of assessee. Whether the audit visit report is vitiated on the ground that the same has been submitted by an officer who was neither a part of nor is the head of the team of audit - Held that:- The audit visit report attached to the writ petition under annexure 1 reveals that on October 1, 2007, an investigation audit under rule 41(3) of the OVAT Rules was preferred by the Enforcement Wing of Commercial Taxes, Government of Odisha, simultaneously, at both the factory premises as well as the registered office premises of the company located at Jajpur and Bhubaneswar. While a team of officials led by ACST-Enforcement Range, Berhampur visited the factory premises, the registered office premises was visited by STO(I), Berhampur and ASTOs of Investigation Unit of Bhubaneswar under the supervision of the ACST, Enforcement Range, Balasore. Thus, the ACST, Enforcement Range, Berhampur was incharge of the audit team conducting audit in factory premises. But the audit visit report reveals that the same has been submitted by the S.T.O., Investigation Unit, Bhubaneswar as head of the audit team. Thus, the audit visit report has not been submitted by the officer in-charge of the audit team authorized to conduct the audit in the factory premises as required under section 41(4) of the OVAT Act read with rule 45(3) of the OVAT Rules. Therefore, the said report is vitiated in law. - Decided in favor of assessee. Whether statutory period of 30 days allowed in section 42(2) of the OVAT Act, 2005 has not been extended to the petitioner in form VAT 306 and thereby the audit assessment proceedings are vitiated - Held that:- Section 42(2) provides that where a notice is issued to a dealer under sub-section (1) he shall be allowed time for a period not less than 30 days for production of relevant books of account and documents. In the instant case, notice in form VAT 306, which has been attached to the writ petition as annexure 1 reveals that such notice though was dated April 30, 2008 has been issued vide issue No. 2177 dated May 16, 2008 fixing date of appearance and production of the books of account on June 10, 2008. Thus, the notice in form VAT 306 itself shows that 30 days time as provided under section 42(2) has not been allowed to the petitioner. The petitioner's case is that the notice in form VAT 306 was served in first week of June, 2008 and thus the petitioner barely had 4-5 days to appear and comply with the direction in the notice and thereby the cardinal principle of natural justice is violated. Thus, this is a case of clear violation/infraction of the mandatory provisions of section 42(2) of the OVAT Act. - Decided in favor of assessee. In the fact situation, completion of audit assessment on the basis of AVR which has been submitted in violation of statutory provisions of section 41(4) of the OVAT Act read with rule 45(3) of the OVAT Rules and upon issuance of notice in form VAT 306 in violation of section 42(2) is not sustainable in law. Accordingly, we set aside the impugned assessment order dated October 20, 2008 and the consequent demand notice. Decided partly in favour of assessee.

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• 2014 (9) TMI 371
  Leviability of VAT - Assam Value Added Tax Act, 2003 - transfer of right to use the goods for consideration - whether the transaction covered by the contract in question involves transfer of right to use - Held that:- For determining whether transfer of right to use the goods was involved, there must be goods available for delivery; there should be consensus as to identity of goods; the transferee should have legal right to use the goods, to the exclusion of the transferor - Question whether it was transfer of right to use did not depend on the provisions of the service tax law and thus amendment by the Finance Act, 2008 had no relevance to determine the said question. Plea of indivisibility of the contract also did not make any difference, if the transaction clearly involved transfer of right to use. The terms of the contract have already been analyzed in the Division Bench judgment in Dipak Nath [2009 (11) TMI 834 - GAUHATI HIGH COURT] and present contract is substantially identical. The agreement is for hiring of the cranes. The heading and the recital clearly show that nature of transaction is for the hiring. The hire charges are per day for all days except the off days, though the bill is to be raised monthly. The provisions for maintenance, providing staff for maintenance and operation and taking responsibility for claim of third parties do not affect the nature of the transaction. A perusal of the above terms shows that (a) the contract is for hiring of the cranes for carrying out the operations of the ONGC; (b) the scope of work is mentioned to specify the operation in connection with which the cranes are hired; (c) the work is not to be executed by the contractor but by the ONGC itself; (d) the contractor is to provide cranes on hire in connection with the said work. It appears to have been wrongly assumed that the contractor is to execute the work mentioned in the heading of "scope of work". It is clear from the recital that the scope of work is mentioned as the work for which the cranes were hired; (e) clause 2.1 shows that the cranes are at the disposal of the ONGC and per day hire charges are paid for all days, except maintenance days; (f) services of staff and maintenance are incidental to the hiring of the cranes. (g) it is the ONGC alone which is entitled to exclusively use the cranes and not the assessee. The transaction clearly involved transaction of right to use. - Decided in favor of revenue.

