TMI Tax Updates - e-Newsletter
September 17, 2014

Case Laws in this Newsletter:

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

Articles

1. WHETHER THE COMMISSIONER OF COMMERCIAL TAXES IS HAVING POWER TO ISSUE CIRCULAR OR CLARIFICATION UNDER TAMIL NADU VAT ACT, 2006?

   By: DR.MARIAPPAN GOVINDARAJAN

2. Indirect Tax Evasion in Some Industries – Case Study- Plastic

   By: Madhukar N Hiregange

News

1. India Signs Loan Agreement with ADB Worth $63.3 Million for Improving Urban Services and Strengthening Municipal and Project Management Capacity in Several Towns in North Karnataka

2. RBI Reference Rate for US $

3. Government sanctions a major power transmission scheme for Arunachal Pradesh & Sikkim to bring them fully into the grid

4. Scheme on Enhancement of Competitiveness in the Indian capital goods sector

5. India’s Foreign Trade (Merchandise): August, 2014

6. Index Numbers of Wholesale Price in India (Base: 2004-05=100), Review for the month of August, 2014

7. SFIO completes investigation of 14 companies

8. Auction for Sale (Re-Issue) of Government Stocks

Notifications

Companies Law

1. F. No. 1/18/2013-CL-V-Part - dated 12-9-2014 - Co. Law

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2014.

Customs

2. 76/2014 - dated 15-9-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Circulars / Instructions / Orders

Income Tax

1. F. No. 225/268/2014/ITA.II - dated 16-9-2014

Extension of due-date for filing returns of Income From 30-9-2014 To 30-11-2014 By assessees In state of Jammu & Kashmir

FEMA

2. 30 - dated 15-9-2014

Data on Import of Gold Statement- Submission under XBRL

Central Excise

3. 984/08/2014-CX - dated 16-9-2014

Amendments to the Appeal provisions in Customs, Central Excise and Service Tax made by Finance Act, 2014- Issue of clarifications – reg.

Highlights / Catch Notes

Income Tax

• High Court Confirms Tribunal's Decision: Assessee Cannot Claim TDS Credit on Sub-Contract Works Payments.

  Case-Laws - HC : TDS Credit - Whether the Tribunal is right in holding that the assessee is not entitled to the credit of tax deducted at source on the amounts paid on sub- contract works - held yes - HC
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• Section 14A and Rule 8D: Mixed Accounts Complicate Expense Allocation for Dividend Income Claims.

  Case-Laws - AT : Application of section 14A r.w rule 8D – When there is a mixed account and the assessee is carrying on the business, it is practically impossible to specify which particular portion of the expenditure was incurred for the purpose of earning dividend income - the assertion of the assessee that no expenditure was incurred for earning of dividend income is a bald assertion - AT
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• Entity's Seminars on Urban Housing for Poor Evaluated u/s 2(15) of Income Tax Act for Educational Qualification.

  Case-Laws - AT : Educational activity or not – it simply providing the services to various Government Agencies both Indian & Overseas to hold seminars, to educate people in the areas of Urban Hosing Development for poor and for their upliftment - assessee’s activities fall under the 2nd limb of the Section 2(15) - AT
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• Revenue Expenditure Without DSIR Approval May Qualify for Deduction u/ss 35(1)(i) and 37(1.

  Case-Laws - AT : Unapproved revenue expenditure if not allowable u/s 35(2AB) of the Act, in absence of approval from DSIR, certainly can be allowed as deduction u/s 35(1)(i) and 37(1) of the Act as the case may be - AT
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• High Court Appeal Admission Blocks Enforcement of Penalty u/s 271(1)(c) of Income Tax Act.

  Case-Laws - AT : Imposition of penalty u/s 271(1)(c) – mere admission of appeal by the High Court is sufficient to debar the penalty levied u/s.271(1)(c) of the Act - AT
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• Penalty for Disallowing Claim on Foreign Education and Travel Expenditure u/s 271(1)(c) Cannot Be Upheld.

  Case-Laws - AT : Imposition of penalty u/s 271(1)(c) – the penalty imposed for disallowing claim of expenditure on foreign education and foreign travelling cannot be upheld - AT
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Customs

• Tribunal Restores Appeal, Finds No Malicious Intent by Petitioner in Delaying Hearing or Failing to Appear.

  Case-Laws - HC : Restoration of appeal before tribunal - It prima facie appears to us that as such there was no malafide intention on the part of the petitioner in prolonging the hearing and/or in not appearing before the learned Tribunal - appeal restored - HC
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• Tribunal Condones 413-Day Delay in Appeal Filing Due to Appellant's Illness Explanation in Petition.

  Case-Laws - HC : Condonation of delay of 413 days in filing the appeal before the Tribunal - appellant had categorically stated in his petition about his illness - delay condoned - HC
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• High Court Nullifies DGFT Circular Directing SFIS Case Reopenings and Recoveries from July 5, 2010, PIC Meeting Decisions.

  Case-Laws - HC : Directions in DGFT Policy Circular, to reopen the SFIS cases and to make recoveries in accordance with decisions taken at PIC meeting of 5-7-2010, is quashed and set aside - HC
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Service Tax

• Business Exhibitions and Technical Inspections Abroad Exempt from Indian Service Tax Liability.

  Case-Laws - AT : Import of services - Business Exhibitions conducted abroad - Technical Inspections were done outside India - Since, these services are performed outside India there is no service tax liability on the services in view of the above provisions. - AT
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• Company Adding Additives & Selling to Customers Not a Service Provider for Tax Purposes Under Business Auxiliary Services.

  Case-Laws - AT : Business auxiliary services - the addition of additives in their own units and selling to their customer, cannot be treated as a service provider - AT
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Central Excise

• High Court Remands Case to Tribunal for Reconsideration of Stay Application u/s 35F, Ensures Hearing Opportunity.

