Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 22, 2014
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Claim on corporate social responsibility – Expenses incurred wholly and exclusively for the purpose of business - upliftment of the Adivasis in the locality - claim allowed as business expenditure - AT
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Exemption u/s 54 – computation of LTCG - The mere filing of a SLP or a Civil Appeal by a party cannot be a ground for either seeking a reversal of the order or for seeking an adjournment - AT
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Royalty paid treated as capital expenses - the assessee company did not obtain any proprietary or ownership right of trademark or knowhow, no asset was created or acquired - held as revenue expenditure - AT
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Business income treated as income from house property – the mere fact of attachment of income to any immovable property cannot be the sole factor for assessment of such income as income from house property - AT
Service Tax
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Simultaneous penalty u/s 76 and 78 - Respondent is situated in Punjab and therefore judgement pronounced by Punjab and Haryana High Court which is jurisdictional High Court, has to be followed - penalties are not imposable simultaneously even prior to amendment on 10.5.2008 in the jurisdiction of Punjab & Haryana High Court - AT
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Business support services (BSS) - In the absence of any knowledge as to what are the purposes for which the service was used, how one can reach a conclusion that the service received by the customers of the appellant could be one of the various services listed under support service of business or commerce is difficult to imagine - revenue failed to prove - demand set aside - AT
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CENVAT Credit - Appellant are entitled for input service credit on towers and cabin, which have been used by the appellant for providing output service under the category of 'Business Auxiliary Service' in the facts of the case. - AT
Central Excise
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CENVAT Credit - plastic crates were being used for the safe transportation of the goods from the place of the manufacture to the place of consignee and the cost of plastic crates is included on pro-rata basis in the assessable value - credit allowed - HC
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Seizure of goods - Discrepany in RG-1 Register - on an earlier occasion similar discrepancy of the goods not being accounted for in the R.G.-1 register had occurred and the appellant was let off in those cases, but the same mistake was being repeated again - levy of penalty confirmed - HC
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Refund claim of amount of cenvat credit reversed wrongly - when the amounts were paid by the appellant and appellant cannot claim a mistake on his part - AT
Case Laws:
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Income Tax
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2014 (9) TMI 629
Validity of reopening of assessment – tangible material to suggest escapement of income - Held that:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - AO has got the reports from the newspapers and then AO also mentioned in the assessment order the steps taken for obtaining the information from Lokayukta, various enquiries caused including statements recorded from the Officers involved in export of iron ore before reopening assessment - AO has prima facie belief to reopen the assessment u/s 147 - At the stage of reopening the assessment, it is not necessary to examine the quantum of escapement - What is required to be verified is whether there is any belief for coming to a decision whether income has escaped assessment - there is prima facie belief for reopening the assessment – it cannot be held that AO has no reason to believe at the time of reopening the proceedings – Decided against assessee. Addition on suppression of sale value of exports – Held that:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - AO has taken exports by NMDC during the year of ₹ 2517,21,27,295 - Relying upon Mysore Minerals Ltd. vs. ACIT [2013 (9) TMI 676 - ITAT BANGALORE] – there was no reason to confirm the addition of the amount, as the assessee company had furnished all the details required by the A.O. and assessee has accounted for all the amounts it received - There is no iota of information that assessee or any agent received any amount over and above the amounts accounted in the books of accounts - I.T. Act does not permit making additions on hypothetical income particularly, as suppression of sales when there is no evidence at all - Additions of ₹ 2517,21,27,295 is set aside as it cannot be made on presumptions and hypothesis – Decided in favour of Assessee. Addition of Mine closure obligation - Expenses accrued bases on the quantity extracted - Whether the CIT(A) has erred in disallowing the mine closure obligation to the extent relating to the project under construction or not having any production during the year – Held that:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - Mine closure obligation is not a contingent liability but ascertain liability - it has to be verified that whether assessee has made the claim on the mines which are in working condition which are being operated or not - Following the decision in NMDC Ltd. Hyderabad Versus Joint Commissioner of Income-tax [2014 (3) TMI 682 - ITAT