TMI Tax Updates - e-Newsletter
September 13, 2014

Case Laws in this Newsletter:

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

Articles

1. Encouragement- Service Exporters- Change in law

   By: Madhukar N Hiregange

News

1. RBI cancels Licence of The Mirzapur Urban Co-operative Bank Ltd., Mirzapur, Uttar Pradesh

2. First Anniversary of GIC Bhutan Re Ltd, the First Reinsurance Company of Bhutan Celebrated at Thimpu; Department of Financial Services,Government of India Runs Two Joint Ventures of Druk PNB JV and GIC Bhutan Re to Improve and Strengthen Our Bilateral Relations with Bhutan and the Levels of Financial Inclusion in the Respective Countries

3. Indirect Tax Revenue (Provisional) Collections increase from ₹ 1,85,881 Crore in April-August 2013 to 1,94,492 Crore during April-August 2014

4. RBI Reference Rate for US $

Notifications

Companies Law

1. F. No. 5/24/2013-CS - dated 8-9-2014 - Co. Law

Appoints Shri U. C. Nahta as Member of the Competition Commission of India for a period of five years

Highlights / Catch Notes

Income Tax

• High Court Grants Exemption u/s 10A for Employment Agent Utilizing Technology in Candidate Assessment Process.

  Case-Laws - HC : Exemption u/s 10A - assessee was rendering services as an employment agent - assessee was using information technology in scanning the data, processing it, conducting online tests for shortlisted candidates, and analysing their results - exemption allowed - HC
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• High Court Confirms Tenancy Rights Held for 14 Years as Long-Term Asset; Gains Classified as Long-Term Capital Gain.

  Case-Laws - HC : Transfer of tenancy right - long term asset or short term asset - the tenancy rights were held for nearly 14 years and consideration received on surrender has been rightly treated as a long term capital gain - HC
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• Court Rules Items Under Rs. 5,000, Like Cylinders, Eligible for 100% Depreciation Without Usage Test Impact.

  Case-Laws - HC : Entitlement for 100% depreciation on value of cylinders purchased – an article whose cost is less than ₹ 5,000/- cannot form part of the block of assets much less the depreciation is subjected to any test as to extent of use - HC
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• Section 69C Covers Both Recorded and Unexplained Expenditures, Requires Satisfactory Explanation from Assessees.

  Case-Laws - HC : Section 69C of the Act would take in its sweep, not only of the expenditure which was reflected in the books of accounts about also the other items of expenditure regarding which no proper explanation is forthcoming from the assessees - HC
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• Validity of Section 143(2) Notice Challenged; AO's Scrutiny Selection Not Independent, Follows Predefined Criteria.

  Case-Laws - AT : Validity of notice u/s 143(2) – it cannot be said that the decision of the AO to select the case for scrutiny in this system is not an independent decision of the AO - AT
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• Compensation for Relinquishing Property Rights Considered Non-Taxable as Loss of Income Source Under Tax Law.

  Case-Laws - AT : Treatment of compensation received – The amount was received because the assessee had given up its right to purchase and/or to operate the property - it is loss of source of income to the assessee - not taxable - AT
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Customs

• CHA License Revocation Overturned: No Proof of Unauthorized Sub-letting Found; Security Deposit Restored.

  Case-Laws - AT : Sub-letting their CHA licence without any authority of law - As all the charges are stands not proved - order revoking the CHA licence No. 11/427 and forfeiture of security deposit set aside with immediate effect - AT
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• High Court Upholds Anti-Dumping Duties on Mulberries Silk Grade IV A to Protect Domestic Industries.

  Case-Laws - HC : Levy of Anti-dumping duties on import of Mulberries Silk Grade IV A - demand confirmed - HC
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Service Tax

• Service Tax Abatement: Include Free Materials in Valuation, Follow Higher Court Rulings, Maintain Judicial Discipline.

  Case-Laws - AT : Industrial or Commercial Construction Services - benefit of abatement @67% - non inclusion of value of free of cost material supplied by the principle - Judicial discipline demands that the Adjudicating Authority should follow the pronouncements made by the higher judicial forums without any reservations - AT
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• Dispute on Tax Classification: Software Maintenance Contracts as "Management, Maintenance or Repair" vs. "IT Services" Pre-May 2008.

  Case-Laws - AT : Management, Maintenance or Repair Service versus ‘Information Technology Services - software usage agreement - annual maintenance contract - period prior to 16/05/2008 - prima facie the activity was taxable - AT
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Central Excise

• Appeal's Validity Challenged: Approval Committee Missing Two Chief Commissioners, Authority Limited to Commissioner-Level Decisions Only.

  Case-Laws - HC : Maintainability of appeal - approval committee did not consist of two Chief Commissioners of Central Excise - The said power is exercised by the Committee of Chief Commissioners only when the order or decision is that of the Commissioner. It does not apply when the order or decision is by an officer/authority subordinate to the Commissioner. - HC
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VAT

• Court Denies Input Tax Credit Due to Traders' Registration Cancellation; Lack of Proof for Goods Purchase Cited.

  Case-Laws - HC : Denial of input tax credit - cancellation of the few traders with retrospective effect - failure to prove the actual purchase of the goods - credit was rightly denied - HC
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• Court Upholds KVAT Act Section 15(2)(xi): Registration Required Even Without Sales Tax Liability.

  Case-Laws - HC : Constitutional Validity of section 15(2)(xi) of the KVAT Act - mandatory requirement to seek registration even if assessee not liable to sales tax - decided against the assessee - HC
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Case Laws:

• Income Tax

• 2014 (9) TMI 422
  Supreme court dismissed the SLP filed by Revenue against the order of High Court [2012 (5) TMI 257 - BOMBAY HIGH COURT] where HC held that there was an error in making an addition u/s 41(1) as there was no remission or cessation of liability during AY 2002-03 - No records have been brought in by the revenue for redemption of shares being sham transaction - also, redemption of preference shares comes u/s 2(47) - non-cumulative redeemable preference shares were not in the nature of bonds or debentures for the purpose of benefit of indexation.