  Case-Laws - HC : Stay Application under Section 35F - Non appearance of assessee - The matter is remitted to the Tribunal to decide the application for pre-deposit afresh in accordance with law after affording an opportunity of hearing to the petitioner - HC
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Case Laws:

• Income Tax

• 2014 (9) TMI 520
  TDS Credit - treatment of TDS as income - relevant assessment year - Whether the Tribunal is right in holding that the assessee is not entitled to the credit of tax deducted at source on the amounts paid on sub- contract works – Held that:- At the time when the amounts were deducted by the principal while making payments to the subcontractors, the amounts were deducted at 2% towards TDS u/s 194C of the Act – giving effect to the orders of the Tribunal, AO had deleted the amount relating to the TDS which was treated as the income of the assessee u/s 198 of the Act - The amount deducted initially as TDS either can be treated as part of the income of the assessee or as representing and relatable to the receipts which are liable to be reckoned in the process of assessment - The amount received by the assessee on account of the TDS came to be treated as part of the commission, which the assessee is entitled to receive under agreement entered into with the subcontractor – it is rightly treated as income for the respective AYs - the assessee obviously is not entitled to the benefit of treating the amounts initially deducted as TDS, as part of the tax paid by the assessee – Decided against assessee.

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• 2014 (9) TMI 519
  Non-speaking order by CIT(A) - Transactions through PMS – STCG treated as business income – Held that:- The AO and revenue’s contentions regarding the frequency of intermixing and interlacing of funds have not been objectively answered by the CIT(A) besides the crucial fact whether there was intra-account transfer from business stock to investment stock of shares or vice versa has not been spelt out - It is acceptable that the assessee can maintain business 65/- per share - CIT(A) without adverting to any factual observations has allowed the relief by summary observation which cannot be upheld. Disallowance u/s 14A r.w. Rule 8D – Held that:- The amount has been disallowed against the interest paid on loans by applying the provision of Rule 8D which on the face of its seems to be excessive - CIT(A) instead of giving any factual projection by summary observation has deleted the entire addition – Thus, the issue should be restored back to the file of the CIT(A) to pass a speaking order on the facts and circumstances of the case duly considering the factual issues raised by the AO in his order about the intermixing and interlacing of the funds and possibility of internal transaction from business account to investment account portfolios – also , the shares of M/s. Share Street (P) Ltd. needs to be correctly worked out and also the disallowance u/s 14A should be considered – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of revenue.

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• 2014 (9) TMI 518
  Admission of appeal – Tax effect below monetary limit – Held that:- Following the decision in CIT Vs M/s. P. S. Jain & Co. [2010 (8) TMI 702 - Delhi High Court] The tax effect being less than the monetary limit specified, the CIT shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction"- there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues - The Income-tax shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other AY, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. The monetary limits shall not apply to writ matters and direct tax matters other than Income tax - Filing of appeals in other Direct tax matters shall continue to be governed by the relevant provisions of statute & rules - Further filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12 A of the IT Act, 1961, shall not be governed by the limits specified to file appeal in such cases may be taken on merits of a particular case – the instruction will apply to appeals filed on or after 10th July, 2014 - the cases where appeals have been filed before 10th July, 2014 will be governed by the instructions on this subject, operative at the time when such appeal was filed – revenue could not point out any of the exceptions – Decided against revenue.

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• 2014 (9) TMI 517
  Transfer pricing adjustment - International transactions – Payment of corporate charges – Details could not furnished before the authority earlier - Held that:- The assessee received various technical, marketing and administrative support service from its AE - The TPO had restricted the payment of service fee to an amount - In terms of application dated 4.7.2014 under Rule 29 of the ITAT Rules, the assessee had sought to place on record the summary of invoices raised on the assessee by its AE during the financial year 2007-08 - The detailed break up of invoices on the basis of nature of services and the summary of the man hours spent by the various divisions of the AE in rendering technical, marketing and administrative service to Contitech group of companies - the specific details or complete break up of how the cost has been allocated could not be furnished before the completion of the proceedings before the TPO/DRP, since these details were to be obtained from its AE Germany - the details now produced have an important bearing for resolving the transfer pricing dispute – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. Invocation of section 14A r/w Rule 8D – Disallowance made for expenses incurred – Held that:- The assssee received dividend income - For making investment in shares and for earning such huge dividend income, it cannot be said, that the assesee has not incurred any indirect expenses such as management establishment expenses and other office overheads - The AO has given a categorical finding that the assessee’s method of calculating expenditure in relation of income not included in the total income is not satisfactory - the AO’s disallowance by invoking provisions of section 14A read with 8D (2) (iii) is justified and is in accordance with law – Decided against assessee.

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• 2014 (9) TMI 516
  Application of section 14A r.w rule 8D – Dividend on shares or mutual funds – Held that:- It could not be said that the satisfaction of the AO is a bald satisfaction without specifying any particular item of the expenditure which was incurred for earning of dividend income – relying upon Maxopp Investment Ltd. Vs. CIT - [2011 (11) TMI 267 - Delhi High Court] - the investment in the shares is only 6,46,000/- plus 2,42,648/- but, it is in large number of companies - The investment in the mutual funds is 14,58,81,026 - the assessee invested in more than 50 different mutual funds - It cannot be believed that no effort was involved in the entire process - when there is investment in large number of mutual funds and moreover during the year various mutual funds were liquidated and investment made in various new mutual funds, certainly, the assessee must be keeping details in a systematic manner and some staff must be doing that job. When there is a mixed account and the assessee is carrying on the business, it is practically impossible to specify which particular portion of the expenditure was incurred for the purpose of earning dividend income - the assertion of the assessee that no expenditure was incurred for earning of dividend income is a bald assertion, contrary to the obvious facts on record and the satisfaction of the AO that some expenditure was incurred for earning of exempt income is based upon the facts of the case – thus, a proper satisfaction as required by Section 14A was duly recorded by the AO and, he was fully justified in working out the disallowance as per Rule 8D of the Income-tax Rules, 1962 - as far as the discrepancy in the working of Rule 8D is concerned, the matter is remitted back to the AO for verification of working of Rule 8D – Decided partly in favour of assessee.