HYDERABAD] - If the assessee has made the claim on mines which have not started operations, the same cannot be allowed - ascertainability of liability is to be ascertained year-wise - the assessee is directed to furnish the relevant data to the AO towards the mines closure obligation and A.O. is directed to verify and allow the amount accordingly – Decided in favour of Revenue. Depreciation on lease hold land disallowed – Held that:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - Assessee rightly contended that the denial of claim of depreciation has been made on misinterpretation of law and the applicability - Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to use which entitles the assessee to claim depreciation - A straight line method of claiming the writing off of lease hold rights for the period of lease cannot be denied to the assessee for the simple reason it being intangible asset has been written off which pertains to land being an intangible asset - All expenses are incurred for the purpose of business and are incidental to the holding of rights were claimed u/s.32(1)(ii) being the license to carry out the mining therefore could not be denied insofar as the Government and the lessee are in control of the asset - The definition of depreciation has been misconstrued for the purpose of allowing deduction by the AO and the CIT(A) in holding a view on the promulgation of Section 32(1)(ii) with effect from the year 1998-99 which has been further amended w.e.f. AY 2003-04 - the assessee is entitled to depreciation as charged to the P & L account in accordance with its business exigencies – thus, the assessee is eligible for claim of depreciation on lease hold land – Decided in favour of assessee. Addition of stamp duty and registration charges – Capital in nature or not – Held that:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] and completely relying upon CIT Vs. Panyam Cements and Minerals Industries Ltd. [1996 (9) TMI 49 - ANDHRA PRADESH High Court] it has been held that stamp duty paid for renewal of mining lease is a revenue expenditure - if the expenditure incurred by the assessee for first time with respect to the assets claimed as capital asset - the AO is correct in treating the amounts as capital in nature - expenditure incurred by the assessee for the first time with respect to the assets claimed as capital asset, depreciation has to be granted and then this expenditure is also to be considered as capital eligible for depreciation – Decided partly in favour of Assessee. Claim on corporate social responsibility – Expenses incurred wholly and exclusively for the purpose of business – Held that:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - the contribution is only a welfare measure for the upliftment of the Adivasis in the locality where the mining unit was situated and also for the welfare of the employees of the assessee – relying upon NMDC Ltd. Hyderabad Versus Joint Commissioner of Income-tax [2014 (3) TMI 682 - ITAT HYDERABAD] - This contribution would definitely go a long way in conducting the assessee's mining business in a profitable manner - indirectly all the contribution made by the assessee takes care of the education of the employees' children - This would certainly be a welfare measure on the part of the assessee for carrying out the business in an effective and efficient manner – thus, the contribution has to be treated as revenue expenditure for the purpose of the business – thus, there is no justification in disallowing the amount – Decided in favour of Assessee. Preoperative expenses disallowed – Held that:- Following the decision in NMDC Ltd., Hyderabad. Versus Joint Commissioner of Income-tax [2014 (3) TMI 682 - ITAT HYDERABAD] - The CIT(A) gave a categorical finding that "these expenses are definitely capital and have been rightly categorized so by the appellant and also certified as capital expenditure by the auditors - It is only at the time of computation of income the assessee claimed this expenditure as revenue without providing any details or reasons” - the assessee has not placed any evidence to establish the expenditure incurred as revenue expenditure – thus, there was no infirmity in the order of the CIT(A) – Decided against Assessee.
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2014 (9) TMI 628
Leave encashment u/s 43B – Held that:- In assessee’s own case for the earlier assessment year, Apex Court has categorically held that the assessee may pay tax and thereafter make the claim in its return which has been done as such the same is allowable - No doubt the position on facts was influx during the time when the return was filed however with the passage of time the position on facts qua the issue under consideration would have crystallized - Consideration of these relevant facts heeding to the request of the revenue that qua the provisions it is necessary to see what amount was actually paid as per the HR policy of the assessee, the issue is restored to the AO who shall necessarily take into consideration the decision of the Apex Court wherein the SLP is pending – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. Treatment of expenses on repair of plant and machinery – Capital or revenue expenses – Held that:- There is no similarity established by the Revenue with the facts taken into consideration by the Tribunal and the Hon'ble High Court in 1994-95 A.Y - Nothing has been placed to show that the machines were lying idle or had become unfit for production and in fact no argument in that line has been advanced by the Revenue - the arguments of the Revenue have no merit – Decided against revenue.
