TMI Tax Updates - e-Newsletter
September 23, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

News

1. Calendar for Auction of Government of India Treasury Bills for the Quarter Ending December 2013

2. Calendar for Marketable Dated Securities for October-March 2013-14 Issued

3. Auction for Sale (Re-Issue) of Government Stock

4. Indian Institute of Corporate Affairs Signs MoU with BSE to Collaborate on Developing India’s First CSR Index

5. RBI Reference Rate for US $ and Euro

6. US Rules in Favour of India in Countervailing Duty Investigation on Frozen Shrimp exports from India

7. Effective Rate of Tax on Certain Works Contract Activities Reduced under the Delhi VAT Act with effect from 20.09.2013

8. 7th India-Russia Trade and Investment Forum focuses on Pharma, tourism and services

Notifications

Income Tax

1. 74/2013 - dated 20-9-2013 - IT

Double Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Australia - Amendment in Notification No. GSR 60(E), Dated 22-1-1992

VAT - Delhi

2. F.3(16)/Fin.(Rev-I)/2013-14/dsVI/786 - dated 20-9-2013 - DVAT

Delhi Tax Compliance Achievement Scheme, 2013 (Amnesty Scheme)

Circulars / Instructions / Orders

FEMA

1. 50 - dated 20-9-2013

Opening of Trading Office / Non-Trading Office / Branch Office/ Representative Office abroad

Highlights / Catch Notes

Income Tax

• Section 271(1)(c) Penalty for Undisclosed Income Found During Assessment or Investigation by Assessing Officer.

  Case-Laws - AT : Penalty u/s 271(1)(c) on surrendered income - assessee would be liable for action under section 271(1)(c) in respect of such items only which are discovered by the AO on the scrutiny of return of income or after carrying out investigation and discovering some more items of income not found declared or mentioned in the return of income - AT
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• Tenancy Rights Classified as Capital Assets: Tax Implications u/s 55(2)(a) of Income Tax Act Explored.

  Case-Laws - AT : Capital gains or Income from other sources - Tenancy rights have also been recognized as capital asset within the meaning of section 55(2)(a) of the Act - AT
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• Assessing Officer's Actions Deemed Perversive: Ignored Panel Instructions and Failed to Act on Rectification Request.

  Case-Laws - AT : TPA - On two counts behavior of the AO can be held to be perverse-first he did not obey the instructions of the panel and second he did not take any action with regard to the rectification application filed by the assessee - AT
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• Taxpayer Entitled to Section 244A Interest Even Without Submitting TDS Certificates with Income Tax Return.

  Case-Laws - HC : Interest u/s 244A - Since the benefit of TDS has been allowed to the assessee, interest under Section 244A could not be denied only on the ground that the TDS certificates were not furnished with the return of income - HC
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• Capital gains tax applies only when sale proceeds are received; no tax due if no payment received.

  Case-Laws - HC : Year of chargeability of capital gains tax - capital gain can be charged only on receipt of the sale consideration and not otherwise. How can a person pay the capital gain if he has not received any amount - HC
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• Insurance Corporation Must Apply TDS on Conveyance Allowance for Development Officers; No Authority to Exempt Tax.

  Case-Laws - HC : TDS on Perquisites - Payment of conveyance allowance to Development Officers of LIC of India are salaried persons - LIC is not competent to determine the allowances which are exempted from the tax. - TDS liable to be deducted - HC
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• Court Rules TDS on Cargo Handling Charges Falls u/s 194C, Not Section 194I, Based on Volume Rates.

  Case-Laws - HC : TDS u/s 194I or u/s 194C - The rates for each kind of cargo have also been specified on the basis of the volume of the cargo being handled and not on the basis of time period involved in the execution of the said contract – TDS to be charged under section 194C - HC
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• Taxpayers avoiding penalties u/s 271(1)(c) if they fully disclose previously undisclosed income, especially when linked to assets.

  Case-Laws - HC : Penalty u/s 271(1)(c) - to the extent the assessee makes a cleanbreast of his undisclosed income represented by assets found to be in the possession of the assessee he is not deemed to have concealed his income or concealed particulars thereof - HC
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• High Court Dismisses Writ Petition on Transfer Pricing, Citing Alternative Remedy; Section 92CA (2A) Stands Firm.

  Case-Laws - HC : Writ petition - alternative remedy - Transfer pricing adjustments - ALP - retrospective effect to section 92CA (2A) - sale of the call centre business - Writ Petition dismissed as alternative remedy is available - HC
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• Provision for Investment Diminution Must Be Added Back to Compute Book Profit u/s 115JB, Court Rules.

  Case-Laws - AT : MAT - Computation of book profit u/s 115JB of the Income Tax Act – As the relevant condition have been fully satisfied in the instant case in terms of the assessee debiting the provision for diminution in the value of investment to its profit and loss account, the same was required to be added for determining book profit - AT
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• Partner's Confirmed Capital Not Subject to Addition u/s 68 of Income Tax Act; No Extra Tax Levied.

  Case-Laws - AT : Addition u/s 68 of the Income Tax Act - capital introduced by the partner - the partner who introduced the capital has confirmed and owned the same – no addition - AT
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• Section 80-IA(4)(iv) Deduction Denied: Electricity Companies Must Complete Expansion for Tax Benefit Eligibility.

  Case-Laws - AT : Deduction u/s.80-IA(4)(iv) - Substantial expansion - electricity distribution company. - the benefit cannot flow to the assessee unless substantial expansion is completed which would result operational efficiency of the electricity company - AT
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• Director Commissions Not Deductible as Expenses Without Services, Even with Board Approval and Companies Act Compliance.

  Case-Laws - AT : Payment of commission to directors without rendering any service - Payment of commission cannot be allowed as expenditure simply because, it is approved by the board and it is in accordance with the provisions of the Companies Act, 1956 - AT
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• Court Rules on Taxability of Club Membership Fees; ITAT Chennai Decision Favors Assessee Over Assessing Officer's Approach.

  Case-Laws - AT : Undisclosed income - Deferred income - Club membership - taxability of 60% or 100% of receipt - revenue model adopted by the assessee is based on hypothesis and not on facts - the revenue model of treating the entire membership fee collection as income of the year of collection proposed by the Assessing Officer is more justified - But in view of SOT [2010 (5) TMI 524 - ITAT, CHENNAI] - Decided in favour of assessee. - AT
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• No Employer-Employee Relationship: Section 194J TDS Deduction Applies for Doctors' Professional Fees, Not Section 192.

  Case-Laws - AT : TDS u/s 192 or u/s 194J - it is not a case of employer-employee relationship between the assessee-appellant and the doctors – Deduction u/s 194J is applicable, which has been done by the assessee - AT
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Customs

• Court on Lifting Corporate Veil: Revenue Must Notify Directors u/s 14 to Impose Liability for Company Debts.

  Case-Laws - HC : Lifting of Corporate Veil - Recovery of demand from the Directors of the company - it would be incumbent upon the revenue to issue a notice u/s 14 to him, stating therein the ground on which such a liability was sought to be fastened on him - Such an obligation cannot be assumed merely on account of the petitioner being or having been a director of the company - HC
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• High Court Rules Limitation Period u/s 27 Applies to 4% SAD Refunds, Overruling Circular No. 23/2010-Customs.

  Case-Laws - HC : Refund of 4% SAD - period of limitation - ulta virus circular – Circular No. 23/2010-Custom in so far as it stipulates that the provisions of section 27 of the Act do not apply to the Notification cannot be sustained to the extent indicated. - HC
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• Goods Valuation Rejected: No Evidence of Similar Imports Undermines Proposed Price Revision Demand.

  Case-Laws - AT : Demand - Valuation of goods - rejection of value - There is no mention as to whether the contemporaneous import of like goods or similar goods in comparable quantity at the prices proposed in the show cause notice has been noticed - value cannot be rejected - AT
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• Chartered Accountant's Certificate Not Conclusive Proof in Customs Duty Refund Cases; Relevant to Unjust Enrichment Claims.

  Case-Laws - AT : Refund of duty – unjust enrichment - Chartered Accountant’s certificate cannot be a conclusive proof of the fact that duty incidence had not been passed on even though it could be one of the evidences with respect to such a claim - AT
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FEMA

• High Court Stresses Consistency in Legal Interpretations for Abetment of FERA Sections 8(3) & 8(4) Violations.

  Case-Laws - HC : Abetment of Contravention of Section 8(3) and 8(4) of FERA - if the department accepted a principle laid down in an earlier case, it should not be permitted to take a contrary stand in a subsequent case - HC
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Service Tax

• Ownership Transfer of Machinery Excludes Goods Cost from Service Tax Valuation, Per Contract Terms.

  Case-Laws - AT : Valuation - inclusion of cost of goods sold - the supply contract indicates that the ownership of the plant and machinery gets passed over to the service recipient, as and when the said machinery is delivered at the site of the said M/s VPCL or M/s EPGL - prima facie value not includible - AT
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• Tribunal Grants Partial Stay in Labor Supply Case; Service Tax Implications Under Manpower Recruitment and Supply Service Examined.

  Case-Laws - AT : Manpower Recruitment and Supply Service - Supply of Labour Without Agreement - prima facie case against the assessee - stay granted partly - AT
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• Payment via German Entity Doesn't Qualify as 'Manpower Supply or Recruitment Agency Service'; Stay Granted in Case.

  Case-Laws - AT : Manpower supply or recruitment agency services - Merely because the payment has been made through the German entity, the activity does not come under the purview of ‘Manpower Supply or Recruitment Agency Service' - stay granted - AT
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• Agreement Between Appellant and M/s BWIL to Integrate Operations Not Subject to Service Tax on Business Auxiliary Services.

  Case-Laws - AT : Business auxiliary services – sharing of cost - appellant and M/s BWIL agreed to integrate and jointly carry out day-to-day functions in both the companies in various areas - not liable to service tax - AT
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• CENVAT Credit Permissible Beyond Goods Removal Point, Aligns with Broad Input Service Definition in Manufacturing.

  Case-Laws - AT : Input Service Distributor - CENVAT credit - The stand taken by the Revenue that no credit was admissible after the place of removal of the goods was totally untenable - The substantive part of the definition input service covers services used directly or indirectly in or in relation to the manufacture of final products - AT
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Central Excise

• High Court Grants 36-Day Duty Abatement for Non-Production of Pan Masala Under 2008 Rule.

  Case-Laws - HC : Production capacity based duty - Abetment of Duty – no production for a period of 36 day - Pan Masala Packing Machine (Capacity determination and collection of duty) Rule, 2008 - benefit of abatement allowed - HC
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• Court Rules on Assessable Value of Goods in Central Excise Case, Upholds Demand Within Normal Limitation Period as Revenue-Neutral.

  Case-Laws - AT : Revenue neutral exercise - Assessable Value of Goods - the demand for the normal period of limitation without invoking extended period has to be upheld - AT
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• Loose Goods for Spare Parts Not Packaged Commodities; No MRP Declaration Needed, Section 4A Not Applicable.

