Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 17, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Disallowance of Depreciation - lease transaction - No depreciation can be allowed to the lessor - it was a case of mere advancing of loan by the assessee to Indo Gulf Fertilizers - There was, in fact, no genuine leasing of boiler, neither operating nor finance - AT
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Capital or Revenue income - Damages received on termination of rental agreement - the exiting tenant was not in a position to use the said property and even the assessee was not in the position to find out any other tenant - The said amount thus was received by the assessee on revenue account - AT
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Exemption u/s 11 - Violation of section 13 - Surplus fund not applied for charitable purpose - accumulation of funds - AO directed to o grant exemption to the assessee under section 11 - AT
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Assessment of other person pursuant to search - Jurisdiction u/s 153C - it is nobody's case that the said documents belong to the petitioner. - It is not even the case that the said three documents are in the handwriting of the petitioner - Consequentially the assessment order passed must be declared as without jurisdiction - AT
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Reassessment u/s 147 - AO could not have independently assessed such other income without assessing the income which escaped assessment as per the reasons recorded and on the basis of which the proceedings u/s 147 were initiated. - AT
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Discontinued business u/s 176 - addition on account of receipt of arrears of professional fees - Discontinuation from legal profession - Not taxable - AT
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Interest u/s 244A(b) - Rectification of error in assessment done - whether interest u/s 244A is to be paid on on self-assessment tax paid ignoring the Explanation section 244A(b) - Held yes - AT
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Capital gain - Sale of property - defunct firm / dissolution of firm - Whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed - Held No - it is taxable as per the actual date of actual sale - AT
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Capital gain - Cost of acquisition - The additional FSI became available to the assessee due to operation of development control regulation which did not involve any cost. - no capital gain could be charged on the ground that no cost of acquisition was involved in the additional FSI - AT
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Adjustment of arm's length price - purchase of Edible Oil - Malaysian Palm Oil Board (MPOB) - reliance on the data / quotation of 'Oil World' - The quotation on is an independent authentic trade quotation which cannot be ignored without any valid reason - AT
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Exemption u/s 10(38) - New shares are purchased deploying funds realized on the sale of such shares. To contend, therefore, of some such shares as being capital assets on the premise that the same are sold beyond one year of their purchase, is, therefore, clearly untenable. - AT
Customs
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Exemption from duty liability – Actual user condition - import of cone type stone crusher - use in construction of roads - the end-use condition relating to the goods stands clearly violated -they were rightly liable to confiscation under the provisions of section 111(o). - AT
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Penalty u/s 112 - any charge of violating the provisions of Customs Act would arise only when somebody files a bill of entry for import of the goods and claims himself to be the importer - AT
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Misdeclaration of goods - import of BIO-ORGANIC FERTILIZER LIQUID - the absence of pesticides has not been shown to constitute a singular ground for holding the imported goods to be prohibited in terms of Section 111(d) or to have been misdeclared in terms of Section 111(m). - AT
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Classification of goods – EPCG Scheme - import of galvanized sheets, nut bolts, angles and frames of GI sheet - The import item cannot be considered as capital goods the question of its coverage under Export Promotion Capital Goods (EPCG) Scheme would not arise at all - AT
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Assessable value - Royalties/licence fees were to be paid to the foreign supplier of the equipments - For application of Rule 9(1)(e) there had to be a finding that although termed as royalty/licence fee, the payment was made or was to be made as a condition prerequisite for the sale of the imported goods and was in fact not royalty/licence fee. - AT
Service Tax
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Commercial or Industrial Construction Service - Land and electricity was supplied free to the appellant. In such a case appellant is not eligible for the benefit of abatement under Notification 15/2004 as amended by 1/2006 dated 01.03.2006 - AT
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Manpower Supply Service - For putting the labourers in contact with the farmers who need the services of labourers they had not received any consideration - prima facie case is in favor of assessee - AT
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Cenvat Credit - Inasmuch as the assesse had reversed the credit attributable to exempted services - they cannot be saddled with the liability to pay amount equal to 8% of the value of the exempted services - AT
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Applicant was a proprietorship firm engaged in Practising Chartered Accountant services – prima facie the services rendered would come within the purview of “Management Consultant Services“ - AT
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Demand of service tax – intermediary services - the intention of the subject, language and object of the show cause notice shall be understood in such manner that the notice seeks to achieve -stay granted partly - AT
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Service tax demand – packaging services section 65(76B) – The activity of packaging undertaken in respect of fertilizer would form an integral part of the manufacturing activity and cannot be viewed as a service activity - AT
Central Excise
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Cancellation of Central Excise Registration - appellant has taken centralised registration for transmission and dispensation of CNG into the vehicles. - The action of the lower authorities in cancelling the registration certificate of these places, AMTS, Acher Sabarmati, AMTS, Paldi and AMTS, Memnagar, seems to erroneous and is not sustainable - AT
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Method of valuation - cost plus - the CAS-4 Certificates of the assesses were faulty which contain gross irregularities - certificate cannot be used as instrument in determination of cost of production whereas it was required to be determined for arriving at the assessable value of the goods - AT
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CENVAT credit - the allegation is that the evidence of physical receipt of that quantity of alumna hydrate is not available in the appellant's record - prima facie allegation is incorrect - stay granted - AT
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Duty Demand of Differential Value - lower authorities were right in including the difference of transit insurance charged and the amount received by the appellant against transit insurance charge in sale price to work out transaction value for the purpose of excise duty. - AT
Case Laws:
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Income Tax
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2013 (9) TMI 491
Deemed Dividend u/s 2(22)(e) - Weather the CIT(A) erred in deleting the addition made by the A. O. on account of deemed dividend uls. 2(22)(e) - Held that:- The amount involved was a pure and simple business transaction-it was neither loan nor advance - The assessee had informed the AO from time to time about the transaction entered by him with KSEPL - In the books of accounts of KSPEL there entry was about flat - We have also considered the agreement - From these papers it can safely be said that transactions in question were business advances - We find that the FAA had dealt the issue about the provisions of Company-Act in detail and there was no legal infirmity in his order - He had taken note of minutes of meeting of KESPL – Following Smt. Tarulata Shyam And Others Versus Commissioner of Income-Tax, West Bengal [1977 (4) TMI 3 - SUPREME Court] - there were four conditions that must be satisfied before section2(22)(e) could be invoked - trade advance which were in the nature of money transacted to give effect to a commercial transaction could not be treated as deemed dividend – Decided against Revenue. Disallowance of Labour Charges - Whether the CIT(A) erred in deleting the addition of made by the A. O. on account of disallowance of part of the labour charges claimed by the assessee and directing to estimate the net profit at the rate of 8% of turnover and make suitable addition - Held that:- The assessee had maintained regular books of accounts and same were audited, that audit report u/s. 44ABwas filed, that the AO had not pointed out any specific defects, that he only stated that the bills were prepared on the last day without pointing out as to how he reached to that conclusion, that the reason for high percentage of labour charges was, that the the assessee had undertaken de-sludging and cleaning of drainage lines which was mainly labour oriented, that the AO could have only rejected the books of accou -nts and estimated 8% of the contract value as income from this business as per the provisions of section 44AD of the Act. As the AR of the assessee did not object to said estimation of 8% profit on the contract value in respect of M/s. Appollo so he directed the to rework the addition. If FAA had tried to restrict the disallowance on percentage method no fault can be found with his decision - No addition can be made by the AO on ad-hoc basis without relying on some documentary or oral evidences-for fastening tax liability to an assessee some kind of material was required proving that he had higher income than shown in the books of accounts - Suspicion, however strong, cannot take place of evidence – Decided against Revenue. Deemed Rent - Whether the CIT(A) erred in deleting the addition made by the A. O. on account of deemed rent in respect of Vishwa Ganga Flat out of the total addition made - Held that:- Vishwa Ganga flat was used for the purpose of providing temporary accommodation to the tenant, that the assessee was in the business of redevelopment of the building, that the AO had summarily rejected the claim of the assessee on the ground that no documentary evidence was filed, that the AO had mentioned that as when and what type of documentary evidence he required from the assessee, that the AO did not prove that that the property was not used for giving accommodation to the tenant by conducting appropriate enquiry - the addition made by the AO was deleted under the head deemed rent in respect of Vishwa Ganga flat. Disallowance on Interest Expenses - Whether the CIT(A) erred in deleting the addition made by the A. O. on account of disallowance of part of interest expenses claimed by the assessee - Held that:- The assessee had claimed interest amount of only Rs. 1. 31lacs whereas the AO mistook the same as Rs. 1, 35, 950/- and made addition in the assessment order, that the assessee had contended before the AO that the borrowals were made in the earlier years and same were used for business of redevelopment, that the AO did not conduct further verification and disallowed the interest on the ground that the assessee had made Investment in fixed assets as seen from the balance-sheet, the AO did not examine the issue in right perspective, that the addition was made on the basis of assumption and suspicion without examining the facts thoroughly, that there were minimum borrowing during the year under consideration, that the funds were used for the business of redevelopment in the earlier year, that same were entitled to deduction while computing the business income - AO was directed to delete the addition made – Decided against Revenue.