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• 2014 (9) TMI 515
  Eligibility to claim deduction u/s 10B – STPI competent to grant registration or not - Held that:- Assessee had filed Form 56F in compliance with the requirement of Section 10A of the Act during the course of assessment proceedings, pursuant to the revision order of the CIT(A) - the benefit for which the assessee is eligible as per law cannot be denied - on being pointed out by the Assessing officer in the de-novo proceedings that deduction u/s 10B was not available to it, changed its claim to one u/s 10A of the Act, by way of filing a report of the Chartered Accountant in the prescribed Form No.56F before the AO - though there is a change of claim from section 10B to 10A, neither the returned income, nor the assessed income of the assessee has undergone any change whatsoever – the AO has not examined the claim, thus, the matter is to be remitted back to the AO for consideration – Decided in favour of assessee.

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• 2014 (9) TMI 514
  Application of section 44BB – Deemed profit rate @ 25% - Whether part of the payment received by the assessee can be considered as fee for technical services and whether the other part would be assessed under the presumptive tax of Sec. 44BB of the Act - Held that:- The scope of the work is not limited to the transportation of coated pipes alone, but also for many other activities listed in the scope of work and price schedule - The assessee is engaged in providing services in connection with prospecting for, or extraction or production of mineral oils by ONGC - by sub-contract agreement between Engineers India Ltd and the assessee, the assessee was given a turnkey project for laying and installation of pipe lines - when a contract consists of a number of terms and conditions each condition does not form separate contract. The assessee is a non-resident which is engaged in the business providing services or facility in connection with the prospecting for, or extraction of production of mineral oil, its income has to be computed as per the provision of Section 44BB - the argument of revenue is not the basis on which either the AO or the CIT(A) have come to a conclusion, that the provisions of Section 44BB do not apply - the claim of the assessee that the income in question is to be determined by applying the provision of Section 44BB is to be upheld – Decided partly in favour of assessee.

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• 2014 (9) TMI 513
  Nature of activity – Scope of education u/s 2(15) – exemption u/s 11 & 12 - Services provided to government agencies to educate people in the areas of Urban Housing Development for poor and for their upliftment – Held that:- CIT(A) has rightly observed that the activities of the assessee are identical and it was found that assessee was involved in helping various Government Agencies or foreign Government Agencies under SARC in providing training to the persons in the field of housing for poor sections of the society and advising the Government for their upliftment and no work is undertaken for any profit motive - CIT(A) has observed that various assignments undertaken have been mentioned which clearly reveal the fact that appellant's activities are in the nature of education as it is providing the training to various persons of the Indian Government and overseas Governments and these training programs are in the nature of education and education programs have been organized by the Institute are mainly for the Government of India which are not of a commercial nature - The issue of charging the fees and number of students to participate in the course are decided by Government of India - the assessee has submitted some additional facts to substantiate its claim regarding the Trust is a charitable institution. The society is not engaged in any trade, commerce or business – it simply providing the services to various Government Agencies both Indian & Overseas to hold seminars, to educate people in the areas of Urban Hosing Development for poor and for their upliftment - There is no element of profit involved in our activity and the entire amount received is spent either for meeting expenditure or the balance / surplus kept in the Bank as per the norms for future utilizations - CIT(A) has rightly held that the assessee’s activities fall under the 2nd limb of the Section 2(15) - as the activities of the assessee has been found to be in the nature of education within the meaning of Section 2(15), benefit of section 11 and 12 given by the CIT(A) is upheld – Decided against revenue.

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• 2014 (9) TMI 512
  Validity of revision u/s 263 – Held that:- An order cannot be termed as erroneous unless it is not in accordance with law - This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous - If the Income-tax Officer had applied his mind while making an assessment and determines the income either by accepting the accounts or by making some estimate himself after making due enquiries, then the said assessment order cannot be termed as erroneous simply because, the Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side - there must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. CIT has initiated the revision proceedings mainly on the reasoning that the AO has failed to follow the procedure prescribed under Rule 8D of the I.T Rules - the revision proceeding is liable to be quashed, as the view entertained by CIT on the issue of disallowance u/s 14A is not in accordance with the law - the AO has examined the issue of disallowance to be made u/s 14A of the Act - the assessee had declared a dividend income and the net profit returned by it was 129.34 crores - the issue relating to invoking of the provisions of Rule 8D was specifically questioned by the AO and the assessee has given above reply - the AO has proceeded to compute the disallowance - the AO has examined the applicability of Rule 8D to the case of the assessee herein - the AO has examined the issue of disallowance to be made u/s 14A of the Act - the assessment order cannot be termed as erroneous and prejudicial to interests of revenue simply because the CIT is having a different view in this matter – Decided in favour of assessee.