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2014 (9) TMI 627
Genuineness of expenditure – Whether construction can be continued even after date of completion certificate – Held that:- CIT(A) while deleting the addition has given a finding that AO has not doubted the source of payments and further the payments have been made through bank and TDS has also been deducted wherever applicable - AO has failed to appreciate that the occupancy certificate does not bar the Assessee to carry out certain works which does not allow structural changes - for disallowing the expenses - AO has to bring on record evidence to prove that the expenses were not for the business purpose or were bogus in nature, which has not been done by AO - Revenue has not brought any material on record to controvert the findings of CIT(A) – the order of the CIT(A) is upheld – decided against revenue. Proportionate interest expenses – Whether the expenses was utilized for the business purpose or not – Held that:- CIT(A) after considering the submissions of the Assessee and perusing the ledger account and the loan account has given a finding borrowed amount was used for the business purposes and therefore the interest was allowable - CIT(A) has also accepted the submission of Assessee that the deposits were carried forward from earlier years and in earlier years no disallowance on account of business purpose was made - Revenue has not brought any contrary material in its support to contradict the findings of CIT(A) – the order of the CIT(A) upheld – Decided against revenue. Confirmation of long term gain on sale of land - Held that:- Assessee contended that it has incurred loss on sale of land and at the same time has earned gains on the sale of building (which is a depreciable asset) - During the course of hearing a specific query was put to the assessee and he was asked about the basis of bifurcation of the value of land and building - assessee could not satisfactorily explain the basis of bifurcation and thus the basis of bifurcation appears to the arbitrary - AO has arrived at a conclusion that by adopting a most consecutive approach the annual appreciation of land was 20% on year to year basis - AO has not brought any material on record to support its conclusion - an estimated addition to cover the revenue loss due to arbitrary bifurcation in the valuation of land and building by the Assessee will meet the ends of justice – the addition is restricted to ₹ 10 lacs – Decided partly in favour of assessee.
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2014 (9) TMI 626
Exemption u/s 54 – computation of LTCG - indexation benefit for computing the indexed cost of acquisition – relief has been denied by the AO on the footing that benefit of indexation is available only from the date the property devolved on the assessee by way of gift and not from the date when it was held by the previous owner. - Held that:- referring to the two sections 29A; 2(42A); Explanation 1(b) to section 2(42A) and the expression “indexed cost of acquisition” used in section 48 defined in Explanation (iii) and Explanation (iv) it was submitted that the claim had wrongly been rejected by the AO and infact was fully covered in the assessee’s favour by virtue of the order of the Mumbai Bench of the Tribunal in the case of Manjula J. Shah [2009 (10) TMI 646 - ITAT MUMBAI] - order of the Tribunal in Manjula Shah was confirmed by the Hon’ble High Court [2011 (10) TMI 406 - BOMBAY HIGH COURT] The mere filing of a SLP or a Civil Appeal by a party cannot be a ground for either seeking a reversal of the order or for seeking an adjournment - The Courts and Tribunals are necessarily required to decide the issues arising before them on the basis of law as available on date and not keep the issues in abeyance ad infinitum on the plea that the decision has or may have been appealed against before a Higher Forum – revenue has made no attempt whatsoever to even seek an adjournment to verify the actual position and has merely made the submission casually - in case there is any interim order of a Higher Appellate Forum staying the proceedings, the Tribunal is bound to follow it – Decided against revenue.
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2014 (9) TMI 625
Validity of assessment u/s 153C r.w.s. 143(3) – Estimation of business income on higher side – Assessment made on assumptions – Held that:- The mandatory conditions of recording satisfaction not complied with to invoke the jurisdiction u/s 153C of the Act - addition in search cases needs to be supported by the seized materials found at the time of search - no material seized in the search shows that it is undisclosed income - the addition is made on the basis of the scribbling found in the Cheque book counter foils found in the survey which was conducted subsequent to the search proceedings - The assessment is not on the basis of the information secured from the incriminating material but on assumption and presumption - Thus, the addition in assessment is bad in law on the facts and circumstances of the case – AO has made addition as Unexplained investments by comparing the AO’s own determined estimated income with that of the determined Unexplained investment and brought to tax the higher of the both, which is not permissible in search proceedings - the assessment is purely on the basis of surmises and estimate and it is not a case of any incriminating material seized during the course of search. The issue relating to validity of assessments made by the AO was not only specifically raised by the assessee in the appeals filed before the CIT(A), but it was also vehemently argued by making a detailed submission and this position, which is clearly evident that the legal issue challenging the validity of assessments was not given up by the assessee - the issue relating to validity of assessments is a legal issue and the assessee is entitled to raise the same for the first time even before the Tribunal as decided in National Thermal Power Corporation Ltd. v. CIT [1996 (12) TMI 7 - SUPREME Court] – thus, the matter is remitted back to the CIT(A) for adjudication – Decided in favour of assessee.
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2014 (9) TMI 624
Royalty paid treated as capital expenses - Held that:- The amounts were kept by the assessee for use of trademark and knowhow for certain period that too under strict terms and conditions and not for setting up any factory - after the termination of agreement in both the cases, the use of knowhow or trademark was not available to the assessee – the assessee company did not obtain any proprietary or ownership right of trademark or knowhow, no asset was created or acquired - there was no enduring benefit to the assessee and there was no element of capital expenditure in the payment of royalty - The royalty paid to BDF or Dr. Wild & Co. was not for any outright or acquisition of knowhow or trademark or any other asset but was for the use only for a specified period that too under various restrictive covenants - The payment made by the assessee to the Hungarian company on the basis of the collaboration agreements was a capital expenditure incurred by it - the drawings/designs etc. were actually “plant” as defined u/s 43(3) of the Act and would therefore, be a depreciable asset - it is not an admitted fact that the expenditure incurred by the assessee was of a capital nature. – Decided in favour of assessee.