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2013 (9) TMI 490
Disallowance of Depreciation - lease transaction - finance lease or operating lease or otherwise - Held that:- The transaction was neither operating lease not financial lease - Therefore, the claim of depreciation cannot be allowed - In the course of arguments when questioned why only six days lease was offered, Ld. Counsel fairly admitted that assessee may be entitled for 50% of the depreciation claim as per the provisions - In case, at any point of time, the findings given by us in this order are to be modified, as the claim before Hon’ble Delhi High Court in liquidation proceedings seems pending, then assessee was entitled for only 50% of the depreciation claim and not full, as the assets were used for less than 180 days during the year - In fact, the usage of asset admittedly by lessor is itself doubtful, but as assessee offered lessee rent to that extent usage issue was not material as per the judicial pronouncements on the issue of ‘use’. the agreement in question cannot be called as a financial lease agreement - it was a simple case of advancing of loan by the assessee to the lease and the so called lease agreement had been attempted to be used as a device to reduce tax liability of assessee - the assessee lessor was not entitled to depreciation - Only the lessee can be treated as owner of the asset in case of a finance lease - It was he who was entitled to claim depreciation as per law - No depreciation can be allowed to the lessor in such a case of a genuine finance lease - it was a case of mere advancing of loan by the assessee to Indo Gulf Fertilizers - There was, in fact, no genuine leasing of boiler, neither operating nor finance - In that view of the matter also no depreciation was admissible to the assessee-lessor. - Decided against the assessee. Validity of Lease Transaction - Whether the lease transaction was treated as non-genuine or finance transaction then lease rentals may not be taken as income for the relevant and subsequent years and directions may be accordingly given – Held that:- The only amount offered was only Rs. 60,000/- in this year stated to be six days lease - Even though assessee accepted 96 lakhs deposit but accounted Rs.84 lacs as lease rental receivable and nine lakhs as advance received in the books - Since the agreement itself was not genuine, we cannot direct the AO to examine the same to determine the principle and interest out of this amount - Since the entire exercise was to claim depreciation at 100%, no such direction can be given in the facts of the case, in other years which were not before us. Assessee had to take necessary steps in relevant years or to face the consequences of its actions. - Decided against the assessee. Interest u/s 220(2) – Whether the Commissioner of Income-tax (A) erred in confirming the order of A.O. levying interest u/s 220(2) without appreciating that demand becomes due only on the making of fresh assessment and not from the original assessment order which was set aside and hence the interest levied u/s 220(2) may be deleted - Held that:- Under the said section, interest at a specified rate is chargeable in case the demand raised on the assessee as per the demand notice was not paid within the time allowed in the notice - The issue raised in this ground was as to when the original assessment had been set aside by Tribunal and fresh assessment had been made by the A.O., the period for levy of interest u/s.220(2) should be reckoned from the date of default as per the original assessment order or as per the fresh assessment order - We find that this issue has already been examined by the CBDT who had clarified the issue vide Circle No.334 Dt.3.4.1982 - the interest can be levied only from the date of default of the demand notice issued in pursuance of the fresh assessment order - The AO was directed to levy interest from the date of re-assessment order only – Decided partly in favour of Assessee.
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2013 (9) TMI 489
Revision u/s 263 - Capital expenditure or Revenue Expenditure - Expenditure registration of trade mark - reasons for disallowance not given - Held that:- it is obligatory on the part of the assessing officer to record reasons in the assessment order. Recording of reason would not only enable the revisional / appellate authorities to discharge their function effectively but also repose confidence in the system - there was an error in the order of the assessing officer inasmuch as that the assessing officer has not recorded his reasons for reaching a conclusion - Following decision of Commissioner of Income-tax vs Sunil Kumar Goel [2005 (1) TMI 34 - PUNJAB AND HARYANA High Court] - Decided against the assessee.
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2013 (9) TMI 488
Disallowance of business expenses - Repairs and maintenance expenses - CIT deleted disallowance - Held that:- when a categorical finding was given by the AO in the assessment order while making the impugned disallowance that the supporting bills and vouchers were not produced by the assessee and the claim made by the assessee of having produced the said vouchers and bills during the course of assessment proceedings was contrary to the finding of the AO, the ld. CIT(A) ought to have given an opportunity to the AO to verify the claim of the assessee in the light of said documentary evidence and this position has been fairly accepted even by the ld. Counsel for the assessee - matter remanded back. Addition on basis of annual information report - Difference in the receipts as per the AIR and the receipts as shown by the assessee - Held that:- assessee has not been able to prove that reconciliation was actually pre-paid and submitted before the AO - assessee thus has failed to reconcile the difference pointed out by the AO on the basis of Annual Information Report - no justifiable reason to interfere with the impugned order of the ld. CIT(A) confirming the addition made by the AO on account of said difference - Decided in against assessee. Unexplained expenditure u/s 69C - Expenditure on marriage - CIT confirmed addition - Held that:- It is not in dispute that the hotel booking for the wedding guests was done in the name of the assessee company and the expenses were incurred on payment made to concerned hotels against the said bookings - if the said expenses on payment made against hotel booking done in the name of the assessee company were incurred by somebody else and not by the assessee as claimed the burden is on the assessee to prove its claim by producing the relevant documentary evidence on record - Since the hotel booking was done in the name of the assessee company, there was a presumption that expenses on payment against said hotel booking were incurred by it and the assessee having failed to rebut the said presumption by bringing any documentary evidence on record - CIT was justified in invoking section 69C - Decided against assessee. Disallowance of business income - CIT marked up the cost by 20% - Held that:- In the earlier years, the AO worked out the addition by applying a net profit ret of 5% while in the year under consideration, he has applied a 20% mark-up on the total cost incurred by the assessee - Therefore addition is deleted - Decided in favour of assessee. Capital or Revenue income - Damages received on termination of rental agreement - Held that:- at the time of hearing in the reply to query raised by the bench, there was no agreement entered into between the parties in writing for termination or cancelation of the live and license agreement. The amount of security deposit in question was actually forgone by the licensee as per the order of the arbitrator - It is manifest from the operative portion of the arbitrator's order reproduced that the property of the assessee was sealed by the committee of the Hon'ble Supreme Court as a result of which the exiting tenant was not in a position to use the said property and even the assessee was not in the position to find out any other tenant - The said amount thus was received by the assessee on revenue account and not on capital account which constituted business income of the assessee as the rental income received from the property earlier was offered to tax as business income by the assessee itself - Decided against Assessee.
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2013 (9) TMI 487
Exemption u/s 11 - Violation of section 13 - Surplus fund not applied for charitable purpose - accumulation of funds - Held that:- CIT(A) was not justified in sitting in Judgment over the order passed by the DIT (Exemption) in condoning the delay and approving the accumulation and setting apart of the surplus fund by the assessee as per section 11 (2) of the Act. From para 7.2 of the CIT(A)'s order, it is very much clear that the Assessing Officer, in his remand report, has also very clearly submitted that after condonation of delay in accepting revised Form No. 10, the assessee is eligible for deduction under section 11 of the Act. That being the case, the CIT(A) was not justified in denying exemption under section 11 of the Act. Denial of exemption on the ground that persons specified u/s 13 are benefited - Held that:- Section 13(2)(h) of the Act provides that the income or the property of the trust be deemed to have been used or applied for the benefit of a person referred to in sub-section (3), if any funds of the trust or institution are continue to remain invested during the previous year in any concern in which such person as referred to in sub-section (3) has a substantial interest. The person referred to in sub-section (3) are the Author of the Trust or founder of the Institution, any person who has made a substantial contribution to the trust or institution where his contribution up to the end of the relevant previous year exceeds ₹ 50,000/-, any trustee of the trust or manager of the institution any relief of such other founder person, Member, Trustee or Manager any concern in which any of the persons referred to hereinabove has a substantial interest - The person who has shareholding in Matrix Laboratories of only 17.09% which cannot be considered as substantial for the purpose of section 13(2)(h) - Therefore, exemption to the assessee under section 11 is granted - Decided in favour of assessee. AO directed to o grant exemption to the assessee under section 11 of the Act. - Decided in favor of assessee.
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2013 (9) TMI 486
Assessment of other person pursuant to search - Jurisdiction u/s 153C - Conditions prescribed u/s 153C - Held that:- condition precedent for assumption of jurisdiction u/s 153C is, the AO must be satisfied that the seized materials belongs to such other person - Undisputedly seized document on the basis of which proceeding u/s 153C is initiated against the assessee is a loose sheet - Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisfied, recourse cannot be had to the provisions of section 153C of the Act - it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner inasmuch as his name is reflected in the list under the heading Samutkarsh Members Details and certain details are given under different columns against the name of the petitioner along with other members, however, it is nobody's case that the said documents belong to the petitioner. It is not even the case of the revenue that the said three documents are in the handwriting of the petitioner - Consequentially the assessment order passed must be declared as without jurisdiction - Following decision of P. Srinivas Naik Vs. ACIT [2007 (11) TMI 443 - ITAT BANGALORE] - Decided in favour of assessee.