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• 2014 (9) TMI 419
  Indexed cost of improvement disallowed – Computation of LTCG on sale of property – Held that:- In order to ascertain as to whether at the time of sale or transfer of the said property, any improvement to the property was in existence, when the property was purchased by the assessee on 25.11.1981 the property was agricultural land with no structure as admitted - according to the sale deed the property continued to be agricultural land, but however notably find no mention of any bungalow / building being or any details of improvements made thereto as claimed - this was made in regard to complaints and FIR’s lodged with the Police Department by the father of the assessee and the valuation is stated to have been made based on documents and information furnished to the valuers by the owner - assessee has not brought on record any evidence to establish that he had in fact incurred any expenditure on improvement as claimed - the question of allowing any deduction u/s 48(ii) of the Act for indexed cost of improvement as claimed by the assessee is not warranted – the order of the CIT(A) is upheld – Decided against assessee. Restriction of expenses on sale of property – Held that:- The assessee claimed to have incurred amounts aggregating to Rs. 40 lakhs in connection with the sale / transfer of the property - CIT(A) rightly disallowed the payment of Rs. 5 lakhs paid to Sri M.S. Narayan, only on the ground that there was no rationale in making the payment on 12.3.2008, almost six months after the sale of the asset - the 4 payments of Rs. 5 lakhs each made by the assessee to Sri M.S. Narayan, Advocate aggregating to Rs. 20 lakhs are incurred in connection with the sale / transfer of the property and are to be allowed as a deduction u/s 48 of the Act while computing the LTCG on sale of the property - these persons were neither a party to the civil suit nor were connected with the original owners of the land and that merely by making payments by cheque and producing receipts for the same are not sufficient to establish that these expenses were incurred wholly and exclusively for the purpose of transfer of the property - the assessee has failed to adduce any evidence to establish that payments to the 4 persons @ Rs. 5 lakhs each were incurred wholly and exclusively in connection with the transfer of the said property – the order of the CIT(A) is upheld – Decided against assessee. Professional charges paid to CA disallowed – Held that:- CIT(A) rightly was of the view that the expense on payments to chartered accountants is not allowable as a deduction u/s 48 of the Act while computing LTCG as it is clear that the expense is not incurred in connection with the cost of improvement or in connection with the transfer of the said property – Decided against assessee. Claim of exemption on investment made in NHAI Bonds u/s 54EC – Held that:- Following the decision in Aspi Ginwala Versus Assistant Commissioner of Income-tax, Circle-5, Baroda [2012 (4) TMI 195 - ITAT AHMEDABAD] - the assessee is entitled to total deduction u/s 54EC of the Act spread over a period of two financial years @ Rs. 50 lakhs each on investments made in specified instruments within a period of six months from the date of sale of the property. The assessee was unable to invest in Bonds within a period of six months as the issue was not open and did so the moment the same was made open to public and thus the allotment was made after the statutory period of six months – relying upon Ram Agarwal Vs. JCIT [2001 (9) TMI 233 - ITAT BOMBAY-G] - the assessee therein was prevented by sufficient cause from investing within the statutorily permitted period of six months and allowed the assessee exemption under section 54EC of the Act in respect of the said investment - the assessee has made payment for the investment in NHAI which was encashed on 9.6.2008 well within the statutorily permitted period of six months from the date of sale of the property - the date of payment is to be reckoned for calculating the six month period and since here the date of payment/encashment being well within the period of six months, the assessee is entitled to exemption u/s 54EC of the Act even on the second investment of Rs. 50 lakhs made in Bonds issued by NHAI – Decided in favour of assessee.

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• 2014 (9) TMI 398
  Issues not addressed by CIT(A) – Matter pending before CIT(A) - Held that:- The question, whether the difference between the fair market price and the concessional price should or should not be added to the total income of the assessee(s) Society, needs to be re-looked by CIT(A) - There are some of the questions which have not been addressed by the Authorities below in the orders - CIT (A) would be entitled to look into the Accounts and verify the basis for sale of sugar at concessional price on month-to-month basis - the matter is pending before the CIT(A) – thus, the matter is liable to be remitted back to the CIT(A) for fresh consideration – Decided in favour of revenue.

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• 2014 (9) TMI 397
  Unsecured loan from friends and relatives – Loans utilized for business purpose or not – Held that:- The assessee has borrowed funds from his friends and relatives and paid the interest thereupon - The funds were borrowed for the purpose of business but were never utilized for the purpose of business - The funds were lying idle in an almirah - It is not case of assessee that the funds were "Cash in hand", as per the balance-sheet - the funds was not shown as "cash in hand" - No special circumstances were mentioned for not utilizing the funds for business purpose – there is no reason to interfere in the order of the Tribunal – Decided against assessee.