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• 2014 (9) TMI 511
  Disallowance u/s 14A r.w Rule 8D – Interest expenses – Held that:- CIT(A) was rightly of the view that the AO has erred in invoking rule 80 in the present case without establishing any nexus between the borrowed funds and the investment - the AY under consideration is 2009-10 wherein the Rule 8D is applicable - the AO has not determined the claim of the assessee regarding expenses whether there were any expenditure related to the earning of the exempted income - Rule 8D can be applied where the AO is not satisfied with the claim of the assessee that no expenditure has been incurred to earn the exempted income – the AO has not fulfilled the onus of recording the findings with regard to the expenditure incurred towards the income to be earned which is exempted from the tax – thus, the CIT (A) was justified in granting the relief to the assessee by holding that when there is no nexus between the borrowed fund and investment made then no disallowance needs to be made as no interest bearing fund utilized by the assessee for making the investment – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (9) TMI 510
  Claim of deduction u/s 35(2)(AB) – Weighted deduction under R&D expenses – Held that:- Approval of DSIR as contemplated is only in respect of weighted deduction to be claimed u/s 35(2AB) of the Act - no material has been brought on record by the department to controvert assessee's claim that it has incurred towards salary and wages of employees engaged in revenue expenditure, R&D and capital expenditure on R&D activities - unapproved revenue expenditure if not allowable u/s 35(2AB) of the Act, in absence of approval from DSIR, certainly can be allowed as deduction u/s 35(1)(i) and 37(1) of the Act as the case may be – revenue not disputed the fact that expenditure incurred was towards salary and wages - the expenditure is allowable u/s 35(1)(i) or u/s 37(1). So far as disallowance of capital expenditure is concerned, no material has been brought on record by the department to controvert assessee's claim that such expenditure incurred was towards scientific research - Disallowance was only for the reason that it is not approved by DSIR - even in absence of approval from DSIR though assessee may not be eligible for deduction u/s 35(2AB), still assessee can claim the deduction u/s 35(1)(iv) – relying upon Tube Investments of India Ltd. Vs. CIT [2002 (9) TMI 45 - MADRAS High Court] - assessee is eligible for deduction in respect of revenue expenditure and capital expenditure – Decided in favour of assessee. Disallowance made u/s 14A read with Rule 8D – Held that:- It is the contention of the assessee that the investment in Godavari Fertilizers Ltd. has to be excluded as the company has merged with the assessee in pursuance to scheme of amalgamation approved by the AP High court - So far as interest expenditure is concerned, as per the details furnished by assessee, total disallowance on account of investments made out of borrowed fund has been worked out - all these facts were available before the departmental authorities, as it appears, they have not properly applied their mind to these factual issues – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• 2014 (9) TMI 509
  Imposition of penalty u/s 271(1)(c) – Expenses on foreign education and foreign travelling expenses - Held that:- Assessee company is engaged in the business of food and catering services - assessee company has claimed expenditure on foreign education and foreign travelling in respect of Tushar Khanna, who is son of one of the Directors of the assessee company - assessee company decided to send Mr. Tushar Khanna, son of the director for specialization in food industries and selected Cornell University to impart the required training and education - in the opinion of the Board of directors of assessee company would benefit the Company substantially in broadening its business horizon - the entire training and education was in Hotel Management, being the specific line of business the Company is engaged in - the employer-employee relationship is in place prior to the assessee Company sponsoring such training - it is clear that to implement International Hotel Business practices and systems, the assessee Company has spent monies on employing foreign nationals - During the previous year 2000-01, the Company had employed an internationally acclaimed foreign cook, Mr Somdet Kesoraprom from Bangkok - it sponsored one of its employees to acquire hotel management education and training at Cornell University, USA. Assessment proceedings and penalty proceedings are separate and distinct and assessee has all the liberty to put his case in the penalty proceedings to prove that there was no concealment of particulars of income or no intention to furnish any inaccurate particulars - in quantum proceedings, assessee’s claim of expenses was declined by Tribunal on the plea that before passing Board resolution, there was all intention to send Mr. Tushar Khanna abroad for higher education - the expenses so incurred were not for the purpose of the business - it was demonstrated that after coming from training Mr. Tushar Khanna is continuously rendering his services to the assessee company with the help of his specialized education in hotel management - the agreement entered with Tushar Khanna, before leaving India for higher education was being acted upon and there is nothing adverse found by the departmental authority to show that after returning back to India, Tushar Khanna has not rendered the services as per terms of agreement dated 1-8-2000 as agreed by him with the assessee company. The entire expenditure was intended to be incurred wholly and exclusively for the purpose of assessee’s hotel business - it is not a fit case for levy of penalty for the disallowance of expenses so made - the penalty imposed for disallowing claim of expenditure on foreign education and foreign travelling cannot be upheld – mere admission of appeal by the High Court is sufficient to debar the penalty levied u/s.271(1)(c) of the Act – penalty u/s 271(1)(c) cannot be levied – Decided in favour of assessee.

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• 2014 (9) TMI 508
  Allowances paid to Directors relating to business u/s 40(b)/40(ba) – Held that:- On the basis of the Auditor’s report, the AO has made disallowance of payment as Director’s allowance - the assessee is a Co-operative Bank Ltd. registered under the Societies Act - The AO though was required to examine the claim of the assessee in the light of the legal provisions of the Act, but he has made disallowance relying upon the Auditor’s report - the AO was required to examine the claim of the assessee on merit also, but it was not done and the claim was disallowed on the basis of the Auditor’s report - the AO is required to assess the income as per law in the right hands - the objection raised by the Auditor in this regard is not in accordance with law and the disallowance was made solely on the basis of the Auditor’s objections - this issue requires to be re-adjudicated by the AO in the light of the relevant provisions of the Act and also the details of payments prepared by the assessee – thus, the matter is to be remitted back to the AO for re-examination – Decided in favour of assessee. Interest to depositors & payment to contractors – Failure to comply with permission of Chapter XVII B – Held that:- The AO has made disallowance paid as interest, having noted that TDS was not deducted on the payments in the light of the provisions of section 40(a)(ia) of the Act, which was later on confirmed by the ld. CIT(A) – relying upon ACIT vs. Visakhapatnam Cooperative Bank Ltd. [2011 (8) TMI 319 - ITAT VISAKHAPATNAM] - if the co-operative society makes payment of interest on deposits received from its members only and it was not required to deduct TDS in view of the provisions of section 194A(3)(v) of the Act - This aspect was not examined by the CIT(A) while confirming the disallowance though the assessee has contended that interest was paid only to the members of the assessee-society in the light of the fact that no other person except the members of the society can open an account with the assessee-bank - this aspect cannot be examined in the absence of relevant information, this issue requires a proper adjudication by the AO – thus, the matter is remitted back to the AO for re-adjudication – Decided in favour of assessee. Restriction of election expenses at 30% – Held that:- AO as well as CIT(A) was rightly of the view that the election expenses can only be allowed from the declaration of election process till declaration of results which is of not more than 30-40 days - disallowance of 30% of the total claim of election expenses is rightly decided as the assessee could not place the details of expenditures incurred for election purpose – Decided against assessee. Investment depreciation reserve disallowed – amount debited to P&L account – Held that:- Following the decision in NORTHERN RAILWAY PRIMARY COOPERATIVE BANK LTD Versus ACIT [2014 (2) TMI 460 - ITAT LUCKNOW] - as per advice of the RBI provision of the investment amount is possible during the first three years i.e. financial years relevant to the assessment years and thereafter its provision cannot be allowed without any further instruction of the RBI - The assessee has claimed provision during the AY without any advice of the RBI against the provisions of the Income-tax Act - CIT(A) is justified in disallowing – Decided against assessee.