  Case-Laws - AT : The goods cleared in loose condition to spare parts division for being packed for retail sale are not the packaged commodity and hence there would be no requirement to declare MRP and the provision of Section 4A would not have applicable - AT
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• Non-Compliance with Rule 8(3A) Leads to Enforceable Duty Demand u/s 11A; No Contest Allowed by Assessee. (3A.

  Case-Laws - AT : Manner of payment of duty - Default under rule 8(3A) - The goods on which the duty was so paid should be deemed to have been cleared without payment of duty as per Rule 8(3A). If that be so, the demand confirmed against the assessee under Section 11A cannot be resisted by them.- AT
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VAT

• Misuse of Declaration Form Leads to Sales Tax Issue for Goods Transferred Outside Delhi; Liability at Purchase.

  Case-Laws - HC : The taxable event was mis-utilisation of the declaration form, which took place when the goods were transferred for manufacturing outside Delhi. But for the declaration form, the purchasing dealer was liable to pay sales tax at the time of the purchase made by him. - HC
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Case Laws:

• Income Tax

• 2013 (9) TMI 691
  Penalty u/s 271(1)(c) of the Income Tax Act - Revised return of income was filed by the assessee on November 24, 2008 in which additional income was declared by the assessee – Assessee in a statement confessed regarding this investment out of additional income as declared by the assessee in the revised return of income filed on November 24, 2008 – Held that:- Notice issued by the Deputy Director of Income-tax (Investigation) under section 131 of the Income-tax Act, 1961 on November 20, 2008, there is no indication regarding any adverse material having brought out on record by the Department regarding any concealment of income by the assessee - Assessee's explanation is this that this investment was made out of past savings but on receipt of this notice under section 131 of the Income-tax Act, 1961, the assessee consulted a chartered accountant who advised the assessee to file revised return of income and include additional income in the same to cover this investment since he was not in a position to substantiate his explanation that the investment was made out of past savings. Reliance has been placed upon the Hon’ble Tribunal decision in the case of Deputy CIT v. Dr. Satish B. Gupta[2010 (8) TMI 641 - ITAT, AHMEDABAD], wherein it has been held that question of considering whether the assessee is liable for action under section 271(1)(c) would arise only when return of income is scrutinised by the Assessing Officer and he finds some more items of income or additional income over and above what is declared in the return. Also, assessee would be liable for action under section 271(1)(c) in respect of such items only which are discovered by the Assessing Officer on the scrutiny of return of income or after carrying out investigation and discovering some more items of income not found declared or mentioned in the return of income – Following the above judgment and various other judgments cited by assessee, penalty is deleted – Decided in favor of Assessee.

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• 2013 (9) TMI 690
  Capital gains or Income from other sources - transfer of sub tenancy rights, deemed tenancy rights - Held that:- the assessee has been referred to as licensor. From the agreement deed it is clear that the assessee had incidental right of the premises through which the looms were to be used. The said right of the assessee has been recognised from the date of agreement till surrender of the said right. Even the original tenant and the original owner did not dispute such right of the assessee over the property. Now, the case of the Revenue is that the agreement dated June 13, 1972 did not provide any right to the assessee of sub-tenancy of the premises but it was only with respect to looms and machinery and user of the premises was only incidental. But the fact remains that incidental right to use the premises was provided by the agreement itself. The fact also remains that assessee has been referred to as licensee in the said agreement. The provisions of section 5(11)(bb) and 15A of the Rent Control Act have already been reproduced above. By virtue of amendment in 1973, i.e., subsequent to the date of agreement of the assessee that the licensees who are deemed to be tenant under section 15A were to be considered as tenant. Therefore, in any case, the assessee had acquired the status of tenant of the landlord. As per the provisions of section 55(2) tenancy right has been considered to be capital asset. Moreover, the definition of capital asset as per section 2(14) of the Act is wide enough to cover "property of any kind" and the type of right acquired by the assessee in the property used by it cannot in any manner be said to be less than "any kind of property" held by the assessee - assessee, in fact, was enjoying possession of the impugned property and for peaceful vacation thereof it had received the impugned amount which was described by both parties as amount paid for surrender of tenancy rights. The assessee had acquired the said right long back and the licensor to the assessee also had recognised the said right of the assessee. The right of the assessee was undisputed and the nature thereof was "property of any kind" which was held by the assessee and was to be termed as a capital asset within the meaning of section 2(14) of the Act. Tenancy rights have also been recognized as capital asset within the meaning of section 55(2)(a) of the Act - Decided in favour of assessee.

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• 2013 (9) TMI 689
  Transfer pricing adjustments - PE - Assesee contended that AO had not passed the order as per the directions given by the DRP, that there was violation of provisions of section 144C(13) of the Act. – Held that:- Open defiance of the directions of the DRP by an adamant AO, non disposal of application of the assessee filed u/s. 154 of the Act and request of the assessee to direct the AO to follow the orders of the DRP unmistakably prove one thing that assessee has been compelled to approach the Tribunal because of the disobedience and inaction of the AO. Helplessness of the assessee is evident from the fact that it is ready not to press other grounds of appeal, if the AO is directed to act as per law. If even for its rightful claim an assessee has to approach a judicial forum, then it has to be held that AO had miserably failed in performing his duties. As a representative of the State, he is duty bound to collect only 'due' taxes and not only taxes. On two counts behavior of the AO can be held to be perverse-first he did not obey the instructions of the panel and second he did not take any action with regard to the rectification application filed by the assessee – Decided in favor of Assessee.

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• 2013 (9) TMI 688
  Interest income to be adjusted towards the cost of the project - Assessee has utilised the borrowed funds for earning the income to that extent, the interest has to be given set off to the interest paid on the borrowed funds - It was the contentions of the assessee that there is a direct nexus and these funds are not surplus funds so as to consider as income from other sources – Held that:- Direct nexus aspect requires examination by the AO and in case there is direct nexus with the earning of interest income with that of the borrowals, then only net interest can be brought to tax or adjusted in the construction account – Restored the issue to the file of the AO to examine the nexus aspect of the earning of interest income on borrowed funds, specifically borrowed for the purpose of project which is under construction and decide accordingly. Disallowance of leave encashment – Amount involved is Rs. 1,03,25,488/- - Assessee made a provision of leave encashment on actuarial basis which was disallowed by the AO as a provision – Held that:- Restored the matter to the file of the AO for fresh adjudication as and when the decision of the Hon'ble Supreme Court is rendered on this issue in the case of Exide Industries Ltd., which has been decided by Kolkata High court referred in [2007 (6) TMI 175 - CALCUTTA High Court ] and which is still pending before the Hon’ble Apex court. Disallowance of Bad Debts – A.O. disallowed the amount on the reason that no details were furnished – Held that:- The claim of amount satisfy the conditions of section 36(2) as these are taken into the books of account - These advances/ receivables are part of the business activity of the assessee and there is no dispute with reference to the amounts being receivable - Except the amount of TDS, which is claimed as bad debt, other amounts, in our view, are allowable as bad debt and in the alternative also as business loss - For the purpose of verification including the claim written off as TDS, the issues are restored to the file of the AO to examine the facts first and then decide according to law – Matter restored to the file of A.O. – Decided in favor of Assessee for statistical purpose.

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• 2013 (9) TMI 687
  Tribunal is final fact finding authority - Reference to the DVO for valuation of building – Held that:- A.O. has not specifically rejected the books of account and never pointed out any defects. The assessee submitted the books of account, vouchers, bills of building accounts which were duly examined by the A.O. with due application of mind and the same were never rejected - The reference to the DVO without rejecting the books of account is not desirable – However, the Tribunal is a final fact finding authority as per the ratio laid down in the case of Kamla Ganpati vs. Cntroller of Estate Duty, [2001 (2) TMI 132 - SUPREME Court] – Decided against the Revenue.

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• 2013 (9) TMI 686
  Interest u/s 244A for delay in refund – Held that:- Reliance has been placed upon the judgment in the case of Commissioner of Income-tax vs. Larsen & Toubro Ltd., [2010 (6) TMI 414 - Bombay High Court], wherein it has been held that Section 244A(2) provides that in the event the proceeding resulting in refund has been delayed for reasons attributable to the assessee, the period of delay so attributable shall be excluded from the period for which the interest is payable - The proceeding resulting in the refund was not delayed for reasons attributable to the assessee. Though the TDS certificates were not submitted with the return and were filed during the course of the assessment proceedings, the Tribunal has noted that the tax was in fact deducted at source at the right time - Since the benefit of TDS has been allowed to the assessee, interest under Section 244A could not be denied only on the ground that the TDS certificates were not furnished with the return of income. Tax was deducted and deposited in the exchequer in time. Section 244A(2) is not attracted – In the light of the above judgment in the case, the issue is decided in favor of Assessee – Decided against the Revenue.

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• 2013 (9) TMI 685
  Year of chargeability of capital gains tax - Assessee is a widow and 81 years old lady. The assessee is the owner of the premises know as "Dady Villa", situated at R.F. Bahadurji Marg (Meera Bai Marg), Lucknow - Assessee entered into an agreement with the builder Shivalik Real Estate Promoters Pvt. Ltd. As per agreement, an area of 18603 sq. ft. was to be developed into a multi story apartment. The builder developed the land and constructed a complex known as "Khushnuma Complex". The built up area was 1,670.3147 sq. mtrs. The builder was to give 35% of the built up area to the assessee or its sale value if the assessee wanted it to be sold through the builder. The builder was to get 65% of the built up area along with undivided 65% interest on the land – Contended that since assessee had handed over the possession of the plot to the builder in pursuance of an agreement for transfer i.e. in part performance of a contract referred to in Section 53A of the Transfer of Property Act, the transfer took place during the previous year itself in view of the provisions of Section 2(47) of the Act – Held that:- capital gain can be charged only on receipt of the sale consideration and not otherwise. How can a person pay the capital gain if he has not received any amount - In the instant case, the assessee has honestly disclosed the capital gain for the assessment year 1998-99 to 2000-01, when the flats/areas were sold and consideration was received. During the year under consideration, only an agreement was signed - No money was received. So, there is no question to pay the capital gain – Decided against the Revenue.

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• 2013 (9) TMI 684
  Reference to the DVO before rejecting the books of accounts - The A.O. did not find any defect in the books of account and without rejecting the books of account he referred the matter and got the valuation from the DVO – Held that:- A.O. put the cart before the horse – As per Sargam Cinema [2009 (10) TMI 569 - Supreme Court of India], A.O. could not have referred the matter to Departmental Valuation Officer without rejecting books of account. He had to first find out whether the books of account were maintained properly, give opportunity to the assessee to explain any deficiency or discrepancy in books of account and then only after he had rejected the books of account, he could have referred the matter to DVO for valuation for the purpose of assessment of income – In the present case, reference to valuation could not be made only to verify the investment disclosed in the construction of the building in books of account – Decided against the Revenue.