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• 2014 (9) TMI 396
  Exemption u/s 10A - Nature of services rendered by assessee - assessee was rendering services as an employment agent, like any other employment agency, and merely forwarded list of shortlisted candidate to their overseas clients - Whether the Tribunal was right in holding that the services provided by the assessee are covered by Section 10A of the Income Tax Act, 1961 read with Notification bearing No. SO 890(E) dated 26th September, 2000 – Held that:- The assessee was not providing recruitment services, as are normally and generally undertaken by the hiring agents - assessee was using information technology in scanning the data, processing it, conducting online tests for shortlisted candidates, and analysing their results – there was no merit in the submissions made by the Revenue that the activities were not covered under the Notification S.O. 890(E), i.e. human resource service. The Tribunal was rightly of the view that assessee had placed on record a list of employees, details of salary paid, a copy of the application made for registration and on the basis of the details, was satisfied that the respondent-assessee on factual basis had undertaken the activities - the Revenue had not stated that no such or actually no activities were performed or carried out by the respondent-assessee at Bangalore - the total business income as declared was accepted as the business receipts of the respondent-assessee - This included the amount for invoices raised by Bangalore units and by the Gurgaon unit - If the invoices issued by the Bangalore unit is excluded, then this figure cannot be added or included as the income or receipts – Thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (9) TMI 395
  Penalty u/s 271(1)(c) – Concealment of income – Held that:- The Government of India had agreed to certain terms and conditions, including the condition relating to payment of taxes - assessee had given an intelligible and cogent explanation in this regard, which was not considered and examined or even noticed by the Tribunal – the explanation was genuine and correct - in the return of income itself, the assessee had taken care and caution to reveal and state full and material facts - the assessee had specifically disclosed that consultancy fee had been treated as exempt under the Act - the subsequent application dated 20th November, 2006 was pursuant to the legal advice, but earlier the receipt was claimed as exempt in view of the terms and conditions set out in the agreement between the appellant-assessee and the ADB - The assessee had taken due care and caution to mention all relevant facts in the return of income without any attempt to conceal or withhold information or details - No reference was made to Section 10(8A) of the Act in the notes - The Tribunal has also recorded that the application filed on 20th November, 2006 has not been disposed of, which also means that the application had not been rejected - it is not a fit case for imposition of penalty u/s 271(1)(c) of the Act and as the appellant-assessee had been able to explain the reason and cause why the income was claimed as exempt and the reason and cause was bona fide and it cannot be a case of the Revenue that all material facts and particulars were not placed before the AO – Decided in favour of assessee.

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• 2014 (9) TMI 394
  Transfer of tenancy right - long term asset or short term asset - AO treated the same as short term - The logic behind the finding of the Assessing Officer was that the tenancy after the initial period of 3 years by of a written instrument, was month-to-month. Thus, tenancy rights extinguished on the last day of each month and a fresh or new tenancy was created. - tribunal held the same as long term capital asset – Held that:- Assessee came into possession of the premises under a written agreement on 15th March, 1973 - The tenancy period specified was till 14th March, 1976 - assessee continued to use and occupy the premises as a tenant - The rent for the premises was paid and accepted by the landlord - “Long-term asset” has been defined in Section 2(29b) of the Act as an asset which is not a short-term capital asset and the expression “short-term capital asset” has been defined in Section 2(42A) of the Act to mean the capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer - The expression “held by the assessee” means the date from when the assessee acquired the right, got hold of and started enjoying the said asset - the assessee had acquired tenancy rights on 15th March, 1973 and since then they had held the said tenancy rights till the surrender was made on 18th February, 1997 - The transfer of tenancy had taken place on 18th February, 1977 and not before - The period of holding was from 15th March, 1973 till 18th February, 1997 - No third person, who had come into possession of the property during the period and it is not a case of the Revenue that respondent-assessee did not hold the property during the entire period of over 14 years. Relying upon CIT versus Ved Prakash & Sons (HUF) [1993 (7) TMI 45 - PUNJAB AND HARYANA High Court] - conversion of leasehold right into freehold by way of improving the title over the property would not affect the taxability of the gain from property, which is relatable to the period over which the property is held - Thus the asset, i.e. the tenancy rights were held for nearly 14 years and consideration received on surrender has been rightly treated as a long term capital gain – Decided against revenue.

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• 2014 (9) TMI 393
  Trading in shares – Business profit or LTCG / STCG - Held that:- The CIT(A) as well as Tribunal rightly was of the view that the assessee was not engaged in the business of purchase and sale of shares - merely because in certain instances the shares were sold before the completion of a year was no reason to treat the income as arising from them as a business transaction when the assessee had duly shown it as short term capital gains - the intention of the assessee was to make an investment and not to carry on any trade or business in shares or securities – as such no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (9) TMI 392
  Deduction u/s 80HH and 80I – Certificate in Form 10C as required Rule 18-B not submitted - Held that:- The assessee has never furnished the required certificates as well as the particulars even before the FAA or before the Tribunal - The certificates or particulars were not even furnished before the Hon'ble Court - The presumption arises that assessee neither possesses the certificates nor have particulars as required by law - When it is so, then, there is no reason to interfere with the impugned order passed by the Tribunal – Decided against assessee.

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• 2014 (9) TMI 391
  Entitlement for 100% depreciation on value of cylinders purchased – Held that:- If the cost of the item is less than Rs. 5,000/-, it need not even be entered in the block of assets at all and that in turn would keep such article outside the field of taxation – relying upon Commissioner of Income Tax v. Dhall Enterprises and Engineers (P) Ltd [2005 (12) TMI 79 - GUJARAT High Court] - an article whose cost is less than Rs. 5,000/- cannot form part of the block of assets much less the depreciation is subjected to any test as to extent of use – Tribunal rightly was of the view that once an article or item is covered by first proviso, it cannot be subjected to any test including the one stipulated under third proviso – Decided against revenue.

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• 2014 (9) TMI 390
  Block assessment - Books of accounts forming part of return - Whether the amount reflected in Books of Account forming part of returns of a particular AY can constitute the subject matter of the proceedings under Chapter-XIVB of the Income Tax Act – Held that:- Section 158B(b) of the Act defines the term undisclosed income – Following the decision in Commissioner Of Income-Tax Versus Vinod Danchand Ghodawat [2000 (6) TMI 13 - BOMBAY High Court] - only such adverse material, as was unearthed during the search, alone can be the basis for the purpose of block assessment, and not the one, that disclosed in the books of accounts in the earlier assessment years - there is no duty cast on the assessee to draw specific attention to each and every item of the books of accounts and it is for the ITO to draw conclusions, based on the record and material placed before him and elicit clarifications in the event of doubt - the amounts which were disclosed in the books of accounts for the earlier assessment years cannot be treated as undisclosed income, in the block assessment proceedings – Decided in favour of assessee. Deduction on unaccounted cash payments - Whether an assessee is entitled to claim deductions or allowances in respect of amounts which are found as unaccounted cash payments in the course of search under the resultant block assessment – Held that:- The Tribunal was rightly of the view that the payments and receipts and the source of expenditure, have not been explained satisfactorily and it were not reflected in the books of accounts of the assessee - each of the amounts which are added by invoking Section 69C of the Act, did not form part of the books of accounts and that there was no proper explanation or supporting material, as to their source, in spite of opportunity was given to the appellant by the AO - Section 69C of the Act would take in its sweep, not only of the expenditure which was reflected in the books of accounts about also the other items of expenditure regarding which no proper explanation is forthcoming from the assessees, once they were discovered in the course of search and seizure – Decided against assessee.