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• Customs

• 2014 (9) TMI 525
  Restoration of appeal before tribunal - Tribunal has refused to restore the main appeals along with the applications for condonation of delay which earlier came to be dismissed for nonprosecution - Held that:- the learned Tribunal has taken too technical view in not restoring the applications for condonation of delay, respective Appeals and the stay applications. It prima facie appears to us that as such there was no malafide intention on the part of the petitioner in prolonging the hearing and/or in not appearing before the learned Tribunal on 30.10.2013. Even no such observations have been made by the learned Tribunal while passing the impugned orders rejecting the restoration applications. - Appeal before the tribunal restored - decided in favor of assessee.

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• 2014 (9) TMI 524
  Condonation of delay of 413 days in filing the appeal before the Tribunal - appellant had categorically stated in his petition about his illness - The Tribunal rejected the petition stating that it is a case of sheer negligence and inaction on the part of the applicant and there is no reason for condonation of delay of filing the appeal. - Held that:- Admittedly, Law of limitation is founded on public policy, not meant to destroy the rights of parties, but to ensure that parties do not resort to dilatory tactics. There was no material produced by the respondent Department stating that the reasons assigned by the appellant was false or the Appellant adopted dilatory tactics or with mala fide intention filed the appeal belatedly. The appellant would contend that the Authorised Signatory was suffering from mental imbalance and considerable amount was spent for treatment and delay of 413 days occurred in preferring the appeal and the other appeal against the order of Adjudicating Authority was also pending before the Tribunal, which explanation could be accepted as sufficient cause for having been prevented to file the appeal within the period of limitation and it cannot be stated that the Appellant was totally lethargic or utterly negligent. Delay condoned - Decided in favor of assessee.

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• 2014 (9) TMI 523
  Reopneing of cases to reject claim for the benefit under SFIS and to make recoveries - Held that:- The Bombay High Court in its order [2011 (7) TMI 427 - Bombay High Court] had held that transmission of data, voice or video utilizing the facility of an optic fibre cable laid by petitioner undersea from a point within India to an overseas destination in one continuous and seamless transaction would constitute a supply of a service from India to any other country, under Foreign Trade Policy. Task of PIC (Policy Interpretation Committee) was to interpret Foreign Trade Policy. In process of constructing the policy, it would not be open to committee or, for that matter, to any administrative authority to modify the policy or amend the policy. Directions in DGFT Policy Circular, to reopen the SFIS cases and to make recoveries in accordance with decisions taken at PIC meeting of 5-7-2010, is quashed and set aside. - Decided in favor of assessee

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• 2014 (9) TMI 522
  Import of usable material as scrap materials from Malaysia - whether the respondent is liable to pay duty on the basis of usable things or on the basis of scrap materials. - Held that:- in the statement alleged to have been given by one of the partners of the respondent, only small quantity as well as length of wires have been mentioned. Under the said circumstances, the Court can come to a conclusion that the things which are in question cannot be couched as usable things. The Appellate Tribunal, after considering the available materials on record, has rightly found that the things in question are nothing but scrap materials. - Decided against the revenue.

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• 2014 (9) TMI 521
  Prohibiting the petitioner from operating as customs broker - invoking Regulation 23 of Customs Brokers Licensing Regulation, 2013 - minimum principle of natural justice of affording an opportunity - Held that:- even if Regulation 2013 does not provide in express term for providing an opportunity of hearing, the cumulative reading of the various Regulations envisage that an opportunity of hearing should be given before such a harsh decision is taken by the authorities. Even a suspension under Regulation 19 has a limited life and, therefore, this Court feels that the petitioner has made out a prima facie case and the exigency requires an interim order to be passed.

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• Service Tax

• 2014 (9) TMI 544
  Import of services - Business Exhibitions conducted abroad - Technical Inspections were done outside India - payments have been made by the appellants to parties located abroad - Held that:- Since, these services are performed outside India there is no service tax liability on the services in view of the above provisions. - Decided in favor of assessee. Processing of Textile materials for chemical wash - Held that:- On scrutiny of the records of the appellants, it was noticed that the appellant had paid the amount towards ‘processing of textile materials for chemical wash’ charges to M/s. Testex, Swiss, Glancario and Reni Hendriks, Holand. So, there is no dispute of the fact that the appellant paid the charges for textile processing. Hence, they are eligible for exemption benefit under Notification No. 14/2004-ST dated 10.9.2004, as amended - Demand set aside - decided in favor of assessee.

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• 2014 (9) TMI 543
  Waiver of pre-deposit of service tax, interest and penalty - Suppression of the value of taxable services - intention to evade payment of appropriate service tax - Held that:- appellant had received the show cause notice on 21.4.2010 issued by the jurisdictional commissioner demanding service tax. It is not in dispute that the appellant had not responded to the said notice. Subsequently, the appellant was called upon for personal hearing on 15.11.2011. However, by letter dated 14.11.2011, the appellant sought time to appear for the personal hearing. Hence, the personal hearings were fixed on 07.12.2011, 27.12.2011 and 18.01.2012. Since the appellant did not appear for the personal hearings, the Commissioner, with no other option, had passed the final order confirming the demand. In any case, no specific provision of law is alleged to have been violated by the Department, on the contrary, we find that a show cause notice has been issued and received by the appellant, for which no reply has been filed by the appellant. Thereafter, notices sent for personal hearing have been returned unserved as the door was locked. - Decided against assessee.