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• 2013 (9) TMI 683
  TDS on Perquisites - Payment of conveyance allowance to Development Officers of LIC of India are salaried persons - scope of section 10(14)(i) - exemption – Held that:- For getting the business, they were paid conveyance/additional conveyance allowances and also incentive bonus - "Perquisite" is excluded from the purview of Section 10(14). 'Perquisite' is defined under Section 17(2) of the Act. Explanation 3 under Section 17(2) clearly provides that Salary includes the pay, allowance, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be - Conveyance/additional conveyance allowance is covered by the word "perquisite" and the same is taxable. - LIC is not competent to determine the allowances which are exempted from the tax. Letter dated 07.04.2004 has rightly been issued by the Senior Divisional Manager, LIC for deducting the Tax at source from the amount paid pertaining to the conveyance/additional conveyance allowances incurred in the performance of duty as Development Officers for generating the business being a permissible deduction as the same is exigible to tax. The members of the petitioner's association being salaried persons on furnishing their return of income return be assessed by the assessing authority and it is only after due assessment he entitled for refund of the amount, if any, deducted by the employers conveyance allowance – Writ petition dismissed.

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• 2013 (9) TMI 682
  TDS to be deducted u/s 194I or section 194C of the Income Tax Act - Assessee is a limited company engaged in the business of clearing and forwarding of cargo, shipping agency and other ancillary trading activities – Is the service provided is cargo handling service – Held that:- Work involved is mainly labour oriented work with the help of various machineries and equipments. This work involves providing of man power for loading and unloading, shifting and transportation of the cargo to the destination as well. It is also evident from these terms and conditions that the possession and control over equipments and man power do not vest with the appellantcompany which is a determinant factor so as to decide the applicability of the provisions of Section 194I. The rates for each kind of cargo have also been specified on the basis of the volume of the cargo being handled and not on the basis of time period involved in the execution of the said contract – TDS to be charged under section 194C – Decided against the Revenue.

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• 2013 (9) TMI 681
  Scope of Explanation 5 to Section 271 (1) (c) of the Income Tax Act – Penalty for concealment of Income - Note book was found during search in which details of expenses of renovation of residence were written. The assessee stated that he had made the expenditure out of business income but had not noted in his books of account – Held that:- Reliance has been placed upon the judgments of Madras High Court in the case of CIT vs. S.D.V. Chandru [2003 (12) TMI 40 - MADRAS High Court]; judgment of Hon’ble Rajasthan High Court in the case of Mishrimal Soni [2005 (12) TMI 83 - RAJASTHAN High Court] and judgment of Gujarat High Court in the case of CIT vs. Mahendra C. Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT], which have explained the extent and scope of Explanation 5 to Section 271 (1) (c) of the Act, which deals with a situation in which any assets are found to be in the ownership of the assessee in the course of search under Section 132 of the Act. Clause (2) of Explanation 5 makes it clear that where in the course of search the assessee makes a statement under Section 132 (4) and owns that he acquired any of such assets out of his undisclosed income, not so far returned, and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income, no presumption of concealment has to be drawn, notwithstanding the admission to that effect. In other words to the extent the assessee makes a cleanbreast of his undisclosed income represented by assets found to be in the possession of the assessee he is not deemed to have concealed his income or concealed particulars thereof. The explanation is not confined to physical possession but extends to other forms of possession – In the present case, as per note book, the total came to Rs.5,39,300/- which the assessee, admitted to be undisclosed income of the financial year 1991-92 and on which he was ready to pay the tax. It is admitted that the statement was made during the course of search and the assessee was ready to make payment of tax. No further detail was required nor any further explanation was required to be given as to how and in what manner and in which year or years the undisclosed income was earned and as to why the tax was not paid on such undisclosed income – Decided against the Revenue.

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• 2013 (9) TMI 680
  Writ petition - alternative remedy - Transfer pricing adjustments - ALP - retrospective effect to section 92CA (2A) - sale of the call centre business - assignment of call options - maintainability of writ petition for setting aside of order passed by the TPO and writ of mandamus petition before the High Court to directing the AO to revise the Draft Assessment Order, after excluding the said transfer price adjustment. Lastly, the petitioner seeks a writ of prohibition, prohibiting the respondents from taking any steps pursuant to the impugned orders. There is one difference of vital importance between the Vodafone case and the case before us. We have already referred to the proceedings that led to Vodafone challenging the order under sections 195, 201(1) and 201(1A). In the Vodafone case, the Revenue proceeded on the basis of a concession and on a demurer. The Revenue did not raise the defence of an alternative remedy that was available to VIH BV even in that case. It was agreed by both the learned counsel that even in that case, VIH BV had an alternate remedy of challenging the notices before the CIT (Appeals). The Revenue, however, invited the Supreme Court to proceed on the basis of the record available in the Writ Petition. It is not open to this Court to speculate or even try and speculate the decision, had the defence of an alternate remedy been taken. However, in the case before us, the defence of an alternate remedy has not only been taken, but has been taken in a very substantial manner and we have found the same to be well founded. In other words, the Revenue in the case before us has not invited a decision on the merits of the matter alone. That they defended the contentions on the merits is irrelevant. In the earlier round in the Vodafone case, the Supreme Court had [2009 (1) TMI 778 - SUPREME COURT OF INDIA] permitted VIH BV to question the decision of the authority on the preliminary issue before this Court in the event of the same being decided against it. The defence, therefore, of an alternate remedy may not have been available before the High Court. Nothing, however, prevented the Revenue from raising a contention of an alternate remedy before the Supreme Court in the final proceedings before the Supreme Court. Even the decision of the authority on the preliminary issue can be appealed against before the CIT (Appeals) and/or the ITAT, as the case may be. The respondents in this case are not bound by the stand taken by them in the Vodafone case. There is no basis for the Court to compel the Revenue in this case to abide by the stand taken by it in the Vodafone case. Writ Petition dismissed

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• 2013 (9) TMI 679
  Transfer pricing adjustment - DRP rejected objections filed by the assessee as non-est and dismissed the same in limine - Rejection of Form 35A - Held that:- Even under the Dispute Resolution Panel Rules or under the provisions of the Act, the mandate to the Dispute Resolution Panel is to consider the objections on merit and give directions to the Assessing Officer with reference to the draft assessment order. Even this basic duty has not been performed by the Dispute Resolution Panel. It simply rejected Form 35A filed by the assessee as invalid, non est and dismissed in limine. On this count also the action of the Dispute Resolution Panel cannot be upheld and therefore, we are of the firm opinion that the order passed on July 4, 2011 by the Dispute Resolution Panel-II is to be set aside with a direction to consider objections afresh and give necessary direction to the Assessing Officer as per the provisions of the Act and the Rules thereon. For this purpose, the matter is restored to the file of the Dispute Resolution Panel for consideration of the objections filed with it, afresh - Decided in favour of assessee.

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• 2013 (9) TMI 678
  MAT - Computation of book profit u/s 115JB of the Income Tax Act – provision for diminution in the value of asset - Provision for bad debts for computation of book profit – Held that:- Reliance has been placed upon the identical case ITO v. TCFC Finance Ltd.[ 2011 (3) TMI 26 - ITAT MUMBAI], which squarely covers the issue in hand - Explanation 1 to section 115JB(2) in no uncertain terms states that any amount set aside as provision for diminution in the value of asset debited to the profit and loss account is to be added to the amount of net profit for the purpose of computing the book profit - Section 115JB has to be considered as code in itself. This section is a special provision for payment of tax by certain companies and opens with non obstante clause thereby excluding any other provisions of this Act in the matter of determination of payment of tax by certain companies - Amount set aside as provision for diminution in the value of any asset, appears on the debit side of the profit and loss account, which implies that the amount of net profit as per the profit and loss account is after the amount of such provisions, then such amount will be added back to the net profit for computing 'book profit' as per Explanation 1 to section 115JB(2) - There is no other requirement in the language of the section for the addition or non-addition of the amount of provision for diminution in the value of any asset to the amount of net profit as shown in the profit and loss account, depending on the way in which such provision has been shown in the balance-sheet - As the relevant condition have been fully satisfied in the instant case in terms of the assessee debiting the provision for diminution in the value of investment to its profit and loss account, the same was required to be added for determining book profit – Decided against the Assessee. The Legislature has employed the expression 'provision for diminution in the value of any asset' in clause (i) to Explanation 1 to section 115JB(2). The expression 'diminution in the value of any asset' has not been defined in this section. In common parlance the word 'diminution' indicates the state of reduction. The meaning of the word 'diminution' in the value of any asset has to be construed as reduction from its original value which may still be a positive value or nil. If the reduced value happens to be cipher, the diminution will be the original value of the asset itself. There is not even a remotest hint in the language of clause (i) of Explanation 1 to section 115JB that some value of the asset must remain after diminution, as a pre-condition for adding it to the net profit. Explanation 1 contemplates the adding back of the provision for diminution in the value of any asset to the amount of net profit. Once provision is made for diminution in the value of any asset, the same has to be added for computing book profit, regardless of the fact whether or not there is any balance value of asset - As Explanation 1 to section 115JB(2) deals with the computation of book profit and specifically provides that the net profit as shown in the profit and loss account for the relevant previous year has to be increased, inter alia, by the amount of provision for diminution in the value of any asset, the amount of provision for diminution in the value of any asset debited to the profit and loss account before the determination of net profit has necessarily to be added. - Decided against the assessee.

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• 2013 (9) TMI 677
  Addition u/s 68 of the Income Tax Act - capital introduced by the partner - the partner who introduced the capital has confirmed and owned the same – Held that:- Reliance has been placed upon the judgment in the case of CIT v. Pankaj Dystuff Industries [2005 (7) TMI 601 - GUJARAT HIGH COURT], which is squarely applicable in the present case in the hand – The Hon’ble High Court in the said case after examining the principles laid down in the judgment of the Allahabad High Court in the case of CIT v. Jaiswal Motor Finance [1983 (2) TMI 47 - ALLAHABAD High Court] answered the question in the favor of Assessee – Decided in favor of Assessee. Disallowance of Rs.4,96,231/- as interest expenditure - documentary evidence for utilization of partnership capital and borrowed funds to the extent for the purpose of business - Held that:- the question of reasonableness of expenditure is a subjective matter which is to be determined by the assessee who is running a business and it is not expected from the Assessing Officer to step into the issues of a businessman - The business need and the business purpose depends upon the circumstances of each case - Merely because the assessee had maintained cash balances at its several branches being in angadia business should not be a cause of disallowance of interest on borrowed funds - Above order of the hon'ble co-ordinate Bench was not available at the time when the impugned order was passed by the learned Commissioner of Income-tax (Appeals) – Matter remitted back to the file of the learned Commissioner of Income- tax (Appeals) to decide this issue afresh – Decided in favor of Assessee for statistical purpose.