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• 2014 (9) TMI 389
  Validity of notice u/s 143(2) – Held that:- The contention of the assessee if the case is selected for scrutiny with the aid of computer then there is no application of mind by the AO as required u/s 143(2)(i) of the Act cannot be accepted - the thrust is on voluntary compliance of the tax payer and by ensuring that some deterring measures are taken that too in a taxpayer friendly manner of promoting the assessee to file returns without attaching any paper and then selecting only very small number of cases for scrutiny with the aid of computer and certain generally formed guidelines - it cannot be said that the decision of the AO to select the case for scrutiny in this system is not an independent decision of the AO – Decided against assessee. Deduction u/s 80IA – Interest received from units - Whether the receipts of the assessee can be said to be income derived from this activity of the assessee company – Held that:- For the purpose of allowing deduction u/s 80IA, only those income are to be considered which are derived from the eligible activity and not those income which are in relation to the eligible activity - it includes Processing fees, Misc. receipt, Interest money & premium forfeiture, Use & occupation charges, Rent received, time extension fee, Interest on FDR, sub Letting charges, Interest on sewerage charges, sales of application forms/TEF etc, rent received on Flattered factory etc. - The deduction u/s 80IA has been claimed by the assessee in respect of developing infrastructure facility as per sub section (4) of section 80IA - it cannot be said that these receipts are derived from the activity of the assessee company regarding development of infrastructure facility - At the best, it can be said that these receipts are in relation to this activity of the assessee company but it cannot be accepted that these receipts are derived from this activity of the assessee company regarding development of infrastructure facility - Therefore, these receipts are not eligible for deduction u/s 80IA – the order of the CIT(A) is upheld – Decided against assessee. Prior paid expenses – Water charges paid – Held that:- CIT(A) rightly held that the interest income had accrued to the assessee in earlier years and had also been offered to tax in those years - the assessee has not established that it has written off alleged interest in the ledger account of the respective allottees - no evidence has been brought on record to establish that the interest receivable having been accrued in the earlier year has been written off in the books of account - Regarding the water charges payable to Jal Sansthan, CIT(A) has directed the AO to verify the demand raised by Jal Sansthan and in case it is found that such demand was raised during the year under reference, the amount would stand allowed as deduction – the order of the CIT(A) is upheld – Decided against assessee. Adhoc disallowance u/s 14A r.w. Rule 8D – Held that:- The AY involved is 2007-08 whereas Rule 8D has been made applicable from next year i.e. AY 2008-09 and therefore, Rule 8D is not applicable – CIT(A) rightly relied upon Godrej & Boyce Manufacturing Co. Ltd. vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D could not be invoked by the A.O. for the A.Y. 2007-08, however, there is no embargo on the A.O. in computing the disallowance under Sec. 14A on a reasonable and fair basis - Rs. 1 lac disallowance is reasonable because the disallowance worked out by the AO as per Rule 8D being 0.5% of average investment – Decided against assessee. Entitlement for deduction u/s 36(1)(viii) – Notice for enhancement issued – Held that:- In a paper book submitted by the assessee, only one sample lease deed executed by the assessee in favour of the allottees - The lease deed is dated 27/12/2004 and as per clause (1) of this lease deed, the outstanding premium was to be repaid by the allottee in 10 equal installments along with the interest @15% per annum - even if it is accepted that allowing installment facility to the allottee of lease by the assessee company is giving loans and advances then also, this is not a long term finance as per clause (h) of explanation to section 36(1)(viii) because as per this explanation, long term advance has been defined as any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years - the repayment is to be made in a period less than five years and this cannot be accepted as long term finance - Since only a sample copy of only one lease deed is made available to us, all other lease deeds are similar - the assessee is not eligible for deduction u/s 36(1)(viii) of the Act – Decided against assessee.

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• 2014 (9) TMI 388
  Treatment of compensation received – Opportunity to examine evidences not given - Whether the compensation received by assessee can be treated as capital receipt not liable to tax without giving opportunity to AO to examine the new evidence/claim of the assessee – Held that:- Assessee received Rs. 3.5 crores from Amba High Rise P Ltd as compensation and out of this, an amount of Rs. 75 Lakhs was claimed as receipt for releasing rights to premises and balance amount of Rs. 2.75 crores was claimed as loss of its right to develop the said premises as per agreement with the said Amba High Rise P Ltd. - assessee has no right or title or interest in the property as on the date of agreement, by virtue of which, the compensation was received - The assessee could not have acquired the property because there was no order of court for transfer of property in the name of the assessee - Even the MOU/agreement cannot be used for specific performance of contract to purchase the property - the Tribunal was right in arriving at a conclusion that it was a capital receipt - The amount was received because the assessee had given up its right to purchase and/or to operate the property - it is loss of source of income to the assessee and that right is determined for consideration. Following the decision in Kettlewell Bullen And Company Limited Versus Commissioner Of Income-Tax, Calcutta [1964 (5) TMI 4 - SUPREME Court] - The amount was received because the assessee had given up its right to purchase and/or to operate the property and the amount was held to be capital receipt and not revenue receipt by giving up its right to purchase and/or to operate the property, injury was inflicted on the capital asset of the company thereby resulting in loss of source of income - the assessee has released/discharged qualcomm from the project agreement thereby giving up its right to purchase/acquire the equipment from the party and this act has certainly inflicted an injury to the capital structure of the assessee company resulting in loss of source of income - the entire sum was capital receipt not liable to tax – Decided against revenue.