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• 2014 (9) TMI 542
  Export of service or not - revenue contended that said advertisement and promotion activity was carried in India for the promotion of the money transfer business in India - according to revenue services in question were performed, delivered, received, used and exhausted in India - Appeal against the order of Tribunal [2012 (12) TMI 424 - CESTAT, DELHI (LB)] admitted by the high court.

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• 2014 (9) TMI 541
  Waiver of the pre-deposit - tribunal directed the appellant to make pre-deposit of 50 lacs against the demand of 63,57,940/- - request for adjournment was not accepted by the tribunal - principle of natural justice - Held that:- Apparently the impugned order was passed without hearing the petitioner. In the order itself it was recorded that a request was made on behalf of the petitioner for an adjournment on the ground on inconvenience of the counsel for the petitioner. However, having regard to the fact that the appeal was filed long back around two years ago the CESTAT was not inclined to grant any adjournment and thus on the basis of the material available on record the impugned order came to be passed. In view of the petitioner’s plea that it has not collected the disputed Service Tax and that the petitioner is hard pressed for funds, we are of the opinion that it is a fit case for modifying the condition imposed in the impugned order. - petitioner to deposit 50% of the Service Tax demand - decided partly in favor of assessee.

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• 2014 (9) TMI 540
  Challenge to the order of the tribunal restoration of appeal - tribunal has dismissed the appeal for default owing to the failure to comply with the order on the applications for waiving the pre-deposit - Held that:- Such discretionary orders exercised by the Tribunal are not to be interfered with under Article 227 of the Constitution of India which is sought to be invoked by the petitioner in the instant case. - The enlargement of time sought for by the petitioner does not exceed ten months and every endeavour shall be made to have a lis disposed of on merits. - I am not prepared to hold by any stretch of imagination that the Tribunal has exceeded its jurisdiction in restoring the appeals for disposal on merits later. - Decided against the revenue.

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• 2014 (9) TMI 539
  Waiver of pre-deposit - Whether CESTAT is justified in directing to deposit the 50% of Cenvat credit even after making an observation that “on the basis of the decisions referred to supra we find a prima facie case in favour of appellant’? - Held that:- The learned counsel for the appellant submit that the controversy on merits stands concluded in favour of the appellant. However, it is not necessary for the court to go into this question as the matter is still subjudice before the Tribunal. Taking into consideration that the Tribunal has recorded finding of prima facie case in favour of the appellant, we are of the opinion that the interest of the Revenue is protected, if the appellant is permitted to furnish bond to the extent of 50% of the basic Cenvat credit instead of asking the appellant to deposit said amount in cash. - order of tribunal modified.

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• 2014 (9) TMI 538
  Business auxiliary services - assessee received Hi-Speed Oil from the refineries on payment of duty and added some fuel additives on HSD oil and marketed the same in the name and style of "Extra-Mile Super Diesel". - revenue contended that additives were used in order to promote/market their product - Held that:- assessee received the HSD oil from the refineries and added some fuel additives for marketing the same. - the addition of additives in their own units and selling to their customer, cannot be treated as a service provider. - no demand - decided against the revenue.

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• 2014 (9) TMI 537
  Refund claim on realization that service tax was paid wrongly - The appellant had mistakenly paid service tax of 2,02,883/- on installation of raised pavement markers (road studs) for a National Highway during the material period. - unjust enrichment - Held that:- The appellant however, chose not to show the service tax amount in any of the invoices. Therefore, under Section 12B, the appellant will be deemed to have passed on the full incidence of tax to the service recipient inasmuch as the contrary has not been proved by the appellant. There is nothing in the work order to show that the service recipient was not liable to pay service tax to the appellant, nor can the appellant evade a statutory liability on the strength of anything contained in the work order (contract). It is trite law that private parties cannot contract to evade or sidestep statutory obligations. The appellant was obliged under Section 12A to show service tax also in the relevant invoices but they did not choose to do so. - refund denied - Decided against the assessee.

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• Central Excise

• 2014 (9) TMI 536
  Classification of goods - assessee is engaged in the making of denim fabrics for which the company uses air jet looms, which are shuttle-less looms - in the process of making denim fabrics, the company undertakes an operation, whereby the cloth is subject to a process through a machine called 'MONTFORT' machine and that the denim cloth undergoes processing in the 'MONTFORT' machine - According to the assessee, it does not amount to manufacture and, therefore, not liable for duty - Adjudicating held issue in favour of assessee - Held that:- From a bare reading of the Section 35-L, more particularly sub-section (b), it is clear that the said Section stands attracts to the facts of the present case. The decisions, cited by the learned counsel for the respondents, more particularly, Navin Chemicals case (1993 (9) TMI 107 - SUPREME COURT OF INDIA), would clearly reveal that the Courts have consistently held that where the issue directly involves, among other things, determination of rate of duty, the matter should be agitated before the Supreme Court - issue involved relates to classification of products and, therefore, this appeal is not maintainable before this Court - Decided against Revenue.

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• 2014 (9) TMI 535
  MODVAT Credit - Whether the Tribunal is correct in allowing Modvat credit in respect of iron and Steel products falling under Chapter 73 inasmuch as these items are not specified goods under Rule 57Q of erstwhile Central Excise Rules 1944 and are used as structural support to plant and machinery - Held that:- The grievance of the Revenue is that many of the goods are not specified for capital goods under Rule 57Q during the relevant period. However, the substantial question of law raised is whether the Tribunal is correct in allowing MODVAT credit in respect of iron and steel products falling under Chapter 73 which are used as structural support to plant and machinery. The said question was considered by us in CMA No.1265 of 2014 by order dated 10.7.2014. Reliance was placed in Rajasthan Spinning and Weaving Mills Limited cited supra, wherein the Apex Court has applied the user test in a case of M.S.Angles, Beams and Channels used in the erection of machineries and held that it would become component of the same. Therefore, we are of the considered view that credit cannot be denied on the ground that the goods are not covered under the definition of capital goods under Rule 57Q as it stood before 16.3.1995. Following decision of Commissioner of Central Excise, Jaipur vs Rajasthan Spinning and Weavinig Mills Ltd [2010 (7) TMI 12 - SUPREME COURT OF INDIA] - Decided against Revenue.