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2014 (9) TMI 623
Business income treated as income from house property – Held that:- The assessee has declared the receipts on account of business arrangement fee under the head "business" and computed on the basis of percentage - The Business Arrangement Agreement dated 23.08.2002 entitled the assessee to receive a fixed consideration per annum with an increase every year @ 15% and thereafter every three years the fee shall be increased with mutual consent - The AO in earlier years and subsequent years has accepted the position as it is and treated the receipts declared as business income - the mere fact of attachment of income to any immovable property cannot be the sole factor for assessment of such income as income from house property - It is necessary to find out the primary object of assessee while exploiting the property - If it is found that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from house property - the main intent ion is to exploit the immovable property by way of complex commercial activities, in that event it must be held as business income - it was a case of rental or commercial utilization of properties, which has been accepted, there is no reason to uphold this deviation – the order of the CIT(A) – Decided against revenue.
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2014 (9) TMI 622
Addition u/s 41(1) – Sundry creditors – Held that:- The matter needs re-examination at the end of the AO - the amount had become time barred and moreover, the assessee had transferred the amount to profit & loss account - no amount is transferred to the profit & loss account - there is no finding by the AO that the amount has become barred by limitation – relying upon Commissioner of Income-Tax Versus TV Sundaram Iyengar And Sons Limited [1996 (9) TMI 1 - SUPREME Court] - obtaining by the assessee of a benefit by virtue of remission or cessation is the sine qua non for the application of this Section - the AO needs to examine the case of each and every creditor and has to ascertain whether the assessee has obtained any benefit by virtue of remission or cessation of any credit liability in respect of any creditor - Section 41(1) would be applicable only where there is a remission or cessation of any liability – thus, the matter is remitted back to the AO for reexamination – decided in favour of assessee. Expenses incurred on pooja expenses on which FBT was paid – Held that:- During the accounting year relevant to the assessment year under consideration, the assessee incurred expenditure under the head 'Pooja Expenses' - keeping in view the prevailing Indian customs and traditions some expenditure on pooja is necessary for smooth business operations and making employees happy to boost their productivity" - the turnover of the assessee is more than ₹ 92 crores and the Pooja expenses are only ₹ 2,81,113 - The business of the assessee is labour intensive because it is in the business of civil construction - the expenditure incurred by the assessee is quite reasonable and the disallowance of 50% of the expenditure on the presumption that the same was incurred for non-business purposes is not justified – Decided partly in favour of assessee. Building material expenses and consumable expenses disallowed – Held that:- The AO considered all the bills and vouchers and then he found only few mistakes - the AO has mentioned, the assessee has submitted the bills of all the parties for building material purchased and consumables along with copy of some ledger accounts and bank statements - when during remand proceedings, all bills and vouchers have been produced and have been examined by the AO and total discrepancy was found only in respect of two bills, there was no justification for adhoc disallowance at 1% - the AO himself has written to the CIT(A) that the quantum of disallowance should not be less than the mistake detected in the remand proceedings – the amount is restricted at ₹ 5,17,540 – Decided partly in favour of assessee. Vehicle Running & Maintenance expenses disallowed – Held that:- The company and the directors are separate legal entities and even if there is some personal use of vehicles by the directors, it cannot be said as personal use of vehicles by the assessee which is a company – relying upon Deputy Commissioner Of Income-Tax Versus Haryana Oxygen Ltd. [1999 (12) TMI 107 - ITAT DELHI-D] - the Government has brought in FBT and assessee has already paid tax under the FBT which will take care of personal use of vehicles, if any, by the directors/employees – thus, the order of the CIT(A) is upheld – Decided against revenue.