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• Customs

• 2014 (9) TMI 403
  Sub-letting their CHA licence without any authority of law - proof - held that:- Although in the statement recorded by DRI, the appellant has admitted that they have given the CHA licence to these persons to use on certain consideration but during the course of enquiry these persons were never called for interrogation or for cross-examination. With regard to the statement of the appellant, the persons who were involved in the activity no other evidence is brought on record therefore, the charge is not proved. Without any other evidence on record that the appellant has sub-let their CHA licence to these 27 persons cannot be proved. - the Charge under Regulation 12 stands not proved. With regard to Regulation 13 (b) we find that no documents are available on record that these 27 persons have dealt with in clearance of imported goods in the name of the appellant. - the Charge under Regulation 13(b) also stands not proved. As charges under Regulations 13 (d) and (e) are consequential to Charges under Regulations 12 and 13(b) therefore, the Charges under Regulations 13 (d) and (e) are also stands not proved. As all the charges are stands not proved - order revoking the CHA licence No. 11/427 and forfeiture of security deposit set aside with immediate effect - Decided in favor of CHA.

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• 2014 (9) TMI 402
  Review petition - Waiver of pre-deposit of penalty - applicant-appellant was directed to deposit Rs. 25 crores against duty demand and interest - main contention raised was that waiver of the penalty amount should have been granted. - Deposit of Rs. 25 crores, in terms of order dated 22nd July, 2014, has not been made and as per the office report, even process fee has not been filed, though this is contested by the counsel for the applicant. Now, this application for review/recall has been filed. - Held that:- we are not inclined to allow the present review application and the same is dismissed.

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• 2014 (9) TMI 401
  Challenge to the show cause notice - export of goods - claim of duty drawback - denial of claim on the ground of misdeclaration of goods - proposal to confiscate the goods - competency of officer to issue SCN - Held that:- So far as the competence of the authority to issue a show cause notice is concerned this Court does not find that the same could be thrown at the nascent stage of its issuance. The heading of the show cause notice clearly depicts that the same has been issued by invoking the provisions contained under Section 124 of the Customs Act, 1962. Section 124 postulates that no order confiscating the goods or imposing any penalty or person shall be made unless the owner of the goods or such person is given a notice in writing with the prior approval of the officer of the customs not below the rank of the Assistant Commissioner of Customs informing him on the grounds on which it is proposed to confiscate the goods or imposed a penalty. Though, the other portions of the said section relates to an opportunity of hearing to be given to the person and also making a representation by the importer or the exporter as the case may be. The show cause notice is admittedly issued by the Assistant Commissioner of Customs (Port), Calcutta. This Court does not find that any case is made out which made warrant the invocation the power of judicial review at the show cause stage. The petitioner can take all the plea available to him in the reply to a said show cause notice before the authority and it is expected that the authority would consider the same and shall decide the proceedings in accordance with law. The petitioner is permitted to file reply to the said show cause notice within four weeks from date. - Decided against the assessee.

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• 2014 (9) TMI 400
  Levy of Anti-dumping duties on import of Mulberries Silk Grade IV A - extended period of limitation - demand notice was issued beyond six months from the dated of payment of duty - CESTAT decided in favor of assessee - Held that:- Tribunal has over-looked the facts which has been recorded by the Original Authority as well as the First Appellate Authority. At this stage, it is to be pointed out that the importer/respondent did not dispute the test report of the Central Authority, which held that the product is of 2A grade. Furthermore, in the statement recorded under Section 108 of the Act, the partner of the respondent had accepted that he was aware of the Notification No. 106/2003-Customs, dated 10-7-2003 that the import of Mulberry Silk of 2A grade attracts anti-dumping duty. The Tribunal rendered a finding that it cannot be taken as a intentional mis-declaration since the certificate was given by the supplier that the product is of 4A grade and the same quality of the product was mentioned in all the import documents. Reasons assigned by the Tribunal not acceptable - In fact, the First Appellate Authority pointed out that the information furnished in the certificate given by the supplier itself was found to be false and investigation was initiated. Moreover, when the respondent themselves requested the assessment to be done at the enhance value, even before test report, it clearly shows that the assessee was aware of the aware of the quality/grade of the imported goods and trying to escape the rigour of anti-dumping duty. Extended period of limitation - Held that:- In the case on hand, Section 9A of the Customs Tariff Act, 1975 was not invoked at all and the goods were given an order of clearance after assessment of the goods. Therefore, it is a clear case, where Section 28(3)(a) of the Customs Act, 1962 is invokable and the relevant date for determination of limitation would be the date of clearance of the goods and therefore, the demand is not hit by limitation. In the absence of specific challenge to the certificate issued by the Central Silk Board or to the findings of the Tribunal, on this aspect of the bonafideness of the assessee/importer, the reasoning of the Tribunal is perverse, hence, the order of the Tribunal is liable to be interfered. - Decided in favor of revenue.

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• Service Tax

• 2014 (9) TMI 416
  Jurisdiction of high court - service tax appeal - Held that:- It is clear from the language of Section 35G that no appeal will lie to the High Court if the order passed by the Tribunal relates to among other things rate of duty or to valuation of taxable service. In such cases, appeal will lie under Section 35L before the Supreme Court. In the present case, the impugned order dated 12th March, 2012 passed by the Tribunal among other issues/question decides the question of rate of duty and valuation of taxable services. In view of the said position and as the respondent herein has already filed an appeal, which is pending before the Supreme Court, we think that the appeal filed by the Revenue before the High Court should not be entertained and cannot be entertained. - Appeal dismissed - Decided against the revenue.