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• 2014 (9) TMI 370
  SSI exemption - Whether the concessional rate of tax confined to the products manufactured by the "SSI units, registered in the State of Kerala" alone, under entry 6 of Schedule II of SRO No. 1091 of 1999, is discriminatory and violative of articles 301, 302 and 304(a) of the Constitution of India - Held that:- stipulation under article 301 of the Constitution of India is not an absolute one, but is subject to the other provisions of Part XIII, i.e., articles 302, 303 and 304 as well. Obviously, article 304 starts with a "nonobstante clause", carving out the exemption thereunder, enabling the State to have a different approach and course to meet the situation by necessary enactments. Section 10 of the KGST Act enables the State to exempt, a class of persons/category. The exemption stands confined only to such industries, who are registered with the Director of Industries and Commerce in the State as aforesaid, and it is with the intent to achieve a definite purpose to promote the social and economic scene and procure more employment opportunities within the State. - the challenge raised by the petitioners, in respect of "entry No. 6" of Schedule II to SRO No. 1091/1999, to the extent the same confines the concession in the rate of tax only for the products manufactured by the small-scale industrial units within the State and having registration with the Directorate of Industries and Commerce of Kerala, stands repelled. - Decided against the assessee. Whether the product "soda maker" manufactured and marketed by the petitioners comes within "entry 116" attracting a tax liability at 12 per cent or whether it comes under the residuary clause under "entry 177", with a lesser tax of eight per cent - Held that:- It is true that the assessment in respect of the assessment years 2000-01, 2001-02 in the case of the petitioner was completed treating "soda maker" under "residuary entry 177", with the rate of tax payable at eight per cent. But later, it came to the notice of the Department that the actual rate of tax payable by the petitioner was 12 per cent as the item "soda maker" very much constituted an item scheduled under "entry 116" of the First Schedule, leading to exhibits P4/P4(a) notices issued by the fast track team, proposing assessment under section 17D of the KGST Act. Going by the items listed under entry No. 116 of the First Schedule to the KGST Act, it is to be noted that the scope of the entry has been much widened, by virtue of the relevant amendments, at different points of time. So also, it is to be noted that the idea and understanding of the petitioner, that the items grouped under entry No. 116 are those, which are primarily connected with "cooking in the kitchen" and hence the term "similar home appliances" cannot take in "soda maker" is only wrong and misconceived. Under entry No. 104 as it existed in 1992-94 and thereafter till 2000, "water filter" was also one of the home appliances as included therein, attracting the tax liability at the prescribed rate, which in fact is in no way connected with cooking in kitchen, nor solely allocable for user in kitchen. In the year 2000 and afterwards, some other additional items were also included under the said entry. The petitioner-company themselves have described their product as "home soda maker" and hence it cannot but be a home appliance. This is more so, when, the "home soda maker" cannot have any application/utility other than the home use, as it is an alien product, so far as any commercial use is concerned. Applying the rule of harmonious interpretation and the principle of "ejusdem generis", the term "similar home appliances" in entry No. 116 of the First Schedule to the KGST Act very much takes in a "home soda maker" as well and it is liable to be treated as a classified item, attracting the tax at the rate as prescribed. The product "soda maker"/"home soda maker" manufactured/marketed/sold by the petitioner is declared as an item grouped under "entry 116" of the First Schedule to the KGST Act - Decided against assessee.

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• Indian Laws

• 2014 (9) TMI 384
  Writ petition for for recovery of money - to enforce contractual obligation - bills against the services provided by the appellant were not cleared and the payments withheld due to some audit objections - period of limitation - Held that:- The said period of three years expired with respect to the first two bills on 26th April, 2002 and for the third bill on 22nd July, 2002. There is nothing to show that the date of payment was agreed to be any other. The writ petition seeking mandamus was filed only on 28th September, 2007. There is nothing to show any acknowledgment of liability within the meaning of Section 18 of the Limitation Act. We have thus wondered whether money claim, suit for which had become barred by time/limitation, can be allowed in writ jurisdiction. The answer obviously is no. - merely because the time barred claim of another has been allowed does not constitute a reason for allowing another time barred claim - Decided against the assessee. Public law remedy under Article 226 of the Constitution of India is not available to seek damages for breach of contract or specific performance of contract unless the contractual dispute has a public law element. - the powers under Article 226 are to be exercised by applying the Constitutional provisions and judicial guidelines and violation, if any of the fundamental rights and the Court would be reluctant to exercise the power of judicial review in rights on the basis of contracts. It was further held that a contract would not become statutory simply because it has been awarded by a statutory body. - writ petition to enforce the contractual claim was not maintainable and more so when the claim was barred by time.

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