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Service Tax
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2014 (9) TMI 649
Levy of penalty for late deposit of service tax - simultaneous penalty u/s 76 and 78 - service tax was recovered from the customers - amount was deposited after initiation of inquiry proceedings - Held that:- Section 68 makes persons providing taxable services to pay Service Tax at the rates specified under section 66. However section 73A is the relevant section to recover Service Tax in the instant case, and not section 68, Section (73A) stipulates that any amount collected as Service Tax is to be paid to the Government forthwith. This has not been done in this case. Surprisingly, Commissioner (Appeals) confirmed payment of interest but set aside imposition of penalties though for both impositions, same principle applied. A clear reading of sections 76 and 78 reveals that penalty under both the sections is imposable for short payment / non payment of Service Tax. Section 76 is applicable to ‘Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax’ similarly Section 78 is applicable for non payment / short payment of service tax for any ‘contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax’. The Chapter mentioned in these provisions is Chapter V of the Finance Act, 1994 which also contains Section 73A. Further Service Tax Rules, 1994 framed under section 94 of the Act regarding collection and payment of the Service Tax are also applicable in the matter as these rules also framed under the same Chapter V of the Finance Act, 1994. Regarding simultaneous penalty - Held that:- The period involved in the matter is March 2008. It is noted that Section 78 was amended w.e.f. 10.5.2008 to the effect that ‘if penalty is payable under this section, the provisions of section 76 shall not apply’. Therefore, after 10.5.08 only, one of these penalties can be imposed at a time. For the period prior to this amendment, it is noted that the matter was rather debatable and different High Courts have interpreted the issue differently. - Respondent is situated in Punjab and therefore judgement pronounced by Punjab and Haryana High Court which is jurisdictional High Court, has to be followed. Accordingly I hold that both these penalties are not imposable simultaneously even prior to amendment on 10.5.2008 in the jurisdiction of Punjab & Haryana High Court. Penalty under section 78 which is equivalent to the amount of Service Tax evaded, is imposable from the Respondent along with interest recoverable under section 75 of the Act.
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2014 (9) TMI 648
Business support services (BSS) - customers used their business center in the hotel - Held that:- It is not known for what purpose the business center was used. In the absence of any knowledge as to what are the purposes for which the service was used, how one can reach a conclusion that the service received by the customers of the appellant could be one of the various services listed under support service of business or commerce is difficult to imagine. Basically the responsibility to show that that a taxable event has occurred and service is leviable to tax is required to be proved by the Revenue. In this case obviously it is an assumption on the part of the Revenue that taking print out, photocopying and use of computer fall under the category of BSS. - demand set aside - decided in favor of assessee. Lapse of cenvat credit - Held that:- In the month of March 2004, a part of the liability was paid by PLA and another part by utilization of credit. In other words, the total tax paid from December 2003 to March 2004 by utilizing the credit comes to ₹ 4,94,494.00. This is actually equal to 35% of their liability from May 2003 to March 2004. There is no rule which says that the credit accumulated during the month should be used in the same month. In fact no time frame has been fixed in the rules. In these circumstances, the utilization of credit to the extent of ₹ 4,94,494/- during December 2003, January 2004, February 2004 and March 2004 is in order and in consonance with Rule 3(5) of the Cenvat Credit Rules, 2002. - demand set aside - decided in favor of assessee.
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2014 (9) TMI 647
CENVAT Credit - inputs and input services - availment of Cenvat Credit on parts of Towers, BTS Cabins etc. - output services being Passive Telecom Infrastructure - demand of interest on reversal of cenvat credit - Held that:- As per Rule 2 (k) (ii) of the Cenvat Credit Rules, 2004 all goods are entitled for Cenvat Credit which are used for providing any output service. In this case nowhere it is disputed by any of the parties that the tower/BTS cabins were not used by the appellant for providing service namely 'Business Auxiliary Service'. Therefore, the Cenvat Credit cannot be denied. Adjudicating authority has heavily relied upon the decision of Bharti Airtel Ltd. [2012 (4) TMI 362 - CESTAT, MUMBAI]; in the said case the facts are totally different to the facts of the case in hand. In fact in that case appellant was engaged in providing cellular telephone service and as per Board Circular No. 137/315/2007 CX-4 dt. 26.2.2008, it is clarified that no Cenvat Credit on towers and BTS cabin is permissible for Cellular Phone Service Provider. - In the instant case, the towers and the cabins are used by the appellant as Passive Telecom Infrastructure for providing output service namely 'Business Auxiliary Service' as declared by the appellant to the department in 2005 and agreed to by the department in their reply dt. 20.9.2005. Appellant are entitled for input service credit on towers and cabin, which have been used by the appellant for providing output service under the category of 'Business Auxiliary Service' in the facts of the case. - Decided in favor of assessee. Levy of Interest on reversal of unutilized cenvat credit - Held that:- The case in hand although the appellant has taken the Cenvat Credit, the same has been reversed on pointing out therefore the facts of this case are similar to the case of Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] and distinguishable from the facts of the case of Ind-Swift Laboratories Ltd. (supra), as in the case of Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court], the Cenvat Credit was taken by the assessee on the strength of fake invoice and credit was not reversed by them but it was recovered by way of demanding duty. Therefore, the said facts are not applicable to the facts in hand. In these terms, we hold that the appellants are not liable to pay interest for wrongful availment of Cenvat Credit which has been reversed before utilization by the appellant - Decided in favor of assessee.