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• 2014 (9) TMI 415
  Rectification of order passed by Tribunal - power of the CESTAT to rectify its order - Held that:- Section 35C of the Central Excise Act, 1944, relates to the orders of the Appellate Tribunal, in that, sub-section (1) contemplates that the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against. Such power includes the power to remit the matter back to the authority for fresh adjudication. Sub-section (2) of Section 35C contemplates a power on the Appellate Tribunal to rectify any mistake apparent from the record within a period of six months from the date of the order. The above provision is made applicable by virtue of the provisions of Section 83 of the Finance Act, 1994, relating to service tax. The finding of the CESTAT holding that there is no statutory provision for filing application for rectification in case of service tax appeals is unsustainable and is liable to be set aside. - matter remitted back to tribunal - Decided in favor of assessee.

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• 2014 (9) TMI 414
  Valuation - reduction of the value of material supplied - notification no. 12/2003 dated 20-6-2003 - Held that:- value of goods and material sold by service provider to the recipient of service shall be exempted from Service Tax liable under Section 66 of the Finance Act, 1994 but admittedly the assessing authority while passing impugned order has completely ignored aforesaid notification for the reasons best known to him though he must be well aware of the said notification issued by Central Government. - matter is remanded for fresh decision - Decided in favor of assessee.

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• 2014 (9) TMI 413
  Industrial or Commercial Construction Services - benefit of abatement @67% - Notification No. 15/2004-S.T. dated 10.9.2004 as amended and Notification No. 1/2006-ST dated 01.03.2006. - non inclusion of value of free of cost material supplied by the principle - Held that:- Findings of the Adjudicating Authority are incorrect. The value as declared by the appellant for the services rendered by him without inclusion of the value of the free supply of the material is not disputed and the returns filed are accepted by the Dept. The Larger Bench in the case of M/s Bhayana Builders Pvt Ltd [2013 (9) TMI 294 - CESTAT NEW DELHI] has categorically ruled in favour of the assessee that cost of free supply of goods for rendering the services is not includable in the assessable value for the discharge of Service tax liability. Such a judicial pronouncement of a Larger Bench has been disregarded by the Adjudicating Authority - Judicial discipline demands that the Adjudicating Authority should follow the pronouncements made by the higher judicial forums without any reservations. - demand set aside - decided in favor of assessee.

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• 2014 (9) TMI 412
  Waiver of pre-deposit - Management, Maintenance or Repair Service versus ‘Information Technology Services - software usage agreement - annual maintenance contract - period prior to 16/05/2008 - Held that:- We are prima facie of the view that the services received by the appellant do not fall within the category of ‘Management, Maintenance or Repair service’ and would fall more appropriately under ‘Information Technology Service’ which was brought under the tax net w.e.f 16/05/2008. Even if hypothetically it is assumed that the services fall under ‘management, maintenance or repair service’ prior to 01/03/2008 there was no provision in law enabling Revenue to tax this activity under ‘management, maintenance or repair service’ when the services were rendered electronically or through a computer network. - stay granted.

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• Central Excise

• 2014 (9) TMI 411
  Rectification of mistake - Whether while disposing of the application (ROM) moved by the appellant the mistake pointed out in the application (ROM) was found debatable and requires re-appreciation of entire facts on records but the same was rejected on the ground that the Tribunal had no jurisdiction as the scope of the ROM is too limited. The order of the learned Tribunal dated 8.7.2005 is prima facie erroneous in law - Held that:- On a perusal of the material available on record, it appears that the excess stock were found during the course of raid/surprise visit by the Department Officers. No satisfactory explanation was given. The Tribunal held that appellant had manufactured and clandestinely removed 278.274 metric tonnes of MTIL marked lead ingots to GPCL without payment of duty. So, the demand of duty on the goods was sustained. The goods were removed in contravention of Rules 9(1), 52A, 53, 173G and 173F with obvious intent to evade the payment of duty, both Sections 11AB (for interest on duty) and Section 11AC (for penalty) stood attracted. So, the MTIL are liable to pay the duty with interest chargeable under Section 11AB and 11AC. Further, the Tribunal observed that MTIL marked ingots 278.274 metric tonnes were not manufactured by by GPCL, but raw material produced by them. The appellant could not show that duty of excise had been paid on the goods - Tribunal has already given the substantial relief to the appellant. There is no scope to grant any further relief either in the name of rectification or otherwise. Hence, we uphold the the impugned orders passed by the Tribunal. - Decided against assessee.

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• 2014 (9) TMI 410
  Determination of annual capacity of production (ACP) - manufacture of Ingots and Billets - Notification Nos.30/97-C.E.(N.T.), dated 1.8.1997 and 31/97-C.E.(N.T.), dated 1.8.1997 - Held that:- From the beginning, the assessee had claimed that it has opted for compounded levy scheme under Rule 96ZO(3) of the Rules, by making a declaration under Rule 96ZO(4) of the Rules. There is no dispute on this fact and, therefore, it will not lie in the mouth of the appellant to plead that there was no declaration in terms of Rule 96ZO(4) of the Rules. Tribunal has set aside the first ACP order dated 16.9.1997 for reconsideration by the jurisdictional Commissioner. As there is no first ACP order subsisting, the show cause notice dated 4.5.1998 for the period from September, 1997 to March, 1998 based on the first ACP order dated 16.9.1997 will have to be reworked only after appropriate ACP order is passed for that period. Therefore, in terms of the order of the Tribunal, the jurisdictional Commissioner will have to pass fresh ACP order after hearing the appellant in terms of the order of the Tribunal and thereafter a show cause notice is to be issued for the period September, 1997 to March, 1998. For this period alone, the appeal is partly allowed by way of remand.