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2013 (9) TMI 485
Rejection of comparables - Adjustment in arm's length price - Held that:- main reason for excluding Wipro BPO is on the basis of higher turnover claimed by that BPO when compared to the assessee in that case - But assessee's turnover is not small - The company which was once selected as comparable cannot be rejected in other similar circumstances - Decided in favour of assessee. Deduction under S.10A - Foreign exchange gain - Held that:- since foreign exchange gain is on account of fluctuations of the foreign exchange received for the services rendered by the assessee, this has to be treated as business income and it has to be considered as profits of the business for computing the deduction under S.10A of the Act - Decided in favour of assessee. Data link charges considered as attributable to delivery of computer software outside India should be excluded from export turnover as well as total turnover, while computing the deduction under S.10A. Further, out of the data link charges spent by the assessee, how much is for intra and inter office services and how much is for delivery of services has not been examined by the Assessing Officer - In case any amounts are to be excluded as attributable to delivery of services outside India, the same should be excluded both from export and total turnover, while computing deduction under S.10A. Non-consideration of profits of overseas branch of the assessee as arising from export of ITES. - For allowing the deduction under S.10A/10B, other conditions are required to be satisfied, including the questions (a) whether the branch is rendering any BPO services; (b) whether the functions are similar; and (c) whether the incomes can be considered as income of STPI eligible for deduction. - matter remanded back for reconsideration.
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2013 (9) TMI 484
Reassessment u/s 147 - Assessment of any other income other than income on which assessment was reopened - Held that:- while completing the assessments for the previous years u/s 143(3) read with section 147 of the Act, the Assessing Officer has not disturbed the exemption claimed u/s 10B of the Act which was allowed in the original assessment - Assessing Officer disallowed the claim of set off of unabsorbed depreciation relating to assessment years 1995-96 and 1996-97 against the business income declared for the aforesaid assessment years. Thus, it is very much clear in the reassessment proceedings the Assessing Officer has made assessment of income other than the income which was subject matter for reopening as per the reasons recorded while initiating proceedings u/s 147 of the Act - reasons recorded for reopening the assessment has no nexus with the income ultimately assessed u/s 147 of the Act. The Assessing Officer without assessing the escaped income as per the reasons recorded has considered some other income which was never the subject matter of reopening as per the reasons recorded - Following decision of M/s Swarnadhara IJMII Integrated Township Development Company Versus DCIT, Hyderabad [2013 (6) TMI 624 - ITAT HYDERABAD] - Decided against Revenue. Assessing Officer is empowered to assess any other escaped income which comes to his notice in course of the reassessment proceedings along with escaped income which was the subject matter of reopening as per the reasons recorded therein. Without assessing the income as per the reasons recorded, the Assessing Officer cannot assess any other income which was not the subject matter of reopening. Therefore, in the facts of the present case, the Assessing Officer could not have independently assessed such other income without assessing the income which escaped assessment as per the reasons recorded and on the basis of which the proceedings u/s 147 were initiated.
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2013 (9) TMI 483
Penalty u/s 271(1)(c) - Unexplained cash credit - Non speaking order - Held that:- ld. Commissioner of Income Tax(A) has not passed a speaking order on various issues raised in the appeal before him, we consider it fair and appropriate to set aside the order of Commissioner of Income Tax(A) and restore the matter to his file for deciding the appeal afresh in accordance with law after allowing sufficient opportunity to both the parties. Needless to say that while re-deciding the appeal, the Commissioner of Income Tax(A) shall pass a speaking order keeping in mind and addressing the legal contentions of the assessee and reply of the revenue to the same as mentioned hereinabove as per mandate of provisions of section 250(6) of the Act. - matter remanded back.
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2013 (9) TMI 482
Taxability of amount received after closure of business / profession - Discontinued business u/s 176 - addition on account of receipt of arrears of professional fees - Discontinuation from legal profession - CIT deleted disallowance - whether the CIT (A) has rightly allowed the claim of the assessee for exemption from tax, the receipt of arrears of his professional fees, such arrears having been received by the assessee after his elevation as High Court Judge - Held that:- before his elevation as a Judge, assessee was carrying on legal profession as an advocate, arrears of professional receipts received after discontinuation of legal profession were not assessable in his hands after he has discontinued his legal profession. Even in spite of introduction of Section 176 (4) in the Act, the receipts in question cannot be treated as the assessee's income falling under the head "Profits and Gains of Business, Profession or Vocation", even though they were, being the fruits of the assessee's professional activities, the profits and gains of a profession, under the very same head of "Profits and Gains of Business, Profession or Vocation - It is due to the absence of any legislative provision that these receipts cannot be treated as business income falling under the head "Profits and Gains of Business, Profession or Vocation" carried on by the assessee during the relevant year. They cannot be included in the total income of the assessee, even though the amount was received by the assessee before the discontinuance of his profession due to his elevation as High Court Judge - Following decision of Commissioner of Income Tax v. Justice R.M. Datta [1989 (7) TMI 59 - CALCUTTA High Court] and Nalinikant Ambalal Mody. Versus S. A. L. Narayan Row, Commissioner Of Income-Tax, Bombay City I. [1966 (5) TMI 13 - SUPREME Court] - Decided against Revenue. Disallowance of expenses - Expenditure on printing and stationery, conveyance, telephone and accounting, etc. - Held that:- since the gross receipts are not liable to tax, the expenditure incurred for recovery of outstanding fees and for maintaining books of account cannot be disallowed and no such disallowance was called for - Decided against Revenue.
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2013 (9) TMI 481
Disallowance of expenditure - Provision for Expenditure in regard to trade fair and exhibition in Singapore - CIT upheld disallowance - Held that:- The assessee has made provision for the expenditure with regard to the sponsorship of its major distributors and customers for participating in trade fair and exhibition in Singapore. This provision was made on the basis of estimated expenditure to be incurred on such trade fair and expenditure. This trade fair and exhibition in Singapore was actually held during the period relevant for assessment year 2005-06 for which the bills and vouchers have been produced - such a provision cannot be allowed in this year and if at all it is to be allowed, the same can be allowed only in the assessment year 2005-06, wherein such expenditure has been incurred - Decided against assessee. Disallowance of office expenditure - Invoices not filed - Held that:- Bill for partial amount is is dated 2nd April 2003 and was received in this year for the services of security guards though pertaining to the month of March 2003. In such cases, expenditure relating to rendering of services can be allowed in the year when bill is received - But the expenditure incurred on tea table cannot be allowed because no details or invoice could be filed before any of the authorities and, therefore, the same cannot be allowed - Decided partly in favour of assessee. Disallowance of depreciation - Held that:- assets on which the depreciation has been claimed in this year are forming part of block of assets and the written down value on such assets is coming from the earlier years. On such assets, depreciation has been allowed by the Department in the assessment year 2000-01 and 2002- 03 and also in the subsequent assessment years. Once the depreciation has been allowed on "Block of Assets", the same cannot be disallowed in this year on the written down value - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - Fees for technical service - Held that:- assessee's case has been that the nature of said payment falls within Article-7 of Indo-Malaysian DTAA as Insight Asian Pacific to whom payment was made was doing business and it was its business income and, therefore, in view of the Article 7(1), the same cannot be held to be taxable in India, as it had no P.E. Further, under the Indo Malaysian DTAA, there is no clause of "fee for technical service", thus, there was no reason to deduct TDS on such payment. With regard to the reimbursement of expenses, it is also not clear as to what was the nature of payment and what was the services rendered to the assessee company for which the payment was made by the A.E. and reimbursement of such expenses was made by the assessee. Even if the debit note has been issued against the credit, then also the nature of expenditure has to be ascertained. Accordingly, this issue is also restored to the file of the Assessing Officer for denovo adjudication. However, if it is found that the payment made to the A.E. is only in the nature of reimbursement of expenditure, then surely there cannot be any liability the assessee to deduct the TDS on such payments - Decided in favour of assessee. Disallowance of sample demonstration expenses - Held that:- assessee was unable to produce any documentary evidence or proper explanation about the sample distribution expenses. There has to be some iota of evidence or material to show that such an expenditure was for the purpose of business and these are the requirement of carrying out the business activity. If it is distribution of samples, the same should have been taken into account in stock account. If it is a direct expenditure, then nature of expenditure can be verified from relevant vouchers or placed any details on record - Decided against assessee. Adjustment of Arm's Length Price - Purchase price of international transaction - Held that:- Before the TPO, the assessee also did not justify as to how the bench marking of its transactions has been carried out except for stating that the price on which plates have been purchased / imported from the A.Es is based on their price list worldwide. Thereafter, before the TPO, the assessee took a different plea that CUP method should be followed based on certain data on which third parties have been importing similar kind of plates. This has been rejected by the TPO on the ground that the assessee could not show as to whether similar kind of plates were imported by third party as the Kodak will sell its plates only to its A.E. and not to the third party - Ultimately, he has bench marked the gross profit margin of the assessee on sales of various other segments which was at 28.56% and thereby made the adjustment in trading segment of plates - entire issue needs to be restored back to the file of the TPO for denovo adjudication - The assessee can file before the TPO all the additional evidences which have been filed before us to justify that unrelated parties / third parties were also procuring similar products by and large on the same price range. Secondly, all the relevant details which are required for adjudication of this issue can be furnished by the assessee to justify its arm's length transactions - Decided in favour of assessee.