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2014 (9) TMI 646
Referring a matter to larger bench - Rectification of mistake - guidelines laid-down by the Constitution Bench of Supreme Court in Pradip Chandra Parija and Others vs. Pramod Chandra Patnaik and Others [2001 (12) TMI 71 - SUPREME Court] and various other decisions - Held that:- The misc. order dated 09.09.2013 had not per se referred the noticed conflict for resolution by a Larger Bench of five Members. It merely recorded an opinion that there was an extant conflict between three Member Bench decisions and such conflict requires resolution by a five Members Bench. This order directed that the papers be placed before the President, CESTAT, for appropriate orders; after clearly recording the issue on which conflict of opinion existed. It is clear that the 09.09.2013 order expressly and clearly identified the specific issue presenting the conflict and had referred the matter to the President, CESTAT, after recommending that an appropriate case is made out for reference to a Larger Bench. Misc. order dated 05.05.2014 reframed the issues to be considered the larger bench of five Members. The core issue to be considered for resolution by the five Members Larger Bench was already identified and specified in Misc. order dated 09.09.2013. The order dated 05.05.2014 merely annotated integers of the issue referred for resolution by the Larger Bench while indicating the probable date for consideration of the Larger Bench i.e. around 09.06.2014; and directed that notices be put up on notice boards of advocates associations at all Regional Benches, so as to afford opportunity to other Members of the Bar, to assist the Larger Bench in answering the identified conflict. The basis for the present applications (seeking review of the misc. applications dated 09.09.2013 and 05.05.2014) is ex-facie misconceived and proceeds on a basic incomprehension of these orders. The CST, New Delhi erroneously assumes that the order dated 09.09.2013 disagreed with the ratio of the Larger Bench in BSBK Pvt. Limited. Clearly, that is not the position. The issues referred to the larger Bench (of five members) essentially involve critical analyses of several precedents, deep principles of constitutional law, elucidation of allocation of legislative powers in our federal context, interpretation of statutes and unraveling of the meaning of evolving statutory prescriptions in an acutely dynamic legislation - The Finance Act, 1994. In our considered view, such issues are better handled by professional counsel, than AR’s. The CBEC/ Finance Ministry may consider this aspect, as well. - Misc. application dismissed - Decided against the revenue.
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2014 (9) TMI 645
Benefit of credit of service tax - outdoor catering services - Held that:- admittedly outdoor catering services stand excluded from the definition of input services w.e.f. 01/04/11. The appellant had stopped availing the credit when such services were being provided to their regular employees. However, they have taken the credit in respect of the service tax paid on the outdoor catering services being provided by them to the contract labour. Appellant would become entitled to the service tax paid on the outdoor catering services even in respect of their regular employees in as much as it is also their statutory duty to provide outdoor catering services to their regular employees. However, we find that the dispute only relates to the such services being provided to the contract employees. We further find that there is no such differentiation made in the said exclusion clause in respect of the regular employees or the contract employees - appellant have also not pleaded any financial hardship - Partial stay granted.
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2014 (9) TMI 644
Revision applicable before the Government of India - Levy of penalty u/s 77 for delayed submission of ST-3 return in violation of Section 70 - Held that:- Government observes that the issue involved in impugned case is of delayed submission of ST-3 return in violation of Section 70 of the Finance Act, 1994. Government finds that this issue does not fall in the category of cases mentioned in proviso to Section 35B(1) of the Central Excise Act, 1944 and hence revision application is filed beyond jurisdiction and not maintainable under Section 35EE of the Central Excise Act, 1944. The applicant is required to file appeal before Hon’ble CESTAT. - application rejected.
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2014 (9) TMI 643
Restoration of appeal before CESTAT - tribunal directed to deposit entire tax demanded - At the stage of entertaining this appeal this Court had directed the appellant to deposit 50% of the demand without interest or penalty. It is not in dispute that the order of this Court dated 9-10-2013 have been complied with and the amount concerned has been deposited. - Tribunal to hear appeal on merit.
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2014 (9) TMI 642
High Court has admitted the appeal on the substantial question of law (i) Whether the expenses incurred after sales service is an input service as defined in Rule 2(l) of the CENVAT Credit Rules, 2004? (ii) Whether the CESTAT was right in holding that if after sales service expenses are included in the assessable value, the assessee is entitled for input service credit on the expenses incurred on after sales charges?