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• 2014 (9) TMI 409
  Maintainability of appeal - Whether Customs, Excise and Service Tax Appellate Tribunal was right in dismissing the appeal preferred by the Commissioner of Central Excise, Delhi-1 on account of non-compliance of Section 35B of the Central Excise Act, 1944 as the committee did not consist of two Chief Commissioners of Central Excise - Held that:- Section 35E of the Act deals with specific powers of Chief Commissioner and Commissioners. Sub-section (2) authorises the Commissioners to on their own motion, challenge the order passed by the adjudicating authority subordinate to them before the Commissioner (Appeals). Sub-section (1) to Section 35E of the Act provides, when the Committee of Chief Commissioners can call for and examine records on legality or propriety of any decision or order of the Commissioner and apply to the Tribunal for determination on specified points. The said power is exercised by the Committee of Chief Commissioners only when the order or decision is that of the Commissioner. It does not apply when the order or decision is by an officer/authority subordinate to the Commissioner. Section 35E(2) is not applicable when the order/decision is that of the Commissioner (Appeals). - Decided in favour of Revenue.

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• 2014 (9) TMI 408
  Penalty under Rule 25 of the Central Excise Rules, 2002 - Redemption fine - retracted statement - Held that:- There are cogent and justifiable reasons assigned by the Tribunal in negating the retracted statement offered by proprietor of the assessee-appellant. Even the learned counsel has not been able to point out anything from the record that the alleged labourers were ever produced for examination in support of the retracted statement. The case of the Revenue is well supported that there was excess of 31.331 MTs of finished goods, which were not accounted for in the records maintained by the assessee-appellant. The Tribunal has rightly held that the assessee-appellant was aware of the fact that the raw material of the goods in question was purchased from the gray market and the same was not accounted for. Had there been no detection, the finished goods would have been certainly cleared without payment of duty and without issuance of any invoice. The retraction is nothing but to create a false plea of defence only. Thus, the redemption fine and penalty has been rightly imposed. Decided against assessee.

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• 2014 (9) TMI 407
  Interest leviable on differential duty paid - Whether the provisions for interest on delayed payment contained in Section 11AB are applicable only for duty determined under sub-section (2) of the Section 11A or also for duty which has been paid under Section 11A of the Central Excise Act, 1944 - held that:- assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demand the balance amounts. Seen thus it was clearly a case of short-payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act - as held by the Apex Court in the case of SKF India Limited (2009 (7) TMI 6 - SUPREME COURT). Decided in favour of Revenue.

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• 2014 (9) TMI 406
  Waiver of the pre-condition deposit of duty - Held that:- The foundation of the order, passed by the Tribunal, is laid upon the judgment of the Larger Bench, rendered in the case of Vandana Global Limited (2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)), which does not hold the field because of the subsequent judgment rendered by the Supreme Court. The Tribunal, in subsequent matters, has clearly indicated that the Larger Bench judgment of the Tribunal is no longer a valid law and, therefore, this Court finds that the order impugned cannot be sustained at all. It does not appear from the impugned order whether the judgment of the Supreme Court and the subsequent judgments of the Tribunal were placed before the Tribunal or not. Furthermore, the Tribunal did not record any findings on the merit of the matter. This Court, therefore, feels that justice would be sub-served if the application, seeking waiver of the pre-condition deposit of duty, is considered afresh by the Tribunal - Decided in favour of assessee.

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• 2014 (9) TMI 405
  Waiver of pre-deposit of duty - clandestine removal - Order based on consumption of electricity - absence of corroborating and supportive evidence - Held that:- Several decisions, passed by the Tribunal as well as different High Courts on such issue, were brought to the notice of the Tribunal wherefrom it could be deciphered that consumption of electricity alone cannot be a sole determining factor in absence of any other corroborating and supportive evidence. On perusal of the judgments, rendered on the aforesaid issue and annexed to this writ petition, this Court finds there are divergent opinions on the above issue and, therefore, this Court feels that the matter is required to be heard for the purpose of settling an issue, which is still unsettled - prima facie case has been made out for an interim order - Respondent restrained from dismissing appeal - stay granted - Decided in favour of assessee.

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• 2014 (9) TMI 404
  Valuation - Inclusion of bill discounting charges - whether in the nature of interest - Whether charges to the extent of 1.9 per cent. of the value of the bills paid by the Tata Motors to the bank in terms of an agreement which would be included within the cost of the raw material while determining the excise duty for its payment by the job workers - Held that:- Tribunal should consider the said point and shall record its findings thereupon. At this juncture Mr. Maity, drew the attention of this Court to a Division Bench order which directed the matter to be considered afresh and submits that remitting the matter back to the Tribunal for reconsideration would be contrary to the mandate of the Division Bench. On meaningful reading of the order of the Division Bench this Court finds that on earlier occasion, the writ petition was remanded to the Tribunal for reconsideration solely on the ground that the Tribunal failed to record reasons while dismissing the miscellaneous application seeking reconsideration of the parent order. Since the subsequent order passed on miscellaneous application is dependent upon the parent order, in view of the quashing or setting aside the parent order, this order cannot independently stand and is accordingly set aside - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (9) TMI 421
  Denial of input tax credit - cancellation of the few traders with retrospective effect - failure to prove the actual purchase of the goods from the vendors and as such there was actual moment of the goods at all on which the input tax credit was claimed - Held that:- At the outset, it is required to be noted that the appellant claimed the input tax credit of Rs. 1,69,872/- on the purchase of the goods worth Rs. 42,46,800/- from M/s. Leela Trading company and other three vendors. In support of the above claim that they actually purchase the goods worth Rs. 42,46,800/- from M/s. Leela Trading Company and other three vendors, the appellant relied upon the invoices / bills and their books of profit and loss. However, it is required to be noted that not a single document and / or material was placed on record to show the actual movement of the goods from the vendors to appellant. The appellant miserably failed to prove the actual transaction by leading the cogent evidence and miserably failed to prove that purchase on which input tax credit was claimed, were genuine and / or on which the tax was paid. There are concurrent findings of fact given by all the authorities below that the alleged transaction / purchase worth Rs. 42,46,800/- from M/s. Leela Trading Company and three others, on which, the appellant claimed input tax credit of Rs. 1,69,872/- were not genuine and it was only billing activities for the purpose of claiming input tax credit etc. The aforesaid findings of facts recorded by all the authorities below are on appreciation of evidence and considering the material on record which are neither perverse nor contrary to the evidence on record. Decided against assessee.