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2013 (9) TMI 480
Penalty u/s 271(1)(c) - deduction u/s 80IA disallowed as the assessee which was awarded a contract for construction of four lane road was acting merely as a contractor, therefore, the deduction will not be allowable in view of the amended provisions of section 80IA(4) brought in the statute by the Finance Act, 2007 with retrospective effect from the year 2000-2001 - Held that:- As decided in case of DCIT v/s Unity Chopra (Joint Venture)[2013 (5) TMI 373 - ITAT MUMBAI] after the decision in the case of ABVG Heavy industries Ltd. (2010 (2) TMI 108 - BOMBAY HIGH COURT) has allowed the claim of deduction u/s 80-IA on similar facts claim of appellant, even on merit (in quantum proceedings) is valid and sustainable. The assessee company was under a bonafide belief that it is eligible for deduction u/s 80-IA. Moreover, from the decisions cited above, it is clearly evident that the said issue is a highly debatable one. It is well settled law that no penalty u/s 271(1)(c) can be levied when the issue is a debatable one as decided in CIT vs. Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT] - thus the orders passed by the Commissioner (Appeals) deleting the penalty levied under section 271(1)(c) confirmed - Decided against Revenue.
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2013 (9) TMI 479
Income from house property - License fees - CIT followed previous decisions and held it as income from business - Held that:- mere fact that income is attached to property cannot be said to be assessable as income from house property if the main intention is not simply letting the property or any portion thereof. If the main intention is of exploiting immovable property by way of commercial activity, then the income must be held to be business income - appellant company with its professed objects as contained in its articles and memorandum as also reflected in its manner of activities and the nature of its dealings with the Haat properties, it is possible to say that the activities are part of its business activities - Folloing decision of Pfh Mall And Retail Management Limited. Versus Income-tax Officer, Ward - 8(3), Kolkata [2007 (5) TMI 258 - ITAT CALCUTTA-A] and Radhasoami Satsang Versus Commissioner of Income-Tax [1991 (11) TMI 2 - SUPREME Court] - Decided against Revenue.
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2013 (9) TMI 478
Interest u/s 244A(b) - Rectification of error in assessment done - whether interest u/s 244A is to be paid on on self-assessment tax paid ignoring the Explanation section 244A(b) - CIT allowed interest on refund - Held that:- Even though the short title to s. 140A reads as self-assessment, the charging phrase employed in s. 140A, namely, where any tax is payable on the basis of any return required to be furnished under s. 115WD or s. 115WH or s. 139 or s. 142 or s. 148 or s. 153A, as the case may be, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return, makes it clear that there is no difference between : (i) the tax paid under s. 115W], which deals with advance tax in respect of fringe benefits; or (ii) the tax collected at source under s. 206C; or (iii) any tax paid by way of advance tax or any tax treated as paid under s. 199, which deals with credit for tax deducted, which are provided under s. 244A(1)(a). That apart, the law is well-settled that even for the refund of tax paid under s. 140A on self-assessment, the assessee is entitled to interest. It is also trite law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay interest on such refund on general principles to pay interest on sums wrongfully retained - following decision of CIT v/s Cholamandalam Investment 7 Finance Co. Ltd. [2007 (6) TMI 69 - HIGH COURT , MADRAS] - Decided against Revenue.
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2013 (9) TMI 477
Adhoc disallowance of Expenditure - Loading and unloading expenses - CIT disallowed expenditure @ 20% - Held that:- it is a case of search assessment under section 153(A) of the Act. It is admitted fact that there is no incriminating material found pertaining to disallowance of expenses - in regular assessment additions on adhoc disallowance of 20% are not sustainable - Section 37 of the Act provides that if the assessee has laid out or expensed wholly and exclusively for the purpose of business, the expenses are allowable. In the case under consideration, there is no dispute about the fact that the expenditure was laid out and expended wholly and exclusively for the purpose of business. The A.O. did not find any contrary material to this fact. Once it is found that the expenditure has been laid out and expended wholly and exclusively for the purpose of business, such adhoc disallowance out of loading and unloading merely on the basis of presumption that the assessee has enhanced the expenses to reduce tax liability unless contrary material is available on record, such addition is not sustainable in law - Decided in favour of assessee. Addition on account of DVO’s report - CIT confirmed disallowance - Held that:- there were no reasons to discard the books of account merely because the same were not found during the course of survey. The AO should have verified each and every entry from the books of account of the assessee on this issue before making reference to the DVO. However, no such findings have been given and the AO merely because the assessee did not produce bills and vouchers referred the matter to the DVO for estimating cost of construction. The findings of the AO are, therefore, not justified - It, therefore, appears that the matter requires reconsideration at the level of the AO - Decided in favour of assessee. Addition of Rs.10,000/- on account of investment from undisclosed sources. - The assessee was asked to correlate the payments from books of accounts but the assessee failed to do so. When the register is found at the time of search and the assessee has failed to reconcile this entry in the register and books of account, the addition is warranted. The assessee has failed to reconcile this entry before us also and also failed to submit any material that this was accounted for in the regular books of account - Decided against Assessee.
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2013 (9) TMI 476
Capital gain - Sale of property - defunct firm / dissolution of firm - Whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed - Held that:- The core issue before us is whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed and our answer is no as per the document on record. We find that the said property remained to be the property of the dissolved firm and it was sold by the assessee firm on 27-03-2003. The law is well settled that the firm in the eyes of law is not a separate legal entity but ultimately the rights or vested in the partners only. The Indian Partnership Act provides the effect on the dissolution of the firm by incorporating the different provisions like Sections 46, 47, 48, 49 and 50 etc. In fact the assessee’s case is supported by the sale deed of the said property dated 29-03-2003 in which the assessee firm is shown as seller no. 1 alongwith the partners. It is seen that the Assessing Officer has wrongly applied Sec. 2(47) (v) of the Income-tax Act by observing that the partners by executing the deed of dissolution have become absolutely owners one of the share of the property. Both the parties below have misinterpreted the provisions of law and by discarding the factual aspect taxed capital gain in A.Y. 2001-02. We therefore hold that the Assessing Officer was not justified to bring to tax the capital gain in hands of the assessee firm in the A.Y. 2001-02. We further hold that the property was sold by the assessee firm in the A.Y. 2003-04 and so far as the present property is concerned the said was not transferred to the partners at any time. As transfer contemplates the transferring the title and interest in the said property. - Decided in favor of assessee.
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2013 (9) TMI 475
Capital gain - Cost of acquisition - Additional floor space index (FSI) - Taxability in the hands of Co. Group housing society (CGHS) - DRA required the developer to pay a sum of Rs. 3.05 crore as corpus fund to the society, additional sum of Rs. 1.50 crore in lieu of additional FSI and Rs. 30 lakh as additional benefit on account of reduction in area for the reason of road widening, nallah etc. Thus, the society was to receive the total of 4.85 crore from the builder in terms of the agreement. - Assessee has argued that assessee retaining the complete control over the property and having not handed over the possession, there could not be any transfer u/s 2 (47) (v). - assessee has also argued that the capital gain that can be charged is only in respect of transfer of additional FSI to which the assessee was entitled. The assessee had not transferred nor was required to transfer the land of which the assessee was absolute owner and the building occupied by the members. The transfer could take place only in respect of additional FSI which the assessee had acquired as per the Government policy and there was no cost of acquisition involved. Therefore, it has been argued that no capital gain can be charged in such a case in view of the judgment of Maheshwar Prakash-2 Co-operative Housing Society Ltd. Versus Income-tax Officer, Ward 19(2)(4) [2008 (5) TMI 455 - ITAT MUMBAI] Held that:- The argument of assessee is supported by the decision of Mumbai bench of Tribunal in case of Jetha Lal D Mehta (2005 (1) TMI 595 - ITAT MUMBAI) and ACIT Vs. Geeta Devi Pasari (2006 (6) TMI 138 - ITAT BOMBAY-F) - the assessee retained full control over the existing building as well as the additional FSI available which had not been parted with. The assessee had received only a sum of Rs. 1.10 lakh from the developer which is stated to be reimbursement of expenses incurred by the assessee. In these circumstances we are of the view that no transfer had taken place in the year under consideration and, therefore, no capital gain can be charged in this year. The additional FSI became available to the assessee due to operation of development control regulation which did not involve any cost. - no capital gain could be charged on the ground that no cost of acquisition was involved in the additional FSI. - Decided in favor of assessee.
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2013 (9) TMI 474
Adjustment of arm's length price - purchase of Edible Oil - Malaysian Palm Oil Board (MPOB) - reliance on the data / quotation of 'Oil World'. - price benefit of +/-5% - Held that:- CIT(A) by well reasoned order has given a finding that the Oil World is an independent organization established in 1958 in Germany and provides independent forecasting services for oil seeds, oils and meals and providing primary information and professional analysis. He has further noted that the quotation adopted by Assessee from oil world is for Malaysia and not for Germany. The quotation on is an independent authentic trade quotation which cannot be ignored without any valid reason. He has further noted that no adjustment under section 92 (C) was required as all the prices at which the purchases were made were less than 5% of the arithmetical mean of the quotation from MPOB and Oil World. He has further noted that the assessee had entered into contract with A.E on long term basis for continuous supply of constant quality as to ensure continuity in production which was also an important factor for considering the ALP. - Decided against the revenue. Disallowance of expenditure - Prior period expenditure - Held that:- CIT(A) while upholding the disallowance the expenses has noted that the assessee has not submitted any evidence to prove the that the expenses crystallized during the year either before the Assessing Officer or before CIT(A). From the paper book placed on record it is seen that the statement of expenses very clearly indicates that the expenses relates to A.Y. 2000-01 - Decided in favour of Revenue.