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• 2014 (9) TMI 534
  Stay Application under Section 35F - Non appearance of assessee - Held that:- Reason given for non-appearance of the counsel for the assessee before the Tribunal at the time fixed appears to be unintentional and bonafide. Accordingly, the order dated 30.10.2013 dismissing the stay application in default and directing the appellant to deposit 100% of the demand duty is set aside. As a necessary corollary, the order dated 11.2.2014 passed by the Tribunal in pursuance thereof, whereby the appeal of the assessee was dismissed for failure of non-deposit is also set aside. The matter is remitted to the Tribunal to decide the application for pre-deposit afresh in accordance with law after affording an opportunity of hearing to the petitioner - Decided in favour of assessee.

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• 2014 (9) TMI 533
  Waiver of pre deposit - Held that:- Interim orders cannot constitute a precedent but there ought to be some consistency even in making interim orders. If in same situation on same grounds, the interim order has been passed imposing certain conditions then in subsequent cases and for maintaining certainty, the Tribunal ought to have passed the identical order. There is no reason for deviating in the present case. There is no grievance made with regard to the financial capacity or otherwise of the assessee. It being a public utility concern, interest of justice would be served if we modify the order passed by the Tribunal and instead of condition of 50% of the deposit of the duty demanded, we direct that on deposit of sum of 15 lakhs within a period of four weeks from today, there shall be a stay in terms of the application made before the Tribunal. To enable the assessee to comply with the modified order and directions, it is directed that no coercive measures be initiated for a period of four weeks - Decided partly in favour of assessee.

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• 2014 (9) TMI 532
  Demanding duty from the firm and penalties were imposed on the firm 20 lakhs imposed as penalty on the appellant, a sum of 17 lakhs has been deposited with the Revenue. Upon production of proof to that extent, the Tribunal shall waive the condition of deposit of the remaining or balance sum of 3 lakhs. The appeal of the appellant shall then stand restored to file. It shall be heard together with the appeal filed by the firm. Both the appeals, thus, stand restored to file and they shall be disposed of on merits and in accordance with law - Decided partly in favour of assessee.

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• 2014 (9) TMI 531
  Validity of Tribunal's order - Tribunal remanded matter back - finding recorded in the said order of remand revealed that the adjudicating officer founded the consideration only on the clearances to the interconnected undertakings and failed to avert to the other legal points canvassed by the petitioner before the said authority - Held that:- In the impugned order the Tribunal have recorded that since the order of remand is not assailed, which has reached in its finality, the petitioner cannot raise the issue which has earlier been raised or not raised which passing a remand order. The aforesaid observation is contrary to the settled proposition of law. The remand was an open one and all the legal points which are available to the petitioner was kept open to be decided by the adjudicating officer - The order of remand cannot stand in the way of raising a legal plea that the same was either raised or not raised in an earlier round of litigation. Probably, the Tribunal was trying to take shelter under Explanation IV to Section 11 of the Civil Procedure Code which estopped the parties to agitate the plea which was available as ground of attack or defence in an earlier proceedings and having not raised, the same cannot be re-agitate - matter remanded back - Decided in favour of assessee.

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• 2014 (9) TMI 530
  Ex parte order - Whether the Tribunal in the given facts and circumstances and in view of the written request for postponement of date on record, erred in proceeding ex parte and passing an order on merits - Held that:- Tribunal was, in the peculiar facts and circumstances, not justified. The Tribunal could have placed the matter on any other date, but with clarification that it would not be postponed or adjourned further on any ground. Once the absence of the Advocate results in grave loss and serious prejudice to a litigant, then, the Tribunal should have, in the larger interest of justice, not passed any orders in the absence of the Advocate or Appellant. The amount of pre-deposit of 5 lacs is the direction issued after expressing an opinion on merits of the controversy. All this, in the absence of the Advocate in the given facts and circumstances, was uncalled for. Appellant pay costs quantified at 25,000 to the Respondents. The costs shall be paid within a period of two weeks from today - Decided in favour of Assessee

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• 2014 (9) TMI 529
  Valuation of goods - representation made to the Central Board of Excise & Customs (Exh.K) pointing out the different views of the Excise authorities in different jurisdictions - Assessee seeks clarification so as to ensure uniformity - No response received - Held that:- interest of justice would be served if this writ petition is disposed of by calling upon the Central Board of Excise & Customs - respondent No. 2 herein to consider and decide the aforesaid representation of the petitioner as expeditiously as possible and preferably within four weeks from the date of receipt of this order - petition disposed of.

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• 2014 (9) TMI 528
  Waiver of pre deposit - Undue hardship - Held that:- The appellant is a manufacturer of various types of castings at their factory. They have purchased MS scrap and SS scrap from registered dealers and they have availed CENVAT Credit. In this case, which is the subject matter of this appeal, the Department Representative submitted that the appellant has availed credit on the basis of invoices showing the description of material MS Round, M.S. Wire, M.S. Wire coils etc., and on investigation it was found that the dealers supplied non-duty paid scrap procured from the market and issued invoices of M.S. Rounds, M.S. Wire, etc., in order to claim CENVAT Credit. The Tribunal after taking note of the statement given by the Managing Director of the appellant regarding the receipt of virgin materials and treated them as scrap, held that it is difficult to accept that a prudent businessman would use virgin material as scrap and such statement is contrary to the statement of the dealers and such material cannot be used in melting scrap in the furnace. Further, the Tribunal pointed out that in terms of Rule 9(5) of Cenvat Credit Rules, 2004, the burden of proof relating to admissibility of CENVAT Credit lies upon the appellant/manufacturer, who avails such credit. The Tribunal, on going through the statement, was prima facie satisfied that the appellant had not made out a prima facie for complete waiver of pre-deposit. Decided against assessee.