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• 2014 (9) TMI 420
  Valuation - works contract - inclusion of value of free supplies - Exemption from tax - earth filling charges - State Government allegedly supplied gravel free of cost to the petitioner - Assessee contended that this portion of the turnover represents the charges for lifting and transporting of gravel to the worksite and that this amount is exempted from levy of sales tax under section 5F of the Andhra Pradesh General Sales Tax Act, 1957 - Held that:- there is no mention of the cost of supply of gravel in the said letter as it does not say that the gravel is being supplied free of cost to the petitioner. No other material is produced before us by the petitioner to prove that the gravel is supplied to it free of cost. Therefore, it is not possible to accept the contention of the petitioner that the gravel was supplied to it free of cost. Assuming that gravel is obtained free of cost by the petitioner from the Department of Jails, it is to be taken that the petitioner acquired the gravel at "zero" cost but the said gravel has to be transported to the place of execution of the contract from the quarry from which it is taken out. In doing so, the petitioner incurred transportation charges as he had to transport the gravel by hiring lorries. These amounts were also collected by the petitioner from the contractee, i.e., the A.P. State Police Housing Corporation. This element of transportation charges becomes part of the value of gravel when it is incorporated in the works as held in Seven Hills Constructions case [2014 (9) TMI 110 - ANDHRA PRADESH HIGH COURT]. The contention of the petitioner that the transportation expenses for transport of gravel come in the category of "other similar expenses relatable to supply of labour and services" in clause (g) of rule 6(2) of the Rules framed under the Act is also not valid because gravel supply charges or transportation charges are not similar to supply of "labour" or "services", although they may be similar to supply of "goods". Transportation charges are not deductible as they are not specifically mentioned in rule 6(2) of the Rules. - Decided against assessee.

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• 2014 (9) TMI 418
  Recovery of dues - Attachment of property - petitioner is an innocent purchaser or not - Notice for eviction of property - Knowledge of creation of charge - Held that:- the warrant of attachment in this case, was not appropriately published in accordance with section 22 of the Punjab Revenue Act, which stipulates that every proclamation shall "be made by beat of drum or other customary method, and by posting of a copy thereof on a conspicuous place in or near the land to which it relates." There is no material on record for the court to reasonably deduce that the warrant was made known to the Sub-Registrar, under the Registration Act, so that a potential purchaser of the suit property was alerted in that regard. Indeed, the two affidavits filed on behalf of the Revenue--the first by the Sub-Registrar, and the second one by the Divisional Commissioner clarify that there is nothing to show that the attachment was made known to that office. Furthermore, even though the respondents urge that the warrant of attachment was pasted on the premises, no date or other particulars are forthcoming. In the absence of these basic requirements, it was not humanly possible for anyone, including the petitioners, to ascertain the Revenue's charge. Therefore, the petitioners were innocent purchasers without notice of any attachment order in respect of the suit property. - Decided in favour of appellant.

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• 2014 (9) TMI 417
  Constitutional Validity of section 15(2)(xi) of the KVAT Act - mandatory requirement to seek registration even if assessee not liable to sales tax - The case of the petitioner is that in a hallmarking unit, there is no sale or delivery of any goods and that therefore, it is not liable to get itself registered under the Act. - Held that:- A reading of the principles laid down by the apex court in the last two judgments where provisions of the Tripura and Assam Acts were upheld by the apex court show that the apex court found that the maintenance of accounts in the prescribed manner and furnishing such information as the Commissioner requires, were for achieving the object of ceiling loopholes of escape from the levy of tax and that the incidental powers under entry 54 entitled the State Legislature to legislate upon these subjects as well. Section 40 of the Act provides that every person registered under the Act, every dealer liable to get himself registered under this Act, etc., shall keep and maintain a true and correct accounts and other such account as may be prescribed in the manner provided in the Act. Similarly section 44 also empowers the provisions of accounts and also confers power of entry, such as rule 58 have been framed under the Act for the effective implementation of these statutory provisions. These provisions are incorporated in the KVAT Act with identical objects and for achieving the very same purposes which are found by the apex court to sustain the provisions of the Tripura and Assam Acts. - Therefore, in view of the principles laid down by the apex court in the aforesaid judgments, the challenge against section 15(2)(xi) has to fail. - Decided against the assessee.

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• Indian Laws

• 2014 (9) TMI 399
  Loss caused due to the short delivery of the goods - suit for recovery from the appellant/first defendant and the second respondent/second defendant - Whether the appellant is liable to make good the loss caused due to the short delivery of goods, as alleged by the first respondent? - Held that:- having regard to the admission made by the first respondent, that the carrier delivered the cargo, entrusted with it, and the shortage of goods occurred, due to theft or pilferage, when the goods were lying in the Madras Port Trust, the appellant cannot be held responsible for the shortage of goods. Hence, the point for consideration is answered in favour of the appellant. The first respondent failed to prove the exact quantity of the cargo sent by the consignor, or, in other words, the correct weight of the cargo sent by the consignor, and having admitted that the entire cargo was discharged and the loss was due to the theft or pilferage at the Madras Port Trust, after the cargo was discharged the appellant cannot be made liable for the loss caused to the first respondent. - Decided in favor of appellant.

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