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2013 (9) TMI 473
Exemption u/s 10(38) - Assessee received Long Term Capital Gains - Whether the assessee’s share transactions are in ‘capital assets’, though of long term tenor, or of trading stock - Revenue assessed it as business income u/s. 28 - Held that:- It is only the assessee, therefore, who needs to establish the basis of his considering some shares, though purchased in the regular course of its business of share trading, as not for acquisition of trading stock, but only as capital assets. All the shares have been bought by the assessee in the regular course of his business, employing common funds, depositing them in the same D-Mat account, and even through the same broker and infrastructure. New shares are purchased deploying funds realized on the sale of such shares. To contend, therefore, of some such shares as being capital assets on the premise that the same are sold beyond one year of their purchase, is, therefore, clearly untenable. The categorization as to whether the scrip acquired is as an investment or as a part of the assessee’s trading stock is primarily one of intention with which the share is purchased/held and, accordingly, gets to be decided at the stage of or upon acquisition itself. That the scrip may eventually be sold, in whole or in part, within a period less than that envisaged earlier, or within a period less than a year, is, however, a different matter, as perceptions and, consequently, decisions, even qua capital acquisitions, may vary or change with time. This would, however, not make it any less an investment, where acquired as such in the first place, so that the gain or loss arising thus would be a short term capital gain or loss, as the case may be - Following decision of CIT vs. Sutlej Cotton Mills Supply Agency Limited [1975 (7) TMI 2 - SUPREME Court] - Decided against assessee.
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Customs
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2013 (9) TMI 510
Exemption from duty liability – Actual user condition - import of cone type stone crusher - use in construction of roads - Held that:- Exemption notification should be strictly construed since it is an exception – relied upon Gammon India Ltd., Vs. CC, Mumbai (2011 (7) TMI 17 - SUPREME COURT OF INDIA) and Novopan India Ltd., Vs. CCE, Hyderabad (1994 (9) TMI 67 - SUPREME COURT OF INDIA) - This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption - assessee had violated the terms and conditions of the notification - he was not eligible for the benefit of duty exemption under the notification. Eligibility for benefit - both the conditions with respect to the user as well as use had to be satisfied which had not been done in the case - When the notification stipulates two conditions, one with respect to the use and the other with respect to the user, both these conditions needs to be satisfied simultaneously and it cannot be said that the condition relating to the user can be ignored - If that was done it would make the condition relating to the user redundant - It was a well settled principle of law that the statute has to be interpreted in a harmonious manner so as to give effect to each and every word/expression used therein. Interpretation of provisions - Held that:- the importer assessee had violated the conditions of exemption and he was not eligible for the benefit of exemption - the confirmation of duty demand along with interest thereon made in the order were upheld - Court should not give such an interpretation to provisions which would render the provision ineffective or odious – following the judgement of Balwant Singh vs. Jagdish Singh (2010 (7) TMI 556 - SUPREME COURT OF INDIA). Confiscation of goods - the end-use condition relating to the goods stands clearly violated -they were rightly liable to confiscation under the provisions of section 111(o). Redemption Fine - Held that:- The fine imposed ought to be reduced substantially - the goods were diverted, they were used for the construction of roads though by a different user which could be considered as a mitigating factor in the case. Penalty u/s 112(a) - penalties imposed on the appellant firm under section 112 (a) – Held that:- penalty was liable to imposed for contravention of the provisions of the law and there was no mens rea required to be established - mens rea was also evident from the conduct of the assesse - Considering the amount of duty sought to be evaded the penalty imposed cannot be said to harsh or unreasonable – demand of duty along with interest was upheld – decided against assessee.
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2013 (9) TMI 509
Penalty u/s 112 - Department issued a show-cause notice to assessee for fraudulent import of sodium sulphate – Held that:- The action was unsustainable in law –order for imposing penalty set aside - from the records no bill of entry had been filed - any charge of violating the provisions of Customs Act would arise only when somebody files a bill of entry for import of the goods and claims himself to be the importer - violating the provisions of Section 111 (m) would not arise at all - the appellant did not had any IEC code at the time of importation - lending of IEC code to anyone else also would not arise – there could not be any violation of Rules 7 & 11 of the Foreign Trade (Regulations) Rules attracting the provisions of Section 111 (d) – no penalty could be imposed – decided in favour of assessee.
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2013 (9) TMI 508
Misdeclaration of goods - import of BIO-ORGANIC FERTILIZER LIQUID - Confiscation of goods u/s 111(d) and 111(m) – penalty u/s 112(a) and 114AA - Held that:- Without ascertaining the correct identity of the goods one cannot hold it to be prohibited or to have been misdeclared - the goods in question cannot be confiscated in terms of Section 111(d) or 111(m) - the importer cannot be held to have rendered the goods liable to confiscation - the test report of IICT indicates that they were required to find out whether any pesticide was contained in the given sample - the analysis result was negative – the absence of pesticides has not been shown to constitute a singular ground for holding the imported goods to be prohibited in terms of Section 111(d) or to have been misdeclared in terms of Section 111(m). Burden to prove - The burden shifted to the Customs authorities to prove that the imported item was not bio-organic fertilizer but an item prohibited for importation under the Customs Act or any other law - the report of RCOF showing absence of bio-organic fertilizer in the given sample was not a reliable evidence - even the lower appellate authority held that the burden of proof was on the department to classify the goods and this burden was not discharged – order set aside – decided in favour of assessee.
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2013 (9) TMI 507
Confiscation of goods – import of marble slab - Redemption Fine and Penalty imposed - appeal filed against the imposition of redemption fine and penalty – Held that:- confiscation of the goods was justified - the value of the goods was less than USD 50 and violation of the DGFT Notification - After considering the amount of declared value and it was a first time import on the facts and circumstances of the case the amount of redemption fine and penalty should be reduced – appeal decided partly in favour of assessee.
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2013 (9) TMI 506
Modification of stay order – non-compliance with Section 129E - Held that:- The application had not made out a prima facie case for modification - liable to be rejected in limine - There was no reason for non-compliance with stay order - reason stated in the letter was that the appellant’s counsel was preoccupied with some other work today could not be accepted - miscellaneous application appears to be re-agitating of the issues with obvious purpose of obtaining complete waiver of pre-deposit - there was none present to move the application - the conduct of the appellant can hardly be appreciated – court followed the judgement of Baron International Ltd. vs. Union of India (2003 (9) TMI 97 - HIGH COURT OF JUDICATURE AT BOMBAY) – decided against the assessee.
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2013 (9) TMI 505
Classification of goods – EPCG Scheme - import of galvanized sheets, nut bolts, angles and frames of GI sheet and there was no electrical or mechanical or thermal equipment in the cargo - department classified the goods under 73090090 as articles of iron or steel and denied the benefit of exemption under the EPCG scheme – they were of the view that the goods not to be classified under CTH 7309 and the benefit of notification No. 103/09-Cus was denied - Held that:- CTH 7309 gives the most specific description - the product was rightly classifiable under the said heading and not anywhere else - the EPCG authorization does not cover goods classifiable under CTH 7309 the benefit under the EPCG scheme cannot be extended to the goods - the goods under import consist of galvanized sheets, nut bolts, angles and frames of GI sheet and there was no electrical or mechanical or thermal equipment in the cargo. By assembly of these items, only a storage bin can be made - CTH 84371000 under which the goods had been sought to be classified covers “machines for cleaning, sorting or grading seed, grain or dried leguminous vegetables - the entry which provided the most specific description should be preferred over a heading giving a general description. The import item cannot be considered as capital goods the question of its coverage under Export Promotion Capital Goods (EPCG) Scheme would not arise at all - viewed from the foreign trade policy angle also the assesse does not had a case at all – Decided against assesse.
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2013 (9) TMI 504
Assessable value - department loaded the assessable value of equipment on account of technical know-how (licence fee) and design fee received from SWEC – They did not load the value on account of royalty or know-how fees - The value had been loaded under Rule 9(1)(c) and Rule 9(1)(e) of Valuation Rules – Held that:- The cardinal principle for loading the value under Rule 9 was condition of sale of imported goods by the buyer to the seller or the buyer to a third party to satisfy an obligation of seller to the extent that such payments were not included in the price actually paid or payable – Addition under Rule 9(1)(c) had to be of payments which constitute a condition prerequisite for the supply of the imported goods from the foreign supplier - Royalties/licence fees were to be paid to the foreign supplier of the equipments - For application of Rule 9(1)(e) there had to be a finding that although termed as royalty/licence fee, the payment was made or was to be made as a condition prerequisite for the sale of the imported goods and was in fact not royalty/licence fee. License fees – Royalty – Held that:- Revenue could not bring out that the licence fee or the royalty payment or any portion - The department could not bring out that royalty paid by the applicant had any nexus with the goods imported under the equipments contract subsequently – There was no direct or indirect role in the procurement and supply of equipment by the appellant and price thereof - The department could not show that the contract for procurement of goods or the equipment agreement was in pursuant to such condition in the engineering and technological agreement - They could not show that it was a condition for sale of equipment to the assesse – Order set aside – Decided in favor of assessee.