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2014 (9) TMI 641
Supreme Court admitted the appeal against the decision of tribunal [2012 (12) TMI 425 - CESTAT, AHMEDABAD] and [2014 (2) TMI 618 - CESTAT AHMEDABAD] involving the issues of Classification of taxable services u/s 65A - Supply of Tangible Goods service u/s Section 65(105)(zzzzj) - Mining of Mineral, Oil or Gas service' u/s Section 65(105)(zzzy) - Survey and Exploration of Mineral, Oil and Gas service
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2014 (9) TMI 640
Supreme Court has admitted an appeal against the decision of Tribunal [2006 (3) TMI 37 - CESTAT MUMBAI] - Tribunal had observed that Construction contract cannot be subject to service tax as consulting engineering service – Work contact cannot be vivisected and part of it subjected to service tax
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Central Excise
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2014 (9) TMI 636
Clandestine removal of goods - Seizure of Grey Cotton Fabrics during interception of vehicle from the transporter removed without valid duty paying documents and duty - Held that:- The very fact that the when the goods were intercepted from the transporter there is no valid duty paying documents and this proves beyond doubt that the goods were clandestinely removed without payment of duty. The appellant failed to justify the invoice No.59 dt. 24.2.2004 which relates to the goods intercepted by the officers. As clearly held by the lower authorities, when all the invoices clearly mentioned the date and time of removal, except few invoices including invoice No.59 dt. 24.2.2004 which did not indicate at the time of removal clearly shows malafide intention on the part of the appellant for using the same invoice for multiple clearance. Since Commissioner (Appeals) has already taken the shortage quantity noticed in the factory premises and the seized quantity together and re-determined duty demand only on balance quantity, confiscation and the revised duty demand of duty and imposition of redemption fine is justified and liable to be upheld. appellant is eligible for the reduced penalty of 25% as per Section 11AC of the Central Excise Act - Decided partly in favour of assessee.
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2014 (9) TMI 635
CENVAT Credit - use of plastic crates - A.O. refused to allow the claim of the assessee-defendant by observing that plastic crates are not being used in or in relation to the manufacture of final products and hence not entitled for CENVAT credit - Held that:- Plastic crates were being used for the safe transportation of the finished goods i.e. Auto Electric parts from the factory to the customers. The plastic crates were being used for the safe transportation of the goods from the place of the manufacture to the place of consignee and the cost of plastic crates is included on pro-rata basis in the assessable value of the finished excisable goods on which duty was being discharged. in the assessee-respondents' own case, the MODVAT credit had been allowed by the Department in earlier assessment years on the packing material - no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained along-with the reasons mentioned therein - Decided against Revenue.
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2014 (9) TMI 634
Seizure of goods - Discrepany in RG-1 Register - Held that:- fact, that the said goods was not accounted in the R.G.-1 register, is indicative of the fact that there was an attempt of clandestine removal of the goods. Non accountal of goods in the statutory record is a sufficient ground for confiscation. The Tribunal has also found that on an earlier occasion similar discrepancy of the goods not being accounted for in the R.G.-1 register had occurred and the appellant was let off in those cases, but the same mistake was being repeated again and, therefore, if penalty was not imposed, the same mistake would continue to be adopted by the appellant. no proper explanation was given by the appellant as to why the goods could not be accounted for in the R.G.-1 register. The value of the goods found in excess was ₹ 90,17,715/- for which a fine of ₹ 50,000/- and a penalty of ₹ 10,000/- was imposed, which in the circumstances was justified - no proper explanation was given by the appellant as to why the goods could not be accounted for in the R.G.-1 register - Decided against assessee.
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2014 (9) TMI 633
Cenvat Credit - Applicability of Amendment - supply of goods to SEZ - Whether the amendment to the Cenvat Credit Rules 2004, by substituting clause(i) of sub-rule (6) of Rule 6 of Cenvat Credit Rules 2004 by way of notification No.50/2008-C.E (N.T.) dated 31.12.2008 is prospective in operation or retrospective - Held that:- benefit of non-reversal/maintenance of separate inventory was extended when the excisable goods were cleared to a "unit" in a special economic zone. The said benefit was not extended when the excisable goods removed without payment of duty or cleared to a "developer" of a special economic zone for their authorized operation. However, in exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government amended the Cenvat Credit Rules, 2004 by issue of a notification - amendment has to be construed as retrospective in nature and the benefit of Rule 6(6)(1) as amended in 2008 has to be extended to the goods cleared to a "developer" of a Special Economic Zone for their authorized operations. Therefore, we do no see any merit in these appeals - Decided against Revenue.