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• 2013 (9) TMI 676
  Disallowance of shortage of stock - shortage is being claimed on year to year basis - Held that:- the assessee's claim of shortages of closing stock cannot be accepted as except for putting forth the same explanation to us as before the authorities below, we find that the assessee has failed to bring on record any evidence to establish that such shortages had in fact occurred at all - Decided against assessee. Disallowance of expenditure - sales promotion expenses - Held that:- no details and supporting evidences have been produced to establish the expenses claimed for which the assessee has failed to discharge the onus upon it. Even before us, no details or supporting evidences have been filed to establish that the expenses on sales promotion claimed have in fact been spent. Further, interestingly, we also find that while the turnover in the immediately succeeding year relevant to the assessment year 2006-07 has increased to Rs. 181 crores, the sales promotion expenses claimed have reduced by more than 50 per cent. to Rs. 19.70 lakhs. In this factual situation of the expenses claimed under this head in the preceding and succeeding years, we are of the considered view that the sales promotion expenses claimed in this year is excessive and in the absence of the assessee filing the details and supporting evidences of having incurred sales promotion expenses as claimed, the Assessing Officer was both reasonable and justified in disallowing only Rs. 10 lakhs out of sales promotion expenses in the relevant period and therefore sustain the same - Decided against assessee. Unexplained income - difference in sales - Held that:- AO has recorded that Karnataka Lokayukta in its report on the mining scam alleged malpractices on the part of the officials of the assessee-company. From the submissions made by the assessee, a Government of Karnataka Undertaking, it can be inferred that the sales of C-ore to Kalyani Steels Ltd. are supported by invoices raised, entries in the books of account audited by chartered accountants. The system of accounting followed by the assessee is the mercantile system as per the provision of section 145 of the Act and we find that no fault has been found therein nor has it been rejected. Nowhere in the order of assessment or the material on record do we find anything to establish that there were any realisation on account of sales beyond what is recorded in the books of account. As per the Income-tax Act, 1961 profits from business are to be computed under section 28 of the Act as per the accounting policies mandated by section 145 of the Act which in the assessee's case is the mercantile system. The scope of total income is also defined under section 5 of the Act. The Income-tax Act, 1961 is very clear that what is to be taxed is the real income of an assessee and not notional or hypothetical income and it does not permit an Assessing Officer to compute income without any evidence. There is no finding by the Assessing Officer that the assessee has sold its C-ore at a price less than that agreed to in the contract entered into with M/s. Kalyani Steels Ltd or that it has realised from M/s. Kalyani Steels Ltd. additional amounts on such sales which it had not recorded in its books. The assessee is legally bound to abide with the terms of the contractual obligations arising out of its agreement to sell C-ore to M/s. Kalyani Steels Ltd. and the contract entered into being legal and valid, it cannot be brushed aside. - no evidence of realization of unaccounted sale proceeds - no aditions - Decided in favour of assessee.

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• 2013 (9) TMI 675
  Deduction u/s.80-IA(4)(iv) - Substantial expansion - electricity distribution company. - AO concluded in his assessment that the Assessee had just made budgetary allocation for proposed capital investments and has not made the actual investment. He held that budgetary allocation of funds does not tantamount to an increase in book value of assets unless the actual investment is made – Held that:- Reliance has been placed upon the judgment in the case of M/s.Bangalore Electricity Company Ltd [2012 (8) TMI 337 - ITAT, Bangalore], wherein Tribunal has already taken a view that the word ‘undertake’ in section 80-IV(4)(iv)(c) to mean that there should be an increase in the Plant and Machinery by at least 50% of the book value of such Plant and Machinery as on 1-4-2004 meaning thereby that there should be capitalization of the Plant and Machinery on completion of installation of Plant and Machinery. The Tribunal has taken the view that the purpose of introduction of the aforesaid provision was to achieve modernization in operation of electricity company consequent to undertaking substantial expansion and the benefit cannot flow to the assessee unless substantial expansion is completed which would result operational efficiency of the electricity company – Order of Commissioner(A) has been confirmed – Decided against the Assessee. Deduction u/s 80IA(4)(iv)(b) of the Income Tax Act – Held that:- Conditions are that the assessee should start transmission or distribution by laying a new network of new transmission or distribution line – No reference to the addition in the Network lines has been made before either A.O. or Commissioner(A) and not anything separate has been shown in the Balance- Sheet - The opening written down value (WDV) of the same was Rs.837,41,39,851/- and there were additions to the tune of Rs.48,03,76,632/-. As to whether these were additions because of laying of network of new transmission or distribution lines or simple additions to existing line cable network is not known - Claim made by the assessee without a sound basis and without proper facts available on record deserves to be rejected – Decided against the Assessee. Deprecation on on assets handed over to the appellant by consumers for their running and maintenance - Held that:- assessee can claim depreciation on an asset only to the extent that the actual cost of such asset was actually met by himself and not on the cost met by any other person. The assets in question here happen to be transformers which are installed at consumers’ premises at their own cost and the whole of the cost of the assets are met by them. - The cost of certain assets collected by the assessee from its consumer, can by no stretch of imagination, be considered as cost of asset on which depreciation can be claimed by the assessee. The fact that the assets are subsequently transferred by the consumer to the assessee and thereafter the assessee maintains the assets are all facts for which the assessee has not given any basis in the form of entries in the books of account. - Depreciation not allowed - Decided against the assessee.

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• 2013 (9) TMI 674
  Disallowance of commission payment - payment to directors without rendering any service - Held that:- The assessee has not produced any evidence before the lower authorities, to show that the commission was paid for rendering any service, which resulted in enhancing the profitability of the company. - Payment of commission cannot be allowed as expenditure simply because, it is approved by the board and it is in accordance with the provisions of the Companies Act, 1956. An expenditure which falls within the ambit of section 37 of the Act can be allowed, if it is incurred wholly and exclusively for the purpose of business. In the present case, the assessee has failed to prove that the expenditure incurred was wholly and exclusively for the purpose of business - Decided against assessee. Valuation of closing stock - Held that:- The contention of the learned authorised representative for the assessee that the assessee is consistently following the same method of valuation of closing stock, which has also been accepted by the Department in the earlier as well as the subsequent years also requires to be considered. The Assessing Officer in the assessment order accepts the fact that the method of accounting followed by the assessee is not questioned. The Commissioner of Income-tax (Appeals) has also not given any basis for estimating the undervaluation of closing stock at Rs.45 lakhs. There is nothing in the order of the Commissioner of Income tax (Appeals) to suggest why he has adopted the figure of Rs. 45 lakhs. The assessee however is required to substantiate with supporting evidence, which are the stocks lying with it, which are not considered for the purposes of valuation, and the reason for doing so. The assessee also had to explain the specific instances pointed out by the Commissioner of Income tax (Appeals), where the assessee has taken into consideration lesser number of books for valuation of closing stock from the current year's printing, when the assessee himself has adopted a formula, as per which the current year's printing is valued at 75 percent of the cost. The assessee is also required to reconcile the discrepancy between the number of copies considered for arriving at the closing stock figure of Rs. 4,23,61,003 as per the consolidated stock statement submitted before the Commissioner of Income-tax (Appeals) and the details given before the Assessing Officer - Matter remitted back - Decided in favour of assessee.

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• 2013 (9) TMI 673
  Disallowance of deduction under section 80HHC - The assessee for the relevant year had earned profit of Rs. 11.12 crores from trading export and there was loss of Rs. 68.80 crores from manufacturing export. The assessee had claimed deduction under section 80HHC ignoring loss from manufacturing export – Held that:- deduction has to be allowed only from net profit from both activities and since there was net loss, therefore, no deduction u/s 80HHC has been allowed – Reliance has been placed upon the judgment of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004 (3) TMI 9 - SUPREME Court] – Decided against the Assessee. Adjustment in book profit on account of any expenditure relatable to income which does not form part of total income - Under the provisions of clause (f) of the Explanation to section 115JA adjustment to book profit is required – Held that:- Quantum of adjustment will depend upon the actual interest disallowed – Restored to the file of A.O. for computation of quantum of adjustment. Adjustment to book profit on account of profit eligible for deduction under section 80HHC in terms of provision (viii) of the Explanation to section 115JA – Held that:- The Special Bench of the Tribunal in case of Deputy CIT v. Syncome Formulations (I) Ltd. [2007 (3) TMI 288 - ITAT BOMBAY-H] has held that the profit eligible for deduction under section 80HHC for the purpose of adjustment under section 115JA has to be computed on the basis of adjusted book profit under section 115JA and not on the basis of profit computed under regular provisions of the Act. The said decision of the Special Bench of the Tribunal has been upheld by the Hon'ble Supreme Court in the case of CIT v. Bhari Information Tech. Sys. P. Ltd. [2011 (10) TMI 19 - Supreme Court of India] - In view of this position, the Assessing Officer is directed to compute profit eligible for deduction under section 80HHC on the basis of adjusted book profit and not on the basis of profit computed under normal provisions of the Act. Disallowance of interest in relation to interest free advance to 100 per cent. subsidiary, i.e., Bespoke Finvest Ltd - Internal accrual were sufficient to advance the amount to the subsidiary – Held that:- In this year, the disallowance is mostly on account of opening balance which has already been deleted by the Tribunal in the assessment year 1998-99. In the current year, the advance given is only Rs. 8 lakhs which are easily explained from the current profit of Rs. 25.92 crores – Disallowance is deleted – Decided in favor of Assessee. Disallowance of professional fee paid to Mckinsey and Co - Assessee had made payment of Rs. 315.26 lakhs to Mckinsey and Co - Professional fees for upgradation of management information system (MIS) and project management system – Held that:- Company had been appointed consultant for upgradation of the MIS in connection with the existing business of supply and erection of transmission towers - Expenditure is obviously of the nature of revenue expenditure as assessee derived no advantage in the capital field. Expenditure neither resulted into creation of new asset or new source of income. The expenditure is thus allowable as revenue expenditure. The expenditure cannot be disallowed only on the ground that there was no formal agreement – Claim is allowed - From perusal of invoices, total of the amount claimed as per invoices does not match with the total claim of expenditure - Assessing Officer has been directed to allow the claim after necessary verification of bills and quantum expenditure – Decided in favor of Assessee. Allowability of voluntary retirement scheme expenditure - The assessee had claimed a sum of Rs. 2.62 crores on account of voluntary retirement scheme (VRS) – Held that:- Following the judgment in the case of CIT v. Bhor Industries Ltd. [2003 (2) TMI 20 - BOMBAY High Court] , the claim of assessee is allowed – The VRS expenditure is treated as Revenue expenditure – Decided in favor of Assessee.