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Corporate Laws
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2013 (9) TMI 503
Maintainability of Award - The delivery period had to commence on July 2007 - But before that, on May 18, 2007 AMCI Pty Ltd. informed SAIL by e-mail its inability to supply any coal in the months of July, October and November - SAIL issued a legal notice through their solicitors to VALE and AMCI informing breach of the contract and calling upon VALE and AMCI to discharge their obligations. It was followed by a subsequent notice dated February 2, 2009 informing that SAIL has a claim for damages against VALE and AMCI – Held that:- As regards appeal there was no merit for the reason the learned Single Judge had correctly held that save and except the amounts awarded as per the award dated March 10, 2011, all other claims were rejected, and this obviously included the claim towards post-award interest. The reasoning by the learned Arbitrator in the order dated May 16, 2011 that he consciously omitted to grant post-award interest in view of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 which envisages interest at the rate of 18% per annum unless otherwise directed, runs in the teeth of the fact that being an international contract where payments had to be made in US$, pre-award interest has been awarded taking into account Libor rate of interest. We find that the learned Arbitrator has awarded interest at the rate of 2.335364% per annum and surely the learned Arbitrator would be contradicting himself if pre-award interest is restricted keeping in view rate of interest as per Libor and post-award interest to be 18% per annum. It was settled law that adequacy or inadequacy of evidence or on which side does the weight of the evidence lead to would not be an exercise permissible to be undertaken by a Court considering objections to an Award under Section 34 of the Arbitration and Conciliation Act 1996 - As long as there was some evidence to sustain a finding of fact recorded by Arbitrator the hands of approach must be adopted by a Court seized of objections to an Award. From the very nature of the objections it was apparent that the objector wanted this Court to re-appreciate the evidence and re-weigh the probabilities to infer facts - an exercise which we refuse to perform because our doing so would be in breach of the mandate of the law - the five limbs had been discussed with reference to the evidence led and law applicable by the learned Arbitrator and suffice would it be to state that each and every aspect of the evidence referred to by AMCI/VALE had not only been noted but had been dealt with by the learned Arbitrator and being a matter pertaining to re-appreciation of evidence court repealed each and every submission made under the five sub-heads. The Arbitrator had noted various decisions in India pertaining to the general principle with regard to waiver of contractual obligations as found in Section 63 of the Indian Contract Act, 1872 - with reference to the letter in question, the Arbitrator had found a waiver by AMCI/VALE to the requirement of a risk purchase notice, and suffice would it be to note that as regards the enunciation of law pertaining to waiver of contractual obligations as per Section 63 of the Indian Contract Act, 1872 –there was no scope to interfere with the Award and similarly as regards interpreting the letter dated December 18, 2007 as constituting waiver – there was also no scope to interfere with the finding or even venture to discuss whether any interference was warranted, for the reason a finding of fact if applied correctly to the law by an Arbitrator on a view possible. The finding of waiver was contrary to the record i.e. there was no evidence to show waiver. Secondly, the finding of waiver was contrary to the terms of the contract i.e. Clause 17 of the General Conditions of the Agreement as per which no change in respect to the terms of this agreement shall be valid unless the same was agreed to in writing by the parties specifically stating the same as an amendment to the agreement - Lastly, that the finding of waiver was inherently contradictory, in that, the learned Arbitrator construed para 9 of the General Conditions of the Agreement as mandating a risk purchase notice followed by a finding that the letter of December 18, 2007 amounted to a waiver notwithstanding the same not expressly authorizing SAIL to buy from other sources - Letter dated December 18, 2007 was a matter of record - Its interpretation was within the domain of the Arbitrator and that it had been treated by the learned Arbitrator as a writing evidencing a consent by AMCI/VALE. While dealing the action taken by SAIL to effect risk purchase – the view taken by the learned Arbitrator that keeping in view the usage of the trade the technical concept of a risk purchase by going to the open market was not applicable and the risk purchase had to be by requiring the short supplied coal to be supplied along with future supplies for the ensuing year when negotiations concluded with long term suppliers - Action of SAIL to call upon VALE/AMCI to participate at the Empowered Joint Committee meetings, which Committee concludes the bargains was nothing but compliance by SAIL with the requirement of law to permit VALE/AMCI to supply the coal which was short supplied as a part of the risk purchase exercise. Being a finding pertaining to a matter of fact and interpretation of the letters exchanged, it would be impermissible for a Court to even relook into the matter while considering objections to the Award - The arguments were nothing but another facet of the submissions advanced pertaining to risk purchase and for our reasons above, simply highlighting that risk purchase in the instant case has not to be treated as conventionally understood, court rejected the submissions - The argument was repelled for the reason it fell within the domain of the Arbitrator to decide which party would bear the cost and it was settled law that with respect to discretions exercised by Arbitrators, a Court would not substitute its view.
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Service Tax
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2013 (9) TMI 517
Commercial or Industrial Construction Service as defined under section 65(25b) of the Finance Act, 1994 - Activities primarily are digging of land, extraction of core and soil stabilization and do not fall under category of Industrial or Commercial Construction Service. He further submits that their activities fall under Site Formation & Clearance, Excavation, Earth moving & Demolition Services as defined under section 65(97a). Since Reservoir is a water body, no service tax is leviable as water bodies are excluded from levy of service tax under section 65(97a) - Appellant has executed three agreements dated 11.05.2000 as amended 17.10.2000, 05,04,2005 and 21.11.2006 with M/s Radius Water Ltd - Held that:- Activities undertaken by the appellant are out of purview of Site Formation, and Clearance Excavation and Earthmoving and Demolition Service as defined under Section 65(97a) of the Act. On the other hand activities mentioned in para 7.1 of the Order in Original are in nature of construction of civil structure which is further supported by the fact that entries in the balance sheet are under the Heading ‘Construction Receipts’ - Appellant are covered under category of Commercial or Industrial Construction service as defined under Section 65(25b) of the Finance Act – Decided against the Assessee. Appellant is eligible for 67% abatement of gross amount in terms of Notification 15/2004 dated 10.09.2004 as amended by Notification 1/2006 dated 01.03.2006 – Held that:- Land and electricity was supplied free to the appellant. In such a case appellant is not eligible for the benefit of abatement under Notification 15/2004 as amended by 1/2006 dated 01.03.2006 – Decided against the Assessee. Extended period of limitation – Held that:- Appellant has not disclosed the value, did not take registration and also did not file any Returns to the department. In such a case extended period has rightly been invoked by the Commissioner and consequently the appellant is liable to penalty under Section 78 of the Act – Decided against the Assessee.
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2013 (9) TMI 516
Manpower Supply Service - Duty Demand – Interest and Penalty – waiver of pre deposit - Assesse were a co-operative society and manufacturers of sugar - Revenue was of the view that the arrangement was a service of Manpower Supply undertaken by the assesse and the assesse should have paid service tax on it under entry at Section 65 (105) (k) r.w 65 (68) - Held that:- Assesse had not got any consideration for doing the activity – labourers were not the employees of the assesse - For putting the labourers in contact with the farmers who need the services of labourers they had not received any consideration – They had not charged any extra consideration other than what was paid to the labourers. Their only job was to route the payments from farmers to the labourers - The fact that they were maintaining a data base of persons who may be available for cane cutting and putting them in contact with the farmers who were in need of such labourers and routing payments to the labourers would not amount to Man Power Supply because they did not have such manpower to supply – waiver of pre deposit allowed – Decided in favor of assesse.
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2013 (9) TMI 515
“Management Consultancy Services” – assesse had availed CENVAT Credit of the Service Tax paid on these services under Rule 6(5) of the Cenvat Credit Rules, 2004 – following the judgement of RPG Enterprises Ltd. Vs. Commissioner of Central Excise, Mumbai-IV – [2008 (4) TMI 168 - CESTAT MUMBAI ] - the matter relating to services received in area such as Strategic planning, Corporate finance, Management information system, Forex management service, Human resources development, Project development etc. and held that services received in these areas would be rightly covered under the definition of ‘Management Consultancy Services'. Demand of CENVAT credit – Held that:- The demand was unsustainable in law - The cap of 20% on the utilisation of CENVAT Credit was lifted on 1.4.2008 - the assesse had the liberty to reverse Service Tax credit attributable to exempted services on a proportionate basis which the assesse had done - Inasmuch as the assesse had reversed the credit attributable to exempted services - they cannot be saddled with the liability to pay amount equal to 8% of the value of the exempted services – Decided in favor of assesse.