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2014 (9) TMI 632
Denial of refund claim - exemption under Notifiction No. 6/2002-CE dtd 1.3.2002 - Duty paid at the time of clearance under self-assessment - Held that:- assessments were never made provisional and the original duty assessment was not varied. Cestat Mumbai, in a difference of opinion matter, has also held in the case of M/s Nicholas Piramal (I) Ltd vs Commissioner of Customs, Airport, Mumbai [2014 (9) TMI 621 - CESTAT MUMBAI (LB)] that exemption not claimed at the time of assessment cannot be claimed by way of a refund claim without challenging the original assessment - Decided in favour of Revenue.
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2014 (9) TMI 630
Availment of modvat credit - Non receipt of inputs - Held that:- As per Rule 57(A) or Rule 57Q of the erstwhile Central Excise Rules, 1944. On perusal of the impugned order, the Commissioner (Appeals) has discussed the issues in detail including the non-receipt of inputs to the respondent’s factory but was directly supplied from the principle supplier to the job workers premises. For better understanding the sequence of movement of inputs from the principal supplier to the job workers - sequence of movements, of inputs from supplier to the job worker and to the respondents, it is seen that they have not received the inputs in their factory but directly supplied from the principal manufacturer to the job workers premises and after the job work is done the goods were returned back to the respondent’s factory. As rightly discussed by the lower appellate authority in his order, the appellants raised 57F4 challans to the job workers only after reversing the credit in their books of account and they finally availed the credit only on receipt of the goods from the job workers, and all transactions of movement & receipt are maintained by the respondents. Following decision of Otis Elevator Co. (I) Ltd. CCE, Mumbai [2009 (6) TMI 825 - CESTAT, MUMBAI] - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (9) TMI 639
Demand of security to the extent of 40% of the valuation of the consignment has been imposed - violation of VAT Act and Entry Tax Act - Held that:- Imposition was at the stage of seizure and not at the stage of penalty and the Court held that imposition of demand of security at the rate of 40% is unjustified and reduced the same to the extent of 15% of the valuation of the goods subject to cash deposit by the revisionist before the authority - amount of penalty being 40% is absolutely disproportionate to the tax, which may ultimately be sought to be levied and the same may be reduced and that so far as the Entry Tax is concerned, the security may be confined to four times of the amount of Tax. although the statute provides 40% by way of penalty but the 40% is the outer limit and it shall be borne in mind that the amount of penalty or security must have a co-relation with the tax sought to be evaded. Therefore, it is directed that the amount of security by way of cash deposit be reduced to four times of the amount of tax which may ultimately be found to be the amount sought to be evaded - Decided in favour of assessee.
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2014 (9) TMI 638
Detention of goods - Movement of goods with intention of evasion of tax - Held that:- Petitioner is ready and willing to pay onetime tax and in respect of compounding fee, he is ready to furnish personal bond and has also drawn the attention of this Court to the provisions of Section 67(4) of the Tamil Nadu Value Added Tax Act, 2006, and would submit that as per the said provision, if the tax is paid or the security is furnished, then the goods so detained shall be released forthwith and in the light of the same, though there is no necessity on his part to pay the compounding fee, since the goods have been detained so longer, he is ready and willing to furnish personal bond for the compounding fee, without prejudice to his rights. The petitioner without prejudice to his rights and contentions, shall pay a sum of ₹ 50,440/- (Rupees fifty thousand four hundred and forty only) being onetime tax, as demanded in the impugned notice, and insofar as the compounding fee of ₹ 1,00,880/-, he shall offer personal bond to the satisfaction of the respondent, both within a period of one week from the date of receipt of copy of this order and on such compliance, the respondent is directed to release the goods detained, in terms of the impugned notice, forthwith - Decided partly in favour of assessee.
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2014 (9) TMI 637
Denial of refund claim - returns were assessed under Section 38 - Held that:- As per Annexure-J dated 01/06/2014, the petitioner is entitled to the amount by way of refund. It is also not in dispute that till date that amount has not been refunded to the petitioner. The Division Bench of the Andhra Pradesh High Court in the aforesaid decision, has categorically stated that withholding of refund to an assessee is permissible only when other proceeding under the Act is pending or where the assessing authority is of the opinion that the grant of refund is likely to adversely affect the revenue. Where none of the aforesaid conditions or circumstances are existing in the instant case, then refusal to refund is illegal. The reason that revisional orders are awaited from the Commissioner of Commercial Tax is not a relevant ground or reason to withhold the refund, particularly when it is not shown that the Commissioner of Commercial Tax has already initiated revisional proceedings under the Act - authorities are directed to refund ₹ 1,06,89,301/- along with interest at 6% p.a. in accordance with Section 50 of the Act - Following decision of Sriram Transport Finance Company Ltd. Versus Commercial Tax Officer and Another [2000 (7) TMI 947 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee.
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