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• 2013 (9) TMI 672
  Undisclosed income - Deferred income - Club membership - taxability of 60% or 100% of receipt - Held that:- membership fee alone is not the obligation collected by the assesseecompany from its members. The assessee-company levies annual charges for the upkeep and maintenance of the resorts and their equipment. Whenever a member occupies his holiday home portion, he is charged for utilities like power, water, etc. The funds necessary for the annual services rendered by the assessee-company to its members are thus annually collected from the members themselves. Therefore, such expenses need not be reserved from the membership fee collected from the members at the time of admission - liability of the assessee is to maintain the assets and properties as a whole for carrying on its business and not for a particular member. The assessee is apportioning the membership fees between 60 per cent. and 40 per cent. on the principle of individual liability existing between the assessee and its members. The concept of individual liability is hypertechnical - Therefore, it is very difficult to agree with the contention of the assessee company that the revenue model of apportioning the membership collection between 60 per cent. and 40 per cent. is justified. We find that the revenue model adopted by the assessee is based on hypothesis and not on facts. On the other hand, the revenue model of treating the entire membership fee collection as income of the year of collection proposed by the Assessing Officer is more justified - But in view of the decision of special bench in ACIT Versus Mahindra Holidays & Resorts (India) Ltd. [2010 (5) TMI 524 - ITAT, CHENNAI] - Decided in favour of assessee. Expenditure on procurement of furniture - whether revenue expenditure in nature - Held that:- Furniture is a capital asset. Rules have provided separate rate of depreciation in the case of furniture and fixtures. They are distinct block of assets. Therefore, the expenses incurred for procuring furniture cannot be allowed as a deduction in the nature of revenue expenditure. As the furniture was not used for the purpose of the business, depreciation also cannot be granted. Therefore, the direction of the Commissioner of Income-tax (Appeals), as far as it related to furniture is concerned, we vacate the same and hold that the expenditure incurred for procuring furniture needs to be disallowed - Decided against assessee. Disallowance of software expenses - Held that:- assessee had acquired licence to use the software for a period of three years. Every year the assessee is making payment as licence fees. As rightly pointed out by the Commissioner of Income-tax (Appeals), it is only a payment of licence fees and the assessee has not acquired any rights. The assessee was having only a permissive right to use the software. The assessee is not enjoying any copyright. In other words, it has not become the asset of the assessee-company. Therefore, the Commissioner of Income-tax (Appeals) is justified in treating the amount of Rs. 66,97,954 as revenue expenditure deductible in computing the income of the assessee-company - Decided against Revenue.

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• 2013 (9) TMI 671
  TDS u/s 192 or u/s 194J of the Income Tax Act - Payment to professional doctors - Assessee had deducted tax of Rs. 11,67,399.40 under section 194J of the Act, whereas AO demanded the tax of Rs. 27,98,169.69 under section 192 of the Act - Default under section 201(1A) of the Act – Held that:- There does not exist employer-employee relationship between the assessee-appellant and the persons providing professional services. On consideration of the agreement in its entirety, it is evident that it is not a case of employer-employee relationship between the assessee-appellant and the doctors – Deduction u/s 194J is applicable, which has been done by the assessee – Decided against the Revenue.

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• Customs

• 2013 (9) TMI 706
  Recovery of demand from the Directors of the company - Export Obligations - Provision of Export and Import Policy - Notification Nos.30/97 & 31/97 - Penalty u/s 11(2) – The goods imported against the licence were to be utilized in accordance with the provisions of export and import policy and custom Notification Nos.30/97 & 31/97 both dated 1.4.1997 as amended from time to time - Held that:- Penalty u/s 11 (2) had been imposed upon the petitioner, the same having been imposed only upon the Company - Even otherwise, no penalty could have been imposed upon the petitioner, without serving him with a mandatory notice in terms of Section 14 of the Act and no such notice was ever given to the petitioner - The notice issued to the Company can by no stretch be construed as notice to its directors, since it contained no proposal to impose penalty on the directors of the company - The penalty imposed upon M/s. Hitkari China Limited shall not be enforced against the petitioner, though it can certainly be enforced against the company - This order, however, shall not come in the way of the respondents proceeding against the petitioner, under Section 11(2) of the Act, in terms of this order. Recovery of Penalty - Whether the penalty imposed upon the Company can be recovered from its Directors of the Company – Held that:- There was no provision in the Act for recovery of the penalty imposed upon a company from its directors, even in the event the said penalty cannot be recovered from the Company - In the absence of a statutory provision, the directors of a company cannot be made liable to discharge its liabilities unless they have stood as guarantors for discharge of such a liability – Relying upon Anita Grover vs Commissioner of Central Excise and Ors [2012 (12) TMI 802 - DELHI HIGH COURT] - The dues recoverable from the company cannot be, in the absence of a statutory provision, be recovered from the directors - the directors of the company were not personally liable for the liability owned by the company - Therefore, the penalty imposed upon the company cannot be enforced against the petitioner. Lifting of Corporate Veil – Imposition of Penalty - Whether in a case where import licence was issued to a company and there was a default in carrying out the export obligation attached to the licence, penalty in terms of Section 11(2) of the Act can be imposed upon the director of the company or not – Held that:- The respondents would be competent to proceed against the petitioner u/s 11(2) of the Act, if they were of the opinion that he was under a duty or obligation to fulfil the export obligation of the company and consciously failed to do so - Of course, in such a case, it would be incumbent upon the respondents to issue a notice u/s 14 of the Act to him, stating therein the ground on which such a liability was sought to be fastened on him - Such an obligation cannot be assumed merely on account of the petitioner being or having been a director of the company. In Santanu Ray vs. Union of India [1988 (8) TMI 106 - HIGH COURT OF DELHI AT NEW DELHI] - After the veil of the corporate entity was lifted, the adjudicating authorities will determine as to which of the directors was concerned with the evasion of the excise duty by reason of fraud, collusion or willful mis-statement or suppression of facts, or contravention of the provisions of the Act and the Rules made there under - So far as individual liability of a director to the payment of excise duty and penalty is concerned, no liability can be fastened on him unless the department was able to show as to how and to what extent a particular director is liable.

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• 2013 (9) TMI 705
  Refund of 4% SAD - Circular No. 23/2010 - whether ulta virus – Refund of Provisional Duty Paid – Notification No. 102/2007 - Period of Limitation - Whether the Central Government while imposing conditions for grant of exemption u/s 25(1) of the Act could lay down conditions in derogation to the specific statutory provisions and stipulations contained in Section 27 of the Act - The problem had arisen largely due to failure of the respondents to pass final adjudication orders which were belatedly made - There was no explanation for this delay and the cause - Held that:- It will be proper to harmoniously construe and interpret notification dated 1st August, 2008 and Section 27 read with Circular dated 29th July, 2010 by holding that an Assessee can make a claim for refund under notification No. 93 of 2008 dated 1st August, 2008 either by filing an application for refund within the limitation period specified under Section 27 of the Customs Act, 1962 or within the extended limitation period of one year from the actual date of payment even, if the said payment made was pursuant to provisional assessment - The longer of the two periods i.e. the period specified under Section 27 or the notification dated 1st August, 2008 read with Circular No. 23/2010–Custom dated 29th July, 2010 would be applicable - The petitioner had filed the claims within the period stipulated by section 27 of the Act, in view of the construction given by us, the same could not have been rejected on the ground of limitation. Circular No. 23 of 2010 was issued on 29.07.2010 stipulating a limitation of one year from the date of payment of the duty at the time of clearance of the imported goods - If the period in the circular was to be followed then some of the refund claims of the petitioner would become time barred and in others hardly any time would be left for the petitioner to make a claim - Where the imported goods were released on payment of CVD on regular assessment, the application seeking refund can be made within one year of the payment of the CVD in terms of the notification dated 1st August, 2008 read with Circular No. 23/2010–Custom dated 29th July, 2010. Where the goods were released on provisional assessment followed by the final assessment, the application seeking refund can be made within the period of one year or six months, as the case may be, of the final assessment as stipulated by Explanation II to section 27 of the Act or within the enlarged period of one year from the date of provisional release as stipulated by the notification dated 1st August, 2008 read with Circular No. 23/2010–Custom dated 29th July, 2010. The Circular No. 23/2010-Custom in so far as it stipulates that the provisions of section 27 of the Act do not apply to the Notification cannot be sustained to the extent indicated. The Circular No. 23/2010-Custom to the extent it holds that section 27 of the Act had no application was held ultra-vires the statute and quashed - The orders dated 21.3.2011 and 27.4.2011 passed by respondent No.2 relying on Circular No. 23/2010-Custom dated 29.07.2010 were hereby set aside and the matter was remanded to respondent No.2 to assess the claim of the petitioner for refund on imports and to process the same in accordance with the provisions of Section 27 of the Act.

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• 2013 (9) TMI 704
  Demand - Valuation of goods - rejection of value - Held that:- declared transaction value can be rejected only if the conditions for accepting the declared transaction value as mentioned under sub-rule (2) of Rule 4 of the Valuation rules are not satisfied or in terms of the provisions of the Rule 12 of the Valuation Rules, the proper officer has reasons to believe that the declared transaction value is not acceptable and in this regard, an order has been passed by following the prescribed procedure. In this case, the impugned order does not discuss as to why the declared transaction value is not acceptable in view of the provisions of sub-rule (2) of Rule 4 of the Valuation Rules and whether there are doubting any valid goods for doubting the declared value. The basis for rejecting the value in the impugned order that the declared value is less than the average price of the raw materials - plastic, glass, metals, etc, is totally incorrect, as the prices of these raw materials in India had been adopted, while the goods have been imported from China. In any case, even if the declared transaction value is rejected, the same has to be determined by sequentially applying under Rule 5 to 8 of the Valuation Rules and the assessing officer cannot jump directly to Rule 7. Even in respect of the Rule 7 also, which provides for valuation of the goods based on the wholesale price of the similar goods or like goods in India imported by other importers, the impugned order does not discuss as to who that importer is. There is no mention in the impugned order as to whether the contemporaneous import of like goods or similar goods in comparable quantity at the prices proposed in the show cause notice has been noticed. In view of this, we hold that the impugned order upholding the rejection of the transaction value and raising the same to Rs.7,18,890/- is not sustainable. For the same reason, the confiscation of the goods under Section 111(m) and imposition of penalty under Section 112 on this count is not sustainable - Decided in favour of assessee. Regarding confiscation - Held that:- the question of confiscation of FSL bulbs and Halogen bulbs under Section 111(d) has to be decided only after giving a clear finding as to whether these goods were imported in pre-packaged form so as to attract the provisions of Note 5 (e) of the General Note of Foreign Trade Policy - matter remanded back on the issue of confiscation.

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• 2013 (9) TMI 703
  Confiscation of goods – penalty u/s 114 – redemption fine - goods cleared were found to be Calcium Hydrogen Phosphate (Dibasic) a cheap chemical and value was highly inflated – Held that:- Confiscation of goods exported previously was not justified as the goods were not available – samples were drawn for testing and it was ascertained that the goods exported is Calcium Hydrogen Phosphate (Dibasic) in the form of white powder as against the declared description of Calcium Hydrogen Phosphate Anhydrous GR grade - redemption fine set aside - decided partly in favour of assessee.