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2013 (9) TMI 514
Management Consultancy Services u/s 65 (65) - Applicant was a proprietorship firm engaged in Practising Chartered Accountant services – department imposed the tax along with interest and penalties - Held that:- Services rendered by a Practicing Chartered Accountant or a Practicing Cost accountant in connection with the management of any organization in any manner shall be deemed to be taxable service under the category of "Management Consultant" or "Manpower Recruitment Services” – prima facie the services rendered would come within the purview of "Management Consultant Services" From the nature of the services it was seen that applicant were rendering services to client in the nature of "Advice on macro political and economic input including national and Global economics and political situation for decision making and guidance needed for policy making - Service was in the nature of advice on national and international policies, social and political issues, promoter family interface and harmony and enabling identification of talent in India, especially in rural areas. Waiver of pre deposit – prima facie case is against the assessee - stay granted partly.
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2013 (9) TMI 513
Demand of service tax –intermediary services - Appellant was providing services to connect the user of service with the provider to fulfil the object of each other consuming the service provided - the appellant was remunerated satisfying the need of the destination based consumption tax - All India Federation of tax practitioners vs. UOI (2007 (8) TMI 1 - Supreme Court) – Held that:- The appellant was an intermediary serving its client who was ultimate service provider - Show cause notice should not be read with hyper technicality – the intention of the subject, language and object of the show cause notice shall be understood in such manner that the notice seeks to achieve – as decided in CCE, Calcutta vs. Pradyumna Steel Ltd. (1996 (1) TMI 127 - SUPREME COURT OF INDIA). Pre–deposit of duty - prima facie case is against the assessee - 50% of the duty to be submitted – stay granted partly.
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2013 (9) TMI 512
Business support services – appellant provided services towards Sales Promotion activities – Held that:- Managing distribution and logistics' would get covered under "Business Support Services – under Section 65A the definition which is more specific has to be preferred over the description of general nature for the purpose of classification of services. Goods transport agency services - Balance-sheet of the appellant described the amount received as transport/delivery charges Held that:- Prima facie the demand of the department appears to be sustainable. Pre – deposit of duty – token amount of was ordered to be deposited – remaining amount stayed till the disposal of issue – stay granted partly.
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2013 (9) TMI 511
Service tax demand – packaging services section 65(76B) – appellant provided packaging activity services in relation to fertilizer manufactured – Held that :- The activity of packaging undertaken in respect of fertilizer would form an integral part of the manufacturing activity and cannot be viewed as a service activity especially in the context of the packaging activity which excludes form its scope any activity of manufacture as defined in Section 2 (f) of the Central Excise Act, 1944 - fertilizer cannot be marketed without packaging, in the manner specified - packaging of fertilizer is a statutory requirement - marketing of fertilizer cannot be take place without packaging. Pre- deposit of duty – court granted unconditional waiver from pre-deposit of dues - stay granted.
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Central Excise
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2013 (9) TMI 518
Penalty when there is contravention of Rule 8(3A) of Central Excise Rules –Facility to pay monthly duty was forfeited because non-payment of duty by the due date under Rule 8 of the Central Excise Rules, 2002 – Held that:- When the period of delay in discharge of monthly duty liability by the due date exceeds 30 days from the due date, the assessee looses the facility to pay duty on monthly basis and is required to pay duty on each clearance and that too through PLA without utilising the Cenvat credit. Rule 8 (3A) specifically provides that if during the forfeiture period, the duty is not paid consignmentwise or is paid by utilising Cenvat credit in respect of certain goods cleared, such clearances would be deemed to have been made without payment of duty and all the consequences for the same as prescribed in the Central Excise Rules, would follow. In the instant case, even during forfeiture period, the duty had not been paid through PLA and had been paid through Cenvat credit, the appellant have been correctly directed to pay the same through PLA. Once the duty is paid through PLA, they would be entitled for re-credit of Cenvat credit earlier utilized - Goods were cleared on payment of duty through Cenvat credit account, the same would be deemed to have been cleared without payment of duty and, hence, the provisions of Rule 25 would be attracted – Decided against the Assessee. Penalty u/r 25 for delay in filing return E.R.-1 – Held that:- Delay in filing of ER-1 return, would attract penalty under Rule 27 not under Rule 25 and therefore Penalty of Rs.2000/- will be imposed.
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2013 (9) TMI 502
Penalty under Section 11AC of Central Excise Act, 1944 - Availed excess credit than the duty paid on the documents under which the inputs were received – Bonafide mistake of the excise clerk – Held that:- Annexure to the Show Cause Notice dated 19.05.2008 shows there are 54 instances where the appellant has taken excess credit - Show Cause Notice dated 05.12.2007 there are four instances where the appellant availed credit - Appellant also utilized the credit - Repeated action of the appellant of taking credit on the value of goods and not of the duty paid on the goods, 62 times and also utilizing the excess credit for payment of duty - Deserves penalty under section 11AC of the Central Excise Act – Decided against the Assessee.
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2013 (9) TMI 501
Issuance of cenvatable invoices to the appellant a second stage dealer without supplying any goods – There was merely paper transactions - Persons who were said to be supplier of the goods themselves admitted that they had not supplied any goods to the first stage dealer as aforesaid for delivery thereof to the appellant second stage dealer – Held that:- Oral statement recorded as stated aforesaid in the course of judicial proceedings u/s 14 of the Act being a valuable piece of evidence that remained un-refuted - Appellant failed to demolish or disturb any of the imputations without leading any cogent evidence to contradict allegations of Revenue - Appellant’s plea that its name did not find place in statements recorded as aforesaid is of no significance when the supplier of goods denied supply of goods to it - The appellant was beneficiary of the fraud perpetuated against Revenue and fraud vitiating solemn act brings the appellant to penal consequence of law – Decided against the Assessee.
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2013 (9) TMI 500
Cancellation of Central Excise Registration - appellant has taken centralised registration for transmission and dispensation of CNG into the vehicles. The appellant purchases natural gas from M/s. Gujarat State Petroleum Corporation Limited at entry point, Hazira and gets delivery at exit point, City Station (CGS), Ahmedabad for distribution to various filling stations at Ahmedabad. The compressed CNG at high pressure, from the stationery Cascade is transmitted into the dispenser through pipeline from where the CNG is dispensed in the vehicles. CNG is also filled in Mobile cascades mounted on the vehicle, at the online mother station and transported to various daughter stations from where CNG is filled in various vehicles through dispenser - In terms of CBEC Circular No. 875/13/2008-CX dated 16.10.2008, the measuring device should be on the compressor installed on the online station. The appellant has set up the measuring device for disposal of CNG Gas at the Dispenser in respect of online station and mass flow meter in respect of online Mother stations. As per Rule 9 of the Central Excise Rules, 2002 read with above referred CBEC Circular dated 16.10.2008, in the case CNG manufacturer, Central Excise Registration is to be given only in respect of those premises where CNG is actually manufactured i.e., where compressor is installed to convert Natural Gas into Compressed Gas (CNG), Registration is not to be given for premises where CNG is merely dispensed as submitted by the Revenue. Held that:- Vide Circular No. . 875/13/2008-CX dated 16.10.2008 the Board has indicated that if the actual quantity of CNG dispensed or sold is ascertained and if the premises belonged to the same legal entity, registration can be granted - The CNG dispensed to AMTS buses at AMTS, Acher Sabarmati, AMTS, Paldi and AMTS, Memnagar are the premises which have been leased out to the appellant - Metering devises are affixed at these places for metering the exact quantity of CNG that has been dispensed to the AMTS Buses - The action of the lower authorities in cancelling the registration certificate of these places, AMTS, Acher Sabarmati, AMTS, Paldi and AMTS, Memnagar, seems to erroneous and is not sustainable – Decided in favor of Assessee.
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2013 (9) TMI 499
Cenvat Credit - Respondent is engaged in the manufacture of sugar, molasses, rectified spirit etc and is availing CENVAT credit on capital goods and inputs - They have a captive power generation plant, which is run by steam which is produced in the factory by the use of boilers wherein water treated with certain chemicals is used. The power generated by the captive power plant is partly used within the factory in the manufacture of final products, the surplus electricity being supplied to the AP Transmission Corporation – Held that:- The first show-cause notice was issued on 05.01.2007 for the period from December 2001 to November 2006. The rest of the show-cause notices were issued within the normal period. The respondent has paid duty with interest for the normal period in the wake of the decision of the Commissioner (Appeals). Therefore the question whether CENVAT credit on inputs used in the generation of electricity supplied to the AP Transmission Corporation during any part of the period of dispute does not survive. Moreover, this issue stands settled against the respondent in the present case by the Hon’ble Supreme Court’s judgment in the case of Maruti Suzuki Ltd. [2009 (8) TMI 14 - SUPREME COURT ] Extended period of limitation – Intention to evade payment of duty – Held that:- In the instant case, the respondent did not deny the department’s allegation that they had contravened various provisions with intent to evade payment of duty - Respondent had not contested the demand of duty in the first show-cause notice on the ground of limitation - Respondent did not deny the allegation that they had suppressed the sale of surplus electricity to the AP Transmission Corporation and the contravention of Rules with intent to evade payment of duty - This allegation was raised in the show-cause notice both in the context of invoking the extended period of limitation and in the context of invoking the penal provisions of Section 11AC. In the total absence of denial of this allegation, it has to be held that the respondent is liable to be mulcted with a penalty under Section 11AC and also extended period of limitation is invokable on them – Decided in favor of revenue.