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• 2014 (9) TMI 527
  Waiver of pre dpeosit - Exemption under the Notification No. 89/95-C.E. - Held that:- With regard to the nature of manufacturing activity carried on by the appellant and the process viz., refining process, they get refined vegetable oil as the main product and soap stock as a by-product, which was further converted as acid oil and soap sludge and whether these products would clarify as “waste” and entitled for exemption under Notification No. 89/95-C.E. are questions of fact, which the appellant/assessee has to establish before the CESTAT and the CESTAT, would go into the said aspects and render a final finding. reason given by the CESTAT cannot be faulted with. However, taking note of the fact that the status of the assessee as Small Scale Industry and such fact is not in dispute, the appellant is hereby directed to make pre-deposit of 5,00,000 - Decided partly in favour of assessee.

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• 2014 (9) TMI 526
  Coercion While Initiation of Recovery Proceedings – Validity of Circular dated 1-1-2013 – Held that:- In the light of judgment passed by Coordinate Bench, referred to supra and the Court while disposing of the petition directed the appellate authority/CESTAT to hear and decide the stay application of the petitioner as early as possible but preferably within a period of eight weeks of their appearance before the authority. However, at the same time, the respondents were restrained from taking coercive steps for recovery of the demand during the said period. Appellate authority/CESTAT to hear and decide the stay application of the petitioners as early as possible but preferably within a period of eight weeks of their appearance. We further direct that in the meantime, no coercive steps for recovery of the demand shall be initiated. Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (9) TMI 507
  Denial of input tax credit - penal interest under Section 42(3) of TNVAT Act, 2006 - Held that:- Assessing Authority is under mandate to give a reasonable opportunity of being heard, in the event of denying the benefit of Input Tax Credit to registered dealer, who has claimed input tax credit based on invoice, bill or cash memorandum. However, a perusal of the impugned orders, which are subject matter of challenge in these writ petitions would disclose that the respondent has not given an opportunity of personal hearing to the petitioner or to its authorised representative and hence, on this sole ground, the impugned orders passed by the respondent are liable to be interfered with. Matter remanded back - Decided in favour of assessee.

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• 2014 (9) TMI 506
  Difference in stock - Reply to SCN not filed - Held that:- In response to the notice dated 17.4.2014, the petitioner has submitted it's reply on 19.5.2014, and along with the reply, also enclosed a cheque bearing No.001055 dated 19.5.2014, for a sum of 1,22,306/-, and it has produced copy of the Letter Delivery Book, which is available at page No.9 of the typed-set of documents, acknowledging receipt of the same, and it would disclose that it was received by the Office of the respondent on 19.5.2014. However, the impugned order proceeds on the footing that the petitioner/assessee did not file any objection and in the considered opinion of the Court, the same is contrary to record and hence on the sole ground, the impugned order is liable to be set aside and the matter be remanded for fresh adjudication - Matter remanded back - Decided in favour of assessee.

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• 2014 (9) TMI 505
  Denial of exemption from payment of entry tax under the Notification No. A-3-995-ST-V(57) dated July 5, 1995 - Held that:- if no tax is charged on goods in the taxing statute then there is no liability to pay tax but if in terms of the taxing statute the goods are liable to tax and the conditional exemption is granted from payment of tax, then the liability to pay the tax continues even if no tax is paid. In the present matter the petitioner was liable to pay the sales tax under the provisions of the M.P. General Sales Tax Act, 1958 but as a dealer conditional exemption was granted by the Notification dated October 23, 1981. Therefore, though no sales tax was paid by the petitioner for the period in question, its liability to pay the sales tax continued and under the Notification No. 55 dated July 5, 1995, his liability to pay the sales tax was reduced to two per cent, therefore, in terms of the Notification No. 57 dated July 5, 1995, the petitioner was entitled to claim exemption from payment of entry tax on the goods in question on satisfaction of the other conditions, which have been specified in the Notification No. 57 dated July 5, 1995. Impugned orders of the assessing authority dated February 13, 2004 as well as the revisional authority dated January 12, 2005, cannot be sustained and are hereby set aside. The assessing authority is directed to pass a fresh order of assessment by treating that the Notification No. 57 dated July 5, 1995 is attracted in the case of the petitioner, since the petitioner is liable to tax at two per cent on the sale under item No. 2 of the Notification No. 55 dated July 5, 1995, and extend him the benefit accruing from the exemption Notification No. 57 dated July 5, 1995, if the petitioner satisfies all other relevant conditions of the said notification. Decided in favour of assessee.

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• 2014 (9) TMI 503
  Sales tax exemption - production of computer stationery under the Assam Industries (Sales Tax Concessions) Scheme, 1997 - Held that:- It is seen that for production of computer stationery the raw materials used are paper rolls and carbon rolls. In order to qualify any product as computer stationery, the said product must be perforated on both sides/ edges of the paper and must also be foldable. Such perforation must be of certain specifications so that such paper can be fed into the computer printers and if it is a continuous paper, such paper must be horizontally perforated so that the continuous paper can be folded and torn off. Therefore, unless such paper is subjected to such perforation with certain specifications, the same cannot be used as computer stationery. Petitioner was engaged in the manufacturing of computer stationery with carbon. The carbon papers are attached to the plain papers and thereafter perforated with necessary specifications and the end-products are papers with carbon for the use by the computer. The carbon element, which is another raw material for production of the computer stationery becomes an integral part of the product which when properly implanted to the normal paper becomes an identifiable distinct product to be used only for the purpose of computer printing and known in the commercial parlance as computer stationery. While ordinary paper may be also used for computer printing, computer stationery having distinct characters as stated above is used only for computer printing. Activity of the petitioner, involving certain processes with the aid of machines by integrating plain paper with carbon and which is perforated under certain specifications, and known in the common trade parlance as a computer stationery, would qualify as a manufacturing process. The process applied results into transformation of the two commodities of paper and carbon used as raw materials to an integrated and non-separable product assuming an identity of a different article or commodity known as computer stationery in the common trade parlance. Decided in favour of assessee.

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