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• 2013 (9) TMI 702
  Classification of Goods – recovery of short paid duty - assessee classified the goods under Heading 7228 70 11 and the goods were cleared under risk-management system - Revenue was of the view that the goods cleared were in fact parts of bulldozers and should have been classified under Customs Tariff Item 8431 49 90 - Held that:- The classification originally adopted for clearing the goods appears to be correct – revenue had not been able to show that the goods imported were goods other than hot rolled sections - There was nothing to suggest that the goods when imported had a nature of parts of tractors - he had been importing this product prior to this consignment and in all cases the goods were classified under CTI 7228 70 11 and there was no reason to change the classification. Stay application – waiver of pre deposit – court granted waiver of pre deposit – stay application allowed – stay granted.

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• 2013 (9) TMI 701
  Refund of duty – assessee filed the application for refund of excess duty paid on import of refractory bricks - Held that:- Principles of unjust enrichment would apply in the case of refractory bricks which were consumables and which are captively consumed and inasmuch as the appellant had not led any sufficient and satisfactory evidence to prove that the burden of duty incidence has not been passed on, they are not eligible for the refund - Court followed the judgement of SRF Ltd., Vs. CC, Chennai (2005 (5) TMI 91 - CESTAT, NEW DELHI) Chartered Accountant’s certificate cannot be a conclusive proof of the fact that duty incidence had not been passed on even though it could be one of the evidences with respect to such a claim – appeal decided against assessee.

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• Corporate Laws

• 2013 (9) TMI 700
  Winding up - Inability to pay debts - Held that:- Whether the statutory notice dated 17.01.2011 - Annexure-E issued by petitioner is contrary to Section 434(1)(a) of the Companies Act, 1956 - Held that:- The certificate of incorporation of respondent-company as per Extract produced at Annexure R-1 along with Statement of objection would indicate that registered office of the Respondent-Company is located at No.41/1, Uipar Mansion, R.V. Road, Basavanagudi, Bangalore and not at the address shown in the statutory notice. Hence, there is non-compliance of Mandatory requirement of Sec. 434(1)(a) of Companies Act - Decided against petitioner. Whether the petitioner has made out a case for winding up of the respondent-company under Section 434(e) and 439 of the Companies Act, 1956 - Held that:- petitioner had participated, negotiated and mediated for the parties to enter into joint development agreement. In fact, petitioners themselves agree in the present petition that they used their long standing expertise in the real estate field and their good offices to persuade M/s. Era Land Marks India Limited enter into a joint development with the respondent-company which ultimately resulted in Joint-Development Agreement dated 05.07.2008 coming into existence on account of the negotiation and discussion made by the petitioner. It is because of this precise reason the agreement dated 26.04.2008 between respondent and petitioner came into existence whereunder respondent agreed to pay to the petitioners a professional fee of Rs. 2.50 crores. The said contract is a contemporaneous contract entered into between respondent and petitioner. In other words, the performance of obligations under the said agreement was dependent on the performance of the obligations by the parties to the Joint-Development agreement dated 05.07.2008 - conditions agreed to between the parties would indicate that there was substantial modification amongst other conditions to the original agreement dated 05.07.2008. This would also indicate that claim of the petitioner which was based on the Joint- Development Agreement dated 05.07.2008 got eclipsed by virtue of the Addendum agreement dated 28.10.2009 and thereby benefits which would have accrued to the respondent got substantially reduced. It is because of these subsequent developments, the respondent has attempted to stave off the claim made by petitioner contending that debt is not admitted and such a plea cannot be brushed aside as a false defence. It is to be further noticed that respondent - company and the developer are now at logger heads and they have ignited the arbitration proceedings and same is pending before the Arbitral Tribunal as admitted to by the learned Advocates appearing for the parties. In this background, it cannot be held or construed that the defence set up by the respondent- company to be either moon shine or a frivolous one to discard it or to construe the said defence raised by the respondent without any basis. In that view of the matter, I am of the considered view that the dispute raised by the respondent to deny the claim of petitioner is bona fide and one of substance and such dispute cannot be construed as frivolous or brushed aside as a cloak to hide its inability to pay the debt and prima facie respondent has established that plea putforward by way of defence in the statement of objections is a bona fide plea - Decided against petitioner.

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• 2013 (9) TMI 699
  Rectification of register of members - Appellant not shown as shareholder - Inspection of books of accounts - Whether there was an oral family settlement in 1993 under which the appellant gave up his shares in the company - Held that:- appellant cannot question it or act contrary to the terms of the settlement at any later point of time. It is not denied by him that he was a signatory to the letter dated 31.12.1993 written jointly by him and his father S.N. Sud to the Noida authority, under which he withdrew his rights in the company which was allotted the premises at G-58, Sector 6, Noida. There was some debate at the Bar as to what this letter meant, the contention of the learned counsel for the appellant being that the letter referred only to the rearrangement of the partnership business carried on by the appellant and his father and did not refer to the company at all, and the contention of the respondent’s counsel being that the reference to the withdrawal of the appellant from his rights was only to the shares in the company, since the appellant did not withdraw from the firm and on the contrary he practically became the full owner of the partnership business, S.N. Sud having decided to become a sleeping partner and that too only till March, 1994. A very crucial aspect of the case is the long period of 15-16 years in which the appellant had accepted the settlement and acted upon it. Not only the appellant, but also the other members of the family did act upon the settlement. It should not be forgotten that the appellant himself got the bag-closing and conveying systems business, earlier carried on by the partnership firm of himself and his father, only in terms of the family settlement. He also resigned from the directorship of the company as he no longer had any interest in the working of the company, having foregone his shares in favour of the other family members. It would therefore be counter-productive for him to question the very existence of the family settlement. But the contention was that the long period of silence or inaction on his part does not amount to acquiescence or estoppel. A shareholder, it was contended, did not have to do anything except hold on to his shares which is what he did in all these years. He also became ill due to acute ulcerative colitis and severe eye problem between 2001 and 2008. But when once he came to know that his name did not appear in the register of members, he immediately hastened to take action. The appellant very well knew of the settlement, because it was only under the settlement that he was getting the bag-closing and conveying systems business, which was henceforth to belong to him exclusively, at least from April, 1994, in return for giving up the shares. He could not have been oblivious to the anxiety of his parents to provide for his sister and nephew, given the fact that they were all staying in the same premises and being aware of the tragedy that had fallen upon her. If he had not accepted the terms of the settlement, he would have made his intentions known at a very early stage and would have resisted when asked to part with the shares. He kept his mouth shut, when there was no compulsion upon him to do so, which can only mean acceptance of the settlement. His long silence for a period of 15-16 years was in conformity and consistent with the family settlement. He had consciously given up his shares in the company. For reasons best known to him, he now wants to resile from the earlier position. That, in the light of the authorities to which I have referred, cannot be permitted. There is no explanation for his long silence. The illness from which he was said to have been suffering is not supported by any medical reports. That does not appear to have hampered the business which he was carrying on – at any rate, no evidence has been brought on record to show that his individual business also suffered on account of his illness. There is total absence of any explanation for the long delay or laches. Moreover, the appellant has confined his claim to the 2500 shares which were allotted to him in 1983 and has not made any claim over the shares left by his deceased parents who died in 1995 and 2001. Further, the copy of the extracts from the minutes-book as on 20.06.1997, filed by the appellant himself, shows that on that date there were only three shareholders: S.N. Sud, Manju Shiv Sud and Pankaj Shiv Sud. The appellant had referred to the inspection report of the chartered accountant which stated that the annual returns for the years 1990-91 to 1998-99 were not available in the records of the RoC; the same inspection report, in the opening paragraph, notes that as per the records available with the RoC, as on 31.03.2000, the status of the shareholding of Rs. 6,50,000 was that Manju Shiv Sud held 39,650 shares of Rs. 10 each amounting to Rs. 3,96,500 and Pankaj Shiv Sud held 25,350 shares of Rs. 10/- each amounting to Rs. 2,53,500. This shows that even on 31.03.2000, the appellant was not a shareholder - Decided against appellant.

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• FEMA

• 2013 (9) TMI 708
  Abetment of Contravention of Section 8(3) and 8(4) of FERA - Whether the appellants were liable for abetment of the contravention of Section 8(3) and Section 8(4) of FERA by virtue of having opened a Letter of Credit as a status holder in terms of the provisions of the Export Import Policy and the Handbook of Procedure, in force at the relevant time – Held that:- Birla Corporation Ltd. vs. Collector of Central Excise [2005 (7) TMI 104 - SUPREME COURT OF INDIA] - if no appeal was filed against an earlier order or the earlier appeal involving the identical issue was not pressed by the revenue, the revenue was not entitled to press the other appeals involving the same question - if the department accepted a principle laid down in an earlier case, it should not be permitted to take a contrary stand in a subsequent case - It was further pointed out that the classification of goods adopted in earlier decision must not be slightly disregarded in the subsequent decisions. Both the notices issued under FERA / FEMA, charged the appellants with similar allegation to the effect that Foreign Exchange was acquired for bringing into India the goods of - (i) specific value; and (ii) specific description, but what was brought into India were goods of different value and different quality and hence there was mis-utilisation of foreign exchange and consequent breach of Sections 8(3) and 8(4) of FERA - when the authorities under FERA while issuing notice solely relied upon the investigation carried out by the customs authorities then in such circumstances the authorities under FERA should not have taken a stand contrary to what was taken by the customs - The rational of this Rule was the need for consistency, certainty and predictability in the administration of justice. The manner in which the customs authorities were expected to follow the decision of the licensing authorities in the matter of issuance of license, the custom authority's decision in the matter of classification and valuation are also final vis-a-vis FERA authorities, more particularly, when the custom authorities were the statutory authorities empowered to decide the issue of classification and valuation of goods at the time of import as well as export. Validity of Saving Provisions of Section 49(3) of FEMA - When proceedings commenced prior to 31.05.2002 under erstwhile Section 51 of the FERA were sought to be saved under Section 49(3) of the FEMA – Held that:- Following Star India Pvt. Ltd. v. Union of India [2010 (12) TMI 657 - BOMBAY HIGH COURT ] - The adjudicating officer, on taking notice of the alleged contraventions of FERA, had signed the show cause notice on 31st May 2002. Since the adjudicating officer had taken note of the alleged offence on 31st May 2002, which was within the period of two years from the commencement of FEMA as contemplated under Section 49, Clause (3) of the FEMA, the adjudicating officer had the jurisdiction to adjudicate the notice dated 31st May 2002 - The fact that the said notice was served upon the appellant on 4th June 2002 would not invalidate the proceedings initiated by show cause notice dated 31st May 2002, because for the purpose of Section 49, Clause (3) of FEMA, what was relevant is taking notice and not issuance or service of notice. Principles of Natural Justice – Held that:- On the material on record there had been no such breach - In the show-cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation - The complaint of the appellant now was that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them - the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Opportunity to Cross Examination – Held that:- The refusal on the part of the adjudicating authority to permit the appellants to cross-examine the experts, who had given their opinions as regards classification and valuation of the goods, has really vitiated the entire proceedings - The appellants were absolutely justified to request the adjudicating authority to permit them to cross-examine those experts on the line as to on what basis they had reached to such a conclusion, which was contrary to the other set of opinion. When there was an apparent conflict between the two sets of opinion the appellants were justified in making a request to cross-examine those officers, who had expressed the opinion quite contrary to the one on which the custom authorities had relied upon - We fail to understand what prejudice could have been caused to the department if at all such permission would have been granted - On the other hand, the prejudice seems to have been caused to the appellants as they were not in a position to convince the adjudicating authority and the Appellate Tribunal why the adverse opinion which was in conflict with the first two opinions should have been ignored in absence of opportunity to cross-examine the person who gave such a opinion in writing - It was also not the case of the department that such request was made only with a view to protract the proceedings. Validity of Order - The order impugned travels much beyond the scope of the show cause notice and his clients had no opportunity to explain many relevant aspects which the Tribunal had taken into consideration - it is settled law that a party to whom a show cause notice of this kind was issued must be made aware of the allegations against it - As observed by the Supreme Court in Kaur Singh v. Collector of Central Excise, New Delhi [1996 (11) TMI 84 - SUPREME COURT OF INDIA ] - this was a requirement of natural justice - Unless the party concerned was put to such notice, he had no opportunity to meet the case against him - Which ground was alleged against the party must be made known to him, and there was no scope for assuming that the ground was implicit in the issuance of show cause notice.