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2013 (9) TMI 498
Condonation of Delay - Commissioner rejected the request for remission of duty in respect of goods destroyed in fire - Based upon the said rejection of remission, Additional Commissioner confirmed the demand of duty - Held that:- It cannot be said that the delay in filing present appeal was on account of any malafide - There was a reasonable cause in the present matter leading to delayed filing of the appeal - the assesse was eventually given a copy of the order only on 11/5/11 and it was lapse on the part of the Revenue to respond to their very first letter addressed on 22nd October 2009 and the subsequent communications - There was no intentional lapse on the part of the assesse to delay filing of appeal. The subsequent order of Additional Commissioner confirming demand of duty as a consequence of rejection of remission application was challenged by the assesse within the period of limitation - if the department responded to their first communication, when the limitation period was yet to expire the delay in filing of appeal could not have been caused - the delay in the present appeal stands contributed by the Revenue and in fact the assesse had to take the strong legal remedy available to them, by way of filing of writ-petition before the Hon’ble Delhi High Court. - Delay condoned.
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2013 (9) TMI 497
Waiver of pre deposit of penalty - method of valuation - cost plus - Held that:- Commissioner had dealt with the contention of application at length - the contention of the revenue that the Commissioner had given discrete findings in respect of each and every CAS-4 filed by the applicant – they had also dropped the demand out of total demand in the case - the CAS-4 Certificates of the assesses were faulty which contain gross irregularities - certificate cannot be used as instrument in determination of cost of production whereas it was required to be determined for arriving at the assessable value of the goods – assesse had submitted the Balance Sheets Profit & Loss Accounts but they had not submitted Unit Trial Balance of the relevant period - applicants were not able to make out a prima facie case of total waiver of duty imposed on them – The balance of convenience was in favour of the Revenue in the case - The applicant was directed to make pre deposit of 25% of duty – Decided partly in favor of assesse.
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2013 (9) TMI 496
Classification of Goods - Assessee was engaged in the manufacture of bodies on the chassis for public transport passenger motor vehicle, ambulance, motor vehicle for transport of goods and special purpose motor vehicle - During the period the respondent claimed classification of above said goods under sub-heading No. 8702.00, 8704.00 & 8705.00 - Department was of the view the same were to be charged under sub-heading No. 8707.00. - Held that:- Bus/Truck body built on chassis supplied by the customers were classifiable under Heading 87.07 of the Central Excise Tariff Act, 1985 - Following C.C.E. v. Ram Body Builders [1997 (9) TMI 103 - SUPREME COURT OF INDIA] - even if the excise duty had been short paid on the basis of any approval, acceptance or assessment by the department, the aforesaid short levied shall be recoverable from the relevant date. When any duty of excise had not been levied or paid or had been short-levied or short-paid or erroneously refunded, whether or not such non-levy or nonpayment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice - Order of Commissioner (Appeals) was not sustainable – Order set aside – Decided in favour of Revenue.
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2013 (9) TMI 495
Application for modification of stay order - Duty on Pan Masala of RSP - Packaging of Goods - production capacity based duty - The Appellant operated packing machine to bring out its output for marketability in pouches - Held that:- a view was taken that there may not be a case for considering that the manufacturer was manufacturing Pan Masala of two different RSPs because though the RSPs were different the duty liability was the same in that case. In this case which was originally decided before the decision in that stay petition was taken, it was seen that the manufacturer was manufacturing Pan Masala and Gutka on the same machines and the duty rates for these goods are different even when the RSPs are the same. Considering this aspect I do not find any case to change the earlier order calling for pre-deposit of Rs. 20,00,000/-which is about 16% of the confirmed demand of Rs. 1,25,29,839/. - The Application for modification of the stay order is accordingly rejected.
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2013 (9) TMI 494
Benefit of Notification No. 47/94 and Notification No. 43/2001 - Manufacture of Textiles and Made-up Articles - Assesses were operating under Rule 13(1)(b) of Central Excise Rules, 1944/Rule 19 of Central Excise Rules, 2001 and they were manufacturing made-up articles - Appellants were job workers and were operating under Rule 13(1)(b) of the Central Excise Rules, 1944 upto 30-6-2001 and thereafter under Rule 19 of Central Excise Rules, 2001 and 2002 - they were holding Central Excise registration for manufacture of textiles and made-up articles falling under Chapter 63 of Central Excise Tariff Act, 1985 - Revenue demanded duty leviable on fabrics on the quantity of fents, rags and chindies in excess of percentage proved by the department - whereas job workers claimed that they had discharged the duty liability as leviable on fents, rags and chindies - Held that:- The duty on the waste generated in form of fents, rags and chindies was payable by M/s. SGP and GTC in terms of these Notifications No. 47/94 and 43/2001 only After going through the Notification No. 47/94 and Notification No. 43/2001 – the notifications had been issued under Rule 13 of Central Excise Rules, 1944 and Rule 19 of Central Excise Rules, 2001 respectively for receiving the goods without payment of duty for manufacture of export goods. These notifications contain many conditions to be fulfilled by the manufacturer or processor - There was a specific provision in these notifications for the waste generated during the processing/manufacture of the export goods - Dutiablity of waste will be governed by the specific provisions under notification - If the duty was demanded on waste as applicable to fabrics under Chapter X procedure or Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, then provisions relating to the waste under these notifications will become redundant - As regards the execution of bond, movement of goods under AR-3 procedure, maintenance of account of goods received, submission of quarterly RT-11 return etc., the manufacturer was required to follow the Chapter X procedure or procedure under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 – Appeal filed by the Assesses was allowed – Decided in favour of Assessees. The Commissioner (Appeals) had allowed the appeals of M/s. SGP and GTC holding that as the procedures prescribed under Notification No. 47/94 (para 5(a) and Notification No. 43/2001) were followed by the manufacturer/processor - the duty under Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 was not recoverable and there was no suppression of the facts as returns were filed by them regularly with the department - We do not find any infirmity in these findings of the Commissioner (Appeals) - the Orders-in-Appeal was upheld and Revenue’s appeals were rejected.
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2013 (9) TMI 493
CENVAT credit - the allegation is that the evidence of physical receipt of that quantity of alumna hydrate is not available in the appellant's record - stay - Held that:- Prima facie the Commissioner confirming the receipt of the consignment of Alumina Hydrate up to the weight bridge of the factory, and also the fact that the receipt of Hydrate Alumina was being shown in the item receipt report being maintained by the appellant, the Commissioner's decision to disallow the credit on the account of appellant's failure to maintain the proper records regarding receipt of Hydrate Alumina was not correct, more so, when on comparison the receipt entries regarding Alumina in RG-23-A Register with the quantity of Alumina hydrate mentioned in the invoice, it is seen that the quantity has been entered in the RG-23 A Register after converting the weight of the Ajurnina hydrate into Calcined Alumina, When the receipt entry in the RG-23 Register regarding receipt of Aluminium was matched with the quantity of mentioned in the invoices - it was seen that the quantity of Alumina had been entered in the RG-23 A Register after dividing the weight of Alumina hydrate, as mentioned in the invoices, by 1.53 i.e. after converting the weight of Alumina Hydrate into the weight of Calcined Alumina - as per report received from the Range office, the record of receipt of Alumina Hydrate upto weight bridge was ascertained. Waiver of Pre-deposit - Prima facie the appellant have strong prima facie case and asking them to pre-deposit of the Cenvat credit demand, interest and penalty would cause undue hardship to them - Therefore, the requirement of pre-deposit was waived for hearing the appeal and recovery was stayed till the disposal of the appeal – Stay Granted.
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2013 (9) TMI 492
Duty Demand of Differential Value - inclusion of transit insurance charge - Suppression of Information - Consideration for sale - The appellant suppressed the information that he had recovered from the buyers as transmit insurance charge against transit insurance premium - Whether the price charged by the appellant from the buyer at the time of delivery at factory gate was the sole consideration for sale - The Department was of the view that the appellant should have included the amount of transit insurance charge recovered in excess of the actual insurance charge premium paid in the transaction value of the goods cleared in terms of Rule 6 of Central Excise Valuation Rules - Held that:- The price charged at the time of removal was not the sole consideration for transaction of sale - the adjudicating authority and the Commissioner (Appeals) were right in including the difference of transit insurance charged and the amount received by the appellant against transit insurance charge in sale price to work out transaction value for the purpose of excise duty. Relying upon Baroda Electric Meters Ltd. v. Collector of Central Excise [1997 (7) TMI 126 - SUPREME COURT OF INDIA] - Transaction on the face of it was highly unnatural and was against the norms of the trade practice - The only inference which can be drawn from such an abnormal transaction was that the price paid at the time of delivery was not the sole consideration for sale and the appellant with the aid of buyers had evaded excise duty by issuing invoices/bills showing lower transaction value and getting compensated by indirectly receiving the price in the guise of transit insurance charges - The adjudicating authority as well as appellate authority were right in including the difference of the transit insurance charged actually paid by the appellant and the amount received by the appellant against transit insurance charges in the transaction value for the purpose of assessing excise duty, as such the order cannot be faulted - Decided against assessee.
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