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• Service Tax

• 2013 (9) TMI 714
  CENVAT credit - Out of turn hearing – Held that:- allow the applications for out of turn of appeals – issues involved in this case are identical to the case court relied upon Parth Poly Wooven Pvt.Ltd. (2011 - (4) TMI 975 - GUJARAT HIGH COURT). CENVAT credit - Whether the assessee had availed CENVAT Credit of the Service Tax paid under the category of Goods Transport Agency and inward as well as outward transportation charges during the period – Court followed the judgement of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others (2011 (3) TMI 248 - KARNATAKA HIGH COURT) – Held that:- Assessees were eligible to avail the CENVAT Credit of the Service Tax paid on the Goods Transport Agency services – appeal decided in favour of assessee.

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• 2013 (9) TMI 713
  Stay application - Valuation - inclusion of cost of goods sold - erection, installation and commissioning services – Held that:- Proviso to Rule 3(1) of the Service Tax Rules,2007 reads as “Provided that nothing contained in this Explanation shall apply to a Works Contract, where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before 07.07.2009.]”. Thus, appellant is not required to include the value of the plant and machinery for discharge of Service Tax liability under erection, installation and commissioning services rendered by him as the said proviso specifically provides for inapplicability of the said explanation for the contract entered prior to 07.07.2009, wherein the work has commenced - From the contract which was produced before us, we find and more specifically the supply contract, it indicates that the ownership of the plant and machinery gets passed over to the service recipient, as and when the said machinery is delivered at the site of the said M/s VPCL or M/s EPGL - Issue needs to be considered in depth - Appellant has made out a case for waiver of pre-deposit of the amounts involved – Appeal allowed – stay granted.

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• 2013 (9) TMI 712
  Manpower Recruitment and Supply Service - Supply of Labour Without Agreement - Held that:- Prima facie, the basis of demand of service tax under the head ‘manpower recruitment and supply’ service was unquestionable - appellant was almost impoverished by stoppage of payments by BHEL - BHEL stopped payments pursuant to the Department’s request -The Department also found large payments having been received by the appellant from BHEL without agreements which amount was adopted as taxable value for the rest of the demand under ‘manpower recruitment and supply’ service - This demand, prima facie, appeared to be based on a confessional statement of the appellant which was to the effect that he had received payments from BHEL for supply of labour without agreement. Waiver of Predeposit - There was no prima facie case for the appellant against the impugned demand - The appellant had not pleaded financial hardships in the present application - His consultant had stated at the bar that he was not in a position to make predeposit on account of financial crunch - This plea made at the bar was being considered in the wake of the revelation made by the learned Superintendent(AR) that BHEL had been requested to stop payments to the appellant – stay granted partly.

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• 2013 (9) TMI 711
  Manpower supply or recruitment agency services - payment to employees through third party – main contention of the appellant was personnel employed by them remained their employees during the period of the agreements hence there is no supply of manpower – Held that:- The appellant has a strong case in their favour - Merely because the payment has been made through the German entity, the activity does not come under the purview of ‘Manpower Supply or Recruitment Agency Service' - Relying on the judgement of ITC LTd. Vs. Commissioner of Central Excise, New Delhi (2012 (7) TMI 744 - CESTAT, NEW DELHI). Pre – deposit of duty – court waived duty demanded till final disposal– stay application allowed – stay granted.

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• 2013 (9) TMI 710
  Business auxiliary services – sharing of cost - appellant and M/s BWIL agreed to integrate and jointly carry out day-to-day functions in both the companies in various areas - the agreement was for rendering executory services and for sharing of the cost towards the same - Held that:- the terms and conditions of the agreement clearly show that the agreement was for rendering executory services and for sharing of the cost towards the same. Nothing in the said agreement relates or refers to management consultancy services to be rendered by the appellant to M/s BWIL. There is also no evidence led by the Revenue to show that the appellant gave consultancy to M/s BWIL in various field of management. In the absence of such any evidence, it has to be concluded that the agreement between the two parties are for executory services and not for any management consultancy services. - In view of the decision in GLAXO SMITHKLINE PHARMACEUTICALS LTD. Versus C. C. E., MUMBAI-IV [2004 (7) TMI 589 - CESTAT, MUMBAI], decided in favor of assessee.

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• 2013 (9) TMI 709
  Input Service Distributor - CENVAT credit - Assessee had availed cenvat credit of service tax paid on various input services on the basis of invoices issued by their head office which had been registered as Input Service Distributor (ISD) - In respect of nineteen services, the credit availed had been disallowed - The disallowance had been made on the ground that there was not nexus with manufacture and credit was admissible only up to the place of removal – Held that:- The stand taken by the Revenue that no credit was admissible after the place of removal of the goods was totally untenable - The substantive part of the definition input service covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of input service covers various services used in relation to the business of manufacturing the final products. Commissioner of Central Excise, Nagpur vs. Ultratech Cement Limited [2010 (10) TMI 13 - BOMBAY HIGH COURT] - the credit of service tax paid on Advertising Agency Services, Business Auxiliary Services, Business Support Services (in the case of this assessee, it is Advertising Agency Service), Management and Consultancy Services, Online Information and data base Access Service, Port service, Maintenance and repair Service, Consulting Engineer’s service, Security Agency Service and Storage and Warehousing credit was admissible. Construction Services in respect of Office and Factory etc. - Credit was admissible and appellant voluntarily reversed the credit taken in respect of service availed for housing colony of the appellant - Similarly, appellants had also reversed the credit taken in respect of security agency services, Cleaning services, Survey and Map-making service in respect of services received other than for the purpose of factory/ office. Event Management Service - The services had to be held as relatable to business of manufacturing only since the services are directly relatable to promotion of goods - Technical inspection services were availed in respect of quality verification etc. and such services were definitely relatable to manufacture - credit was admissible in respect of such services also. Penalty Under Rule 15 of Cenvat Credit Rules, 2004 - Appellant had taken credit correctly and where credit had been taken inadvertently or by mistake for housing colony etc. they had promptly reversed the amount - availment of credit can be said by mistake and therefore no penalty was imposable - order set aside - Decided in favour of Assessee.

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• Central Excise

• 2013 (9) TMI 698
  Stay Operation - Coercive Recovery - Restraining the Department from enforcing coercive recovery of the duty against the applicant – Held that:- Under the circumstances and in the facts and circumstances of the case, more particularly when the applicant was a public sector undertaking and the fact that if the recovery proceedings qua recovery of penalty was stayed, it will meet with the ends of justice and it will be in the fitness of things. It was directed that during the pendency and final hearing of the main Tax Appeal, there shall be stay of further operation and implementation of the order passed by the CESTAT with respect to penalty only - Meaning thereby, During the pendency and final disposal of the main Tax Appeal, there shall not be any coercive steps/recovery proceedings to recovery the amount of penalty and the applicant to pay the entire amount of duty liability and interest and whatever amount was already paid, the same shall be appropriated towards the duty liability and interest - However, aforesaid adjustment shall be without prejudice to the rights and contentions of respective parties in the main Tax Appeal.

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• 2013 (9) TMI 697
  Production capacity based duty - Abetment of Duty – Non operation of Pan Masala Packing Machine for a fraction of month - closure of unit - Pan Masala Packing Machine (Capacity determination and collection of duty) Rule, 2008 – Held that:- Admittedly, there was no production for a period of 36 days, i.e., from 01.4.2011 to 5.4.2011 including from 1.4.2011 to 5.4.2011. - Reference by counsel for the appellant to Rules 7 and 9 of the Rules in support of his contention, that as duty liability was determined for each month, abatement cannot be granted for a fraction of a month was misplaced as no such intent was discernible from a reading of these rules - Rule 7 of the Rules merely provides that duty payable shall be calculated for a particular month and Rule 9 of the Rules merely prescribes that monthly duty payable on notified goods, shall be paid by the 5th day of the same month. These rules cannot be pressed into service by the revenue in support of its view that abatement cannot be claimed for a fraction of a month - This apart, reference to a continuous period of 15 days or more under rule 10 of the Rules relating to the right of an assessee, pertains to its obligation, to inform the Deputy Commissioner or the Assistant Commissioner of Central Excise, of closure of machines cannot be read in isolation to raise an inference that if closure in a month was less than 15 days a party shall not be entitled to abatement of duty – Decided against revenue.

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• 2013 (9) TMI 696
  Captive consumption - Disallowance of Modvat credit - Rule 57C of the Central Excise Rules, 1944 - Notification No. 108/95 - Goods falling under the Schedule to the CET Act, 1985 were exempted from the whole of the duty of excise when supplied for the official use of UN or or for the projects funded by UN – Held that:- Benefit of exemption in respect of intermediate product was available under Notification No. 217/86-C.E. dated 2.4.1986 - the parts assembles to the motor vehicle which was the final product supplied to unit - Therefore, the intermediate product of the parts assembled, the benefit of Notification No. 67/1995 read with Notification NO. 108/95 was available to the appellants. As per Notification No. 108/95-CE dt. 28.8.95 the goods were exempted which were supplied to the United Nations or an international organization for their official use - as there was a anomaly in the Rule to plug that anomaly Notification NO. 11/97-Ce dated 1.3.1997 came into effect – Indian Aluminum Co. Ltd. vs. Collector Of Central Excise, Cochin [1995 (4) TMI 167 - CEGAT, NEW DELHI ] - No bond was executed in these cases, as they fell within the category of export units where taking of bond was not obligatory and such non-execution is only a procedural lapse and for such lapse, the benefit of the exemption cannot be denied – order set aside – Decided in favour of Assessee.

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• 2013 (9) TMI 695
  Revenue neutral exercise - Assessable Value of Goods - manufacture of dispensing pump sets for petroleum products - clearance of goods from one unit to another unit of the assessee - availability of Modvat / Cenvat Credit - Third member decision - Whether the demand for the normal period of limitation without invoking extended period has to be upheld as observed by Member (Technical) or whether the demand for the entire period has to be set aside as held by learned Member (Judicial). Held that:- the issue in an identical case in the case of IMP Power Ltd. [2011 (9) TMI 391 - CESTAT, AHMEDABAD], wherein also, the difference of opinion on the same issue, arose. - the demand of duty liability within the limitation period as provided under Section 11A (1) will be applicable, as has been held by Hon'ble Member (Technical). In view of the majority order demand of duty within the period of limitation is upheld, which is required to be quantified by the Original Adjudicating Authority. The interest liability would be examined by the Original Adjudicating Authority in accordance with law . However, the demand beyond the period of limitation is set aside along with setting aside of penalties imposed upon all the appellants.

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• 2013 (9) TMI 694
  Application of Section 4A - MRP based duty - Commissioner upheld duty and penalty u/s 11A - Held that:- The goods cleared in loose condition to spare parts division for being packed for retail sale are not the packaged commodity and hence there would be no requirement to declare MRP and the provision of Section 4A would not have applicable - provisions of Section 4A are not attracted to goods cleared by their Daruhera Unit to their spare parts division - Following decision of Jayanti Food Processing (P) Ltd. v. CCE, Rajasthan [2007 (8) TMI 3 - Supreme Court] and Malhotra Shaving Products (P) Ltd. v. CCE, Hyderabad [2009 (8) TMI 489 - CESTAT, BANGALORE] - Decided in favor of assessee.

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• 2013 (9) TMI 693
  Manner of payment of duty - Default under rule 8(3A) -Utilization of Cenvat credit - Held that:- for the period April to June 2008, the assessee defaulted payments of duty beyond the grace period. The duty for this period was paid with interest on 04.08.2008. However, the assessee continued to be a defaulter for purposes of Rule 8(3A) and consequently became liable to pay duty on each clearance in July 2008, from the account current, without utilizing CENVAT credit. However CENVAT credit was utilized to the extent for the entire July 2008 - The goods on which the duty was so paid should be deemed to have been cleared without payment of duty as per Rule 8(3A). If that be so, the demand confirmed against the assessee under Section 11A cannot be resisted by them. However, they have no liability to pay interest under Section 11AB of the Act inasmuch as interest on equal amount of CENVAT credit was paid by them - Decided against assessee.

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• 2013 (9) TMI 692
  Shortage of Goods - undervaluation - shout receipt of inputs - private records - demand of duty - proof - Held that:- Appellant had no case as regards confirmation of the demand of shortage of finished goods - The finished goods which were polyester filament yarn and the assessee had not been able to prove from records that the said shortage was due to losses or pilferage in his premises - It was also to be noted that the assessee had not claimed any wastage during the earlier period but on being detected - the claim of the assessee does not have any firm legal backing was without any substance, as the appellant himself should have reconciled the stocks earlier and could have informed the department as regards the shortage - Decided against assessee. Demand on the Input Short Received - Held that:- It was substantiated by the appellant that when the shortages were detected - The claim of the appellant was that it was due to weighment differences and it was not a question of inputs not received - they lodged a claim with the supplier as regards the shortages - The supplier of the goods had admitted that there could be shortage and had compensated appellant on which the appellant had already reversed the cenvat credit attributable to such polyester chips. COMMISSIONER OF C. EX., CHENNAI Versus BHUWALKA STEEL INDUSTRIES LTD. [2009 (11) TMI 177 - CESTAT, CHENNAI [LB]] - There was no diversion of the inputs enroute and there was also no findings of clandestine diversion/sale of inputs - The losses which had been claimed by the appellant was claimed to be on weighment differences, which was not contested seriously by the Revenue, as both the lower authorities have only recorded summarily that the assessee had not putforth any evidence in the defence - appellant had made out a case for setting aside the demands raised and confirmed by the lower authorities to the tune - that portion of the order was set aside which upholds the confirmation of demand of for short receipt of inputs. Demand on Waste Yarn on the Ground of Undervaluation – Held that:- Accepting the responsible statement of the counsel that the total excess duty on such differences after considering the payment of central excise duty by the appellant on the invoices - the amount of duty which had been not paid by the appellant by undervaluing the yarn waste needs to be confirmed - The order to the extent it confirmed the demand of the duty on the yarn waste which had been undervalued was upheld - There was existence of the private notebook, which indicated an amount received in excess of the amount which had been billed in the corresponding invoices - such an amount received by the appellant in excess of the amount billed needed to be confirmed and considered as an additional consideration received by them and needs to be taxed. Differential Duty on Yarn Waste - Held that:- The demand raised on the undervaluation of waste of yarn cleared from the appellant’s factory premises cannot be in excess - the appellant’s appeal against the confirmation of demand on this point was rejected to the extent of the liability and his appeal as regards the balance amounts involved was allowed and the order was modified to that extent - There was nothing on record to come to a conclusion that the appellant had in fact received the amount of the yarn waste cleared from the factory premises - In the absence of any evidence or any statement. Penalties - Appellant was liable to be penalised under the various provisions of the Central Excise Law - the penalties was upheld on the appellant - ends of justice would meet on imposition of equivalent penalties under Section 11AC for shortage of finished and for undervaluation of goods - the appellant had not properly maintained the records as regards the finished goods and also indulged himself in undervaluing the goods and had not followed the provisions of law, hence penalty under Rule 173Q of erstwhile Central Excise Rules, 1944, read with Rule 25 of Central Excise Rules, 2002, was also leviable.

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• CST, VAT & Sales Tax

• 2013 (9) TMI 715
  Contravention of Section 4(2)(e) - Manufacturing Process carried partly outside Delhi - Finishing Process within Delhi – Goods Exported out of India - Delhi Sales Tax Act, 1975 - Held that:- where a registered dealer purchases goods without payment of sales tax, on furnishing a declaration that the goods were for the purpose of manufacture and manufactured goods would be sold in Delhi or sold in course of intra-State sale or in course of export, but there was violation of the said declaration, then the price of the goods so purchased would be included in the turnover of the purchasing dealer. The third proviso had been inserted to the Section in order to penalise mis-utilization of the declaration form. By furnishing the declaration form, the purchasing dealer gave an undertaking to the seller and in turn to the Government of Delhi to the effect that raw material purchased by him would be used for manufacture in Delhi and goods would be subjected to sale in Delhi, in course of intra-State trade or in course of export outside India. Movement of such goods from Delhi should be occasioned by the sale and not for/by any other purpose. Therefore, when a purchasing dealer did not adhere to the declaration, which he had furnished, the State was wrongfully deprived of revenue i.e. sales tax. Accordingly, the turnover of the purchasing dealer would include the goods covered by the mis-declaration. The taxable event was mis-utilisation of the declaration form, which took place when the goods were transferred for manufacturing outside Delhi. But for the declaration form, the purchasing dealer was liable to pay sales tax at the time of the purchase made by him. Thus, the taxable event and the tax, which was due and payable but not paid in view of the declaration, became payable as there was mis-utilisation and false or wrong declaration Decision in Seagull Laboratories (I.) Private Limited versus Delhi Administration and Others [1990 (12) TMI 300 - DELHI HIGH COURT] followed - Decided against the assessee.

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• Wealth tax

• 2013 (9) TMI 716
  Treatment of Land under wealth tax act – Agricultural Or Urban Land - Disallowance of Exemption - Definition of Urban Land u/s 2(ea) - Retrospective Amendment - Whether the CWT (Appeals) erred in dismissing the appeal and confirming the order of the Wealth Tax Officer, treating the agricultural land as urban land liable to wealth tax - Whether the CWT (Appeals) erred in upholding the action of the AO of treating the land used for agricultural purposes and classified as agriculture land in the records of the govt., as Urban Land as defined u/s 2(ea) while disallowing the exemption claimed by the assessee – The law on this issue had been amended with retrospective effect from 1st day of April, 1993 and the land which had been classified as agricultural land in the records of the govt. and used for agricultural purposes had been excluded from the definition of urban land - Held that:- In view of the amended provisions with retrospective effect from 01.04.1993 in the Wealth Tax Act, whether the said land which had been claimed as exempt by the assessee in the return of wealth had complied with all the amended provisions or not had to be examined - Therefore, in pursuance of amendment through Finance Act, 2013, as mentioned which amendment was clarificatory in nature. It was appropriate to set aside the matter to the file of the W.T.O. to examine the documents lead by the assessee as required in the amended provisions and decide the issue accordingly afresh in view of the said amendment in Explanation-1 to section 2(ea) with retrospective effect 01.04.1993 - The A.O. was directed to provide reasonable opportunity of being heard to the assessee in this regard - Thus, the appeal of the assessee in WTA No.15(Asr)/2013 for the assessment year 2002-03 was allowed for statistical purposes - Decided in favour of Assessee.

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• Indian Laws

• 2013 (9) TMI 707
  Blacklisting of company - Bar for participating in future bids - Company not reliable - Deal given to another bidder after petitioner chose to back out - Held that:- There is no illegality or irrationality in the conclusion reached by the 2nd respondent that the petitioner is not (commercially) reliable and trustworthy in the light of its conduct in the context of the transaction in question. We cannot find fault with the 2nd respondent’s conclusion because the petitioner chose to go back on its offer of paying a premium of Rs.190.53 crores per annum, after realising that the next bidder quoted a much lower amount. Whether the decision of the petitioner is bona fide or mala fide, requires a further probe into the matter, but, the explanation offered by the petitioner does not appear to be a rational explanation - The dereliction, such as the one indulged in by the petitioner, if not handled firmly, is likely to result in recurrence of such activity not only on the part of the petitioner, but others also, who deal with public bodies, such as the 2nd respondent giving scope for unwholesome practices. No doubt, the fact that the petitioner is blacklisted (for some period) by the 2nd respondent is likely to have some adverse effect on its business prospects - Power of judicial review will not be invoked to protect private interest at the cost of public interest, or to decide contractual disputes - The prejudice to the commercial interests of the petitioner, as pointed out by the High Court, is brought about by his own making. Therefore, it cannot be said that the impugned decision of R-2 lacks proportionality - Decided against petitioner.

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